OCL INDIA LTD.,NEW DELHI V. DCIT, NEW DELHI

ITA 4068/DEL/2015

AI Insights

The case involves cross appeals by Dalmia Bharat Ltd. and the Income Tax Department against the order of the Commissioner of Income Tax (Appeals)-7 for the assessment year 2007-08. The primary issues revolved around the treatment of a gain from the cancellation of a forward contract, the disallowance of unsecured loans, and the treatment of payments for technical knowhow and environmental studies. The Tribunal examined whether the gain from the forward contract was a capital or revenue receipt, the validity of the disallowance of certain loans, and the classification of specific expenditures as capital or revenue.

• Counselvise Citation: [2025] 140 COUNSELVISE.COM (IT) 773693 (ITAT-DELHI)
• Duration Of Justice: 10 year(s) 3 month(s) 3 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 23-09-2025
• Appeal Filed By: Assessee
• Order Result: Partly Allowed
• Bench Allotted: D
• Assessment Year: 2007-2008
• Appeal Filed On: 19-06-2015
• Other Referred Cases: Sutlej Cotton Mills Ltd. vs. CIT, Apollo Tyers Ltd. vs ACIT, NTPC Ltd. vs. CIT, Jute Corporation of India vs. CIT, CIT vs. Euro India Ltd., CIT vs. Priya Village Road Shows Ltd., DCIT vs. Graphite India Ltd., DCIT vs. Gloster Jute Mills Ltd., Tata Metaliks Ltd vs. ITO, CIT vs. Raymond Limited
• Laws Referred To: Income Tax Act
• Result in Favour of: Partly Allowed
• Court: TRIBUNAL
• Department Lawyers: AMANINDER SINGH DHINDSA; HARPREET KAUR HANSRA
• Assessee Lawyers: S VIJAY SHAH; NAVIN VERMA; ALKA ARREN; CHARTERED ACCOUNTANTS
• Keywords: Business income; Capital asset; Additional evidence; Revenue expenditure; Depreciation; Additional depreciation; Cost of acquisition; Capital receipt; Capital expenditure; Rule 8D
• Section: 68; 14A; 43(5); 115JB; 37(1)

Judgement Text

"आयकर अपीलीय अिधकरण िदʟी पीठ “डी”, िदʟी ŵी िवकास अव̾थी, Ɋाियक सद˟ एवं ŵी नवीन चंū, लेखाकार सद˟ क े समƗ IN THE INCOME TAX APPELLATE TRIBUNAL DELHI BENCH “D”, DELHI BEFORE SHRI VIKAS AWASTHY, JUDICIAL MEMBER & SHRI NAVEEN CHANDRA, ACCOUNTANT MEMBER आअसं.4068/िदʟी/2015(िन.व. 2007-08) ITA No. 4068/Del/2015(A.Y 2007-08) Dalmia Bharat Ltd., (Successor in the interest of OCL India Ltd.) 11th and 12th floor, Hansalaya Building, 15, Barakhamba Road, New Delhi 110001 PAN: AABCO-8750-F ...... अपीलाथᱮ/Appellant बनाम Vs. Deputy Commissioner of Income Tax, Circle 19(1), C R Building New Delhi 110095 ..... ᮧितवादी/Respondent आअसं.3767/िदʟी/2015(िन.व. 2007-08) ITA No. 3767/Del/2015(A.Y 2007-08) Assistant Commissioner of Income Tax, Aayakar Bhawan, Uditnagar, Rourkela, Dist. Sundargarh, Odisha 769012 ...... अपीलाथᱮ/Appellant बनाम Vs. Dalmia Bharat Ltd., Successor of OCL India Ltd., 11th and 12th floor, Hansalaya Building, 15, Barakhamba Road, New Delhi 110001 PAN: AABCO-8750-F ..... ᮧितवादी/Respondent अपीलाथᱮ Ȫारा/ Appellant by : S/Shri Vijay Shah, Navin Verma & Ms. Alka Arren, Chartered Accountants ŮितवादीȪारा/Respondent by : Shri Amaninder Singh Dhindsa & Ms. Harpreet Kaur Hansra, Sr.DR Printed from counselvise.com 2 ITA Nos 4068 & 3767/Del/2015 (AY 2007-08) सुनवाई कᳱ ितिथ/ Date of hearing : 27/06/2025 घोषणा कᳱ ितिथ/ Date of pronouncement : : 23/09/2025 आदेश/ORDER PER VIKAS AWASTHY, JM: These cross appeals by the Revenue and assessee are directed against the order of Commissioner of Income Tax (Appeals)-7, (hereinafter referred to as ‘the CIT(A)’) dated 24.03.2015, for assessment year 2007-08. 2. Shri Vijay Shah, AR of the assessee narrating facts of the case submitted that, the assessee is engaged in manufacturing and sale of cement, refractories and sponge iron. The assessee had acquired plant and machinery from one German company Loesche GmbH Germany. The assessee issued a letter of intent dated 19.04.2005 to Loesche India P. Ltd. and Loesche GmbH Germany expressing its intent to import plant & machinery for its new cement plant, Kapilas Unit. The assessee entered into an agreement dated 10.05.2006 with Loesche GmbH Germany and Loesche India P. Ltd. for import of Cement Vertical Roller Mill along with all equipments accessories and essential spare parts. The consideration for supply of plant & machinery from overseas was €41,79,800/-. The assessee booked a forward contract with UTI Bank on 04.07.2005 to guard against exchange rate fluctuations