Adani Logistics Ltd., Ahmedabad V. The DCIT, Circle-1(1)(1), Ahmedabad

CO 29/AHD/2019

• Counselvise Citation: [2019] 115 COUNSELVISE.COM (IT) 6419 (ITAT-AHMEDABAD)
• Duration Of Justice: 6 month(s) 27 day(s)
• Appeal Type: Cross Objection
• Pronouncement Date: 22-10-2019
• Appeal Filed By: Assessee
• Order Result: Dismissed
• Bench Allotted: A
• Assessment Year: 2014-2015
• Appeal Filed On: 26-03-2019
• Result in Favour of: Revenue
• Court: TRIBUNAL
• Department Lawyers: BIREN SHAH
• Assessee Lawyers: S K DEV
• Keywords: Capital asset; Depreciation; Earning of tax free income; Unabsorbed depreciation; Rule 8D
• Section: 143(3); 14A; 115JB

Judgement Text

, A IN THE INCOME TAX APPELLATE TRIBUNAL A BENCH, AHMEDABAD BEFORE SHRI WASEEM AHMED, ACCOUNTANT MEMBER & SMT. MADHUMITA ROY, JUDICIAL MEMBER I.T.A. NO. 57/AHD/2018 WITH CROSS OBJECTION NO. 29/AHD/2019 ( / ASSESSMENT YEAR: 2014-15) DCIT CIRCLE-1(1)(1), AHMEDABAD / VS. ADANI LOGISTICS LTD. ADANI HOUSE, NEAR MITHAKHLAI SIX ROADS, NAVRANGPURA, AHMEDABAD- 380009 ./ ./PAN/GIR NO. : AAB CI4 157 J ( AP PELLANT / RESPONDENT ) .. ( RESPONDEN T /CROSS OBJECTOR ) / APPELLANT BY : SHRI S. K. DEV, SR. DR / RESPONDENT BY : SHRI BIREN SHAH, AR / DATE OF HEARING 26/07/2019 / DATE OF PRONOUNCEMENT 22/10/2019 !' /O R D E R PER MADHUMITA ROY- JM: BOTH THE APPEAL AND CROSS OBJECTION FILED BY THE RE VENUE AND THE ASSESSEE ARE DIRECTED AGAINST THE ORDER DATED 2 3.10.2017 PASSED BY THE CIT(A)-1, AHMEDABAD ARISING OUT OF TH E ORDER DATED 30.11.2016 PASSED BY THE LD. DCIT CIRCLE-1(1)(1), A HMEDABAD UNDER SECTION 143(3) OF THE INCOME TAX ACT, (HEREIN AFTER REFERRED TO AS THE ACT) FOR ASSESSMENT YEAR 2014-15. ITA NO.57/AHD/2018 WITH C.O. NO. 29/AHD/2019 [DCIT VS. ADANI LOGISTICS LTD.] A.Y. 2014-15 - 2 - ITA NO. 57/AHD/2018(A.Y. 2014-15):- 2. THE REVENUE HAS CHALLENGED THE FOLLOWING GROUNDS :- (1) THAT THE LD. CIT(A) HAS ERRED IN LAW AND ON FA CTS IN DELETING THE DISALLOWANCE OF RS. 89,72,884/- MADE U/S. 14A O F RULE 8D. (2) THAT THE LD. CIT(A) HAS ERRED IN LAW AND ON FAC TS IN HOLDING THAT ADDITION OF RS. 89,72,884/- IS NOT TO BE MADE WHILE COMPUTING THE BOOK PROFIT U/S. 115JB OF THE ACT. (3) THAT THE LD. CIT(A) HAS ERRED IN LAW AND ON FAC TS IN DELETING DISALLOWANCE OF FOREX LOSS OF RS. 2,12,05,000/-. GROUND NO. 1:- 3. THIS GROUND RELATES TO DELETING OF ADDITION OF R S. 89,72,884/- MADE UNDER SECTION 14A R.W.R. 8D. AT THE VERY OUTS ET OF THE HEARING OF THE MATTER THE LD. COUNSEL APPEARING FOR THE ASSESSEE SUBMITTED BEFORE US THAT THE ISSUE IS SQUARELY COVE RED IN ASSESSEES OWN CASE BY AN ORDER DATED 28.05.2019 IN APPEAL PREFERRED BY THE REVENUE BEING ITA NO. 2077/AHD/201 7 WITH CROSS OBJECTION NO. 55/AHD/2018 FOR A.Y. 2013-14. THE COPY OF THE SAID ORDER DATED 28.05.2019 HAS ALSO BEEN SUBMI TTED BEFORE US. THE ASSESSEE PRAYED FOR THE SIMILAR RELIEF ON THE I DENTICAL ISSUE. 