TMI Blog2021 (10) TMI 976X X X X Extracts X X X X X X X X Extracts X X X X ..... arguments advanced by the Revenue. None of the authorities have examined the issue in this angle in deciding the matter relating to substantial questions of law No.1. Hence, we remand the matter to the Tribunal to reconsider the matter in the light of the judgment of the Hon ble Apex Court in the case of Vijaya Bank. Foreign exchange fluctuation loss - AO disallowed the same holding that the assessee had not established the nexus for utilization of the funds raised in FNCR are used for the business purposes - HELD THAT:- The assessee has demonstrated before the Tribunal that increase in investments from ₹ 102.92 crores to ₹ 380.32 crores was on account of investment of ₹ 287 crores in 8% redeemable preference shares of Phipso Distillery Ltd., which was made on 31.03.2005 i.e., on the last day of the year and therefore the working capital obtained on various dates between 02.04.2004 and 31.03.2005 could not have been utilized from the same. It was also pointed out that the interest paid on the loans were allowed by the Assessing Officer himself as a deduction, however no loss in connection thereto was allowed. The action of the Assessing Officer accepting the ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... short) challenging the order dated 31.03.2015 of the Income Tax Appellate Tribunal, A Bench, Bangalore ( Tribunal for short) in ITA No.652/Bang/2013 relating to the assessment year 2008-09. 3. ITA No.37/2010 is filed by the revenue under Section 260A of the Income Tax Act, 1961 challenging the order dated 21.08.2009 of the Income Tax Appellate Tribunal, B Bench, Bangalore ( Tribunal for short) in ITA No.217/Bang/2009 relating to the assessment year 2005-06. 4. These appeals were admitted to consider the following substantial questions of law: In ITA No.548/2015: Whether on the facts and in the circumstances of the case, the Tribunal is right in holding that the funds raised in FCNR were utilized for business purpose and exchange loss was to be allowed in spite of the fact that the same was not established to be linked to the working capital of the business of the assessee and even when the case relied upon by the Tribunal is not applicable to present case? In ITA No.37/2010: 1. Whether the finding of the Tribunal that the assessee is entitled to write off bad debts and the same is eligible for deduction, is based on conjectures and surmise ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... t Appellate Authority, the Tribunal has observed that the Assessing Officer ought to have verified the claims of amounts taken in the very nature of their expenses have been allowed as day to day business expenses considering the assessee s own case relating to assessment years 1996-97, 1997- 98, where the amount was claimed as revenue expenditure on renovation and repairs of an asset not owned by the assessee but categorized as the advances paid to Martin Burns Limited, which has been paid subject to deduction at source. Thus, considering trade of the credit as claimed by the assessee being revenue in nature allowed the claim. 9. Learned counsel for the revenue has placed reliance on the judgment of the Hon ble Apex Court in the case of Vijaya Bank vs. Commissioner of Incometax reported in (2010) 323 ITR 166 (SC), wherein it has been explained that after the explanation vide Finance Act, 2001, in Section 36(1)(vii) with effect from 01.04.1989, the assesee (s) is now required not only to debit the profit and loss account but simultaneously also reduce loans and advances or the debtors from the asset side of the balance sheet to the extent of the corresponding amount so that, ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... erminative or conclusive and the matter is to be examined on the touchstone of provisions contained in the Act [See Kedarnath Jute Manufacturing Co. Ltd. v. CIT; Tuticorin Alkali Chemicals Fertilizers Ltd., Madras v. CIT; Sutlej Cotton Mills Ltd. v. CIT and United Commercial Bank, v.CIT. 13. In the case of Commissioner of Income Tax vs. Reliance Industries Ltd., reported in (2019) 102 taxmann.com 52 (SC), while considering the question whether the High Court is correct in holding that interest amount being interest referable to funds given to subsidiaries is allowable as deduction under Section 36(1)(iii) of the Income Tax Act, 1961 (for short the Act ) when the interest would not have been payable to banks, if funds were not provided to subsidiaries?, the Hon ble Apex Court held that, the issue raises a pure question of fact. The High Court has noted the finding of the Tribunal that the interest free funds available to the assessee were sufficient to meet its investment. Hence, it could be presumed that the investments were made from the interest free funds available with the assessee. 14. In the case of Commissioner of Income-tax vs. Reliance Utilities and ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... of incurring this loss as a business loss in the hands of the assessee. The annexure furnished indicates the forward rate and the spot rate during the accounting year therefore resulted in loss amounting to ₹ 1.8 crores is brought out clearly to be allowed as a business loss when primarily the assessee indicates that the loans were obtained in foreign exchange for working capital from its banks therefore indicated that a foreign exchange loss as noted by the bank was not to be borne by the banks but by the assessee. Therefore it is clear that the assessee has been able to establish its working capital requirements as was not related as otherwise noted by the Assessing Officer claimed as interest on forward contracts for investment in shares of companies which investment increased from ₹ 102 crores to ₹ 380 crores. Justifiably the learned counsel pointed out the issue in accordance with the provisions of section 43A distinguishing the capital/revenue nature imbibed therein to result in consideration thereof as were claimed by the assessee before the authorities below. The assessee himself rendered income on gain from exchange fluctuation on identical nature of reve ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... h and Development expenses on the ground that the said expenditure was not connected to the business of the assessee as it was in the business of manufacture and trading of beer and the details of research and development had not been furnished. The assessee contends that the details of the said expenditure were furnished before the CIT[A] which were primarily in the nature of employee related expenses with a breakup as under: 1. Salaries and wages ₹ 90.21 lakhs 2. Contribution of PF other funds ₹ 9.64 lakhs 3. Staff welfare expenses ₹ 0.79 lakhs 4. Rent ₹ 6.28 lakhs 5. Rent Taxes ₹ 0.01 lakh 6. Miscellaneous expenses ₹ 11.85 lakhs 20. It was submitted that the assessee being in the business of manufacture and trading of IMFL, the act of blending for each brand is under an exclusive formula which requires to be tested at the technical centers. The assessee also explained ..... X X X X Extracts X X X X X X X X Extracts X X X X
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