M/S DCIT, FARIDABAD V. M/S A2Z MAINTENANCE AND ENGG. SERVICES LTD., GURGAON

ITA 3417/DEL/2016

AI Insights

The case involves a series of appeals by both the assessee, M/s A2Z Maintenance and Engg. Services Ltd., and the Revenue against the orders of the CIT(A)-3, Gurgaon, for the Assessment Years 2011-12 to 2013-14. The primary issues revolved around the treatment of certain expenses and losses claimed by the assessee, which the Revenue contested. The Tribunal examined the nature of these expenses, particularly focusing on whether they should be treated as revenue or capital in nature, and whether certain losses were speculative. The Tribunal's decision was guided by previous judgments and the specific provisions of the Income Tax Act, leading to a nuanced understanding of what constitutes revenue expenditure in the context of business operations.

• Counselvise Citation: [2026] 140 COUNSELVISE.COM (IT) 841355 (ITAT-DELHI)
• Duration Of Justice: 9 year(s) 8 month(s) 15 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 25-02-2026
• Appeal Filed By: Department
• Order Result: Dismissed
• Bench Allotted: F
• Assessment Year: 2013-2014
• Appeal Filed On: 09-06-2016
• Other Referred Cases: Taparia Tools vs. 2015 (55) Taxman.com 361 (SC), India Cements vs. 60 ITR 52 (Mad.), Choodambigai Mills vs. MANU/TN/0798/1998, Britannia Industries vs. 2015 Taxmann.com 60
• Laws Referred To: Income Tax Act, 1961
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: MONIKA SINGH
• Assessee Lawyers: PUNEET AGARWAL
• Keywords: Speculation loss; Business income; Revenue expenditure; Commercial expediency; Capital expenditure; Search and seizure
• Section: 143(3); 153A; 37; 37(1)

Judgement Text

"ITA Nos.3505 To 3507/Del/2016 & ITA Nos.3415 to 3417/Del/2016 M/s A2Z Maintenance and Engg. Services Ltd. Page 1 of 14 IN THE INCOME TAX APPELLATE TRIBUNAL DELHI BENCH ‘F’, NEW DELHI BEFORE SHRI SATBEER SINGH GODARA, JUDICIAL MEMBER And SHRI NAVEEN CHANDRA, ACCOUNTANT MEMBER ITA Nos.3505 To 3507/Del/2016 Assessment Years:2011-12 to 2013-14 M/s A2Z Maintenance and Engg. Services Ltd. O-116, DLF Shopping Mall, Arjun Marg, DLF Phase-I, Gurgaon, Haryana Vs DCIT Central Circle-II, Block-B, , New CGO Complex, NIT, NH- IV, Faridabad-121001 (APPELLANT) (RESPONDENT) PAN No.AAECA1203A ITA Nos.3415 To 3417/Del/2016 Assessment Years: 2011-12 to 2013-14 DCIT Central Circle-II, Block-B, , New CGO Complex, NIT, NH- IV, Faridabad-121001 Vs M/s A2Z Maintenance and Engg. Services Ltd. O-116, DLF Shopping Mall, Arjun Marg, DLF Phase-I, Gurgaon, Haryana (APPELLANT) (RESPONDENT) PAN No.AAECA1203A Assessee by Shri Puneet Agarwal, Adv., Shri Yuvraj Singh, Adv. Shri Chetan Kumar, Adv. & Ms. Shruti Garg, Adv. Revenue by Ms. Monika Singh, CIT-DR Date of Hearing 04.02.2026 Date of Pronouncement 25.02.2026 ORDER Printed from counselvise.com ITA Nos.3505 To 3507/Del/2016 & ITA Nos.3415 to 3417/Del/2016 M/s A2Z Maintenance and Engg. Services Ltd. Page 2 of 14 PER NAVEEN CHANDRA [A. M]: This bunch of six appeals filed by the assessee as well as by the Revenue are against separate orders all dated 04.03.2016 passed by the ld. CIT(A)-3, Gurgaon, u/s 250 of the Income Tax Act, 1961 [hereinafter referred to as, “Act”] for Assessment Years 2011-12 to 2013-14, respectively. The assessments in the respective appeals are framed by the Assessing Officer [for short, AO] under section 153A r.w.s.143(3) of the Act. 2. For the purpose of present adjudication, all the three AYs have common issues except for variance in figures. For sake of brevity and convenience, the AY 2011-12 be treated as the Lead Appeal. The decision in AY 2011-12 will apply mutatis mutandis for the other AYs appeal as well. Assessee’s appeal ITA Nos.3505/Del/2016(AY 2011-12) 3. Grounds of appeal for Assessment Year 2011-12 in ITA No.3505/Del/2016 filed by the assessee are as under:- 1. That on facts and circumstances of the case, the order passed by the Ld. CIT (Appeal is bad both in the eyes of law and on facts. 