Judicial Analysis Court Copy Headnote Facts Arguments Court observation

2026 Supreme(Online)(ITAT) 9499

INCOME TAX APPELLATE TRIBUNAL (DELHI BENCH)
S. Rifaur Rahman, Accountant Member, Vimal Kumar, Judicial Member
Asst. CIT – Appellant
Versus
Aamby Valley Ltd. – Respondent
ITA No.1352/Del/2018 (ASSESSMENT YEAR 2013-14) | ITA No.1434/Del/2018 (ASSESSMENT YEAR 2013-14)

Advocates:
For the Appellants/Petitioners: Shri Aditya Vohra, Adv., Ms. Aakriti Bansal, CA
For the Respondents: Ms. Monika Singh, CIT-DR

Notional/hypothetical income like interest on interest-free business advances not taxable; s.14A disallowance impermissible absent exempt income; expense disallowances require proof of non-business nexus; revised computations entertainable in appellate proceedings; bad debts allowable as business loss.

Headnote:(A) Income Tax Act, 1961 - Sections 14A, 37(1), 40(a)(ia), 36(2), 250 - Cross appeals against CIT(A) order - Advances from customers deleted as revenue recognized per percentage completion method or agreement to sell execution; notional interest on interest-free business advances and imprest rejected as only real income taxable; disallowance u/s 14A deleted absent exempt income; various expense disallowances deleted/upheld post verification of bills/invoices nexus to business; TDS disallowances deleted where no deduction obligation or payee compliance via Form 26A; revised computation withdrawing amortization of foreign currency monetary item translation difference remitted for verification; bad debts written off as business loss allowable even if not qualifying u/s 36(2); brokerage for employee accommodation allowed as staff welfare expenditure. (Paras 9, 12, 18, 21, 27, 30, 33, 38, 41, 45, 50, 53, 56, 59, 62)

(B) Accounting Standards - AS-7, AS-11 - Revenue recognition for construction contracts/sale of land via percentage completion or agreement execution upheld; forex fluctuation gain on long-term loan to subsidiary treated as capital accretion, amortization to P&L not taxable. (Paras 8, 43)

Facts of the case:
Cross appeals for AY 2013-14 by revenue and assessee against CIT(A) order on assessment u/s 143(3). Assessee filed return declaring nil income after loss adjustment, revised computation showing substantial loss by withdrawing forex amortization. AO made multiple additions on advances, expenses, notional interest, s.14A disallowance; CIT(A) partly allowed assessee's appeal.

Findings of Court:
Revenue appeal dismissed; assessee appeal partly allowed - certain disallowances deleted (advances Rs.8.94 cr, notional interest Rs.3.90 cr, s.14A Rs.395.49 cr, bad debts Rs.23.01 lac, brokerage Rs.7.02 lac etc.), some remitted to AO (revised computation, certain expenses/TDS), one upheld (advertisement Rs.3.50 lac).

Issues: Whether additions on customer advances, expense disallowances, notional interest, s.14A, TDS non-deduction, bad debts, brokerage valid; revised forex claim entertainable; expense nexus to business.

Ratio Decidendi: Tribunal upheld CIT(A) deletions where documents verified revenue recognition, bills genuine, no exempt income for s.14A, only real income taxable; remitted unadjudicated claims; allowed alternate business loss claim; no ad-hoc disallowances without evidence.

Result: Revenue appeal dismissed; assessee appeal partly allowed.

Table of Content
1. factual background and procedural history established. (Para 1 , 2 , 3 , 4)
2. parties' grounds of appeal listed. (Para 5 , 6)
3. advances from customers properly accounted under poc method. (Para 7 , 8 , 9)
4. advertisement expenses allowed with invoice verification. (Para 10 , 11 , 12)
5. consultancy charges verified and allowed. (Para 13 , 14 , 15)
6. no notional interest on business advances taxable. (Para 16 , 17 , 18)
7. no s.14a disallowance without exempt income. (Para 19 , 20 , 21)
8. prior period expenses allowed on crystallization. (Para 22 , 23 , 24)
9. expenses with bills verified under s.37(1). (Para 25 , 26 , 27)
10. bills post-demerger related to assessee allowed. (Para 28 , 29 , 30)
11. documentary evidence supports expense allowance. (Para 31 , 33)
12. ground rejected as unpressed. (Para 34 , 35)
13. no tds required on certain payments. (Para 36 , 37 , 38)
14. no notional interest on imprest advances. (Para 39 , 40 , 41)
15. revenue appeal dismissed. (Para 42)
16. remitted revised computation on forex amortization. (Para 43)

