TMI Blog2019 (11) TMI 406X X X X Extracts X X X X X X X X Extracts X X X X ..... greement dated 16.03.2002 was advanced to the assessee was interest free for a period of four years. - earlier agreement came to an end and a fresh loan agreement was entered into between the parties, under which it was agreed that the interest @ 6 % would be charged. There is no dispute of the aforesaid stand of the assessee. The only question whether by a subsequent agreement between the parties, interest free loan can be converted to interest bearing loan the answer to the same is yes . The parties in the first go had agreed that the loan would be non interest bearing but later on lender had demanded interest @ 6 % w.e.f. 01.04.2006 which was agreed upon by the borrower of the assessee company. In these circumstances, the interest claimed by the assessee was to be allowed in its hands in its entirety. Coming to the next statement of the assessee that since it had losses, the interest expenditure was reversed back in Assessment Year 2009-10 on which taxes were paid in the said year. The said fact is again not disputed and while deciding the present appeal, we consider the facts for the present year and decide the issue on its merit. Accordingly, we allow the claim of the a ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... HOWLA, JM: Out of this bunch of appeals, the assessee is in appeal against the order of CIT(A)-1, New Delhi dated 06.12.2012 relating to assessment years 2005-06, 2007-08, 2008-09 2009-10 respectively passed under section 143(3) of the Income-tax Act, 1961 (in short the Act ). Further, the Revenue has filed an appeal against the order of CIT(A)-1, New Delhi dated 17.11.2014 relating to Assessment Year 2009-10 passed under section 271(1)(c) of the Act. 2. This bunch of appeals were heard together and are being disposed of by this consolidated order for the sake of convenience. 3. The assessee in Assessment Year 2005-06 has raised the following grounds:- 1. The order of the learned Commissioner of Income-tax (Appeal) is bad in law and in facts. 2. That on the facts and in the circumstances of the case, the learned Commissioner of Income-tax (Appeal) has erred in upholding the disallowance of ₹ 5,22,238/- being 20% of fee paid to ROC as capital expenditure. 4. The issue which arises in the present appeal is whether in the absence of any incriminating document found du ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... s regard and the additional ground of appeal is admitted for adjudication. Coming to the issue raised vide additional ground of appeal, the case of the assessee is that in the absence of any incriminating material found/seized relating to disallowance of 20% fee paid ROC of ₹ 5,22,238/-, no assessment could be made u/s 153C of the Act. In this regard, reliance was placed on the decision of Hon ble Supreme Court in the case of Sinhgad Technical Education Society [2017] 397 ITR 344 and the decision of Hon ble Delhi High Court in the case of Kabul Chawla 380 ITR 573. 9. The Ld.DR for the Revenue placed reliance on the orders of the authorities below. 10. We have heard rival contentions and perused the record. The issue raised vide additional ground of appeal is against the exercise of jurisdiction by the Assessing Officer u/s 153C of the Act, in the absence of any incriminating material found from the premises of searched person. Nature of addition which is made in the hands of the assessee is 20% fee paid to ROC for increase in share capital. The disallowance has not been made on the basis of any incriminating material found during the course o ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... as w.e.f. 01.04.2006 under which it was agreed that for term of four years, interest would be charged @ 6 %. The Ld.AR for the assessee also explained that the assessee was following mercantile system of accounting and hence expenditure was debited; but since the assessee was incurring losses, the parent company i.e. Y2K System agreed to reverse the interest, which was reversed in Assessment Year 2009-10 in which year the assessee paid taxes on its reversal. In this regard, reliance was placed on the ratio by the Hon ble Supreme Court in the case of CIT vs M/s. Excel Industries Ltd. in Civil Appeal No.125 of 2013 dated 08.10.2013. 14. The Ld. DR for the Revenue placed reliance on the order of CIT(A) with special reference to para 3.4. 15. We have heard rival contentions and perused the record. The issue which arises in the present appeal is against the claim of interest expenditure of ₹ 52,12,800/-, payable on loan advanced by Y2K System of which the assessee was 100% subsidiary. The said loan was advanced to the assessee on 16.03.2002 as per the loan agreement entered into between the parties. It was acknowledged that Y2K System was the hold ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ee company. In these circumstances, the interest claimed by the assessee was to be allowed in its hands in its entirety. 17. Now coming to the next statement of the assessee that since it had losses, the interest expenditure was reversed back in Assessment Year 2009-10 on which taxes were paid in the said year. The said fact is again not disputed and while deciding the present appeal, we consider the facts for the present year and decide the issue on its merit. Accordingly, we allow the claim of the assessee vis- -vis the interest expenditure. Thus, this ground of appeal raised by the assessee is allowed. 18. The Ld.AR for the assessee fairly pointed out that the issue in Assessment Year 2008-09 was similar to the issue raised in Assessment Year 2007-08. Following the same parity of reasoning, we allow the claim of the assessee in Assessment Year 2008-09. 19. Let us take the appeal of the assessee for Assessment Year 2009- 10 wherein the assessee has raised the following grounds in this appeal:- 1. The order of the learned Commissioner of Income-tax (Appeal) is bad in law and in facts. ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... In this regard, reliance was placed on the ratio laid down by the Hon ble Supreme Court in the case of CIT vs Woodward Governor India Pvt.Ltd. [2009] 312 ITR 254(SC) and various other decisions. 23. The Ld.DR for the Revenue on the other hand, placed strong reliance on the orders of the authorities below and stressed that it was notional loss on the loan received and hence, it was a capital loss. 24. We have heard the rival contentions and perused the record. The assessee had raised loan in Assessment Year 2003-04, which during the assessment proceedings was held to be non-genuine. However, the Tribunal vide order dated 01.07.2019 has accepted the case of the assessee and held that the loan was raised by the assessee from its holding company in order to meet its working capital requirement. The interest paid on such loan has been allowed by us as revenue expenditure in the paras above for Assessment Years 2007-08 2008-09. During the year under consideration, the issue which arises is in respect of the diminution in value of foreign exchange loan. The loss on re-statement of the foreign exchange loan was claimed as deductible in th ..... 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