2. That on facts and circumstances of the case, the order passed by the Ld. CIT(Appeal) is bad both in the eyes of law and on facts as the assessment order passed u/s 153A itself is invalid and liable to Printed from counselvise.com ITA Nos.3505 To 3507/Del/2016 & ITA Nos.3415 to 3417/Del/2016 M/s A2Z Maintenance and Engg. Services Ltd. Page 3 of 14 be quashed as there was no incriminating material found during search and no proceedings were abated. 3. That the Ld. CIT (Appeal) has erred in law and on facts in confirming the addition of Rs. 5,77,02,769/- disallowing Public Issue Expense by treating the same to be capital in nature, despite the fact that the amount is eligible for deduction u/s 35D. 4. That the Ld. CIT Appeal has erred in law and on facts in confirming the addition of Rs. 5,77,02,769/- disallowing Public Issue Expense' by treating the same to be capital in nature, despite the fact that no material was found during search and seizure, suggesting concealment of income and no proceedings were 5. That the Ld. CIT (Appeal) has erred in law and on facts in confirming the addition of Rs. 84,94,515/- disallowing 'Loss on Forward Commodity' despite the fact that the transactions were executed for the business purpose and in the commodity which are used in the business of the assessee. 6. That the Ld. CIT (Appeal has erred in law and on facts in confirming the addition of Rs. 84,94,515/- disallowing 'Loss on Forward Commodity' despite the fact that no material was found during search and seizure, suggesting concealment of income and no proceedings were abated. 7. That the impugned appellate order is arbitrary, illegal, bad in law and violation of rudimentary principles of contemporary jurisprudence. 8. That the Appellant craves leave to add/alter any/all grounds of appeal before or at the time of hearing of the Appeal. Revenue’s appeal:- ITA No.3415/Del/2016(AY 2011-12) 4. Grounds of appeal for Assessment Year 2011-12 in ITA No.3415/Del/2016 filed by the Revenue are as under:- 1. That on the facts and in the circumstances of the case the Ld. CIT(A) has erred in deleting the addition of Rs. 7,04,30,295/- treating the same as revenue expenses despite the fact that the Assessing Officer has elaborately discussed the issue while making an addition on this count. Printed from counselvise.com ITA Nos.3505 To 3507/Del/2016 & ITA Nos.3415 to 3417/Del/2016 M/s A2Z Maintenance and Engg. Services Ltd. Page 4 of 14 2. That on the facts and in the circumstances of the case the Ld. CIT(A) has erred in deleting the addition of Rs.70,71,842-on account of premium on Forward Contracts' despite the fact that the Assessing Officer has duly discussed the issue in length in his order framing the assessment. 3. That the appellant craves leave to add or amend any ground of appeal before the appeal is heard or disposed off. 5. The Assessing Officer made the additions on the following counts in the Assessment Order passed u/s 153A r.w.s 143(3) of the Income Tax Act, 1961 (“the Act”) - S.No. Particulars Amount (in Rs.) 1 Addition on account of Loan Processing Fee [Para 4.2] 7,04,30,295/- 2 Addition on account of disallowance of deduction of share issue expenses [Para 5.4 & 4.4] 5,77,02,769/- 3 Addition on the ground of alleged speculative loss on commodity forward trading [Para 6.5] 84,94,515/- 4 Addition on the ground of premium paid on transaction for hedging of foreign currency loan [Para 7] 