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TMI Blog2019 (4) TMI 82X X X X Extracts X X X X X X X X Extracts X X X X ..... 83 - MADRAS HIGH COURT]. It is also pointed out by the learned Sr. Counsel that there is no dispute for the Department as to the genuineness of the expenditure incurred by the Assessee and as such, the contention/challenge raised is rather hyper-technical. There was no need, necessity or occasion for the Assessee to have made any provision for meeting the expenses in the year 1992-93, as the demand from the Stock Brokers was raised only as per their bill dated 10.03.1993, accountable for the assessment year 1993-94. The finding and reasoning given by the Tribunal holding it in favour of the assessee and against the Department is within the four walls of law. No substantial question of law Characterization of income - gains earned on cancellation of the Foreign Exchange Forward Contract - capital receipts or revenue receipts - Raise additional ground - HELD THAT:- It was noted by the Tribunal that additional ground was raised both by the Assessee and the revenue for the first time before the Tribunal; by virtue of which there was no opportunity for the Assessing Officer and the Commissioner of Income Tax (Appeals) to have it considered and hence left it to be decided by the As ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ation to the challenge against 'club expenses'. The finding arrived at by the Tribunal is well supported by reasons. The amount spent for acquiring membership in the Clubs stands on a different pedestal from the amounts incurred for availing materials supplied or service provided in the clubs. This Court finds that the said issue is to be answered in favour of the assessee. Deduction of commission - sister concern of the assessee, which according to the AO was an instance of 'diversion of funds' - HELD THAT:- In the appeal preferred by the Assessee, the CIT(Appeals) deleted the above additions, holding that there was no dispute as to the actual payment of commission and that the details of export (through the sister concern/Raunaq International Ltd.) were produced before the AO and the said Company (payee) had duly disclosed the said income in its account and satisfied the income tax. It was also observed that the AO had no case that the agreement in this regard was not valid. Reliance was also placed on the various other supporting factors to hold that the allegation of diversion of income was wrong and misconceived. The finding of the CIT (Appeals) was affirmed ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... encashed, we are of the view that this is not a fit case where interference is to be made with the finding and reasoning given by the Tribunal. The omission/absence on the part of the Bank to produce the particulars in respect of the cheque for ₹ 9,30,332/- (stating that the said cheque could not be traced out) by itself cannot be a ground to draw any adverse inference, as the other ingredients with regard to the work involved, payment of publicity charges through crossed cheques and encashment of cheques by Bankers stand vindicated. That apart, the finding given by the Tribunal is purely a 'question of fact' and no substantial question of law is involved. 'Roll over charges' for renewal/roll over of the foreign exchange forward contracts taken by the Assessee for repayment of foreign currency loans - HELD THAT:- We are of the view that the challenge raised by the Assessee does not constitute any substantial question of law coming within the purview of Section 260A of the Income Tax Act, to be entertained by this Court in the appeal. This Court is also aware of the present 'Litigation Policy' framed by the Government of India, Ministry of Finance as ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 0 fixing the total income at 14,70,65,440/-. This was sought to be challenged by the Assessee by way of appeal before the Commissioner of Income Tax (Appeals), which came to be dismissed as per Annexure D order dated 15.02.2001; in turn, giving rise to the challenge before the Income Tax Appellate Tribunal. 4. The Tribunal considered all the three appeals together and passed a common verdict, as borne by Annexure E order dated 28.03.2007, virtually accepting the stand of the Assessee to the extent the relevant orders were impugned, except on one aspect. This made the Department to file three appeals to the extent they are aggrieved, whereas the Assessee has moved this Court by filing I.T.Appeal No.534 of 2009. 5. We heard Mr.Joseph Markose, the learned Sr. Counsel appearing for the Assessee and Mr. Christopher Abraham, the learned Standing Counsel for the Income Tax Department at length. 6. At the very outset, we would like to note that, though some questions have been suggested by the appellant/s to be considered while admitting the matter and ordering notice, no substantial question of law, as envisaged under Section 260A of the Act is seen framed by this Court. 7 . ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... came up before the Tribunal, where it was held that the Assessee had received the bills from M/s. J.M. Financial Consultancy Services Ltd only on 10.03.1993 and since this was within the previous year of the assessment year 1993-94, the amount of ₹ 56.50 lakhs was liable to be allowed as business expenditure; also holding that if the liability was based upon some contractual obligation, it would arise only when it was ascertained . It is the said decision of the Tribunal, that is sought to be challenged by the Department in I.T.A.No.1075 of 2009 suggesting the following questions as the 'substantial questions of law', for consideration of this Court: 1(a) Whether, on the facts and in the circumstances of the case and also in view of the fact that the debenture issue was closed on 04.10.91, the assessee, following mercantile system, is entitled to claim deduction in the assessment year 1993-94? ( b) should not the assessee have claimed the deduction in the assessment year 1992-93? 10. The issue involved in ITA. 6177/Del/1996 filed before the Tribunal[forming the subject matter of consideration in I.T.A.No.1075 of 2009 has been considered by t ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... the genuineness of the expenditure incurred by the Assessee and as such, the contention/challenge raised is rather hyper-technical. 13. In the light of the given set of facts and circumstances and also the judicial precedents as mentioned above, we are of the view that there was no need, necessity or occasion for the Assessee to have made any provision for meeting the expenses in the year 1992-93, as the demand from the Stock Brokers was raised only as per their bill dated 10.03.1993, accountable for the assessment year 1993-94. The finding and reasoning given by the Tribunal holding it in favour of the assessee and against the Department is within the four walls of law. We hold that no substantial question of law is raised to have the appeal preferred by the Department to be entertained by this Court. 14. The Department has filed I.A.No.1424 of 2016 seeking for permission to raise an additional ground and also raising an additional question as to: whether, on the facts and in the circumstances of the case, the gains earned on cancellation of the Foreign Exchange Forward Contract are capital receipts or revenue receipts ? This is mainly in the context of the course ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ng gains on cancellation of forward contracts, which is claimed to be of capital in nature, in view of the findings of the Special bench in respect of the related amount of ₹ 11,06,49,739/-. 22. As regards the revenue's additional ground is concerned, in our considered opinion this has also got a direct link with the forward contracts taken to cover the interest portion of loan. Since we have admitted the assessee's additional ground on similar issue, on the receipt side, we are inclined to admit this additional ground also, which is on payments side. 23. Having admitted these additional grounds, we also heard the parties on the merits of the claims. However, in our considered view since this claim was made for the first time before the Tribunal by both the parties, there had been no occasion for the Assessing Officer to deal with the issue, since the assessee itself had claimed them to be revenue receipt and revenue payment. Thus, the CIT (Appeals) had also no occasion to deal with this issue because no such grounds were raised before him. Therefore, in the interest of natural justice, we deem it and proper to restore these two additional grounds (one raised by ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... f the agreement shall be for a period of 5 years from expiry of the earlier agreement and hence the agreement became operative on the date of expiry of the earlier agreement itself, i.e. from 26.01.1992, though the approval was given by the Government only later on 13.10.1993. It was held that the approval related back to the effective date of agreement viz. 26.01.1992. The Commissioner of Income Tax (Appeals) also observed that, out of the total royalty amount of ₹ 2,61,52,641/-, a sum of ₹ 49 lakhs was in respect of the period from 26.01.1992 to 31.03.1992 falling within the period of the assessment year 1992-93 and hence the said extent cannot be allowed as part of expenses of the assessment year 1993-94. The Commissioner of Income Tax (Appeals) virtually deleted the dis-allowance of ₹ 2,12,52,641/- relatable to the period from 01.04.1992 to 31.03.1993. The Tribunal considered the facts and figures meticulously and found that the order passed by the Commissioner of Income Tax (Appeals) was not liable to be interdicted. It was accordingly, that the appeal preferred by the Revenue was dismissed. We hold that the finding and reasoning given by the Tribunal is c ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... eal preferred by the Assessee, the Commissioner of Income Tax (Appeals) deleted the above additions, holding that there was no dispute as to the actual payment of commission and that the details of export (through the sister concern/Raunaq International Ltd.) were produced before the Assessing Officer and the said Company (payee) had duly disclosed the said income in its account and satisfied the income tax. It was also observed that the Assessing Officer had no case that the agreement in this regard was not valid. Reliance was also placed on the various other supporting factors to hold that the allegation of diversion