WIPRO FINANCE LTD. versus COMMISSIONER OF INCOME TAX

Citation: [2022] 2 S.C.R. 1146 · Decided: 12-04-2022 · Supreme Court of India · Bench: A.M. KHANWILKAR, ABHAY S. OKA, C.T. RAVIKUMAR · Disposal: Appeal(s) allowed
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Judgment (excerpt)

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[2022] 2 S.C.R.
[2022] 2 S.C.R. 1146
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WIPRO FINANCE LTD.
v.
COMMISSIONER OF INCOME TAX
(Civil Appeal No. 6677 of 2008)
APRIL 12, 2022
[A. M. KHANWILKAR, ABHAY S. OKA AND
C. T. RAVIKUMAR, JJ.]
Income Tax Act, 1961: s.37 – Disallowance – Loan borrowed
by assessee in foreign currency for expanding its primary business
of leasing and hire purchase of capital equipment to existing Indian
enterprise – While repaying the loan, due to the difference of rate
of foreign exchange, the assessee had to pay higher amount,
resulting in loss to the appellant –Claim for deduction on account
of loss of income owing to exchange fluctuation – Held: Transaction
of loan was in nature of borrowing money which was necessary for
carrying on its business of financing – It was the activity concerning
the business of the assesseeand not for creation or acquisition of
asset by appellant for its primary business – Hence, assessee was
entitled to claim deduction of entire expenditure or loss suffered in
connection with such a transaction in terms of s.37 of the 1961 Act
– With respect to the fresh claim set up by assessee before ITAT that
revenue expenditure of certain amount was erroneously capitalized
in returns – As no objection was taken by department before ITAT,
hence, cannot be contradicted at this stage.
India Cements Ltd. v. Commissioner of Income Tax,
Madras AIR 1966 SC 1053 : [1966] 2 SCR 944; Empire
Jute Co. Ltd. v. Commissioner of Income Tax (1980) 4
SCC 25 : [1980] 3 SCR 1370 – relied on.
National Thermal Power Co. Ltd. v. Commissioner of
Income Tax (1997) 7 SCC 489; Goetze (India) Ltd. v.
Commissioner of Income Tax [2006] 284 ITR 323;
Assistant Commissioner of Income Tax, Vadodara v.
Elecon Engineering Company Limited (2010) 4 SCC
482 : [2010] 3 SCR 108 – referred to.
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Case Law Reference
(1997) 7 SCC 489
referred to
Para 3
[1966] 2 SCR 944
relied on
Para 7
[1980] 3 SCR 1370 
relied on
Para 7
[2006] 284 ITR 323
referred to
Para 11
[2010] 3 SCR 108
referred to
Para 12
CIVIL APPELLATE JURISDICTION: Civil Appeal No. 6677
of 2008.
From the Judgment and Order dated 02.04.2008 of the High Court
of Karnataka at Bangalore in I.T.A. No.633 of 2014.
S. Ganesh, Arijit Prasad, Preetesh Kapur, Sr. Advs., Tejveer
Bhatia, K. R. Pradeep, Rohan Swarup, Gaurav Sharma, Abhinav Mukerji,
Ms. Archana Sachdeva, Ms. Pragati Agrawal, Vikramjit Banerjee,
Shailesh Madiyal, Siddhartah Sinha, Jauhri Prakash, Tathagat, Nring C.
Zehiang, Abhishek Mahajan, Prashant Rawat, O. P. Shukla, Kumar
Shashank, Raj Bahadur Yadav, Senthil Jagadeesan, Ms. Sonakshi Malhan,
Advs. for the appearing parties.
The following Order of the Court was passed:
ORDER
1. This appeal takes exception to the judgment and order dated
2.4.2008 passed by the Division Bench of the High Court of Karnataka
at Bengaluru in I.T.A. No. 633/2004.
2. Briefly stated, the appellant company submitted returns of
income on 29.11.1997 for the assessment year 1997-1998, mentioning
loss of income, amongst others, owing to exchange fluctuation of
Rs.1,10,53,909/-. After processing the return under Section 143(1)(a) of
the Income Tax Act, 19611, the assessment was completed on 16.3.2000.
As against the loss declared by the appellant due to exchange fluctuation,
the assessment was concluded by positive taxable income. Against that
decision, the matter was carried in appeal by the appellant before the
Commissioner of Income Tax (Appeals)2 and eventually, by way of appeal
before the Income Tax Appellate Tribunal3 being I.T.A. No. 795 (Bang)/
2000.
1 for short, “the 1961 Act”
2 for short, “CIT(A)”
3 for short, “ITAT”
WIPRO FINANCE LTD. v. COMMISSIONER OF INCOME TAX
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3. In the appeal before the ITAT, the appellant not only claimed
deduction in respect of loss of Rs.1,10,53,909/- arising on account of
exchange fluctuation, but also set up a fresh claim in respect of revenue
expenses to the tune of Rs.2,46,04,418/-, erroneously capitalised in the
returns. The ITAT entertained this fresh claim set forth by the appellant
and recorded in its judgment that the department’s representative had
no objection in that regard. Additionally, the ITAT adverted to the decision
of this Court in National Thermal Power Co. Ltd. vs. Commissioner
of Income Tax4 in support, for entertaining fresh claim of the appellant
in exercise of powers under Section 254 of the 1961 Act. The ITAT, in
the first place, reversed the
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