TMI Blog2022 (4) TMI 694X X X X Extracts X X X X X X X X Extracts X X X X ..... lant, machinery and equipment to be used by them. It is a different matter that they may do so because of the leasing and hire purchase agreement with the appellant. That would be, nevertheless, an activity concerning the business of the appellant. In that view of the matter, the ITAT was right in answering the claim of the appellant in the affirmative, relaying on the dictum of this Court in India Cements Ltd. vs. Commissioner of Income Tax, Madras [ 1965 (12) TMI 22 - SUPREME COURT] The analysis done by the ITAT and the conclusion arrived at in respect of the subject claim of the appellant being the correct approach consistent with the exposition of this Court, needs to be upheld. In our opinion, the High Court missed the relevant aspects of the analysis of the ITAT concerning the fact situation of the present case. As a matter of fact, the High Court has not even adverted to the aforementioned reported decisions, much less its usefulness in the present case. Claim raised for the first time before the ITAT - whether since the appellant in its return had taken a conscious explicit plea with regard to the part of the claim being ascribable to capital expenditure and partly ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... l, Adv. Mr. Siddhartah Sinha, Adv. Mr. Jauhri Prakash, Adv. Mr. Tathagat, Adv. Mr. Nring C. Zehiang, Adv. Mr. Abhishek Mahajan, Adv. Mr. Prashant Rawat, Adv. Mr. O.P. Shukla, Adv. Mr. Kumar shashank, Adv. Mr. Raj Bahadur Yadav, AOR Mr. Preetesh Kapur, Sr. Adv. Mr. Senthil Jagadeesan, AOR Ms. Sonakshi Malhan, Adv. ORDER 1. This appeal takes exception to the judgment and order dated 2.4.2008 passed by the Division Bench of the High Court of Karnataka at Bengaluru in I.T.A. No. 633/2004. 2. Briefly stated, the appellant company submitted returns of income on 29.11.1997 for the assessment year 19971998, mentioning loss of income, amongst others, owing to exchange fluctuation of ₹ 1,10,53,909/. After processing the return under Section 143(1)(a) of the Income Tax Act, 1961 for short, the 1961 Act , the assessment was completed on 16.3.2000. As against the loss declared by the appellant due to exchange fluctuation, the assessment was concluded by positive taxable income. Against that decision, the matter was carried in appeal by the appellant before the Commissioner of Income Tax (Appeals) for short, CIT(A) and eventually, by way of appeal before the Income Tax ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ) fully covers the issue in favour of the assessee. We also find that in this case, assessee s claim satisfies all the tests laid down by Supreme Court in 124 ITR 1 extracted supra. In this case entire borrowal of loan and the utilisation of the same, is in trading operations of the company more profitably and the fixed capital in this case is untouched. Hence the expenditure is on revenue account and allowable. We also find the loss incurred by the assessee cannot be treated as contingent in nature as the loss on account of foreign exchange fluctuation has been quantified in terms of rule 115 of IT Rules and further the liability is real as per terms of the agreement with CDC. Just because the liability is payable in future does not covert the actual liability into contingent liability as held by the Supreme Court in Calcutta Co Ltd. vs. CIT 37 ITR 1 and Bharat Earth Movers Ltd. vs. CIT 245 ITR 428. Similar view has been expressed by ITAT special bench in ONGC case 83 ITR 51 (SB). Looking from any angle the claim on this issue is allowable. Accordingly, we allow the entire claim of ₹ 3,56,57,727/. We direct the AO to do so. This issue is held in favour of the ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... appellant for financing the existing Indian enterprises for procurement of capital equipment on hire purchase or lease basis. The fact remains that the activity of financing by the appellant to the existing Indian enterprises for procurement or acquisition of plant, machinery and equipment on leasing and hire purchase basis, is an independent transaction or activity being the business of the appellant. 7. As regards, the transaction of loan between the appellant and Commonwealth Development Corporation, the same was in the nature of borrowing money by the appellant, which was necessary for carrying on its business of financing. It was certainly not for creation of asset of the appellant as such or acquisition of asset from a country outside India for the purpose of its business. In such a scenario, the appellant would be justified in availing deduction of entire expenditure or loss suffered by it in connection with such a transaction in terms of Section 37 of the Act. For, the loan is wholly and exclusively used for the purpose of business of financing the existing Indian enterprises, who in turn, had to acquire plant, machinery and equipment to be used by them. It is a differen ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... t. If the advantage consists merely in facilitating the assessee's trading operations or enabling the management and conduct of the assessee's business to be carried on more efficiently or more profitably while leaving the fixed capital untouched, the expenditure would be on revenue account, even though the advantage may endure for an indefinite future. The test of enduring benefit is therefore not a certain or conclusive test and it cannot be applied blindly and mechanically without regard to the particular facts and circumstances of a given case. .. xxx xxx xxx 11. .. What is an outgoing of capital and what is an outgoing on account of revenue depends on what the expenditure is calculated to effect from a practical and business point of view rather than upon the juristic classification of the legal rights, if any, secured, employed or exhausted is the process. The question must be viewed in the larger context of business necessity or expediency. .. (emphasis supplied) 9. A priori, we are of the considered opinion that the analysis done by the ITAT and the conclusion arrived at in respect of the subject claim of the appellant being the co ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... Goetze (India) Ltd. supra at footnote No. 10 itself make it amply clear that such limitation would apply to the assessing authority , but not impinge upon the plenary powers of the ITAT bestowed under Section 254 of the Act. In other words, this decision is of no avail to the department. 12. Learned counsel for the department had also relied on the decision of this Court in Assistant Commissioner of Income Tax, Vadodara vs. Elecon Engineering Company Limited (2010) 4 SCC 482 . This decision is on the question of application of Section 43A of the 1961 Act. Accordingly, the exposition in this decision will be of no avail to the fact situation of the present case. For, we have already noticed that the appellant had not acquired any asset from any country outside India for the purpose of his business. 13. In view of the above, this appeal ought to succeed. The impugned judgment and order of the High Court needs to be set aside and instead, the decision of the ITAT dated 3.6.2004 in favour of the appellant on the two questions examined by the High Court in the impugned judgment, needs to be affirmed and restored. We order accordingly. 14. As a result of allowing the entire ..... X X X X Extracts X X X X X X X X Extracts X X X X
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