of income was wrong and misconceived. The finding of the Commissioner of Income Tax (Appeals) was affirmed by the Tribunal, leading to the dismissal of the appeal preferred by the Department (paragraph 48). This is a clear 'finding on fact' and the challenge raised by the Revenue in this appeal does not involve any substantial question of law. 21. Yet another question involved in this appeal is in respect of the depreciation claimed by the Assessee in terms of Section 43A of the Income Tax Act on the increased cost of the asset due to fluctuation in curren ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ) and never returned to the Assessee. But the summons issued under Section 131 of the Act to the aforesaid parties came to be returned unserved by the postal authorities, with the endorsement that there was no such company/concern, except in the case of one establishment by name Business Wings , who denied their involvement and the business transaction with the Assessee Company. This made the Assessing Officer to issue a letter to the bankers of the Assessee (State Bank of Patiala, New Delhi), whereupon photocopies of all the cheques which were encashed, were furnished by the Bank Manager, except the cheque for a sum of ₹ 9,30,332/- stating that it was not traceable. Despite the factual aspects proved before the Assessing Officer, he disallowed the advertisement expenditure of ₹ 76,63,510/-, which came to be affirmed by the Commissioner of Income Tax (Appeals) as well. 23. In the appeal preferred by the Assessee before the Tribunal, meticulous analysis was made as to the evidence produced, particularly as to the actual work executed. The Tribunal held that, merely because the summons issued to 5 parties were returned unserved and one party had denied the service r ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... at the payment was effected through crossed cheques and further since all these cheques have been encashed, we are of the view that this is not a fit case where interference is to be made with the finding and reasoning given by the Tribunal. The omission/ absence on the part of the Bank to produce the particulars in respect of the cheque for ₹ 9,30,332/- (stating that the said cheque could not be traced out) by itself cannot be a ground to draw any adverse inference, as the other ingredients with regard to the work involved, payment of publicity charges through crossed cheques and encashment of cheques by Bankers stand vindicated. That apart, the finding given by the Tribunal is purely a 'question of fact' and no substantial question of law is involved. 28. ITA. No.534 of 2009: Coming to I.T.A.No.534 of 2009, the factual position reveals that the Assessee had incurred 'roll over charges' amounting to ₹ 3.10 crores for renewal/roll over of the foreign exchange forward contracts taken by the Assessee for repayment of foreign currency loans. Out of the total amount, a sum of ₹ 0.80 crores was charged to the Profit and Loss Accounts (relati ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 30. After hearing both the sides, we are of the view that the challenge raised by the Assessee does not constitute any substantial question of law coming within the purview of Section 260A of the Income Tax Act, to be entertained by this Court in the appeal. This Court is also aware of the present 'Litigation Policy' framed by the Government of India, Ministry of Finance as per the Circular No.3/2018 dated 11.07.2018 of the CBDT, Department of Revenue, which has been issued in supersession of the earlier Circular bearing No.21/15 dated 10.12.2015. Paragraphs 3,5 and 12 of the said Circular are extracted below: Henceforth, appeals/SLPS shall not be filed in cases where the tax effect does not exceed the monetary limits given hereunder Sl. No. Appeals/SLPs in Income-tax matters Monetary Limit (Rs.) 1 Before Appellate Tribunal 2000000 2 Before High Court 5000000 3 Before Supreme Court 10000000 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... the said Circular , it has been categorically stated that the Circular shall apply to the SLPs/Appeals/Cross Objections/References to be made henceforth in Supreme Court/High Courts/Tribunal and it shall also apply retrospectively to pending SLPs/Appeals/Cross Objections/References. It is also given in crystal-clear terms in the said paragraphs that pending appeals below the specified tax limits in paragraph 3 may be withdrawn/not pressed. 32. Incidentally, it is brought to the notice of this Court that the word 'may appearing in paragraph 13 of the said Circular gives only a discretion to the Department and it is open for the Department to pursue the matter, if it is so desired. But this issue came to be considered by the Apex Court in a common verdict dated 17.09.2018 in Civil Appeal N o.7126 of 2008 and connected cases, wherein it was held, that in all the said appeals, the tax effect was less than Rs. one Crore and hence were covered by the Circular of the CBDT and in turn, all the said appeals were dismissed. 33. In the above facts and circumstances, we are of the firm view that in the above appeals preferred by both the Revenue and the assessee, no merit or sub ..... X X X X Extracts X X X X X X X X Extracts X X X X
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