9911796707
TMI Blog2021 (6) TMI 202X X X X Extracts X X X X X X X X Extracts X X X X ..... utilisation out of it as an expenditure in its computation of income - HELD THAT:- It is not the issue of taxability or the chargeable of the receipt in isolation. But the claim of deduction for utilisation of the so-called exempt grant which has to be considered alongwith. This is the actual subject matter of debate over here. Hence this claim of the learned counsel of the assessee that assessing officer has quoted wrong section is not at all sustainable. Moreover, it is settled law that quoting a wrong section is not fatal. AO has not specifically invoked section 56(2). The dubious method adopted by the assessee of claiming the utilisation of grant as deduction from taxable income without offering the corresponding grant as income cannot be brushed aside on the claim that it is not debited to profit and loss account. As in substance the assessee is claiming the utilisation of grant as deduction in the computation of income. CIT(A) has completely erred in this regard. The amount received from the holding company cannot be allowed to be treated as exempt if the utilisation out of it is allowed as deduction from the total income chargeable to tax. The assessee cannot treat th ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ce of salary provisions u/s. 43B(f) of the I.T. Act, 1961 amounting to ₹ 30,02,616/- without appreciating the fact that provision for leave salary only an estimate and was not actual paid, thus making it a contingent liability. 2. On the facts and the circumstances of the case and in law, the learned CIT(A) erred in treated the grant of ₹ 2,27,74,314/- received from holding company as capital receipt as the same was not used for creating any capital asset but was used to pay salary to the director. 3. On the facts and the circumstances of the case and in law, the learned CIT(A) erred in relying on the case law in the case of CIT vs. Deutsche Post Bank Home Finance Ltd. [2012] 209 Taxman 313 (Delhi) as the case law applies to money received from holding company to recoup losses and not applicable to money received for paying salary of directors in contravention of the company act, 2013. 4. On the facts and the circumstances of the case and in law, the learned CIT(A) erred in deleting the disallowance of loss on forward contracts of ₹ 74,306/-without appreciating the facts that no benefit of adjustment of income or gain on account of mark to mar ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... m of provisions for leave salary. Ground No. 6 is accordingly allowed. 6.7 I find that the Hon'ble ITAT Mumbai has held that leave encashment is not a statutory liability but a contractual liability and hence does not attract Section 43B. Further, as per Explanation 2 to Section 43B, the leave encashment must be both due and payable to be disallowed under Section 43B. Thus, following the ITAT decision in Aditya Birla Nuvo Ltd. v ACIT (supra], this ground of appeal is decided in favour of the appellant and the disallowance of leave salary of ₹ 30.02.616/- is deleted. 5. Against the above order revenue is in appeal before us. 6. Having heard both the parties and perused the record, we find that the issue is duly covered in favour of the assessee by the decision of ITAT referred by the Ld.CIT(A) as above. No contrary decision was brought to our notice. Hence, we are uphold order of Ld.CIT(A). 7. Apropos ground No. 2 and 3 Brief facts on this issue are that the assessee company was required to make payment to its Directors. Due to the constraints of provisions of Companies Act with regard to managerial remuneration it could not pay more than & ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... Crores and credited grant received of ₹ 2.27 crroes. In other wards, the appellant claimed net deduction of ₹ 48 Lakhs being Director fees paid to Mr.Thomas Varghese. In the return of income, the appellant claimed deduction for the entire Director s remuneration of ₹ 2.76 crores, but excluded the capital grant received. 9. Ld.CIT(A) found that the it may be noted that this grant is a form of donation. Learned CIT(A) further observed that however, the holding company M/s. Grasim Industries Ltd has not claimed deduction for the grant in its income tax return. This observation was made despite noting that the grant was claimed as exempt and its utilisation was claimed by the assessee as its deduction from taxable income. 10. Ld.CIT(A) referred to following decisions:- i. Hon ble Supreme court in Siemens Public Communication Network (P.) Ltd. Vs. CIT[2017] 390 ITR 1 (SC) ii. Hon ble Delhi High Court in CIT v Deutsche Post Bank Home Finance Ltd. [2012] 209 Taxman 313 (Delhi) 11. Referring to the above decision Ld.CIT(A) deleted the disallowances holding as under:- 8.9 Thus, Courts have held that if the grant from holding company was to r ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... rder, revenue is in appeal before us. 13. We have heard both the parties and perused the record. 