4. THE LD. DR, HOWEVER, HAS NOT RAISED ANY SERIOUS OBJECTION TO THAT OF THE CONTENTIONS MADE BY THE LD. AR. 5. HEARD THE PARTIES AND PERUSED THE RELEVANT MATER IAL AVAILABLE ON RECORD INCLUDING THE ORDER PASSED BY THE HONBLE TRIBUNAL IN ITA NO. 2077/AHD/2017 WITH CROSS OBJECTION NO. 55/A HD/2018 ITA NO.57/AHD/2018 WITH C.O. NO. 29/AHD/2019 [DCIT VS. ADANI LOGISTICS LTD.] A.Y. 2014-15 - 3 - FOR A.Y. 2013-14 THE RELEVANT PORTION WHEREOF IS RE PRODUCED HEREUNDER BELOW:- 3. AT THE VERY OUTSET, THE LD. COUNSEL FOR THE ASS ESSEE SUBMITTED THAT IN THE CASE OF CIT VS. CORRTECH ENERGY LTD., 372 ITR 97 (GUJ) H ON'BLE GUJARAT HIGH COURT HAS HELD THAT IN THE ABSENCE OF ANY EXEMPT INCOME B EING CLAIMED BY THE ASSESSEE PROVISIONS OF SECTION 14A R.W.R 8D COULD NOT BE INV OKED. IT IS PERTINENT TO OBSERVE THAT EXPENSES RELATABLE TO EARNING OF EXEMP T INCOME DESERVE TO BE DISALLOWED UNDER SECTION 14A OF THE INCOME TAX ACT. IN CASE THE ASSESSEE FAILED TO PIN POINT THE EXPENSES RELATABLE TO EARNING OF S UCH INCOME, THEN FORMULA GIVEN IN RULE 8D OF THE INCOME TAX RULES, 1962, DIS ALLOWANCE IS TO BE WORKED OUT. THE HON'BLE GUJARAT HIGH COURT HAS HELD THAT IN CAS E THERE IS NO EXEMPT INCOME, THEN NO EXPENSES COULD BE CONSIDERED FOR DI SALLOWANCE. IN THE PRESENT CASE, THE LD.CIT(A) HAS HELD THAT THE ASSESSEE HAS NO EXEMPT INCOME IN THIS YEAR. IN VIEW OF THE ABOVE SITUATION, WE FIND THAT NO MER IT IN THE FIRST GROUND OF APPEAL RAISED BY THE REVENUE. IT IS REJECTED . 6. HENCE, IN THE ABSENCE OF ANY CHANGED CIRCUMSTANC ES RESPECTIVELY RELYING UPON THE SAME WE CONFIRM THE O RDER PASSED BY THE LD. CIT(A). HENCE, REVENUES APPEAL IS DISM ISSED. 7. THE NEXT GROUND OF APPEAL IS DIRECTED AGAINST TH E ORDER PASSED BY THE LD. CIT(A) IN HOLDING THAT ADDITION O F RS. 89,72,884/- IS NOT TO BE MADE WHILE COMPUTING THE B OOK PROFIT UNDER SECTION 115JB OF THE ACT. 8. IT APPEARS THAT THE LEARNED AO DISALLOWED RS.89, 72,884/- U/S 14A OF THE ACT BY APPLYING PROVISION OF RULE 8D WHI LE CALCULATING INCOME UNDER THE PROVISION OF SECTION 1 15JB MAT. IT IS THE CASE OF THE ASSESSEE THAT THE LEARNED AO ERRONEOUSLY DISALLOWED U/S 14A BY APPLYING THE PROVISION OF RUL E 8D WHILE CALCULATING THE INCOME UNDER PROVISION OF SECTION 1 15JB MAT WHEN IT HAS BEEN DECIDED IN NUMBER OF JUDGMENTS THA T SO FAR AS COMPUTATION OF ADJUSTED BOOK PROFIT IS CONCERNED PR OVISION OF SECTION 2 AND SUB SECTION 3 OF SECTION 14A CANNOT B E IMPORTED INTO CLAUSE (F). IN SUPPORT OF HIS ARGUMENT THE LD. AO H AS ALSO RELIED ITA NO.57/AHD/2018 WITH C.O. NO. 29/AHD/2019 [DCIT VS. ADANI LOGISTICS LTD.] A.Y. 2014-15 - 4 - UPON THE JUDGMENT PASSED BY THE SPECIAL BENCH OF IT AT AT DELHI IN THE MATTER OF ACIT, CIRCLE 17(1)-VS-VIREET INVES TMENT (P.) LTD. ON THE OTHER HAND, LEARNED DR RELIED UPON THE ORDER PASSED BY THE AUTHORITIES BELOW. 