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TMI Blog2023 (6) TMI 1393X X X X Extracts X X X X X X X X Extracts X X X X ..... iness and to protect its business interest under commercial expediency. Therefore ground no. 2 3 of assessee being devoid on merits are dismissed. Disallowing long term capital loss - relevant assessment year incurred on account of transfer of land - AO treated the transaction as sham and disallowed claim - HELD THAT:- rom relevant paras of first appellate order we note that the ld. CIT(A) dismissed the claim of assessee of long term capital loss by observing that the transfer of capital asset by appellant company to its parent/holding company (in which appellant company is 100% subsidiary of its parent company i.e. BILT) therefore in view of provision of 47(v) of the Act the transaction of transfer of land from subsidiary to holding company is not covered u/s. 45 of the Act. We are in complete agreement with the findings arrived by the ld. CIT(A) based on section 47(v) of the Act and when the transaction does not falls within ambit of section 45 of the Act then any claim of long term capital loss/profit cannot be held as allowable. Accordingly, we are unable to see any reason to interfere with the findings of ld. CIT(A) and thus, we uphold the same - Decided against assessee. Allo ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... The assessee consistently submitting that the impugned loss is real and such loss has been debited to the P L account under the head provision for doubtful loans and advances. It was further submitted that from the perusal of audited account it is clear that the same was return of in the account as irrecoverable though the nomenclature was used as provision. On being asked by the bench the ld. Senior DR could not show us any factual matrix which may lead us to take a view that the impugned amount was not certain and was merely a provision. Thus the ld. CIT(A) keeping in view the judgment of Vijaya Bank [ 2010 (4) TMI 46 - SUPREME COURT] held that the impugned amount was certain in nature and therefore upward adjustment as per clause (c) of explanation 1 to section 115JB (2) of the Act cannot be made as per provisions of the Act. Therefore we are unable to see any valid reason to interfere with the findings arrived by the ld. CIT(A) on this issue and hence we uphold the same. - SHRI CHANDRA MOHAN GARG, JUDICIAL MEMBER AND DR. B.R.R. KUMAR, ACCOUNTANT MEMBER For the Assessee : Shri Upvan Gupta, Adv. For the Revenue : Shri Kanv Bali, Sr. DR ORDER PER CHANDRA MOHAN GARG, J.M. These c ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... xpenditure under consideration was incurred wholly and exclusively for the purposes of business. 3.1 That on the facts and in the circumstances of the case, the CIT(A) grossly erred in confirming the aforesaid action of the assessing officer without appreciating that the assessing officer has not doubted the fact of actual incurrence of the aforesaid expenditure for the purposes of business. 3.2 That on the facts and in the circumstances of the case, the CIT(A) grossly erred in confirming the aforesaid action of the assessing officer without appreciating that the statutory/ tax auditors of the assessee have verified the incurrence of aforesaid expenditure and no adverse observations were made by them in this regard. 3.3 That on the facts and in the circumstances of the case, the CIT(A) grossly erred in confirming the aforesaid action of the assessing officer without appreciating that the assessee, in order to protect its business interests, had discretion and right to re-incur a requisite expenditure. 3.4 That on the facts and in the circumstances of the case, the CIT(A) grossly erred in confirming the aforesaid action of the assessing officer without appreciating that the assessee ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... he facts of the instant case is similar to the case of The Commissioner of Income Tax (IT)-4 v/s. M/s. Siemens Nixdorf Information Systemse GmbH, wherein Hon'ble Bombay High Court held that a loss arising on the assignment of a loan granted by a foreign parent company to its Indian subsidiary is a capital loss within the meaning of section 2(14) of India's Income-tax Act, 1961. 2. The Ld. CIT(A) has erred on facts and in law by not considering the decision of Hon'ble Apex Court in the case of Bestobell(India), wherein the Hon'ble Apex Court had made distinction between exchange rate losses on capital account and revenue account. 3. The Ld. CIT(A) has erred on facts and in law in providing relief amounting to Rs. 96,609/- by erroneously stating that the agreement between the assessee and the Ballarpur Industries Limited did not cover the expenses incurred on insurance and audit fees. 4. The Ld. CIT(A) has erred on facts and in law by deleting the disallowance of Rs. 11,16,14,6371- made u/s 14A by placing reliance on the judgment on the decision of Hon'ble Delhi High Court in the matter of Joint Investments Private Limited wherein the Hon' ble High Court ruled ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ries Ltd. under the agreement with the appellant and therefore he rightly uphold the addition to this extent. 