for €41,70,000/- for the delivery period from 15.06.2006 to 17.07.2006. The said forward contract was cancelled on 13.07.2006 resulting into a net gain of $1,98,909/- equivalent to Rs.92,05,509/-. The assessee treated the said gain as capital receipt and the same was reduced while computing total income. During scrutiny assessment proceedings, the Assessing Officer (AO) held that the gain on cancellation of forward contract was speculative business income u/s. 43(5) of the Act. He further held that in the subsequent year of purchase of machinery, Printed from counselvise.com 3 ITA Nos 4068 & 3767/Del/2015 (AY 2007-08) the above gain was not reduced from cost of machinery, hence, gain on cancellation of forward contract amounting to Rs.92,05,509/- was added back to the total income of the assessee. The assessee carried the issue in appeal before the CIT(A). The CIT(A) held that the provisions of section 43(5) of the Act though not applicable, section 53A of the Act which provides for capitalization of foreign exchange gain/loss with the cost of asset is also not applicable since the asset was not acquired during the year under consideration. The CIT(A) held gain on cancellation of forward contract amounting to Rs.92,05,509/- as Revenue receipt chargeable to tax. The ld. Counsel for the assessee submitted that the CIT(A) has erred in holding that no asset has been acquired nor there was any payment made. The assessee had acquired the asset in assessment year 2009-10 and the assessee had duly reduced foreign gain from the cost of the asset in terms of Explanation 3 to section 43A of the Act in the year of acquisition i.e. AY 2009-10. This fact has also been duly certified by the Tax Auditor vide certificate dated 10.08.2010 at pages 58 to 61 of the paper book. The AO has accepted the above deduction while passing the assessment order dated 19.12.2011 for AY 2009-10. Therefore, the amount has already been brought to tax and if in the impugned assessment year the foreign exchange fluctuation gains are held to be on Revenue account this would result in double taxation on same amount. The ld. Counsel for the assessee submitted that any gain arising on cancellation of forward contract entered into in relation to purchase of capital asset shall be treated as capital receipt. In support of his argument, he placed reliance on the decision rendered in the case of Sutlej Cotton Mills Ltd. vs. CIT 116 ITR 1 (SC). He further placed reliance on the decision of Special Bench of the Tribunal in Apollo Tyers Ltd. vs ACIT 89 ITD 235 (Del. SB) to contend that dominate intention, motive and purpose of entering into forward exchange contract and cancellation thereof was to provide hedging mechanism Printed from counselvise.com 4 ITA Nos 4068 & 3767/Del/2015 (AY 2007-08) against enhancement of liabilities for repayment of foreign loans raised for the purpose of acquisition of capital asset. Hence, any gain from cancellation of such contract was to be treated as capital receipts. 2.1. In respect of ground no. 2 of appeal relating to disallowance of unsecured loans Rs.44,36,000/-, the ld. Counsel for the assessee submits that during the Financial Year relevant to assessment year 2007-08, the assessee had accepted deposits from public by way of issue of advertisement in newspaper u/s. 58A of the Companies Act, 1956 r.w. Companies (Acceptance of Deposits) Rules, 1975. As per the terms and condition of the advertisement, only depositors making fixed deposit of Rs.50,000/- or above were required to furnish their PAN. The assessee furnished list of depositors before the CIT(A). It was contended before the CIT(A) that the deposits amounting to Rs.44,36,000/- are fresh deposits accepted during the year and remaining deposits of Rs.2,17,80,000/- were merely renewals of the old deposits from earlier assessment years. The CIT(A) granted part relief holding that old deposits renewed during the year amounting to Rs.2,17,80,000/- could not be added back u/s. 68 of the Act and in respect of balance deposits of Rs.44,36,000/- confirmed the addition u/s. 68 of the Act. The CIT(A) confirmed the addition without examining the deposits. The ld. Counsel pointed that a complete list of depositors is at page no.66 to 72 of the paper book. He further contended that out