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Income Tax Appellate Tribunal, “E” Bench, Mumbai
O R D E R Per Shamim Yahya (AM) :-
This appeal by the Revenue is directed against the order of learned Commissioner of Income Tax (Appeals) [in short learned CIT(A)] dated 27.2.2009 and pertains to Assessment Year (A.Y.) 2004-04.
The grounds of appeal
read as under :- “On the facts and in the circumstances of the case and in law, learned CIT(A) has erred in allowing relief to the assessee to the extent impugned in the grounds enumerated below :
1. The learned CIT(A) has erred in allowing the expenses on shelved project amounting to Rs. 1,68,94,456/- and expenses on feasibility studies amounted to Rs.9,16,589/- without appreciating that these expenses are capital expenses.
2. The learned CIT(A) has erred in deleting the taxation of a sum of Rs. 2,31,67,715/- being the foreign exchange gain on repatriation of certificates of deposits (Euro Notes) without appreciating that the assessee itself is following a dual policy in respect of foreign exchange fluctuation gain/loss in various years.
3. The Ld. CIT(A) has erred in deleting the disallowance of provision for wages of Rs. 19,81,60,000/- without appreciating the fact that the 2 M/s. Tata Power Co. Ltd. provision debited by the assessee is contingent in nature and the liability is not accrued and/or crystallized.
4. For these and other grounds that may be urged at the time of hearing, the decision of the Ld. CIT(A) may be set aside and that of the Assessing Officer restored.
3. We note that this appeal was earlier disposed of by this Tribunal by a combined order with & 3080/Mum/2009 vide order dated 21.5.2019. Subsequently, in Miscellaneous Application order dated 22.5.2020, the ITAT order qua ground No. 2 above was recalled as under :-
“We have considered rival submissions and perused the material on record. As could be seen, in ground no.3 of ITA no.3036/Mum./2009, the Revenue has challenged the decision of learned Commissioner (Appeals) in deleting the surplus on buyback on Euro Notes issued by the assessee earlier. It was the claim of the assessee that since Euro Notes were issued by the assessee for capital expenditure, the income derived as a surplus on buyback of Euro Notes would be capital receipt, hence, not taxable. Though, the Assessing Officer treated it as income of the assessee, however, learned Commissioner (Appeals) relying upon the decision of the Tribunal in assessee’s own case for the assessment year 2000–01, allowed assessee’s claim and deleted the addition. Before the Tribunal, the assessee, apart from relying upon the decision of the Tribunal in its own case also relied upon the decision of the Hon'ble Supreme Court in CIT v/s Mahindra & Mahindra Ltd., [2018] 302 CTR 201 (SC), to contend that foreign exchange fluctuation gain on buyback of Euro Notes cannot be treated as income chargeable to tax as Euro Notes were raised for incurring capital expenditure. Though, the Tribunal has restored the issue to the Assessing Officer for fresh adjudication after applying the ratio laid down in Mahindra & Mahindra Ltd. (supra), however, before us, leaned Counsel for the assessee has submitted that after taking note of the decisions of the Hon'ble Supreme Court in Mahindra & Mahindra Ltd. (supra) and in CIT v/s T.V. Sundaram Iyengar & Sons, [1996] 222 ITR 344 (SC), the Hon'ble Jurisdictional High Court has reiterated the view expressed by the Hon'ble Supreme Court in Mahindra & Mahindra Ltd. (supra). He submitted, by virtue of the aforesaid decision of the Hon'ble Jurisdictional High Court, the issue stands settled in favour of the assessee. Therefore, there is no need for restoring the issue to the Assessing Officer. Having considered the submissions of the parties, we find that the Hon'ble Jurisdictional High Court in Reliance Industries Ltd. (supra), after taking note of the decisions of the Hon'ble Supreme Court in CIT v/s Mahindra & Mahindra Ltd., [2018] 404 ITR 001 (SC) and T.V. Sundaram Iyengar & Sons (supra) has upheld the decision of the Tribunal in holding that the gain derived from buyback of foreign currency bonds issued by the assessee cannot be treated as revenue receipt. Though, it may be a fact that the aforesaid decision was not cited before the Tribunal at the time of hearing of appeal, however, as held by the Hon'ble Supreme Court in Saurashtra Kutch Stock Exchange Ltd. (supra), non–consideration of a decision of Hon'ble
