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2019 (11) TMI 406

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..... 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 asse .....

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..... , 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 during the course of search in the premises of the searched person, any proceedings can be initiated against the assessee u/s 153C of the Act. 5. Briefly the facts and circumstances of the case are that se .....

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..... 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 of search. In absence of the same, the Assessing Officer cannot exercise his jurisdiction u/s 153C of the Act for the captioned Assessment Year. We place reliance on the ratio laid down by the Hon ble Apex Court in the case of Sinhgad Technical Education Society(supra) and Hon ble Delhi High Court in the case of Kabul Cha .....

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..... 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 holding company of the assessee company and the loan was advanced to meet the general corporate expense and working capital requirements and also to repay existing overdraft loan. The loan was US dollars 2 million. The loan had to be repaid after three years from the date on which the assessee received the funds or such later dates as may be mutually agreed in writing. The said loan was provided interest free to the assessee. The copy of the agreement is place .....

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..... s 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. 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 foreign exchange loss of ₹ 2,20,90,211/- on the ground that loan of US$ 20,00,000 obtained from M/s Y2K Systems International Ltd, Mauritius, was treated as unexplained in A.Y. 2003- 04 and increase in loan amount due to foreign exchange loss cannot be allowed in A.Y. 2009-10. 2.1 That the Ld. CIT(A) has erred in upholding the disallowance of foreign exchange loss without considering the submissions made before him and order of the ITAT dated 24.07.2012 in ap .....

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..... e 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 the hands of the assessee. As per the Standard AS-11 of Accounting principles, such restatement of foreign exchange loan is the requirement of accounting principles. On such re-statement, the loss or gain arising there from is to be allowed as a deduction or added as income in the hands of the assessee, as the case may be. The assessee has filed tabulated chart in this regard wherein in Assessment Year 2005-06 loss arises in the hands of the assessee of ₹ 17,20,000/-, which has been allowed as a deduction. Further, the gain arising in all the other years has been added in the hands of the assessee. Following the similar principle of accounting, the assessee in the year under consideration had debited expenditure of ₹ 2.22 crore, which merits .....

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