70,71,842/- 6. The Assessee filed an appeal before the Ld. CIT(A) which remained unsuccessful in respect of additions at S. No. 2 & 3; whereas in respect of S. No. 1 & 4, the Ld. CIT(A) allowed the Assessee’s appeal. The assessee is in appeal before us against addition at S. No. 2 & 3 and the department is in appeal against addition at S. No. 1 & 4 which are tabulated below for sake of convenience. Printed from counselvise.com ITA Nos.3505 To 3507/Del/2016 & ITA Nos.3415 to 3417/Del/2016 M/s A2Z Maintenance and Engg. Services Ltd. Page 5 of 14 S. No. Particulars Assessee’s [ITA No. 3505/2016] Department’s [ITA No. 3415 of 2016 ] 1 Addition on account of Loan Processing Fee 7,04,30,295/- 2 Addition on account of share issue expenses 5,77,02,769/- 3 Addition on the ground of alleged speculative loss on commodity forward trading 84,94,515/- 4 Addition on the ground of premium paid on transaction for hedging of foreign currency loan 70,71,842/- 7. At the outset, the counsel of the assessee submitted that additions at S. No 1, 3 and 4, relating to ground 1 and 2 of Revenue’s appeal and ground 5 & 6 of assessee’s appeal, were also subject matter of dispute in previous Assessment Year i.e., 2010-11. Identical to the present situation, addition at S No. 1 & 4 were allowed in favour of assessee by Ld. CIT(A) in that AY also and department was in appeal. In respect of issue at S. No. 3, assessee was in appeal. This Hon’ble Tribunal vide order dated 29.08.2025 [common] in ITA No. 3503/2016, 3504/2016 & 3414/2016, has decided in favour of the assessee in respect of all these issues i.e.S. No. 1, 3 and 4 for the previous AY. 8. Addition at S. No. 1: With regard to Addition on account of Loan Processing Fee, Hon’ble Tribunal held that Ld. CIT(A) has rightly followed judgement in Taparia Tools 2015 (55) Taxman.com 361 Printed from counselvise.com ITA Nos.3505 To 3507/Del/2016 & ITA Nos.3415 to 3417/Del/2016 M/s A2Z Maintenance and Engg. Services Ltd. Page 6 of 14 (SC); and Hon’ble Madras High Court in India Cements 60 ITR 52 (Mad.) has also taken same view. 9. Addition at S. No. 3: Addition on the ground of Speculative Loss On Commodity Forward Trading, Hon’ble Tribunal followed Hon’ble Madras High Court judgement in Choodambigai Mills MANU/TN/0798/1998, and noted that since assessee entered into transaction to cover up loss in price fluctuation in execution of the works contract, therefore, it does not constitute speculative activity rather it is a hedging done for the purpose of business. 10. Addition at S. No. 4: Addition on the ground of Premium Paid On Transaction For Hedging Of Foreign Currency Loan was allowed by the ITAT by following Calcutta High Court judgement in Britannia Industries 2015 Taxmann.com 60. It was found as a matter of fact that premium was paid for hedging of foreign currency loan to mitigate loss on account of foreign exchange fluctuation. In view of the above, ground 1 and 2 of Revenue’s appeal is dismissed and ground 5 & 6 of assessee’s appeal is allowed. 11. Ground no. 3 and 4 of the Assessee’s appeal with respect to addition at s. no. 2 on account of share issue expenses, the ld AR submitted that the AO admitted that the proceedsfrom issue of shares were meant and utilized for working capital and general corporate Printed from counselvise.com ITA Nos.3505 To 3507/Del/2016 & ITA Nos.3415 to 3417/Del/2016 M/s A2Z Maintenance and Engg. Services Ltd. Page 7 of 14 purpose, hence deduction is allowable as revenue expenditure. While admitting so, the AO has relied on Note 46 of the Financial Statements for year ending on 31.03.2012. On this basis, the AO denied claim for deduction u/s 35D, without considering that there is no question of not allowing deduction u/s 37 of the Act in case proceeds of shares are admittedly for working capital and general corporate purpose. 