14. Ld. Departmental Representative submitted that while assessee has treated the amount received from its holding company as a tax-free grant and at the same time treated the utilisation out of it as an expenditure in its computation of income. Learned Departmental Representative submitted that this is totally contradictory and unsustainable proposition and learned CIT(A) has completely erred in his order. He further submitted that the case laws referred by learned CIT(A) are not at all applicable on the facts of the case. He submitted that in the case laws referred by learned CIT(A), the holding company was giving amount to its subsidiary companies i.e. the assesse s who were loss making companies. Hence, the amount was received for the survival of the companies and recovery of loss. He submitted that in the present case assessee has made a profit of ₹ 12.77 crores and hence facts are different. 15. Learned Counsel of the assessee submitted that the amount was received from the holding company to pay director remuneration as the assessee was not in a position to p ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... very kind which is not to be excluded from the total income under this Act shall be chargeable to income tax under the head income from other sources, if it is not chargeable to income tax under any of the heads specified in section 14 items A to E. He further submitted that section 56(2) only prescribes in particulars of incomes, which shall be chargeable to income tax under the income from other source. Hence he pleaded that the addition of receipt of ₹ 2,27,74,314/- from holding company is to be upheld. 18. We have carefully considered the submissions and perused records. As per the undisputed fact in this case assessee company has paid remuneration to its director As per the provisions of the Companies Act, assessee company could pay only ₹ 48 lakhs. The remuneration payable was ₹ 2.76 crores. So assessee received fund from the holding company to pay the balance i.e. ₹ 2.27 crores. The assessee accounted for the amount so received as grant and debited the remuneration paid against the said grant. Only the balance i.e. income of the remuneration paid over grant received was claimed in the profit and loss account. Thus the debit to profit and loss acc ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... red alongwith. This is the actual subject matter of debate over here. Hence this claim of the learned counsel of the assessee that assessing officer has quoted wrong section is not at all sustainable. Moreover, it is settled law that quoting a wrong section is not fatal. Furthermore assessing officer has not specifically invoked section 56(2). The dubious method adopted by the assessee of claiming the utilisation of grant as deduction from taxable income without offering the corresponding grant as income cannot be brushed aside on the claim that it is not debited to profit and loss account. As in substance the assessee is claiming the utilisation of grant as deduction in the computation of income. 20. In this view of the matter in our considered opinion CIT(A) has completely erred in this regard. The amount received from the holding company cannot be allowed to be treated as exempt if the utilisation out of it is allowed as deduction from the total income chargeable to tax. The assessee cannot treat the grant as its not taxable income and at the same time claim utilisation out of it as a deduction from total income. Hence, we are of the considered opinion that the sum of ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... wed the mark to market loss of ₹ 74,306/-. 22. Upon assessee s appeal Ld.CIT(A) referred to several case laws and distinguished the decision referred by the assessing officer. He concluded as under:- 9.9 In view of all the above factors, I am of the view that the forward contract market to market loss is an allowable deduction. The loss was incurred for the purpose of business and revenue in nature as the forward contracts were purchased in connection with the appellant s export obligation. Thus, Ground NO.4 of the appeal is allowed and the disallowance made by the ld. Assessing Officer is hereby deleted. The appellant is entitled to relief of ₹ 74,306/-. 23. As regards the above Revenue is in appeal before us. 24. We have heard both the parties and perused the records. 25. Learned Departmental Representative relied upon the Assessing Officer s order. 26. Learned Counsel of the assessee submitted that the issue is covered in favour of the assessee. Learned counsel referred to the decision of Hon'ble jurisdictional High Court in the case of CIT v. D. Chetan Co. [2017] 390 ITR 36 (Bom HC), where it was held that Forward contracts for pu ..... X X X X Extracts X X X X X X X X Extracts X X X X
|
