DCIT, Circle - 8(1), Kolkata, Kolkata v. M/s. Magma Fincorp Ltd., Kolkata

ITA 1503/KOL/2018 | 2014-2015
Pronouncement Date: 28-02-2020 | Result: Dismissed

Appeal Details

RSA Number 150323514 RSA 2018
Assessee PAN AABCM9445K
Bench Kolkata
Appeal Number ITA 1503/KOL/2018
Duration Of Justice 1 year(s) 7 month(s) 16 day(s)
Appellant DCIT, Circle - 8(1), Kolkata, Kolkata
Respondent M/s. Magma Fincorp Ltd., Kolkata
Appeal Type Income Tax Appeal
Pronouncement Date 28-02-2020
Appeal Filed By Department
Order Result Dismissed
Bench Allotted C
Tribunal Order Date 28-02-2020
Last Hearing Date 12-12-2019
First Hearing Date 12-12-2019
Assessment Year 2014-2015
Appeal Filed On 12-07-2018
Judgment Text
1 ITA NO.1503/KOL/2018 MAGMA FINCORP LTD. AY 2014-15 C IN THE INCOME TAX APPELLATE TRIBUNAL C BENCH: KOL KATA ( )BEFORE . /AND . # . $ ) [BEFORE SHRI J. SUDHAKAR REDDY AM & SHRI A. T. VAR KEY JM] I.T.A. NO. 1503/KOL/2018 ASSESSMENT YEAR: 2014-15 DEPUTY COMMISSIONER OF INCOME-TAX CIRCLE-8(1) KOLKATA. VS. M/S. MAGMA FINCORP LIMITED (PAN: AABCM9445K) APPELLANT RESPONDENT DATE OF HEARING 29.01.2020 DATE OF PRONOUNCEMENT 28.02.2020 FOR THE APPELLANT SHRI SUPRIYO PAL JCIT SR. DR FOR THE RESPONDENT SHRI RAVI TULSIYAN FCA ORDER PER SHRI A.T.VARKEY JM THIS IS AN APPEAL FILED BY THE REVENUE AGAINST THE ORDER OF LD. CIT(A)-3 KOLKATA DATED 14.05.2018 FOR AY 2014-1. 2. GROUND NO. 1 OF REVENUES APPEAL IS AGAINST THE ACTION OF LD. CIT(A) IN ALLOWING THE ESOP EXPENSES OF RS.65 19 000/-. 3. THE ISSUE IS REGARDING DELETION OF DISA LLOWANCE OF ADDITIONAL ESOP EXPENSES OF RS.65 19 000/-. FACTS OF THE CASE AS PER THE AO AR E THAT HE HAS MADE THE DISALLOWANCE ON THE GROUND THAT THE ABOVE EXPENSES HAVE NOT BEEN DEBITED IN THE BOOKS OF ACCOUNT AND HENCE NOT ALLOWABLE. AGGRIEVED ASSESSEE PREFER RED AN APPEAL BEFORE THE LD. CIT(A). BEFORE THE LD. CIT(A) THE ASSESSEE CONTEN DED THAT THE ISSUE IS COVERED BY THE DECISION OF THE SPECIAL BENCH OF THE TRIBUNAL IN TH E CASE OF BIOCON LTD. VS. DCIT 35 TAXMANN.COM 335 AND ALSO BY THE DECISION TAKEN BY T HE PREDECESSOR LD. CIT(A) IN ASSESSEES OWN CASE FOR AY 2013-14. AFTER CONSIDER ING THE SUBMISSIONS THE LD. 2 ITA NO.1503/KOL/2018 MAGMA FINCORP LTD. AY 2014-15 CIT(A) WAS OF THE OPINION THAT THE CLAIM FOR DEDUCT ION OF RS.65 19 000/- ON ACCOUNT OF ESOP EXPENSES IS ALLOWABLE. THEREFORE HE DELETED THE ADDITION OF RS.65 19 000/- AS MADE BY THE AO. AGGRIEVED REVENUE IS BEFORE US. 4. BEFORE US THE LD. DR