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TMI Blog2021 (4) TMI 902X X X X Extracts X X X X X X X X Extracts X X X X ..... of assessment proceedings, from the P&L A/c of the assessee, the Assessing Officer observed that the assessee has credited Rs. 7,01,48,671/- towards forex gain under the head "other income" and the assessee had shown Rs. 49,11,07,448/- towards loss on 'Mark to Market on foreign exchange forwards'. The Assessing Officer also observed that the assessee has debited/reduced Rs. 49,11,07,448/- towards 'unrealized hedging loss' to arrive at the net Forex gain of Rs. 7,01,48,671/-. The assessee was therefore, asked to justify the allowability of such unrealized hedging loss in view of the CBDT instruction No.3 of 2010. The assessee furnished its reply vide letter dated 2.2.2016. The Assessing Officer, however, was not convinced with the assessee's contentions. He held that the loss on forward contracts is not to be allowed as per the above CBDT instructions. He accordingly disallowed the same and brought it to tax. 3. Further, he also observed that the assessee has incurred expenditure of Rs. 2,86,26,000/- on the issue of ESOPs. The Assessing Officer, inspite of taking note of the decision of the Hon'ble Special Bench of ITAT in the case of Biocon Pharmaceuticals Ltd, observed that ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ations and Processing Enterprise (India) Private Limited which was merged with HDPI pursuant to the order of Hon'ble Mumbai High Court; The Appellant craves, to consider each of the above grounds of appeal without prejudice to each other and craves leave to add, alter, delete or modify all or any of the above grounds of appeal". 7. As regards Ground No.1(a), the learned Counsel for the assessee submitted that this issue is covered by the decision of the Coordinate Bench of this Tribunal in the assessee's own case for the A.Y 2014-15. Further he placed reliance upon the following other decisions: a) ITAT Mumbai in the case of Lupin Ltd in ITA No.7274/M/2014 dated 26.10.2016 b) ITAT Hyderabad in the case of Kesoram Industries Ltd in ITA No.1195/Hyd/2019, dated 21.10.2020 c) ITAT Kolkata in the case of Speciality Restaurants Ltd in ITA No.1318/Kol/2017 dated 30.11.2018. 8. The learned DR however, supported the orders of the authorities. Having regard to the rival contentions and the material on record, we find that the issue is covered in favour of the assessee by the order of this Tribunal in the assessee's own case for A.Y 2014-15 and the relevant paras are reproduced ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ce with the provisions contained in sections 30 to 43D." General: Section 37 : "(1) Any expenditure (not being expenditure of the nature described in sections 30 to 36 and not being in the nature of capital expenditure or personal expenses of the assessee), laid out or expended wholly and exclusively for the purposes of the business or profession shall be allowed in computing the income chargeable under the head "Profits and gains of business or profession". Explanation.- For the removal of doubts, it is hereby declared that any expenditure incurred by an assessee for any purpose which is an offence or which is prohibited by law shall not be deemed to have been incurred for the purpose of business or profession and no deduction or allowance shall be made in respect of such expenditure." (emphasis supplied) Method of Accounting: Section 145: "(1) Income chargeable under the head "Profits and gains of business or profession" or "Income from other sources" shall, subject to the provisions of sub-section (2), be computed in accordance with either cash or mercantile system of accounting regularly employed by the assessee. (2) The Central Government may notify in the Offici ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... " has also been used. For example, depreciation and allowances are dealt with in Section 32. Therefore, Parliament has used the expression "any expenditure" in Section 37 to cover both. Therefore, the expression "expenditure" as used in Section 37 may, in the circumstances of a particular case, cover an amount which is really a "loss" even though the said amount has not gone out from the pocket of the assessee. 14. In the case of M.P. Financial Corporation v. CIT reported in 165 ITR 765 the Madhya Pradesh High Court has held that the expression "expenditure" as used in Section 37 may, in the circumstances of a particular case, cover an amount which is a "loss" even though the said amount has not gone out from the pocket of the assessee. This view of the Madhya Pradesh High Court has been approved by this Court in the case of Madras Industrial Investment Corporation Ltd. v. CIT reported in 225 ITR 802. According to the Law and Practice of Income Tax by Kanga and Palkhivala, Section 37(1) is a residuary section extending the allowance to items of business expenditure not covered by Sections 30 to 36. This Section, according to the learned Author, covers cases of business expenditur ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... or market price, whichever is the lower. As profits for income-tax purposes are to be computed in accordance with ordinary principles of commercial accounting, unless, such principles stand superseded or modified by legislative enactments, unrealized profits in the shape of appreciated value of goods remaining unsold at the end of the accounting year and carried over to the following years account in a continuing business are not brought to the charge as a matter of practice, though, as stated above, loss due to fall in the price below cost is allowed even though such loss has not been realized actually. At this stage, we need to emphasise once again that the above system of commercial accounting can be superseded or modified by legislative enactment. This is where Section 145(2) comes into play. Under that section, the Central Government is empowered to notify from time to time the Accounting Standards to be followed by any class of assessees or in respect of any class of income. Accordingly, under Section 209 of the Companies Act, mercantile system of accounting is made mandatory for companies. In other words, accounting standard which is continuously adopted by an assessee can ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... nees UK Limited (a tax resident of United Kingdom), is in excess of the rate provided under Article 11 under the India - United Kingdom DTAA (i.e. 15%), and thus the tax paid over and above the rate provided in the DT AA is eligible for refund. The Appellant craves leave to add, alter, delete or modify the above ground of appeal". 12.2 The assessee has made the following submissions in support of his prayer for admission of additional grounds: "To The Hon'ble Members of the Income-tax Appellate Tribunal, A Bench, Hyderabad 2- Re: M/S HSBC Electronic Data Processing India Private Limited ('HDPI' or 'Appellant') Assessment Year 2014-15 - AAACH8235M Sub: Request for permitting to file additional grounds of appeal. Appeal fixed on 26 November 2019. ITA No: 1249/Hyd/17 (Assessee Appeal) Assessment Year: 2012-13 Dear Sir/ Madam, The Appellant has filed an appeal before the Hon'ble Income Tax Appellate Tribunal (' IT A T or 'Tribunal') challenging the order dated 01 March 2017 passed by the Learned Commissioner of Income-tax (Appeals) - 7, Hyderabad ['Ld. CIT(A)'] under Section 250 of the Income Tax Act, 1961 ('t ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ribution tax under section I 15-0 is a tax on "dividend income" paid by the company. Further, the Hon'ble Mumbai Tribunal in case SGS India Private Ltd (ITA No 2467/Mum.l2014) dated 3 July 2017 has admitted the additional ground raised by the taxpayer company in respect of refund of DOT paid in excess of Treaty rate as applicable on the dividend paid to foreign shareholders. Accordingly, in view of the above, the Appellant wishes to file an additional ground before your Honours to claim refund of excess DOT paid on dividend distributed to foreign shareholders as tabulated below: S.No Name of the shareholder Amount of dividend paid (NUR) DDT paid (INR) 1 HSBC Holdings BV Netherlands, UK 3,596,281,936 583,406,837 2 HSBC Finance, Netherlands 832 135 3 HSBC Group Nominees UK, Ltd 100,582,456 16,316,989 Your Honours would appreciate that additional grounds can be raised at appellate stages, if the facts in connection with the issues raised, are on record. In support of the said proposition, the Appellant relies on the following judicial precedents in this regard. a) National Thermal Power Co. Ltd. Vs. CIT 229 ITR 383 (SC) b) Jute Corporation o ..... X X X X Extracts X X X X X X X X Extracts X X X X
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