of the addition in respect of deposits amounting to Rs.44,36,000/-, the assessee has already furnished PAN in respect of deposits amounting to Rs.21,40,000/-. In so far as deposits aggregating to Rs.7,71,000/- is concerned, no PAN was required as the deposits in each case was less than Rs.50,000/-. Therefore, there was no statutory requirement for such depositors to furnish PAN. Printed from counselvise.com 5 ITA Nos 4068 & 3767/Del/2015 (AY 2007-08) 2.2. In ground no. 3 and 4 of appeal, the assessee has assailed disallowance of payment on account of technical knowhow. The ld. Counsel for the assessee submits that during the period relevant to assessment year 2007-08 payments to the tune of Rs.63,69,932/- were made to Mr. Glenn Ray Trapp, Mr. Guntur Maercker and Prof. Hi Limpu for refractory division to obtain technical assistance in connection with manufacture of continuous casting refractories which would result in improvement in product quality, cycle time, reduction in cost of manufacturing, etc. The AO held that the assessee had acquired intangible asset in the form of technical knowhow. The AO after treating the said payment for acquiring intangible asset allowed depreciation at the rate of 25% and thus disallowed remaining amount of Rs.52,61,434/-. He submitted that this issue is squarely covered by the decision of Coordinate Bench of the Tribunal in assessee’s own case in AY 2005-06 and 2006-07 in ITA No. 2843/Del/2011 and 3203/Del/2011, respectively decided by common order dated 29.06.2015. 2.3. In respect of ground no. 5 to 7 of appeal relating to disallowance of Environmental Study Expenses. The ld. Counsel submits that the AO has disallowed Rs.12,09,199/- towards Environmental Study Expenses treating it as capital expenditure. He submitted that this issue is also covered in favour of the assessee by the order of Tribunal for AY 2005-06 and 2006-07 in ITA No. 2843/Del/2011 and 3203/Del/2011 (supra) wherein the Tribunal has held the said expenditure as revenue in nature. 2.4. In respect of ground no. 8 to 10 of appeal relating to disallowance u/s. 14A of the Act, the ld. Counsel for the assessee made statement at Bar that he is not pressing ground no. 8 to 10 of appeal. Printed from counselvise.com 6 ITA Nos 4068 & 3767/Del/2015 (AY 2007-08) 3. Apart from above grounds of appeal, the assessee vide application dated 18.05.2022 has raised additional grounds of appeal in respect of claim of pre operative expenses as Revenue expenditure and claim of additional depreciation in second and subsequent assessment years. Apart from above two issues, the assessee has raised two more additional grounds of appeal i.e. ground no. 5 on exclusion of profit on sale of fixed assets and investment while computing book profit u/s. 115JB of the Act and ground no. 6 of appeal relating to exclusion of debenture redemption reserve while computing book profit u/s. 115JB of the Act. The ld. Counsel for the assessee submits that he has not pressing ground no. 5 and 6 of appeal. In respect of additional ground of appeal no. 2, 3 and 4 i.e. in respect of pre operative expenses and additional depreciation. He submitted that these grounds are legal in nature and no additional/fresh documentary evidences are required for adjudicating these grounds. Therefore, this ground should be admitted for adjudication in the light of decision of Hon’ble Supreme Court of India in the case of NTPC Ltd. vs. CIT 229 ITR 383 (SC) and Jute Corporation of India vs. CIT, 187 ITR 668 (SC). 4. Shri Amaninder Singh, representing the department vehemently defended findings of the CIT(A) in so far as gain on cancellation of forward contracts treated as capital receipt. With regard to ground of appeal no. 2 of assessee appeal, the ld. DR submitted that the Revenue has also raised a ground of appeal assailing findings of the CIT(A) on unsecured loan to the extent relief has been allowed by the First Appellate Authority. The CIT(A) has not examined the issue thoroughly and has granted relief merely on presumption that the deposits to the extent of Rs.2,17,80,000/- are renewal of deposits from preceding assessment years. He thus prayed for upholding the findings of the AO on the issue. Printed from counselvise.com 7 ITA Nos 4068 & 3767/Del/2015 (AY 2007-08) 4.1. In so far as