Dy. CIT v. Albasta Wholesale Services Ltd.

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The Tax Publishers2019 TaxPub(DT) 0958 (Del-Trib) : (2019) 070 ITR (Trib) 0504

INCOME TAX ACT, 1961

Section 28

Though, bid for construction of power plant through subsidiary was not successful, however, it was beyond dispute that assessee had already set up business and assessee had given advance to subsidiary to promote its business globally, which was nothing but business activity of the assessee and, accordingly, foreign exchange fluctuation loss, incurred by assessee while receiving back the money which was earlier advanced to its subsidiary for the purpose of setting up of plant abroad was expenditure incurred wholly and exclusively for the purpose of its business and the same was therefore, allowable.

Business loss - Foreign exchange fluctuation loss - While receiving back the money which was earlier advanced to its subsidiary -

Assessee engaged in establishing, commissioning, setting up, operating and maintaining power generating stations incurred foreign exchange fluctuation loss while receiving back the money which was earlier advanced to its subsidiary for the purpose of setting up of plant abroad. AO disallowed deduction thereof holding that said advance could not be said to have been given for business purpose.Held: Though, bid for construction of power plant through subsidiary was not successful, however, it was beyond dispute that assessee had already set up business and assessee had given advance to subsidiary to promote its business globally. The same was nothing but business activity of the assessee and, accordingly, foreign exchange fluctuation loss, incurred by assessee was expenditure incurred wholly and exclusively for the purpose of its business and the same was therefore, allowable.

Followed:Hero Cycles (P.) Ltd. v. CIT (2015) 379 ITR 347 (SC) : 2015 TaxPub(DT) 4897 (SC), S.A. Builders Ltd. v. CIT (2007) 288 ITR 1 (SC) : 2007 TaxPub(DT) 0833 (SC), CIT v. Modi Entertainment Ltd. (2014) 89 CCH 0014 (Del), CIT v. M/s. Dhoomketu Builders & Development Pvt. Ltd. (2014) 368 ITR 680 (Del) : 2013 TaxPub(DT) 1760 (Del-HC) and CIT v. ESPN Software India (P) Ltd. (2008) 301 ITR 368 (Del) : 2008 TaxPub(DT) 1756 (Del-HC).

REFERRED :

FAVOUR : In assessee's favour.

A.Y. : 2011-12

IN THE ITAT, DELHI BENCH