2018 (6) TMI 1778 - HC - Income Tax

Disallowance of notional loss on account of foreign exchange fluctuation loss - claim on account of Mark to Market basis - HELD THAT - As in the case of very assessee in SUZLON ENERGY LIMITED 2018 (2) TMI 1789 - GUJARAT HIGH COURT the Division Bench of this Court has held in favour of the assessee and against the Revenue. Following the decision of the Division Bench of this Court in the case of very assessee in present appeal qua proposed question no. 2(A) is hereby dismissed. Fresh claim of the assessee in respect of Revenue expenditures for issue of debenture of LIC of India when such claim was never made by Assessee in its return of income in contradiction to in the case of Goetze (India) Ltd 2006 (3) TMI 75 - SUPREME COURT - Tribunal has erred in law and on facts in remanding the issue of relief under Section 90 to the file of AO - HELD THAT - Tribunal has remitted the matter back to the AO to consider the said claim. The only grievance on behalf of the Revenue is that without filing revised return the same ought not to have been permitted. However the said issue is concluded against the Revenue in view of the decision of this Court in the case of Commissioner of Income Tax vs. Woodward Government India P. Ltd 2009 (4) TMI 4 - SUPREME COURT . Under the circumstances present appeal qua proposed question nos. 2(C) and 2 (E) is hereby dismissed. Present Tax Appeal is admitted for consideration of following substantial question of law B. Whether the Appellate Tribunal has erred in law and on facts in deleting upward adjustment made on account interest charged on the loans granted to the Associated Enterprises at discounted rate to the prevailing Market rate ? D. Whether the Appellate Tribunal has erred in law and on facts in holding that disallowance under Section 14 A cannot be added to book profit while working out tax liability under the provisions of MAT as the said section has no applicability beyond chapter IV while computing the book profit under Section 115JB of the Act ?

Issues Involved:
1. Disallowance of notional loss on account of foreign exchange fluctuation.
2. Upward adjustment of interest charged on loans to Associated Enterprises.
3. Fresh claim of Revenue expenditures for issue of debenture.
4. Disallowance under Section 14A in book profit for MAT tax liability.
5. Relief under Section 90 remanded to AO without revised return.

Analysis:

1. The appeal raised the issue of disallowance of notional loss on account of foreign exchange fluctuation. The Appellate Tribunal was questioned for deleting the disallowance of a substantial amount claimed on a Mark to Market basis. The court dismissed the appeal in line with a previous Division Bench decision favoring the assessee, thus upholding the Tribunal's decision.

2. Another issue concerned the upward adjustment of interest on loans granted to Associated Enterprises. The Appellate Tribunal's decision to delete this adjustment was challenged. The court upheld the Tribunal's decision, emphasizing that the adjustment was made at a discounted rate to the prevailing market rate, which was found to be in accordance with the law and facts presented.

3. The fresh claim of Revenue expenditures for issuing debentures was also contested. The Appellate Tribunal's decision to allow this claim, despite it not being originally made in the return of income, was challenged. The court dismissed the appeal, citing a precedent that supported the Tribunal's decision, thereby upholding the allowance of the fresh claim.

4. The issue of disallowance under Section 14A in book profit for Minimum Alternate Tax (MAT) tax liability was raised. The Appellate Tribunal's decision that disallowance under Section 14A cannot be added to book profit for computing tax liability under Section 115JB was challenged. The court upheld the Tribunal's decision, stating that Section 14A's applicability does not extend beyond Chapter IV when computing book profit under Section 115JB.

5. Lastly, the matter of relief under Section 90 being remanded to the Assessing Officer without a revised return was contested. The court dismissed the appeal, noting that the Tribunal's decision to remand the issue was in line with legal precedent, specifically referencing a case that supported the Tribunal's authority to do so without requiring a revised return.

The judgment addressed each issue raised in the appeal, providing detailed analysis and legal reasoning for upholding or dismissing the challenges presented by the Revenue.

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