disallowance of payments made to various persons on account of technical knowhow and disallowance of Environmental Study Expenses treating as capital expenditure, the ld. DR placed reliance on findings of the AO. However, the ld. DR fairly stated that both these issues have been considered by the Tribunal, in the preceding assessment years in assessee’s own case. 5. With respect to the additional ground of appeal, the ld. DR vehemently opposed admission of additional ground at this stage. The ld. DR pointed that the fresh claim made by the assessee cannot be considered at this belated second appellate stage. Without prejudice to his primary objection on admissions of additional grounds of appeal, the ld. DR submitted that if at all additional grounds are to be admitted the same be restored back to the AO for examination as they have not been examined by the AO. 6. We have heard the submissions made by rival sides and have examined the orders of authorities below. Since, the assessee in its appeal has raised multiple grounds assailing the order of CIT(A). The appeal of the assessee is taken up first for adjudication. The solitary ground raised by the Revenue in appeal is with respect to deleting the addition of Rs.2,17,00,000/- on account of acceptance of deposits without examination by the CIT(A), the said ground of appeal is corresponding to ground no. 2 in appeal by the assessee, hence, appeal of the Revenue will be taken up while deciding ground of appeal no. 2 of the assessee. 7. The first issue in assessee’s appeal is with respect to treating of gain on cancellation of forward contract as Revenue receipt, as against capital receipt treated by the assessee. The assessee had entered into agreement between Loesche India P. Ltd. and Loesche GmbH Germany for supply of Cement Vertical Roller Mill. The contract price for supply of plant and machinery from overseas was Printed from counselvise.com 8 ITA Nos 4068 & 3767/Del/2015 (AY 2007-08) €41,79,800/-. The assessee in order to guard against the exchange rate fluctuation booked a forward contract with UTI Bank Ltd. for €41.70 lakhs. The assessee cancelled the aforesaid forward contract on 13.07.2006 and in the process gained $1,91,909/- which was equivalent to 92,05,509/-. Since, the said contract was in respect of acquiring capital asset i.e. plant and machinery, the assessee treated the aforesaid gain on cancellation of forward contract as capital in nature. The AO held the capital gain as speculative income u/s. 43(5) of the Act. In First Appellate proceedings, the CIT(A) held the gain as revenue in nature. 8. Now, the short issue for consideration before us is; Whether the gain on foreign exchange fluctuation is revenue receipt or capital in nature? The Hon’ble Supreme Court of India in the case of Sutlej Cotton Mills Ltd vs. CIT (supra) while dealing with an issue where the assessee has suffered loss on account of devaluation of currency in International trade held that, whether the loss suffered by the assessee was a trading loss or not would depend on whether the loss was in respect of trading asset or a capital asset. The excerpts from the judgment rendered by the Hon’ble Apex Court are as under:- “The law may, therefore, now be taken to be well settled that where profit or loss arises to an assessee on account of appreciation or depreciation in the value of foreign currency held by it, on conversion into another currency, such profit or loss would ordinarily be trading profit or loss if the foreign currency is held by the assessee on revenue account or as a trading asset or as part of circulating capital embarked in the business. But, if on the other hand, the foreign currency is held as a capital asset or as fixed capital, such profit or loss would be of capital nature. Now, in the present case, no finding appears to have been given by the Tribunal as to whether the sums of Rs. 25 lakhs and Rs. 12,50,000 were held by the assessee in West Pakistan on capital account or revenue account and whether they were part of fixed capital or of circulating capital embarked and adventured in the business in West Pakistan. If these two amounts were employed in the business in West Pakistan and formed part of the circulating capital of that business, the loss of Rs. Printed from