12. The ld AR submitted that the assessee had incurred expenditure of 28.85 Crores on issuance of shares. The quantum of expenditure relating to revenue purposes was Rs. 278.47 Crores being for Working capital of Rs. 156.69 Crores and for General corporate purpose of Rs. 121.78 Crores. The Expenditure on other accounts (excluding share issue relatedexpenses) was Rs. 367.68 Crores. The assessee calculated the ratio of 43% of Rs. 28.85 Crores in ratio of 278:367 which works out to Rs. 12.43 Crores towards revenue purpose. The assessee submits that out of Rs 12.43 crore the deduction allowable as revenue expenditure is Rs 6.10 Crores for AY 2011-12 and Rs 6.23 crore in AY 2012-13. 13. The Ld AR stated that it is well settled that expenses incurred in respect of raising money for working capital and general corporate purposes are revenue in nature, and fully deductible under Section 37 of the Act. He relied on ITAT decision in ACIT v. PC Jewellers ITA No. 6649/Del./2017 and other dated 07.12.2021 while considering Printed from counselvise.com ITA Nos.3505 To 3507/Del/2016 & ITA Nos.3415 to 3417/Del/2016 M/s A2Z Maintenance and Engg. Services Ltd. Page 8 of 14 allowability of share issue expenses relatable to amount raised for the purpose of working capital and the general corporate purposes.Share issue expense proportionate to amount of the proceeds utilized for working capital/general corporate purposes was held to be allowable under Section 37. The ld AR further relied on 3 Member Bench decision of Hon’ble ITAT Chennai in Lakshmi Auto Components Limited vs. DCITMANU/IX/0142/2006 [ITAT Chennai]. 14. Per contra the ld DR relied on the orders of the AO and the decision of Brooke BondIndia Ltd(1997) 225 ITR 798. 15. We have heard the rival submissions and have perused the materials on record. We find that the decision of Hon’ble Supreme Court in the Brooke Bond case does indicates that where the funds are for meeting working capital needs, the same may fall under revenue expense. In any case, the decision of Hon’ble ITAT Chennai in Lakshmi Auto Components Limited vs. DCIT MANU/IX/0142/2006 [ITAT Chennai]has distinguishedthe judgement of Brooke Bond India Limited(SC) (supra) as below: 10. From this it can be concluded that if the expansion of capital is in order to meet the need for more working funds, in that eventuality the expenditure could partake the nature of revenue expenditure. De hors examination in this regard, it is not possible to apply the ratio. 11. Each case depends on its own facts, and a close similarity between one case and another is not enough because even a single significant detail may alter the entire aspect. In deciding such cases, one should avoid temptation as said by Cordozo by matching the colour of one case against the colour of another. I am reminded of Printed from counselvise.com ITA Nos.3505 To 3507/Del/2016 & ITA Nos.3415 to 3417/Del/2016 M/s A2Z Maintenance and Engg. Services Ltd. Page 9 of 14 Heraclitus who said \"you never go down the same river twice\". What the great philosopher said about time and flux can relate to law as well. It is trite that a ruling of superior court is binding law. It is not of scriptural sanctity but is of ratio-wise luminosity within the edifice of facts where the judicial lamp plays the legal flame. Beyond those walls and de hors the milieu we cannot impart eternal vernal value to the decision, exalting the doctrine of precedents into a prison house of bigotry, regardless of varying circumstances and myriad developments. Realism dictates that a judgment has to be read, subject to the facts directly presented for consideration. 