7. On careful consideration of above rival submissions, we note that the assessee has debited expenses on account of office other expenses and consultancy fee and these expenses were covered under the agreement and suppose to be incurred by M/s. Ballarpur Industries Ltd. therefore the Assessing Officer was right in disallowing both the claim of expenditure on account of office other expenses and consultation fee the ld. counsel could not show us any factual position to take a view that the assessee incurred expenditure under commercial expediency for the purpose of business and to protect its business interest. However, we note that the Assessing Officer has not doubted incurring of expenditure and quantum but for claiming such expenditure the assessee has to establish and discharge the onus that the assessee incurred expenditure wholly an exclusively for the purpose of business and to protect its business interest under commercial expediency. Therefore ground no. 2 3 of assessee being devoid on merits are dismissed. Ground No. 4 of assessee 8. Apropos ground no. 4 the ld. ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... indexation benefit claimed a long term capital loss for Rs. 3,74,14,983/-. The purchaser Ballarpur Industries Ltd, by all practical means had the right over the land through its once subsidiary, now held by another associate group company as holding company of the assessee. No valuation of the land was made prior to the sale and the assessed company agreed to sale the land at a lump sum consideration much below the book value price. There was no physical payment and neither any deed of conveyance was drawn and registered. The capital loss claimed is, therefore, disallowed. Thus, this transaction, entered into and executed through an agreement signed over a non judicial stamp paper of Rs. 50/- only is treated as sham. Considering the principle laid down by the Apex Court in the case of McDowell Co case reported in 154 ITR 148, the above transaction the Assessing Officer rightly treated the same as a colorable transaction to reduce taxable income of the assessee. He lastly pointed out that the Assessing Officer was right disallowing the claim of long term capital loss artificially created in the books of assessee. 10. On careful consideration of above submissions, and perusal of the ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ee charges interest on the loan which is offered to taxation. He further, submitted that the loss on fluctuation of foreign currency is a business loss as it is incidental to the nature of business therefore the ld. CIT(A) was right in allowing relief to the assessee. The ld. counsel also placed reliance on the judgment of the Hon ble Bombay High Court in the case of CIT vs. V.S Dempo Co. (P.) Ltd. (1993) 115 CTR 163 (Bom.). 13. On careful consideration of above submission, first of all, we note that the Assessing Officer has not doubted the quantum and reason that the assessee sustained loss on fluctuation of foreign currency rates of Rs. 16,06,000/-. It is noted by the Assessing Officer that the assessee company is non banking financial company and it provided loan for earning interest which is offered for taxation. In such a situation the loss incurred to the assessee due to fluctuation in the foreign currency rate cannot be held as capital loss and the ld. CIT(A) was right in allowing the same to the assessee. Our conclusion also gets support with the order of Hon ble High Court of Bombay in the case of CIT vs. V.S Dempo (supra). Accordingly, ground no. 1 2 of revenue are dismi ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ts thus in view of this preposition the amendment cannot be applied retrospectively to present AY 2004-05. Thus we are in agreement with the conclusion drawn by ld. CIT(A) that the disallowance u/s. 14A of the Act should be restricted to exempt income. Accordingly ground no. 4 5 of revenue being devoid of merits are dismissed. 18. Apropos ground no. 6 the ld. Senior DR submitted that The Ld. CIT(A) has erred on facts and in law and in holding that since the liabilities shown in Provision for doubtful loans advances' , are 'certain in nature, therefore no upward adjustment us 115JB(2)(C) can be made in this regard, by ignoring the provisions contained in Explanation [1](c) to the section 115JB(2) which provides that amount set aside to provisions made for meeting liabilities, other than ascertained liabilities has to be increased for the purpose of computing book profit. Therefore he submitted that the First Appellate Order may kindly be set aside by restoring that of the Assessing Officer. Replying to the above the ld. counsel submitted that in the present case the liabilities were certain in nature therefore no upward adjustment was required to be made. 19. On careful cons ..... X X X X Extracts X X X X X X X X Extracts X X X X
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