counselvise.com 9 ITA Nos 4068 & 3767/Del/2015 (AY 2007-08) 11 lakhs and Rs. 5,50,000 resulting to the assessee on remission of those two amounts to India, on account of alteration in the rate of exchange, would be a trading loss, but if, instead, these two amounts were held on capital account and were part of fixed capital, the loss would plainly be a capital loss. The question whether the loss suffered by the assessee was a trading loss or a capital loss cannot, therefore, be answered unless it is first determined whether these two amounts were held by the assessee on capital account or on revenue account or, to put it differently, as part of fixed capital or of circulating capital.” Thus, before proceeding further it would be relevant to first examine whether the expenditure for which forward contract was taken was for capital expenditure or revenue. In the instant case, it is apparent from the record that the assessee had entered into an agreement for purchase of plant and machinery. The assessee had taken forward contracts to hedge the aforesaid transaction of purchase of plant and machinery. Thus, any gain arising from cancellation of the forward contract would result in capital gain as it is on account of capital transaction. 9. The next contention of the assessee is that the intention of the assessee was to acquire capital asset i.e. plant and machinery as detailed in the contract agreement and the same was subsequently purchased in the period relevant to assessment year 2009-10. The assessee has reduced the capital gain arising on cancellation of forward contract from the cost of acquisition of said machinery. Even depreciation has been claimed in the subsequent assessment years on the reduced amount of capital asset. In support of this contention, the assessee has placed on record revised deprecation schedule for AY 2009-10 at page 61 of the paper book. Dehors the fact that in subsequent AY capital gain on cancellation of forward contract was reduced from the cost of acquisition of capital asset, once it is held that the transaction was with respect to acquisition of capital asset for which forward contract was taken and the gain on cancellation of such contract Printed from counselvise.com 10 ITA Nos 4068 & 3767/Del/2015 (AY 2007-08) would be on capital account, hence, such gain would not be exigible to tax. Thus, assessee succeeds on ground of appeal no. 4. 10. In ground no. 2 of appeal, the assessee has assailed disallowance of unsecured loans to the tune of Rs.44,36,000/-. During the period relevant to assessment year under appeal, the assessee had invited Fixed Deposits from public by way of issue of advertisement in the newspaper in accordance with the provisions of u/s. 58A of the Companies Act, 1956 r.w.r Companies (Acceptance of Deposits) Rules, 1975. The advertisement for accepting Fixed Deposits from general public is at pages 62 to 65 of the paper book. A perusal of the advertisement reveals (page 63 of the paper book) that the said advertisement was issued after the same was approved by the Board of Directors on 15.05.2006. In response to said advertimsent, the assessee purportedly received deposits to the tune of Rs.2,62,16,000/-. The assessee has placed on record complete list of depositors at pages 66 to 72 of the paper book. 10.1. During assessment proceedings, the AO made inquiries with respect to unsecured loans received by the assessee in the form of: (a) Fixed Deposits to the extent of Rs.9.06 crores; and (b)Loans from other companies to the extent of Rs.16.45 crores. The assessee vide reply dated 18.11.2009 furnished the details of each fixed deposits of Rs.2,00,000/- and more, and also furnished confirmation of balances in respect of Stockiest Security Deposits received from certain parties. The assessee before the AO submitted PAN details of the depositors wherever the same were provided by the depositors. The AO disbelieved the submissions made by the assessee and made addition of Rs.2,62,16,000/- holding that the aforesaid deposits are without PAN, hence, unverifiable. The assessee carried the issue in appeal Printed from counselvise.com 11 ITA Nos 4068 & 3767/Del/2015 (AY 2007-08) before the CIT(A). During First Appellate proceedings remand report was also sought from the AO. During remand