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DCIT Circle 17(1), New Delhi vs. M/s. Mosaic India Pvt. Ltd. Y-65, Ground Floor, Hauz Khas, New Delhi- 110016
October, 16th 2019
                                           1                       ITA No. 2325/Del/2015

                          IN THE INCOME TAX APPELLATE TRIBUNAL
                               DELHI BENCH: `C' NEW DELHI

                       I.T.A. No. 2325/DEL/2015 (A.Y. 2009-10)

          DCIT                            Vs.     M/s. Mosaic India Pvt. Ltd.
          Circle 17(1),                           Y-65, Ground Floor,
          New Delhi                               Hauz Khas,
                                                  New Delhi- 110016
                                                  PAN : AACCC4033C
          (APPELLANT)                             (RESPONDENT)

                      Appellant by     Sh. Manoneet Dalal, Ms.
                                       Manisha Jain, Sh. Vishu
                                       Goel, CA's
                      Respondent by    Sh. Amit Katoch, Sr.DR

                          Date of Hearing           07.08.2019
                          Date of Pronouncement
          This appeal is filed against the order dated 30.01.2015 passed by CIT(A)-
VI, New Delhi for assessment year 2009-10.

2.        The grounds of appeal are as under :

     1.       Whether on the facts & circumstances of the case & in law, the Ld.
     CIT(A) is justified in deleting the addition of Rs. 13,11,26,585/- on account of
     loss incurred on sale of bonds having span of 16 to 23 years received in lieu
     of cash subsidy and regarded as a capital loss by the A.O.
     2. That the order of the Ld. CIT(A) is erroneous and is not tenable on facts
     and in law.
     3. That the appellant craves leave to add, alter, amend or forego any
     ground(s) of appeal either before or at the time of hearing of appeal."
                                           2                        ITA No. 2325/Del/2015

3.    The assessee is a company incorporated in India under the provisions of
the Companies Act, 1956. The assessee is engaged in the business of import
and export of fertilizers, domestic trading and distribution of fertilizers and
Incidental activities such as stevedoring and warehousing services. The
assessee company electronically filed its revised return of income for the
subject year on 15.10.2010, declaring loss of Rs. 282,673,846 and claiming a
refund of Rs. 177,258,732. Furthermore, a paper copy of the said return was
filed with the office of the DCIT, Circle 5(1), New Delhi. The return was selected
for scrutiny under Section 143(3), and vide order dated 11.03.2013 passed
under Section 143(3) read with Section 144C of the Act, the Assessing Officer
assessed the income of the assessee company at Rs. 30,050,180 while making
the following additions:
 S.No.   Additions made by AO                                       Amount (Rs.)
 1       Disallowance       of   notional        loss/expenditure   181,597,443
         incurred      on   account   of       foreign   exchange
 2       Disallowance of loss incurred on sale of Special           131,126,585
         Government of India Fertilizer bonds ("bonds")
         received in lieu of subsidy from Government of
         India ("GOI")
         Total additions                                            312,724,028

4.    Being aggrieved by the Assessment Order, the assessee filed appeal
before the CIT(A). The CIT(A) allowed the appeal of the assessee.

5.    The Ld. DR submitted that the CIT(A) erred in deleting the addition of Rs.
13,11,26,585/- on account of loss incurred on sale of bonds having span of 16
to 23 years received in lieu of cash subsidy and regarded as a capital loss by
the Assessing Officer.

6.    The Ld. AR relied upon the decision of the co-ordinate bench in case of
                                           3                      ITA No. 2325/Del/2015

DCM Shriram Consolidated Ltd. vs. ACIT (ITA Nos 274 & 1301/Del/2013 order
dated 14.10.2015). The Ld. AR also relied upon the order of the CIT(A).

7.      We have heard both the parties and perused all the relevant material
available on record. The assessee company has to accept the special bonds in
lieu of cash/cheque payment made by the Government of India previously
against the amount of Fertilizer Subsidy receivable by the companies. These
bonds have been issued by GOI on face value with maturity of 16 to 23 years.
These bonds are in nature of trading assets of the company and the assessee
company was not in the position to hold these bonds as investment since it is
issued by the Govt. of India in lieu of subsidy recoverable in cash/cheque and
due to lack of funds, the assessee company was not able to hold these bonds.
The decision of the Tribunal in case of DCM Shriram (supra) is squarely
applicable in the present case. The facts of the present case is also identical
and therefore, the CIT(A) was right in holding that the same is a revenue loss
and not that of capital loss. The CIT (A) held as under:
     "4.2.10 It is well settled position that mere nomenclature or reflection or
     treatment adopted by the assessee for a particular item such as disclosing
     the Special Bonds issued by the GOI under the head "Investment" does not
     determine the taxability of such item. Hon'ble Supreme Court in the case of
     Kedarnath Jute Mfg. Co. Ltd. [82 ITR 363] held that, "whether the assessee is
     entitled to a particular deduction or not will depend on provision of law
     relating thereto, and not on view taken by the assessee nor can be existence
     or absence of entries in the books of accounts be decisive or conclusive in the
     matter" In the case of National Cement Mines Industries Ltd. vs. CIT [42 ITR
     69], Apex court held that, "the character of the receipt either as capital or as
     income should not be based on the name given to the amount received by the
     assessee in his records, because in law the real nature and character of the
     transaction must be determined in light of the terms of the contract and right
     and obligation of the parties flowing therefrom unguided by the nomenclature
     of the transaction". In view of the above factual and legal position the loss on
                                          4                      ITA No. 2325/Del/2015

     the sale of bonds is a revenue loss and, therefore, the AO is not justified in
     disallowing the same as capital loss. The appeal is allowed in this ground."
The addition therefore, was correctly deleted by the CIT(A). The reasoning given
by the CIT(A) was correct and there is no need to interfere with the findings of
the same. The appeal of the Revenue is dismissed.

8.      In result, appeal of the Revenue is dismissed.

Order pronounced in the Open Court on 15th October, 2019.

            Sd/-                                             Sd/-
(PRASHANT MAHARISHI)                                  (SUCHITRA KAMBLE)
 ACCOUNTANT MEMBER                                     JUDICIAL MEMBER

Dated:     15/10/2019

Copy forwarded to:

1.      Appellant
2.      Respondent
3.      CIT
4.      CIT(Appeals)
5.      DR: ITAT

                                                    ASSISTANT REGISTRAR

                                                         ITAT NEW DELHI
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