ASST.C.I.T., BANGALORE vs. M/S SUBEX LTD., BANGALORE

Per Sunil Kumar Yadav, Judicial Member

This appeal is preferred by the Revenue against the order dated 14.05.2015 of CIT(Appeals)-6, Bangalore for the assessment year 2008-09 inter alia on the following grounds.

2. On the facts and in circumstances of the case, the CIT(A) erred in directing the Assessing Officer to re-compute the benefit allowable u/s 10A on account of change in profit without appreciating that the gain arising from restatement of Foreign Currency Convertible Bonds (FCCBs) does not have direct nexus with profits derived from the export activity of the assessee. 3. For these and such other grounds that may be urged at the time of hearing, it is humbly prayed that the order of the CIT(A) in so far as it relates to the above grounds may be reversed and that of the Assessing Officer be restored. 4. The appellant craves leave to add, to alter, to amend or delete any of the grounds that may be urged at the time of hearing of the appeal.”

3. The issue in this appeal on alternative claim of allowability of 10A deduction on the income enhanced due to certain disallowances made to the income by the AO in his order giving effect to the directions of the CIT u/s. 263 of the Act. The order of the CIT u/s. 263 of the Act holding foreign exchange gain arising from restatement of FCCBs is to be treated as income. The assessee was aggrieved by the said order of the CIT and filed an appeal before the Tribunal and the Tribunal vide its order dated 19.6.2015 held that FCCBs are instrument issued to investors for receiving funds which is repayable after certain period. Therefore, gain or loss would be on capital account and not taxable. The Tribunal accordingly set aside the view taken by the CIT. Therefore, the gain arising on account of statement of FCCBs cannot be treated as income in the hands of the assessee. The order of the ld. AO dated 5.1.2015 giving effect to the directions of the CIT became invalid, insofar as the aforesaid ground is concerned, because the subsequent appeal of the assessee and the appellate order of CIT(Appeals) insofar as the same is related to the aforesaid issue have become non est. In light of these facts, the appeal filed by the Revenue against the order of ld. CIT(Appeals) is infructuous and liable to be dismissed. The ld. DR did not dispute these factual aspects.

4. Having given a careful consideration to the rival submissions, we find that once the order passed u/s. 263 of the Act has been set aside by the Tribunal, the assessment order passed by the AO consequent to the order of CIT u/s. 263 of the Act became non est and any appeal arising out of it is not sustainable in the eye of law. We therefore dismiss the appeal of the Revenue as the same is not maintainable.

Pronounced in the open court on this 1st day of April, 2016.