VEHEMENTLY RELIED ON THE ORDER OF AO AND CONTENDED THAT THE ALLOWABILITY OF ESOP EXPENDITURE HAS NOT ATTAIN ED FINALITY FROM THE HONBLE APEX COURT. HENCE HE URGED BEFORE THE BENCH TO SET ASI DE THE ORDER OF THE LD. CIT(A) AND RESTORE THAT OF THE AO. PER CONTRA THE LD. COUNSE L FOR THE ASSESSEE SUBMITTED THAT THE ISSUE IN RESPECT OF THE ASSESSEES CLAIM ON ACCOUNT OF ESOP EXPENSES DURING THE RELEVANT ASSESSMENT YEAR STANDS SQUARELY COVERED BY THE DECISION OF SPECIAL BENCH OF THE TRIBUNAL IN THE CASE OF BIOCON LTD. VS. DCIT RE PORTED IN 35 TAXMANN.COM 335 AND ALSO BY THE DECISION OF THIS TRIBUNAL IN ASSESSEES OWN CASE FOR THE AY 2013-14 IN ITA NO. 946/KOL/2017 DATED 07.12.2018 SO HE URGED BEFO RE THE BENCH TO DISMISS THE APPEAL OF REVENUE ON THIS SCORE. 5. WE HAVE HEARD RIVAL SUBMISSIONS AND GONE T HROUGH THE FACTS AND CIRCUMSTANCES OF THE CASE. WE NOTE THAT THE ISSUE IS REGARDING D ELETION OF DISALLOWANCE OF ADDITIONAL ESOP EXPENSES OF RS.65 19 000/-. WE NOTE THAT THIS ISSUE STANDS SQUARELY COVERED BY THE DECISION OF SPECIAL BENCH OF THE TRIBUNAL IN TH E CASE OF BIOCON LTD. VS. DCIT REPORTED IN 35 TAXMANN.COM 335 AND ALSO BY THE DECI SION OF THIS TRIBUNAL IN ASSESSEES OWN CASE FOR THE AY 2013-14 IN ITA NO. 946/KOL/2017 DATED 07.12.2018. SINCE THE LD. DR IS UNABLE TO CONTROVERT THIS FACT WE ARE OF THE CONSIDERED OPINION THAT THE ISSUE IS SQUARELY COVERED BY THE DECISION OF SPECIAL BENC H OF THE TRIBUNAL IN THE CASE OF BIOCON LTD. VS. DCIT REPORTED IN 35 TAXMANN.COM 335 AND ALSO BY THE DECISION OF THIS TRIBUNAL IN ASSESSEES OWN CASE FOR THE AY 2013-14 IN ITA NO. 946/KOL/2017 DATED 07.12.2018 (SUPRA). WE ALSO NOTE THAT THE LD. CIT( A) HAS ALSO GIVEN RELIEF TO THE ASSESSEE BY RELYING ON THE DECISIONS CITED SUPRA. SINCE THIS ISSUE IS SQUARELY COVERED IN FAVOUR OF THE ASSESSEE WE DISMISS THE GROUND OF AP PEAL OF THE REVENUE AND CONFIRM THE ACTION OF THE LD. CIT(A) IN THIS REGARD. REVENUES GROUND OF APPEAL IS DISMISSED. 3 ITA NO.1503/KOL/2018 MAGMA FINCORP LTD. AY 2014-15 6. GROUND NO. 2 OF REVENUES APPEAL IS AGAIN ST THE DELETION OF ADDITION MADE BY AO TO THE TUNE OF RS.1 97 06 000/- TOWARDS EXCHANGE LO SS. BRIEFLY STATED THE FACTS AS OBSERVED BY THE AO ARE THAT HE NOTED FROM THE COMPU TATION OF INCOME OF THE ASSESSEE THAT THE ASSESSEE HAS REDUCED AN AMOUNT OF RS.197.0 6 LAKHS ON MTM PROFIT ON DERIVATIVE CONTRACT FROM THE COMPUTATION OF INCOME . ACCORDING TO AO THE ASSESSEE IN ITS REPLY DATED 27.07.2016 REFERRED