Calcutta High Court
Principal Commissioner Of Income Tax ... vs M/S. Avantha Realty Ltd on 19 June, 2024
Author: Hiranmay Bhattacharyya
Bench: T.S Sivagnanam, Hiranmay Bhattacharyya
OD-4
IN THE HIGH COURT AT CALCUTTA
SPECIAL JURISDICTION [INCOME TAX]
ORIGINAL SIDE
ITAT/282/2023
IA NO: GA/2/2023
PRINCIPAL COMMISSIONER OF INCOME TAX CENTRAL 2 NEW DELHI
VS
M/S. AVANTHA REALTY LTD.
BEFORE :
THE HON'BLE THE CHIEF JUSTICE T.S SIVAGNANAM
-A N D-
HON'BLE JUSTICE HIRANMAY BHATTACHARYYA
DATE : 19TH JUNE, 2024.
Appearance :
Ms. Smita Das De, Adv.
Mr. Prithu Dudhoria, Adv.
...for appellant.
Mr. Abhratosh Majumder, Sr. Adv.
Mr. Pramit Kr. Bag, Adv.
Mr. A.K. Dey, Adv.
...for respondent
The Court :- This appeal by the revenue filed under Section 260A of the
Income Tax Act, 1961 (the Act) is directed against the order dated June 09,
2023 passed by the Income Tax Appellate Tribunal, Delhi Bench "A", New Delhi
in ITA/1333/Del/ 2022 and ITA/1196/Del/2022 for the assessment year
2004-2005.
The revenue has raised the following substantial questions of law for
consideration:
a. Whether on the facts and in the circumstances of the case the
Learned Income Tax Appellate Tribunal was justified in law by not
considering the exchange rate losses amounting to Rs.16,06,000/-
was incidental to the nature of business of the assessee by not
considering that the facts of the instant case is similar to the case of
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The Commissioner of Income Tax [IT] -4 v/s. M/s Siemens Nixdorf
Information Systemse GmbH, wherein Hon'ble Bombay High Court
held that a loss arising on the assignment of a loan granted by a
foreign parent company to its Indian subsidiary is a capital loss
within the meaning of section 2[14] of the Income Tax Act, 1961 ?
b. Whether on the facts and in the circumstances of the case the
Learned Income Tax Appellate Tribunal was justified in law by not
considering the decision of Hon'ble Apex Court in the case of Bestobell
[India], wherein the Hon'ble Apex Court had made distinction between
exchange rate losses on capital account and revenue account ?
c. Whether on the facts and in the circumstances of the case the
Learned Income Tax Appellate Tribunal was justified in law by
allowing the Insurance and Audit fees expense, amounting to
Rs.96,609/- by erroneously stating that the agreement between the
assessee and the Ballarpur Industries Limited did not cover the said
expenses ?
d. Whether on the facts and in the circumstances of the case the
Learned Income Tax Appellate Tribunal was justified in law by
deleting the disallowance of Rs.11,16,14,637/- made under Section
14A by placing reliance on the judgment of Hon'ble Delhi High Court
in the matter of PCIT vs. Era Infrastructure Ltd., wherein the Hon'ble
High Court ruled that the disallowance under Section 14A cannot
exceed exempt income ?
e. Whether on the facts and in the circumstances of the case the
Learned Income Tax Appellate Tribunal was justified in law by
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ignoring the CBDT circular no.5/2014 dated 11.02.2014 which has
clarified that the disallowance for any assessment year may not be
limited to the exempt income for the said assessment year ?
f. Whether on the facts and in the circumstances of the case the
Learned Income Tax Appellate Tribunal was justified in law by
deleting the addition of Rs.4,36,52,375/- by holding that since the
liabilities shown in 'Provision for doubtful loans & advances', are
'certain' in nature, therefore no upward adjustment u/s 115JB[2][c]
can be made in this regard, by ignoring the provisions contained in
Explanation [1][c] to the section 115JB[2] which provides that amount
set aside to provisions made for meeting liabilities, other than
ascertained liabilities has to be increased for the purpose of
computing book profit ?
We have heard Ms. Smita Das De, learned standing Counsel along with
Mr. Prithu Dudhoria, learned standing Counsel and Mr. Abhratosh Majumder,
Learned Senior Advocate assisted by Mr. Pranit Kumar Bag, learned Advocate.
So far as the first two substantial questions are concerned, on going
through the facts and circumstances of the case we find that the learned
Tribunal rightly affirmed the order passed by the Commissioner of Income Tax
(Appeals) which followed the decision in the case of Commissioner of Income
Tax Vs. V.S.Dempo & Co. (P.) Ltd. (1994) 206 ITR 291 (Bom).