12. I have considered the entire conspectus of the case. In my opinion, the decision of the Apex Court in the case of Brooke Bond (India) Ltd. (supra) can be applied only after examining the object of the capital enhancement. This decision is not applicable if enhancement of capital was made for gearing up funds for working capital. The object of gearing up of the capital was not looked into. Total amount was disallowed without examining the details. Even applicability of Section 35D was not considered. In my opinion, this is not correct. I have gone through the reasoning adduced by the ld. Judicial Member. In my opinion he took a correct view in the matter. I concur with his decision on this issue. 16. We also find that the decision of PC Jewellers (supra) has followed the principle that where expenses are incurred in respect of raising money for working capital and general corporate purposes,they are revenue in nature, and fully deductible under Section 37 of the Act. 33. Hence ,the claim of the assessee that the expenditure is in the nature of revenue expenses and hence allowable u/s 37(1) of the Act for the years in appeal in computing the total income under the normal provisions of the act as the fund raised is used as working capital by the company except an amount of Rs. 41 .02 crores. As the assessee has utilised 92% of receipts on account of public issue on working capital and hence 92% of Rs.38 crores of share issue expenditure would be revenue expenditure and balance 8% of share issue expenditure which was spent on capital expenditure would not be treated as revenue expenditure. The proceeds utilized for capital expenditure, is allowable u/s 35D of the Act. Appeal of the assessee on this ground is allowed. Printed from counselvise.com ITA Nos.3505 To 3507/Del/2016 & ITA Nos.3415 to 3417/Del/2016 M/s A2Z Maintenance and Engg. Services Ltd. Page 10 of 14 17. In the facts of the instant case,it is an uncontroverted fact that the assessee has utilized 43% of the funds raised in the IPO towards working capital and general corporate purposes which is even admitted by the AO. In such a facts and circumstances, we are of the considered view that proportionate expenses incurred in respect of raising money for working capital and general corporate purposes are revenue in nature and allowable u/s 37 of the Act. Ground 3 and 4 of the assessee is allowed. 18. The appeal of the assessee is allowed while the appeal of the Revenue is dismissed. Assessee’s appeal ITA Nos.3506/Del/2016(AY 2012-13) Revenue’s appeal ITA Nos.3416/Del/2016(AY 2012-13) 19. In assessee’s appeal, ground no 3&4, 5&6 correspond and stands pari-materia with ground no 3&4 and 5&6 of the appeal for AY 2011-12. The same has been decided above in favour of the assessee. The said grounds of assessee is allowed. 20. The grounds 7&8 of assessee relates to guest house expense. The ld AR submits that the CIT(A) has erred in confirming the addition on account of rent for guesthouse amounting to Rs. 6,60,000/-. The ld DR per contra stated that thesaid guest was locked and not used. The Printed from counselvise.com ITA Nos.3505 To 3507/Del/2016 & ITA Nos.3415 to 3417/Del/2016 M/s A2Z Maintenance and Engg. Services Ltd. Page 11 of 14 assessee, even before CIT(A), did not file any evidence that the said guest house was used for business. 21. In such factual matrix, we are of the considered view, that in absence of any evidence/document to show the commercial expediency for use of the guest house, we sustain the decision of the CIT(A). The ground of the assessee is dismissed. 