TO THE BOARDS INSTRUCTION NO. 3/10 DATED 23.03.2010 AND CONTENTED THAT THE PROFIT SHOULD BE TREATED AS NOTIONAL PROFIT ONLY AND SHALL NOT BE TAXABLE. THE AO EXAMINED THE SUBMISSI ONS OF THE ASSESSEE AND FOUND IT TO BE UNTENABLE. HE THEREFORE HELD THAT THE MTM PRO FIT ON DERIVATIVE AS INCOME OF THE ASSESSEE. ACCORDING TO AO THE DIFFERENCE LOSS OR GAIN ARISING ON CONVERSION OF THE OUTSTANDING LIABILITY AT THE CLOSING RATE SHOULD BE RECOGNIZED IN THE PROFIT AND LOSS ACCOUNT FOR THE REPORTING PERIOD WHICH HAS BEEN DUL Y RECOGNIZED BY THE ASSESSEE BUT IN THE COMPUTATION OF INCOME THE MTM PROFIT HAVE BEEN DEDUCTED WHICH ACCORDING TO HIM IS AGAINST THE DECISION OF HONBLE SUPREME COU RT IN THE CASE OF CIT VS. WOODWARD GOVERNOR INDIA (P) LTD. (2009) 179 TAXMAN 326 (SC). IN VIEW OF THE ABOVE DEDUCTION OF RS.1 97 06 000/- CLAIMED BY THE ASSESSEE IN ITS COMPUTATION OF INCOME WAS DISALLOWED BY THE AO AND ADDED BACK TO T HE TOTAL INCOME OF THE ASSESSEE. AGGRIEVED ASSESSEE PREFERRED AN APPEAL BEFORE THE LD. CIT(A) WHO DELETED THE ADDITION AS MADE BY AO BY OBSERVING AS UNDER: THE ISSUE IS REGARDING THE ADDITION OF RS.1 97 06 000/- ON ACCOUNT OF NOTIONAL INCOME OF MARKED TO MARKET PROVISION REVERSED. FURT HER THE APPELLANT HAS RELIED ON THE DECISION TAKEN BY MY PREDECESSOR IN APPELLANT'S OWN CASE FOR THE ASSESSMENT YEAR 2013-14 IN APPEAL NO. 2210/CIT(A-3/C-8( I )/20 15-1 6 ORDER DATED 20.02.2017 THE OBSERVATION OF MY PREDECESSOR IS AS FOLLOWS: 14. I HAVE CONSIDERED THE FACTS OF THE CASE ASSES SMENT ORDER THE REMAND REPORT AND THE OTHER MATERIAL BROUGHT ON RECORD. THE ASSES SING OFFICER HAD DISALLOWED AN AMOUNT OF RS. 283.30 LACS SHOWN AS NEGATIVE FIGURE UNDER NOTE 24 AS FINANCE COST ARRIVING OUT OF DERIVATIVE TRANSACTIONS. THE REASON GIVEN FOR DISALLOWANCE WAS THAT IN ABSENCE OF DETAILS FOR TRANSACTIONS IT COULD NOT B E DENIED THAT THE TRANSACTIONS WERE RELATED TO THE BUSINESS OF THE ASSESSEE. HOWEVER TH E APPELLANT HAS EXPLAINED THAT THE AMOUNT REDUCED THIS YEAR WAS ACTUALLY RELATED TO TH E REVERSAL OF ENTRY IN THE PREVIOUS YEAR. DURING THE YEAR ENDED ON 31. 03. 