It is not in dispute that the assessee is an NBFC and suffered loss on
account of foreign exchange fluctuation on receipt of repayment of loan to a
foreign company. The revenue sought to place the decision in the case of
Bestobell [India] Vs. CIT, [1979], 117 ITR 289 (Kol) as rightly pointed out by the
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learned Senior Advocate appearing for the respondent assessee that in the said
case it was not contended that it had incurred extra expenditure in order to
secure the loan and it is at the point of repayment that the assessee had to
provide extra amount of rupees by reason of devaluation on the relevant date.
Furthermore, it was not the case of a financial company. The revenue also
placed reliance on the decision in the case of Commissioner of Income Tax (IT)-
4 Vs. M/s. Siemens Nixdorf Information Systemse GmbH, [2013] 150
taxmann.com 383 (SC).
In the said decision the Hon'ble Supreme Court affirmed the
interpretation given by the learned Tribunal as well as the High Court as it
related to one particular transaction. Therefore, the Court did not go into the
other aspects of the mater. Therefore, both the decisions relied on by the
revenue will not be of any assistance to their case.
In the result, the substantial questions of law Nos. A and B are answered
against the revenue.
So far the substantial question of law No. "C" is concerned, this pertains
to allowing the insurance and audit fees expenses amounting to Rs.96,609/-
on the ground that the agreement between assessee and Ballarpur Industries
did not cover the said expenses. We have gone through the factual findings
recorded both by the CIT(A) as well as by the Tribunal and we find that the
factual position has not been shown to be wrong. Therefore, we find that no
substantial question of law arises as suggested by the revenue in question No.
"C".
Substantial questions Nos. D & E pertain to the deletion of the
disallowance made under Section 14A of the Act. The learned Tribunal took
5
note of the decision of the High Court of Delhi in PCIT Vs. Era Infrastructure
Ltd. [2022] 141 taxman.com 289 (Del), which had taken note of the decision in
the case of Cheminvest Ltd. Vs. CIT wherein it was held that amendment by
the Finance Act, 2022 of Section 14A of the Act by inserting a non-obstante
clause and explanation we take effect from 01.04.22 and cannot be presumed
to have retrospective effect and, therefore, on facts the amendment cannot be
applied to the assessment year under consideration. We find no error in such
conclusion arrived at by the learned Tribunal.
Accordingly, substantial questions of law No. D & E are decided against
the revenue.
So far as the ground "F" is concerned, the learned Tribunal has recorded
the following finding:-
"19. On careful consideration of above rival submissions and findings recorded
by the Assessing Officer as well as learned CIT(A) at the very outset, from the
assessment order we note that the Assessing Officer has not given any reason for
making upward adjustment u/s.115JB while calculating the books profit for MAT
purpose and despite this fact the ld. CIT(A) presume that Assessing Officer might
have invoked provisions of section 115JB (2)(c) of the Act by treating the loans
and advances which are actually return of as doubtful. However, the assessee
consistently submitting that the impugned loss is real and such loss has been
debited to the P&L account under the head provision for doubtful loans and
advances. It was further submitted that from the perusal of audited account it is
clear that the same was return of in the account as irrecoverable though the
nomenclature was used as provision. On being asked by the bench the ld. Senior
DR could not show us any factual matrix which may lead us to take a view that
the impugned amount was not certain and was merely a provision. Thus the ld.
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CIT(A) keeping in view the judgment of Hon'ble Supreme Court in the case of
Vijaya Bank vs. CIT 231 CTR 209 (SC) held that the impugned amount was
certain in nature and therefore, upward adjustment as per clause (c) of
explanation 1 to section 115JB (2) of the Act cannot be made as per provisions of
the Act. Therefore, we are unable to see any valid reason to interfere with the
findings arrived by the ld. CIT(A) on this issue and hence we uphold the same.
Accordingly, ground no. 6 of revenue is also dismissed."
The submissions by the revenue before the learned Tribunal was that the
order passed by the first Appellate Authority should be set aside. The Tribunal
in the above paragraph has noted that the department could not show any
factual matrix which may lead the Tribunal to take a view that impugned
amount was not certain and was merely a provision. Thus, we find the matter
being factual and substantial questions of law arise for consideration as
suggested by the revenue in question no. F above.
For the above reasons, the appeal stands dismissed.
The application also stands dismissed.
.
(T.S. SIVAGNANAM)
CHIEF JUSTICE
(HIRANMAY BHATTACHARYYA, J.)
pkd/GH.
