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TMI Blog2019 (4) TMI 1723X X X X Extracts X X X X X X X X Extracts X X X X ..... expenditure by the A.O. without appreciating the findings recorded in the assessment order ? (b) Whether in the facts and in circumstances of the case, the learned ITAT has erred in law and on facts in deleting addition on account of loss on allotment of fertilizer bonds at Rs. 18,52,04,574/- by holding that the loss offered on allotment cannot be considered as capital loss but has to be allowed as business loss u/s. 28 read with section 37 of the Act without appreciating that merely because the market value of bonds on the date of allotment of bonds was less than actual value of bonds received by way of subsidy, it could not be said that the assessee had incurred business loss on allotment of fertilizer bonds, since consequent upon allotment of fertilizer bonds, the assessee did not sell it but held it as investment? (c) Whether in the facts and in circumstances of the case, the learned ITAT has erred in law and on facts in deleting addition on account of loss on actual sale of fertilizer bonds of Rs. 3,77,73,348/- by holding it as business loss u/s. 28 read with section 37 of the Act without appreciating that the fertilizer bonds received by the assessee was a capital asset ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e of Rs. Rs. 2,55,82,153/- /- and disallowed the addition on that score. 4. It emerges from records that the manufacturing facility of the appellant included fertilizers and chemical plants complex wherein fertilizers like Urea and Ammonium Nitrophosphate and chemicals like Ammonia, Formic Acid, Acetic Acid, Weak Nitric Acid, Concentrated Nitric Acid and Methanol were manufactured. Various plants and equipment were in continuous operation in corrosive and acidic atmosphere. It was found that no new assets were created in the process of replacement of worn out parts. There was no capacity addition. The replacement of components of old machinery was made to bring to its original state of efficiency so that the entire integrated manufacturing unit which was considered as a profit making apparatus functions efficiently to its capacity and produces quality products. The CIT (Appeals) after perusing the paper book which contains the details like name of the main plant or machinery to which the replaced component pertains, cost of replaced component, cost of total plant and past history of disallowance and appellate decision in past in respect of similar components and the facts which w ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... and the bonds so received by the assessee company in lieu of subsidy being part of sale price have been shown as current assets. These bonds are issued in lieu of debt which the company's books disclose as due from the Government as subsidy. However, when the company received the bonds, the market value was less than the face value. Accordingly, effectively the assessee company has realised the lower value of subsidy to the extent of difference in the face value and the market value of the date of the issue of bonds and the said difference in value was claimed as a loss on the date of allotment, which was disallowed by the Assessing Officer, amounting to Rs. 1862.04 lakhs. 5.2 Being aggrieved by the said disallowance, the assessee preferred an appeal before the CIT (Appeals), which was allowed. 5.3 Being aggrieved, the revenue filed appeal before the Tribunal. The Tribunal confirmed the findings of fact and affirmed by the order of the CIT (Appeals) and dismissed the appeal of the revenue. 6. Learned advocate Mr. Varun K Patel for the revenue submitted that merely because the market value of the bond on the date of allotment was less than the value of the bond received b ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ditional sale price received from the Government of India and the assessee company had offered such amount to tax accordingly as part of the sale price and, therefore, the realisation to the additional sale price by way of subsidy in the form of fertilizer bonds does not make bond an investment, because such bonds were never acquired by the assessee as investment for capital but the same were received as debt and also shown as current assets. Accordingly, the loss on actual sale of the bonds cannot be considered as capital loss but the same was required to be allowed as business loss. 10. The Tribunal followed its earlier decision in ITA No.339/Ahd/2012 for assessment year 2008-09 in the case of Gujarat State Fertilizer and Chemicals Ltd. wherein similar issue had arisen. Being aggrieved by the same, the revenue preferred Tax Appeal No.900 of 2018 and this court by order dated 31.7.2018 dismissed the appeal by holding that the fertilizer bonds were issued by the Central Government in lieu of the subsidy. It is not disputed that the subsidy income cannot be said to be a business income. Therefore, in the facts of the case, the fertilizer bonds which were given by the Central Gover ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... n between the assessee company and the dealer is of Principal to Principal and the assessee company makes sales of the goods to the dealer. The appellant company and the dealer are mutually liable for fulfilling all the terms and conditions of the sale. Property in the goods passes to the dealer along with delivery of the goods and, therefore, discount given by the assessee company to the dealer is not a commission. The Tribunal affirmed the decision of the CIT (Appeals). 12. It was contended on behalf of the revenue that for sales made through dealers there were tripartite agreements between the assessee, the dealer and the ultimate purchaser. That in the case of sales under such tripartite contract, consumers and the dealers are informed about the price, discounts and other terms and conditions of sales and the material is transferred directly to the consumer. Therefore, the dealer does not have any control over the price at which the product would be sold to the consumer and, therefore, it was submitted that the dealer is acting like commission agent. Further the major distinguishing point of dealer and commission agent would be whether the person has any flexibility in chargi ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... year to the account of, or to, the payee, does not exceed fifteen thousand rupees: ... ... .. Explanation - For the purposes of this section, - (i) "commission or brokerage" includes any payment received or receivable, directly or indirectly, by a person acting on behalf of another person for services rendered (not being professional services) or for any services in the course of buying and selling of goods or in relation to any transaction relating to any asset, valuable article or thing, not being securities." 14. On a perusal of the aforesaid provision of section 194H, it is clear that any person, not being an individual or Hindu undivided family, who is responsible for paying by way of commission or brokerage shall, at the time of credit of such income to the account of the payee or at the time of payment of such income in cash whichever is earlier, is liable to deduct tax. Explanation (1) to section 194H defines "Commission or Brokerage" which includes any payment received or receivable, directly or indirectly by a person acting on behalf of another person for services rendered (not being professional services) or for any services in the course of buying and selling ..... X X X X Extracts X X X X X X X X Extracts X X X X
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