Dalmia Bharat Ltd. Vs DCIT (ITAT Delhi)
These were cross appeals by both the Assessee & Revenue against the order of CIT(A). Assessee, engaged in manufacture of cement, refractories & sponge iron, had raised multiple issues.
The first issue related to gain of Rs.92.05 lakhs on cancellation of a forward contract entered with UTI Bank for import of cement plant machinery from Germany. Assessee treated it as capital receipt reducing the cost of machinery in AY 2009-10, whereas AO treated it as speculative business income u/s 43(5) & CIT(A) held it as revenue receipt. Tribunal held that since the forward contract was inextricably linked with acquisition of capital asset, the gain was capital in nature following Sutlej Cotton Mills Ltd. (SC) & Apollo Tyres (SB). Accordingly, addition was deleted.
On the issue of unsecured public deposits of Rs.2.62 crore, AO added entire sum for want of PANs. CIT(A) gave partial relief accepting Rs.2.17 crore as renewals but sustained Rs.44.36 lakh. Tribunal found that CIT(A) deleted addition without proper verification, & restored the entire issue back to AO for denovo examination, thus allowing Revenue’s appeal for statistical purposes.
On technical knowhow payments of Rs.63.69 lakh made to foreign experts, AO had treated them as capital expenditure granting depreciation only. Tribunal, relying on its own orders in Assessee’s cases for AY 2005-06 & 2006-07, held the expenditure as revenue in nature since no enduring asset was acquired, only improvement of manufacturing process. Relief was granted.