ORDER

PER VIMAL KUMAR, JM:

Above captioned cross appeals filed by the Department of Revenue and the assessee are against order dated 29.12.2017 of the Learned Commissioner of Income Tax (Appeals), 23, New Delhi [hereinafter referred to as ‘the Ld. CIT(A)’] passed u/s 250 of the Income Tax Act, 1961, [hereinafter referred to as ‘the Act’] arising out of assessment order dated 26.12.2016 of Ld. Assessing Officer/ Assistant Commissioner of Income Tax, Central Cirlce-1, New Delhi [hereinafter referred as ‘the AO’] u/s 143(3) of the Act for Assessment Year 2013-14.

2. Brief facts of the case are that the assessee company filed original return of income on 30.11.2013 declaring income of Rs. Nil after adjusting brought forward losses of Rs.2,39,51,488/- against the profit earned during the year. The assessee company revised computation showing loss of Rs.58,49,38,385/- as the assessee has drawn amount of Rs.60,88,89,873/- being amortization of Foreign Currency Monetary Item Translation as Difference Account. The assessee submitted from Form No.3CEB U/s 92E along with audit report. The case was selected for scrutiny. Notice u/s 143(2) dated 04.09.2014 was issued to the assessee. Notices u/s 142(1) and 143(2) along with questionnaire were issued on 24.09.2015. The assessee was asked for certain details vide Notice dated 17.10.2016. S/Shri Sanjeev Singh, Shri Ram Babu Keshari and Anuj Tomar, ARs of the assessee appeared and filed details, produced books of accounts, bills & vouchers etc. The assessee reported “Receipt of Interest” of Rs.1,39,65,20,274/- on loan granted to its Wholly Owned Foreign Subsidiary Company M/s Aamby Valley Mauritius Limited (AVML). The loan of 480 million (mn) GBP i.e. Rs.35,24,51,61,000/- was granted in the previous financial year i.e. 2010-11. Certain other specified domestic transactions were also reported by the assessee. Because of specified domestic and international transaction, the matter was referred to the TPO 1(1) to determine the arm’s length price u/s 92CA(3) vide letter F. No. ACIT/CC-1/2015-16/1281 dt. 17.02.2016. 2(i) The T.P.O. passed order u/s 92CA(3) of the I.T. Act on 30.09.2016 wherein it was held that:-

“In view of functional and economic analysis of the assessee, no adverse inference is drawn in respect of the domestic and international transactions undertaken by the assessee during the F.Y.2012-2013.”

2(ii) On completion of proceeding Ld. AO vide assessment order dated 26.12.2016 made following additions:

3. Against order dated 26.12.2016 of Ld. AO, the assessee filed appeal before the Ld. CIT(A) which was partly allowed for statistical purposes vide order dated 29.12.2017.

4. Being aggrieved, the Department of Revenue and the assessee preferred the present cross appeals.

5. In ITA No.1352/Del/2018, the Department of Revenue raised following grounds of appeal:

“1. The order of Ld. CIT(A) is not correct in law and on facts.

2. On the facts and circumstances

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2026 Supreme(Online)(ITAT) 9499

INCOME TAX APPELLATE TRIBUNAL (DELHI BENCH)S. Rifaur Rahman, Accountant Member, Vimal Kumar, Judicial MemberAsst. CIT – AppellantVersusAamby Valley Ltd. – RespondentITA No.1352/Del/2018 (ASSESSMENT YEAR 2013-14) | ITA No.1434/Del/2018 (ASSESSMENT YEAR 2013-14)

INCOME TAX APPELLATE TRIBUNAL (DELHI BENCH)
S. Rifaur Rahman, Accountant Member, Vimal Kumar, Judicial Member
Asst. CIT – Appellant
Versus
Aamby Valley Ltd. – Respondent
ITA No.1352/Del/2018 (ASSESSMENT YEAR 2013-14) | ITA No.1434/Del/2018 (ASSESSMENT YEAR 2013-14)