22. In Revenue’s appeal, the ground 1& 2 correspond and stands pari- materia with ground no 1&2 of the appeal for AY 2011-12. The same has been decided above against the Revenue. The grounds of Revenue is dismissed. 23. The ground 3 of Revenue is with respect to Set off of Business Income of Rs. 5.66 Crores against surrender of undisclosed income. The ld AR submitted that Rs. 5.66 Crores was related to business expense of the assessee. It is stated thatthe law in this regard is well settled that that an assessee is entitled to claim set-off of loss/expenditure against income determined under section 115BBE of the Act till the assessment year 2016-17. Reliance in this regard is placed upon the following: a. CIRCULAR NO. 11/2019 [F.NO.225/45/2019-ITA.II], DATED 19-6- 2019 issued by CBDT(Please referPara 3-4@Pg. 187of CLC) b. ACIT v. Sri Balaji 2022 (7) TMI 1013 -ITAT Delhi. Please refer Para 4.1 to 4.3 @Pg. 190 of CLC) Printed from counselvise.com ITA Nos.3505 To 3507/Del/2016 & ITA Nos.3415 to 3417/Del/2016 M/s A2Z Maintenance and Engg. Services Ltd. Page 12 of 14 c. M/s. Innovative Construction Pvt. Ltd. Versus ACIT – 12 (2) (2), Mumbai [2020 (12) TMI 662 - ITAT MUMBAI]Please refer Para 6 & 7 @Pg. 196 of CLC) d. Manubhav. ITO 2025 (9) TMI 1243 – ITAT Ahmedabad Please refer Para 2&3 @Pg. 201 of CLC) 24. We are of the considered view that assessee, in the instant year, is entitled to claim set-off of loss/expenditure against income determined under section 115BBE of the Act till the assessment year 2016-17as elucidated in CBDT Circular itself and the decision sited above. In view of the same the ground of the Revenue is dismissed. 25. In the result, appeal of the assessee is partly allowed while the appeal of the Revenue is dismissed. Assessee’s appeal ITA Nos.3507/Del/2016(AY 2013-14) Revenue’s appeal ITA Nos.3417/Del/2016(AY 2013-14) 26. The grounds in assessee’s appeal are common as in AY 2011-12 and 2012-13 except ground 7. Therefore, the identical grounds 3,4,5 and 6 are likewise decided in favour of the assessee. With respect to ground 7 the issue is assessee’s eligibility for set off of income u/s 69A against business loss. The ld AR submitted that the assessee is eligible for the set off of the addition of Rs. 1.56 Crores asthe claim of set-off of Printed from counselvise.com ITA Nos.3505 To 3507/Del/2016 & ITA Nos.3415 to 3417/Del/2016 M/s A2Z Maintenance and Engg. Services Ltd. Page 13 of 14 loss/expenditure against income determined under section 115BBE of the Act till the assessment year 2016-17 is allowed. 27. We are of the considered view that assessee, in the instant year, is entitled to claim set-off of loss/expenditure against income determined under section 115BBE of the Act till the assessment year 2016-17as elucidated in CBDT Circular itself and the decision sited above. In view of the same the grounds of the assessee is allowed. 28. The grounds in Revenue appeal are identical and are pari-materia with facts with AY 2011-12 and AY 2012-13. Following the decision in those years, the appeal of the Revenue is dismissed. 29. In the result, the appeal is decided as under: Assessee’s appeal in ITA 3505/D/2016 and ITA 3507/D/2016 is allowed. Assessee’s appeal in ITA 3506/D/2016 is partly allowed. Revenue appeal in ITA 3415 to 3417/Del/2016 are dismissed. Order pronounced in the Open Court on 25.02.2026. Sd/- Sd/- (SATBEER SINGH GODARA) (NAVEEN CHANDRA) JUDICIAL MEMBER ACCOUNTANT MEMBER Dated: 25.02.2026 Shekhar Printed from counselvise.com ITA Nos.3505 To 3507/Del/2016 & ITA Nos.3415 to 3417/Del/2016 M/s A2Z Maintenance and Engg. Services Ltd. Page 14 of 14 Copy forwarded to: 1. Appellant 2. Respondent 3. CIT 4. CIT(A) 5. DR Asstt. Registrar, ITAT , New Delhi Printed from counselvise.com "