3 M/s. Tata Power Co. Ltd.
Supreme Court or the Jurisdictional High Court, even rendered posterior to disposal of appeal would constitute a mistake apparent on the face of record. In our view, since the aforesaid decision of the Hon'ble Jurisdictional High Court will have a crucial bearing on the disputed issue, non–consideration of the said decision certainly constitutes a mistake apparent on the face of record as envisaged under section 254(2) of the Act. Accordingly, we recall the order dated 21st May 2019, passed in Mum./2009, and restore the appeal to its original position. The Registry is directed to fix the appeal for hearing before the assigned bench in regular course upon intimation to both the parties. In the result, misc. application is allowed. Order pronounced through circulation in the notice board under rule 34(4) of the Income Tax (Appellate Tribunal) Rules,1962.”
Learned Counsel of the assessee submitted that there was some typing error in Miscellaneous Application order in as much as only ground No. 2 is recalled which needs to be adjudicated. In this regard he referred to the following corrigendum issued by the ITAT dated 7.10.2021 as under :-
“Due to certain inadvertent mistakes creeping into the order dated 22/05/2020 passed in MA.No.596/Mum/2019, we are issuing this corrigendum. In the second line of paragraph No.4 in place of "ground No.3", "ground No.2" should be read. Further, the order dated 21/05/2019 passed in is recalled for the limited purpose of deciding ground no.2 only. This corrigendum should be read as a part of order dated 22/05/2020 passed in MA.No.596/Mum/2019.”
Upon careful consideration and hearing both the parties, we find that this issue is now covered in favour of the assessee on the ratio of Hon'ble Bombay High Court decision in the case of Reliance Industries Ltd. (ITA No. 993 of 2016 dated 15.1.2019).
The brief facts on the issue are that to advance its capital expenditure programme, on 19.08.1997, the assessee had issued Euro Notes, partly maturing in 2007 and the remaining in 2017. It bought back Euro Notes of USD 42,444,000 which were maturing in 2017. The Euro Notes were bought back at a discount to the face value resulting in a surplus of Rs. 2,31,67,715. The aforesaid amount of Rs.2,31,67,715 was not offered for tax by the assessee in its return of income as this was a capital receipt, being a 4 M/s. Tata Power Co. Ltd.
reduction in a liability taken for a capital purpose. However, the Assessing Officer (AO) following his assessment orders for AY 2000-01 and 2002-2003 brought the said amount to tax under section 41(1) of the Income-tax Act, 1961 (the Act). The Commissioner of Income-tax (Appeals) [CIT(A)] following his appellate order for AY 2000-01, which by then had also been upheld by the Tribunal, deleted the addition. Against the deletion of addition by the CIT(A), the Revenue is in appeal before the Tribunal by way of ground No.2 in their appeal in as above.
We note that the ITAT in earlier year in assessee’s own case has decided the issue in favour of the assessee by relying upon the decision of Hon'ble Supreme Court in the case of Mahindra & Mahindra [2018] 302 CTR 201 (SC), on identical issue. We note that in similar situation Hon'ble Bombay High Court in the case of Reliance Industries Ltd. (supra) has reiterated the decision of Mahindra & Mahindra Ltd. (supra), after duly considering the decision of Hon'ble Supreme Court in the case of T.V. Sundaram Iyanger & Sons, [1996] 222 ITR 344. It was duly held that such gain on buyback of foreign currency bonds issued by the assessee cannot be treated as revenue receipt.
Respectfully following the precedent as above, we uphold the order of learned CIT(A).
In the result, ground No. 2 of the aforesaid appeal is decided in favour of the assessee.
Pronounced in the open court on 1.4.2021.