proceedings, the AO had issued notices to 29 parties. Reply was received from 14 parties only indicating that their income is not taxable. The Assessing Officer observed that since their income is less than taxable limit their creditworthiness is not established. No reply was received from 5 parties as the notices sent were received back un-served. In the absence of sufficient replies, the AO raised doubt over genuineness of the depositors. It was submitted by the assessee before the CIT(A) that out of total deposits of Rs.2,62,16,000/-, deposits to the tune of Rs.2,17,80,000/- represent renewal of deposits received in earlier assessment year. Without further examination, the CIT(A) accepted the submissions of the assessee and deleted the addition to the extent of Rs.2,17,80,000/-. In so far as balance amount of Rs.44,36,000/- the same was confirmed in the absence of PAN details. The contention of the assessee is that PAN details were asked from the depositors who had made deposits of Rs.50,000/- or more. Where the deposits were less than Rs.50,000/- there was no mandatory requirement to ask for PAN details. 10.2. A perusal of the impugned order reveals that the CIT(A) has deleted the addition to the extent of Rs.2,17,80,000/- merely on the basis of statement made on behalf of the assessee, without examining as to whether in the preceding assessment years any fixed deposits were accepted by the assessee. As pointed earlier, the advertisement for acceptance of deposit was approved by the Board on 15.05.2006. No material is placed before us to substantiate that in the preceding assessment years the assessee has accepted fixed deposits u/s. 58A of the Companies Act, 1956 r.w.r Companies (Acceptance of Deposits) Rules, 1975. In so far as the argument of the assessee that PAN details of only those depositors were asked where the deposits were Rs.50,000/- or more, we find that the threshold Printed from counselvise.com 12 ITA Nos 4068 & 3767/Del/2015 (AY 2007-08) limit for furnishing PAN details as mentioned above is reflected in the Terms and Conditions of Fixed Deposits which are part of the advertisement at page 65 of the paper book. Considering entire facts of the case and documents on record, we are of considered view that this issue requires denovo adjudication. The issue is thus, restored to AO for fresh examination, in accordance with law. Accordingly ground no. 2 of assessee’s appeal and issue raised by the Revenue in its appeal are allowed for statistical purpose. 11. In ground no. 3 & 4 of appeal, the assessee has assailed disallowance of payment on account of technical knowhow. During the period relevant to assessment year under appeal, the assessee had made payment aggregating to Rs.63,69,932/- to Mr. Glenn Ray Trapp, Mr. Guntur Maercker and Prof. Hi Limpu to obtain technical assistance in connection with manufacture of continuous casting refractories. We find that this is a recurring issue. In AY 2005-06 and 2006-07 similar disallowances were made by the AO and confirmed by the CIT(A). The matter travelled to the Tribunal in assessee’s appeal in ITA No. 2843/Del/2011 and 3203/Del/2011 (supra). The Coordinate Bench decided the issue vide order dated 29.06.2015 as under:- “7.1. A perusal of these agreements clearly demonstrate that the assessee has acquired technical know-how by way of transfer from Mr.Trapp. The issue to be considered is whether the expenditure incurred for the acquisition in question is in the capital filed or revenue filed. The agreement with Mr.Glenn Trapp is for a period of 04 years. A perusal of this agreement further demonstrates that the expenditure in question was incurred for acquiring know-how with an object of improving the manufacturing process of continuous casting activities. Thus, it is a case of improving the manufacturing process, increasing efficiency and consequent profitability by incurring expenditure for acquiring technical know-how and technical assistance. As regards the issue as to whether there is enduring benefit, the company represented before the A.O. that there was no positive results consequent to this agreement and in fact the expenditure was infructuous Printed from counselvise.com 13 ITA Nos 4068 & 3767/Del/2015 (AY 2007-08) expenditure. On facts we are of the opinion that the assessee has not acquired any capital asset nor any enduring benefit in this case. Thus, in our view the expenditure in question is in the revenue field. Thus, we allow this ground of the assessee.” No material has been placed on record by the Revenue to distinguish or controvert the aforesaid decision of the Coordinate Bench. Therefore, ground no. 3 & 4 of appeal are allowed for parity of reasons. 