9. HEARD THE RESPECTIVE PARTIES, PERUSED THE RELEVA NT MATERIALS AVAILABLE ON RECORD. WE HAVE ALSO CAREFULLY CONSIDE RED THE JUDGMENT IN THE MATTER OF VIREET INVESTMENT (P.) LT D. THE RELEVANT PORTION WHEREOF IS AS FOLLOWS: THE QUESTION IS, WHETHER THE AMOUNT OR AMOUNTS OF E XPENDITURE RELATABLE TO EXEMPT INCOME AS CONTEMPLATED IN CLAUS E (F) TO EXPLANATION 1 TO SECTION 115JB(2) COULD BE ARRIVED AT BY RESORTIN G TO PROVISIONS OF SECTION 14A OR NOT. THE DEPARTMENT, CONTENTION , IS THAT THE OBJECT OF SECTION 14A AND CLAUSE (F) TO EXPLANATION 1 TO SECTION 115JB(2) IS SAME AND, THEREFORE, IT CANNOT BE DISPUTED THAT SECTION 14A CAN BE RESORTED TO FOR FINDING OUT THE EXPENDITURE RELATABLE TO ANY IN COME WHICH IS EXEMPT. [PARA 6.2] WHEN THE QUESTION ARISES AS TO THE APPLICABILITY OF SIMILAR PROVISIONS IN DIFFERENT PARTS OF THE STATUTE, THEN IT IS NOT ONLY LEGITIMATE BUT PROPER TO READ BOTH THE PROVISIONS IN THEIR CONTEXT. IF CONTE XT IS SAME, DIFFERENT MEANING CANNOT BE ASSIGNED. I T IS TO BE FOUND OUT THAT WHAT MISCHIEF WAS INTENDED TO BE REMEDIED BY INSERTING A PARTICUL AR SECTION. THE INTENTION OF THE LEGISLATURE ONCE IS MANIFESTED IN A PARTICULAR SECTION IN THE STATUTE THEN SAID INTENTION CANNOT BE GIVEN A D IFFERENT MEANING, IF A SIMILAR PROVISION HAS BEEN INCORPORATED IN A DIFFER ENT SECTION IN THE STATUTE. THE INTENTION OF THE LEGISLATURE MUST BE F OUND OUT BY READING THE STATUTE AS A WHOLE. [PARA 6.3] LITERAL MEANING CANNOT ALWAYS BE FOLLOWED LOGICALLY , BECAUSE SOMETIMES IT T ENDS TO DEFECT THE OBVIOUS INTENTION OF THE LEGISLA TURE AND RESULTS IN PRODUCING A WHOLLY UNREASONABLE RESULT. [PARA 6.4] THUS, THE SUBMISSION OF DEPARTMENT IS THAT WHEN BAS IC OBJECT AND PURPOSE OF SECTION 14A AND CLAUSE (F) TO EXPLANATION 1 TO SECTIO N 115JB(2) IS SAME, THEN IT CANNOT BE SAID THAT MEREL Y BECAUSE SECTION 14A HAS NOT BEEN MENTIONED IN CLAUSE (F), IT HAS NO APPLICATION. THE MODE OF COMPUTATION WITH SAME PURPOSE CANNOT BE DIF FERENTLY MADE MERELY BECAUSE SECTION 115JB CREATES A DEEMING SECT ION. THE OBJECT OF DEEMING PROVISIONS IS TO SUBSTITUTE THE TOTAL INCOM E COMPUTED UNDER NORMAL PROVISIONS BY THAT COMPUTED UNDER MAT PROVIS IONS. SUBMISSION OF DEPARTMENT IS THAT THIS CANNOT BE EXTENDED TO CO MPUTATION FOR SAME ITEMS UNDER NORMAL AS WELL AS M AT PROVISIONS. UNDER THE PROVISIONS OF ITA NO.57/AHD/2018 WITH C.O. NO. 29/AHD/2019 [DCIT VS. ADANI LOGISTICS LTD.] A.Y. 2014-15 - 5 - SECTION 14A, BOTH DIRECT AND INDIRECT EXPENSES IN R ELATION TO EARNING OF EXEMPT INCOME ARE TO BE REDUCED. THEREFORE, DIFFERE NT MEANING CANNOT BE ASCRIBED IN CLAUSE (F) AND, THEREFORE, THE