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TMI Blog2013 (5) TMI 760X X X X Extracts X X X X X X X X Extracts X X X X ..... H COURT) the surplus received on cancellation of forward foreign exchange contract was a capital receipt not liable to tax and that it did not fall under section 28(iv). Thus ITAT was right in holding that the receipt by way of gain on cancellation of foreign exchange contracts is a capital receipt not liable to tax and was accordingly justified in directing the Assessing Officer to make necessary adjustment to the cost of the acquisition/WDV of the plant and machinery to which the receipt pertains and to make consequential adjustment to the depreciation granted. Depreciation in respect of Butachlor Plant - Held that:- The question as formulated partly does not appear to arise out of the impugned order of the Tribunal, inasmuch as the order of assessment itself indicates that the assessee had claimed depreciation at the assessment stage. Insofar as the merits of the controversy is concerned, it is an accepted position that identical controversy between the same parties has been concluded in favour of assessee by an order passed in [2013 (5) TMI 759 - GUJARAT HIGH COURT]. - Tax Appeal No. 401 of 2000, Tax Appeal No. 399 of 2000, Tax Appeal No. 400 of 2000 - - - Dated:- 6-5-2011 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... uestion pertains to disallowance of interest free advances of Rs.9,39,10,192/-, Rs.10,49,64,986/- and Rs.8,48,22,775/- respectively under section 36(1)(iii) of the Act. The Tribunal took note of the fact that this issue was also involved in assessment year 1995-96 wherein the Assessing Officer had disallowed sum of Rs.1,61,69,397/- as according to him the assessee had made advances to three concerns out of the interest bearing funds. Therefore out of the interest claimed by the assessee 14% on the said advances, being the rate on which the assessee had claimed interest on borrowings utilised for purposes of business came to be disallowed by the Assessing Officer. The three concerns to which advances were made are as under: (a) Gujarat Narmada Auto Ltd. (GNAL) (b) Gujarat Narmada Finance and Investment Co. Ltd. (GNF IC) (c) Narmada Education and Scientific Research Society (NF SRS) 6. For the said assessment year before the Tribunal it was submitted that similar disallowances were made right from assessment year 1990-91, but the disallowance was deleted in appeal. It was emphasized that the assessee had sufficient funds of its own and, therefore, there was no occasion to ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... umstances in the three years under appeal have been admitted by both the parties to be identical with facts and circumstances considered by the Tribunal in assessment year 1995-96. The assessee has also furnished evidence to show that it had sufficient funds of its to make advances to the three concerns. No diversion of borrowed funds has been established. Therefore, consistent with the order of ITAT for the assessment years 1995-96, we direct that disallowance of interest made u/s. 36(1)(iii) be deleted in all the three assessment years and this ground of appeal is allowed. 8. Mr. K.M. Parikh, learned standing counsel for the appellant revenue placed strong reliance upon the decision of the Supreme Court in the case of S.A. Builders Ltd. v. Commissioner of Income-tax (Appeals) Chandigarh and Another, (2007) 1 SCC 781, to submit that the test in such a case is really whether the loans had been advanced as a measure of commercial expediency. According to the learned counsel even in case where loans were advanced from noninterest bearing funds, the test of commercial expediency was required to be fulfilled. Per contra, Mr. J.P. Shah learned advocate for the assessee submitted that ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... bility of interest on the borrowed funds from the above angle. In other words, the High Court and other authorities should have enquired as to whether the interest-free loan was given to the sister company (which is a subsidiary of the assessee) as a measure of commercial expediency, and if it was, it should have been allowed. 27. The expression commercial expediency is an expression of wide import and includes such expenditure as a prudent businessman incurs for the purpose of business. The expenditure may not have been incurred under any legal obligation, but yet it is allowable as a business expenditure if it was incurred on grounds of commercial expediency. (Emphasis supplied) 10. Thus, it is apparent that the Supreme Court was dealing with the question of allowability of interest on borrowed funds which were given as interest free loan to the sister company. It is in the context of the aforesaid facts that the Court held that the test in such a case is whether this was done as a measure of commercial expediency. In the facts of the present case, the Tribunal has upon going through the figures in the balance sheet of the assessee company found as a matter of fact that th ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... res judicata does not apply to income tax proceedings. Again, each assessment year being a unit, what is decided in one year may not apply in the following year but where a fundamental aspect permeating through the different assessment years has been found as a fact one way or the other and parties have allowed that position to be sustained by not challenging the order, it would not be at all appropriate to allow the position to be changed in a subsequent year. In the circumstances, once the revenue has accepted the decision of the Tribunal on the issue in relation to assessment year 1995-96, on the same facts and issue it would not be appropriate to allow the position to be changed in relation to other assessment years. Therefore, on this count also, the said ground of appeal deserves to be dismissed. 12. Insofar as the second question is concerned, it is an accepted position between the parties that the controversy raised vide the said question stands concluded by a decision of this High Court in the case of Deputy Commissioner of Income Tax (Assessment) vs. Garden Silk Mills Ltd., (2010) 320 ITR 720, wherein the Court has held that the surplus received on cancellation of f ..... X X X X Extracts X X X X X X X X Extracts X X X X
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