12. In ground no. 5 to 7 of appeal, the assessee has assailed disallowance of Environment Study Expenses while treating the same as capital expenditure. We find that this issue is also considered by the Tribunal in assessee’s appeal for AY 2005-06 and 2006-07 in ITA No. 2843/Del/2011 and 3203/Del/2011, respectively. The relevant extract of the findings of the Tribunal on this issue are as under:- “8. Ground no.2 is against the disallowance of environmental study expenses by treating the same as capital expenditure. The assessee in this case has incurred an expenditure of Rs.12,10,000/- towards carrying out Environmental Impact Assessment study for the proposed modernisation cum expansion of its existing Rajgangpur Cement Plant. Both the A.O. as well as the Ld.CIT(A) held that the expenditure was in the capital field.” 8.1. After hearing rival contentions, we observe that the expenditure was incurred for modernisation cum expansion of its existing Rajgangpur Cement Plant. The assessee has to statutorily obtain certain environmental clearances, for which the study has to be made as per the Guidelines of the Ministry of Environment and the Orissa Pollution Control Board. Under these circumstances, we are of the considered opinion, that the expenditure in question is in the revenue field. While coming to such conclusion we rely on the following decisions of the Jurisdictional High Court. (i) CIT vs. Euro India Ltd. (2014) 45 Taxmann 173 (Del.) (ii) CIT vs. Priya Village Road Shows Ltd. (2011) 332 ITR 0594 (Del.) In the result this ground of the assessee is allowed.” Printed from counselvise.com 14 ITA Nos 4068 & 3767/Del/2015 (AY 2007-08) Since, the issue in hand is identical we see no reason to take a different view. Accordingly, ground of appeal no. 5 to 7 are allowed for parity of reasons. 13. The ld. Counsel for the assessee has made a statement at Bar that on instructions from the assessee he is not pressing ground of appeal no. 8 to 10 in respect of disallowance u/s. 14A of the act as per Rule 8D both under normal and MAT provisions. In light of the statement made by ld. Counsel for the assessee, ground no. 8 to 10 of appeal dismissed as not pressed. 14. The assessee vide application dated 18.05.2022 has raised five additional grounds of appeal, the same reads as under:- “2.0. Claim of pre-operative expenses as revenue expenditure [Rs. 2,78,56,090/-] 2.1. During the previous year relevant to assessment year 2007-08, an amount of Rs.2,78,56,090/ - has been incurred in respect of insurance, staff cost, etc. for expansion of project at Rajgangpur unit and Kapilas Cement Works (KCW) unit, which has been considered as Preoperative expenses and has been debited to the Capital Work in Progress. As the expenditure has been incurred in respect of new units which is not a new business but only expansion of the existing business of the company, such expenditure is allowable as revenue expenditure u/s 37(1) of the Act in computing the total income chargeable to tax. The above view is supported by the decision of Hon'ble Jurisdictional Delhi High Court in the case of CIT -vS.-Relaxo Footwears Ltd. (2007) 293 ITR231 (Del) [SLP filed by the Department has been dismissed by Hon ble Supreme Court vide order in SLP Civil (Appeal) No. 12361/2007 dated 03-01-2008. Similar view taken in Jay Engineering Works Ltd. - vs.- CIT (2009) 311 ITR 405 (Del) [SLP filed by the Department has been dismissed by Hon ble Supreme Court vide order in SLP Civil (Appeal) No. 9818/2008 dated 28-07- 2008]. 3.0. Claim of additional depreciation in second & subsequent years [Rs. 18,29,68,743/-] 3.1. For the previous year relevant to assessment year 2007-08, the assessee is entitled to claim additional depreciation @20% on all eligible plant & machinery acquired on or after 01-04-2005, subject to the conditions specified in Sec. Printed from counselvise.com 15 ITA Nos 4068 & 3767/Del/2015 (AY 2007-08) 32(1)(tia) and subject to overall criteria that total depreciation does not exceed the actual cost. The above view is supported by the decision of Hon ble Kolkata Tribunal in DCIT -vs.