IN THE INCOME-TAX APPELLATE TRIBUNAL “D” BENCH, MUMBAI BEFORE SHRI RAHUL CHAUDHARY, JUDICIAL MEMBER &

SMT. RENU JAUHRI, ACCOUNTANT MEMBER आयकर अपील सं./ITA No. 6715/MUM/2024 ( निर्धारण वर्ा / Assessment Year :2009-10)

DCIT-1(3)(1), Mumbai v/s. Diebold Nixdorf India Pvt.

Room No. 540, 5^th Floor, Ltd.

बनाम Aayakar Bhavan, M. K. 17^th Floor, Romell Tech Road, Churchgate, Park, North Side, IT Mumbai-400020 Building No. 2, Nirlon Compound, Village Pahadi, Goregaon East, Maharashtra-400063 स्थायी लेखा सं./जीआइआर सं./PAN/GIR No: AAACD3206C ..

Appellant/ Respondent/

अपीलधर्थी प्रनिवधदी

निर्धारिती की ओर से /Assessee by: Shri Nikhil Tiwari राजस्व की ओर से

/Revenue by: Shri R. R. Makwana

12.02.2025 सुनवाई की तारीख / Date of Hearing घोषणा की तारीख/

Date of Pronouncement 10.03.2025 आदेश / O R D E R PER RENU JAUHRI [A.M.] :-

This appeal is filed by the assessee against the order of the Learned Commissioner of Income-tax (Appeals), Mumbai-56/ [hereinafter referred to as “CIT(A)”] dated 24.09.2024 passed u/s. 250 of the Income-tax Act, 1961 [hereinafter referred to as “Act”] for Assessment Year [A.Y.] 2009-10.

2. The assessee has raised the following grounds of appeal:

“(1) Whether on the facts and circumstances of the case & in law, the learned CIT(A) has erred in allowing Foreign Exchange Loss amounting to Rs. 17,28,23,000/- under section 37(1) read with section 93 of the Income Tax Act, 1961.

(ii) Whether on the facts and circumstances of the case & in law, the learned CIT(A) has erred in allowing a sum of Rs. 19,11,951/- towards interest on delayed payments of Sales Tax and Service Tax.”

3. Ground No. 1 relates to allowing the claim of Foreign Exchange Loss u/s 37(1) r.w.s. 93 of the Act – Rs. 17,28,23,000/-

3.1 Brief facts of the case are that the assessee is a company engaged in the business of supply and installation of ATMs. Return for AY 2009-10 was filed on 29.09.2009 declaring a total income of Rs. 15,56,06,400/-. The case was selected for scrutiny and reference u/s 92(CA)(1) of the Act was made to the Transfer Pricing Officer [TPO] for determination of the Arm’s Length Price [ALP] in respect of the international transactions entered into by the assessee with its Associate Enterprises [AE]. Vide order dated 31.12.2012, Ld. TPO held that no adjustment was required to the value of international transactions entered by the assessee. Thereafter, the assessment was completed u/s 143(3) of the Act under which a disallowance of foreign exchange loss of the tune of Rs.

17,28,23,000/- u/s 37(1) was made by the Ld. AO.

3.2 Aggrieved with the order of Ld. AO, the assessee preferred an appeal before Ld. CIT(A). Vide order dated 24.09.2024, Ld. CIT(A) allowed the assessee’s appeal.

Aggrieved with the order of Ld. CIT(A), the revenue is in appeal before the Tribunal.

3.3 Before us, Ld. DR heavily relied on the order of Ld. AO and has pointed out that the outstanding balance to M/s Diebold Inc. (US) remained unpaid since FY 2003-04, and therefore, it lost its character as a credit and attained the character of a loan. Accordingly, the loss on account of change in forex rates is capital in nature and cannot be allowed as a revenue loss. It was submitted that the assessee held back the funds and did not repay the trading debt in time, as a result of which the outstanding debt rose to Rs. 1,06,86,08,000/- due to the escalation of the value of USD vis-a-vis INR. Ld. DR has further pointed out that under the RBI policy, such payment cannot be held back beyond a maximum period of 3 years without the permission of the governing body of RBI. However, the assessee has not obtained any such permission from the RBI, and therefore, the expenditure incurred is in contravention of legal provisions and is, therefore, not allowable as per the explanation to section 37(1) of the Act.

3.4 On the other hand, Ld. AR has strongly relied on the order of Ld. CIT(A). It has been argued that the decision of the Ld. CIT(A) is well reasoned with due appreciation of the facts of the case. He arr