2012 THE ASS ESSEE HAD A MTM LOSS ON REINSTATEMENT OF HEDGING TRANSACTIONS OF RS. 522.68 LACS WHICH HAD BEEN CLAIMED IN THE BOOKS OF ACCOUNTS. AT THE TIME OF FILING OF RETURN FOR A. Y 2012-13 THE SAID AMOUNT WAS ADDED BACK WHILE COMPUTING RETURNED INCOME. AS ON 0 1.04.2012 IN THE BOOKS THE SAID LOSS OF RS. 522.68 LACS HAD BEEN REVERSED AND THERE FORE APPEARED AN INCOME SIDE. ALSO 4 ITA NO.1503/KOL/2018 MAGMA FINCORP LTD. AY 2014-15 AS ON 31.03.2013 [HERE WAS MTM LOSS OF RS. 239.38 W HICH APPEARED AS EXPENDITURE IN THE BOOKS. WHILE FILING OF RETURN FOR THE YEAR THE APPELLANT REVERSED BOTH THE ENTRIES RESULTING IN NET REDUCTION OF RS. 283.30 LACS. THE APPELLANT HAS PRODUCED COPY OF COMPUTATION OF INCOME FOR BOTH THE YEARS TO SUPPORT ITS CONTENTION. THUS IT CAN BE SEEN THAT THE DEDUCTION IS ON ACCOUNT OF REVERSAL OF ENT RY WHICH HAD BEEN CONSIDERED AS PART OF INCOME IN A. Y 2012-13. CONSIDERING THIS THERE IS NO JUSTIFICATION IN ADDING BACK TO THE AMOUNT OF RS. 283.30 LACS. THE ADDITION OF RS. 283.30 LACS IS ACCORDINGLY DELETED. IT IS OBSERVED THAT IN THIS CASE THE APPELLANT OFF ERED TO TAX A SUM OF RS. 522.86 LACS ON ACCOUNT OF REVERSAL OF MTM PROVISION IN AYR 2012-13 . THE SAID LOSS WAS REVERSED IN THE LAST ASSESSMENT YEAR TO THE EXTENT OF RS. 2 83 30 000/-. THE FIGURE FOR THE IMPUGNED YEAR IS RS. 1.97 06 000/-. THIS PROFIT IS NOTIONAL IN NATURE. FURTHER THE AMOUNT OF RS. 2 83 30 000/ WAS ALLOWED IN AYR. 2013- 14. RESPECTFULLY FOLLOWING THE SAME THE ADDITION MA DE BY THE AO OF RS. 1 97 06 000/- IS HEREBY DELETED. AGGRIEVED REVENUE IS IN APPEAL BEFORE US. 7. WE HAVE HEARD RIVAL SUBMISSIONS AND GONE THROUGH THE FACTS AND CIRCUMSTANCES OF THE CASE. WE NOTE THAT THIS ISSUE IS COVERED IN FAVOUR OF THE ASSESSEE IN ASSESSEES OWN CASE FOR THE AY 2013-14 IN ITA NO . 946/KOL/2017 DATED 07.12.2018 (SUPRA) AND THE LD. DR COULD NOT POINT OUT ANY CHAN GE IN FACTS OR LAW WHICH WOULD HAVE WARRANTED ANY INTERFERENCE ON THE PART OF US. IN THE ABSENCE OF THE SAME WE NOTE THAT THE ISSUE UNDER DISPUTE HAD BEEN DEALT ELABORA TELY BY THE LD. CIT(A) SUPRA WHICH WE AGREE AND THUS IN OUR CONSIDERED OPINION DOES N OT CALL FOR ANY INTERFERENCE. ACCORDINGLY THIS GROUND OF REVENUE IS DISMISSED. 8. IN THE RESULT THE APPEAL OF REVENUE IS DISMISSE D. ORDER IS PRONOUNCED IN THE OPEN COURT ON 28TH FEBR UARY 2020 SD/- SD/- (J. SUDHAKAR REDDY) (ABY. T. VARKEY) ACCOUNTANT MEMBER JUDICIAL MEMBER DATED : 28TH FEBRUARY 2020 JD.(SR.P.S.) 5 ITA NO.1503/KOL/2018 MAGMA FINCORP LTD. AY 2014-15 COPY OF THE ORDER FORWARDED TO: 1 . APPELLANT DCIT CIRCLE-8(1) KOLKATA. 2 RESPONDENT M/S. MAGMA FINCORP LIMITED MAGMA HOUS E 24 PARK STREET KOLKATA-700 016. 3 . THE CIT(A)-3 KOLKATA (SENT THOROUGH E-MAIL) 4. 5. CIT KOLKATA DR KOLKATA BENCHES KOLKATA (SENT THOROUGH E-MAIL) / TRUE COPY BY ORDER ASSTT. REGISTRAR .