- Graphite India Ltd. [ITA No. 472/Kol/2018 dated 22-11-2019] and also in DCIT -VS.- Gloster Jute Mills Ltd. (2017) 88 taxmann.com 738 (Kolkata - Trib.) 4.0. Claim of balance additional depreciation on asset put to use for less than 180 days in the preceding financial year [Rs. 33,68,933/-] 4.1. Without prejudice to the above, if the claim of additional depreciation is not allowed on all eligible assets, the assessee is entitled to claim balance additional depreciation @10% on all eligible plant & machinery put to use for less than 180 days in the preceding financial year, i.e., F.Y. 2005-06. The above view is supported by decision of Hon'ble Jurisdictional Delhi Tribunal in DCIT -vs.- Cosmo Films Ltd. (2012) 13 ITR_TRIB 340 (Del-Trib) & Karnataka High Court in CIT -vs.- Rittal India (P) Ltd. (2016) 380 ITR 423 (Kar). 5.0. Exclusion of profit on sale of fixed asset and investment while computing Book Profit u/s 115JB of the Act [Rs. 5,75,29,183/-] 5.1. During the year under consideration, the assessee has credited to its Profit & Loss A/c, profit on sale of fixed assets and investments amounting to Rs. 5,75,29,183/-. Such profit on sale of fixed Assets and investments may be treated as capital receipts and excluded while computing Book Profit u/s 115JB of the Act. The above view is supported by the decision of Tribunal in DCIT -vs.- Gloster Jute Mills Ltd. (2017) 88 taxmann.com 738 (Kol - Trib.) & Tata Metaliks Ltd -vs.- ITO [ITA No. 439 & 478/Kol/2016 dated 27-04-2018]. 6.0. Exclusion of Debenture Redemption Reserve while computing Book Profit u/s 115JB of the Act [Rs. 4,06,25,000-] 6.1. During the year under consideration, the assessee has transferred Rs. 4,06,25,000/- to Debenture Redemption Reserve to comply with the provisions of Sec. 117C of Companies Act, 1956. The said fact is apparent from Profit & Loss Account. Such amount transferred to Debenture Redemption Reserve is liable for exclusion while computing Book Profit u/s 115JB of the Act. The said view is supported by the decision of Hon'ble Bombay High Court in CIT - vs.- Raymond Limited (2012) 71 DTR 265 (Bom).” Printed from counselvise.com 16 ITA Nos 4068 & 3767/Del/2015 (AY 2007-08) 15. At the outset, ld. Counsel for the assessee submits that he is not pressing additional ground of appeal no. 4 & 5 i.e. grounds raised in para 5 & 6 of the said application. With regard to other grounds of appeal, the ld. Counsel submitted that no additional evidences are required to be adduced for adjudication of the grounds as the issues are squarely covered either by the decision of Hon’ble High Courts or decision of Coordinate Bench of the Tribunal. After examining additional ground raised by the assessee prima facie, we are of considered view that the additional claim made by the assessee can be admitted. Nevertheless, the additional grounds raised by the assessee have not been examined by the authorities below as they were never agitated before the AO. Since, no additional documents are required to be examined for deciding these issues and relevant documents are already on record, we deem it appropriate to restore the additional grounds no 1 to 3 raised by the assessee in para no. 2 to 4 of the application (supra), to the AO for examination. The AO shall examine the additional claims made by the assessee before the Tribunal and shall decide the same, in accordance with law. 16. In the result, appeal of the assessee is partly allowed and appeal of the Revenue is allowed for statistical purpose. Order pronounced in the open court on Tuesday the 23rd day of September, 2025. Sd/- Sd/- (NAVEEN CHANDRA) (VIKAS AWASTHY) लेखाकार सद᭭य/ACCOUNTANT MEMBER ᭠याियक सद᭭य/JUDICIAL MEMBER िदʟी/Delhi, ᳰदनांक/Dated 23.09.2025 NV/- Printed from counselvise.com 17 ITA Nos 4068 & 3767/Del/2015 (AY 2007-08) ᮧितिलिप अᮕेिषतCopy of the Order forwarded to : 1. अपीलाथᱮ/The Appellant , 2. ᮧितवादी/ The Respondent. 3. The PCIT/CIT(A) 4. िवभागीय ᮧितिनिध, आय.अपी.अिध., िदʟी /DR, ITAT, िदʟी 5. गाडᭅ फाइल/Guard file. BY ORDER, //True Copy// (Asstt. Registrar) ITAT, DELHI Printed from counselvise.com "