ACIT Vs Aamby Valley Ltd. (ITAT Delhi)
In a cross-appeal arising from assessment proceedings for Assessment Year 2013–14, the Tribunal examined multiple additions and disallowances made by the Assessing Officer and partly modified by the Commissioner of Income Tax (Appeals). The assessee had originally filed a nil income return after set-off of brought forward losses, but later filed a revised computation showing a substantial loss after withdrawing amortization of Foreign Currency Monetary Item Translation Difference Account. The Transfer Pricing Officer drew no adverse inference regarding the assessee’s domestic and international transactions. However, the Assessing Officer made total additions/disallowances exceeding ₹410 crore on various counts, including advances from customers, advertisement expenses, consultancy charges, diversion of interest-bearing funds, section 14A disallowance, prior period expenses, unsupported bills, TDS defaults, and notional interest on outstanding imprest.
On Revenue’s appeal, the Tribunal upheld the relief granted by the CIT(A) on all contested issues. It confirmed deletion of addition on advances from customers after noting that advances relating to sale of land had already been accounted for in earlier years and advances relating to chalets were recognized under the Percentage of Completion Method. Deletion of disallowances relating to advertisement and business promotion expenses, consultancy charges, bills not available, bills in another entity’s name, and expenses supported by documentary evidence was also sustained after verification of invoices and supporting material. The Tribunal further upheld deletion of addition on alleged diversion of interest-bearing funds, observing that only real income can be taxed and hypothetical notional interest cannot be brought to tax. Similarly, deletion of the massive disallowance under section 14A was affirmed because no exempt income had been earned during the year. Deletion of disallowances relating to prior period expenses, certain TDS-related payments where no deduction was required, and notional interest on long outstanding imprest was also upheld. As a result, Revenue’s appeal was dismissed in full.
