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2021 (11) TMI 130 - AT - Income TaxRevision u/s 263 - As per CIT Assessee, in the garb of conversion from loan to equity, was irregularly allowed Long-Term Capital losses - HELD THAT:- The assessee had made strategic investment in RLS Inc. in earlier years. The investment was in the shape of share application as well as loans. As per the agreement, the loan was convertible into share capital. Accordingly, entire share application money as well as loan was converted into share capital / capital surplus as on 31/03/2011 - Long-Term Capital losses have been computed by the assessee as per the provisions of Sec.46 by deducting the indexed cost of acquisition from sale consideration. These transactions were duly reflected in the computation of income and necessary disclosures were made at appropriate places in the financial statements. These transactions were also reflected in Form No.3CEB which has been subjected to benchmarking before Ld. TPO. Not only this, specific enquiries were made by Ld. AO by issuance of notice u/s 142(1) wherein elaborate information was sought from the assessee with respect to this claim. The assessee responded to the queries comprehensively along with requisite information and documentary evidences. Allegation of Ld. Pr. CIT that the assessment order was passed without making requisite enquiries do not have any sound basis rather the same is based more on surmises and conjectures without appreciating material facts on record and without considering detailed response filed by the assessee during assessment proceedings as well as during revisional proceedings. As per settled legal position, the revisionary proceedings could not be held to be valid where Ld. AO had made enquiries and adopted the claim with due application of mind. Merely because the issue has not been discussed in the assessment order, the same would not lead to a conclusion that assessment was made without application of mind. On the facts and circumstances of the case, we are of the opinion that revisional jurisdiction as exercised by Ld. Pr. CIT u/s 263 is bad in law and is liable to be quashed in terms of settled legal position . Allowability of interest - As the interest was taxable u/s 56 to 59 as ‘Income from Other Sources’, the claim made u/s 36(2) could not be made and therefore, incorrect grant of the deduction has made the assessment order erroneous - We find that the allegations made by Ld. Pr. CIT are without any sound basis. The interest income was offered as well as accepted as ‘Business Income’ which is evident from the assessment order framed by Ld. AO. Not only this, the assessment orders for AYs 2009-10 to 2014-15 has been placed by the assessee on record, the perusal of which would show that interest income has always been accepted as ‘Business Income’ only. The opinion that interest would be taxable as ‘Income from Other sources’ is nothing more than an opinion of Ld. Pr. CIT and is one of the possible views. However, it is a fact on record that Ld. AO has chosen to accept the interest income as ‘business income’ in all the earlier years as well as in this year and accordingly, the write-off would be allowable business expenditure to the assessee as claimed in the Profit & Loss Account. This view is an equally possible view keeping in mind the fact that the investments were strategic investments in subsidiary and out of commercial expediency. This stand of the assessee was always accepted by the revenue in earlier years as well as in this year. The rule of consistency would debar the revenue to take different stand on similar factual matrix which is supported by the decision of Hon’ble Bombay High Court in the case of Pr.CIT V/s Quest Investment Advisors Pvt. Ltd[2018 (7) TMI 479 - BOMBAY HIGH COURT] After going through the assessment proceedings, it could be seen that the claim was well examined by Ld. AO and specific queries were raised with respect to the claim. The same were duly responded to by the assessee along with requisite documentary evidences. After considering the same, the claim was allowed with due application of mind. The view taken by Ld.AO could not be said to be contrary to the law. Therefore, the assessment order could not be held to be erroneous and prejudicial to the interest of the revenue. Assessee appeal allowed.
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