SUBMI SSION OF THE ASSESSEE TH AT ONLY DIRECTLY RELATABLE EXPENDITURE IS TO BE RED UCED, CANNOT BE ACCEPTED. [PARA 6.10] IN VIEW OF ABOVE DISCUSSION, THE COMPUTATION UNDER CLAUSE (F) OF EXPLANATION 1 TO SECTION 115JB(2), IS TO BE MADE WITHOUT RESORTIN G TO THE COMPUTATION AS CONTEMPLATED UNDER SECTION 14A, READ WITH RULE 8D OF THE INCOME-TAX RULES, 1962. WE FIND FROM THE ISSUE CITATION THAT IN THE SAME SE T OF FACTS THE COMPUTATION UNDER CLAUSE (F) OF EXPLANATION 1 T O SECTION 115JB AS HAS BEEN DONE BY THE AUTHORITIES BELOW U/S 14A R .W.R. 8D OF THE INCOME TAX ACT, 1962 IS NOT PERMISSIBLE AND HENCE T HE LD. CIT(A) DELETED SUCH DISALLOWANCE WITHOUT ANY AMBIGU ITY SO AS TO WARRANT INTERFERENCE. HENCE, THIS GROUND OF APPEAL PREFERRED BY THE REVENUE IS DEVOID OF ANY MERIT AND THUS DISMISS ED. THIS GROUND OF APPEAL PREFERRED BY THE ASSESSEE IS THUS ALLOWED. 10. THE NEXT GROUND OF APPEAL RELATES TO DELETION O F DISALLOWANCE OF FOREX LOSS OF RS. 2,12,05,000/-. A T THE VERY OUTSET THE LD. AR SUBMITTED BEFORE US THAT THE ISSU E IS SQUARELY COVERED IN ASSESSEES OWN CASE IN FAVOUR OF THE ASS ESSEE IN ITA NO. 2077/AHD/2017 WITH CROSS OBJECTION NO. 55/AHD/2 018 FOR A.Y. 2013-14 A COPY WHEREOF HAS BEEN SUBMITTED BEFO RE US. 11. THE LD. DR HOWEVER, HAS NOT BEEN ABLE TO REBUT SUCH CONTENTIONS MADE BY THE LD. AR. 12. HEARD THE RESPECTIVE PARTIES, AND PERUSED THE R ELEVANT MATERIALS AVAILABLE ON RECORD. ITA NO.57/AHD/2018 WITH C.O. NO. 29/AHD/2019 [DCIT VS. ADANI LOGISTICS LTD.] A.Y. 2014-15 - 6 - WE HAVE ALSO CAREFULLY CONSIDERED THE JUDGMENT AND ORDER PASSED BY THE LD. CO-ORDINATE BENCH IN ITA NO. 2077 /AHD/2017 WITH CROSS OBJECTION NO. 55/AHD/2018 FOR A.Y. 2013- 14 THE RELEVANT PORTION WHEREOF IS AS FOLLOWS:- 4. IN THE NEXT GROUND OF THE REVENUE HAS PLEA DED THAT THE LD.CIT(A) HAS ERRED IN DELETING DISALLOWANCE OF FOREX LOSS OF RS. 1,70,45,000/-. 5. BRIEF FACTS OF THE CASE ARE THAT THE ASSESSEE HA S FILED ITS RETURN OF INCOME ON 28.11.2013 DECLARING TOTAL INCOME AT NIL AFTER C LAIMING UNABSORBED DEPRECIATION LOSS OF RS.23,48,193/- FOR THE CURRENT YEAR. ON SCRUTINY OF THE ACCOUNTS, THE LD.AO FOUND THAT HAS DEBITED A SUM OF RS.170.45 LAKHS IN THE PROFIT & LOSS ACCOUNT. HE CONFRONTED THE ASSESSEE A S TO WHY THIS LOSS SHOULD NOT BE DISALLOWED. THE ASSESSEE FILED WRITTEN SUBMISSIO NS. THE LD.AO WAS NOT CONVINCED WITH THE EXPLANATION OF THE ASSESSEE AND DISALLOWED ITS CLAIM. DISSATISFIED WITH THE DISALLOWANCE, THE ASSESSEE CA RRIED THE MATTER IN APPEAL BEFORE THE LD.CIT(A). IT HAS FILED WRITTEN SUBMISSI ONS JUSTIFYING THE ALLOWANCE OF THIS LOSS, AND HOW THIS LOSS HAS BEEN WORKED OUT BY IT. THE ASSESSEE HAS COMPILED DETAILS IN TABULAR FORM AND ALL SUCH DETAI LS HAVE BEEN REPRODUCED BY THE LD.CIT(A) FROM PAGE NOS.19 TO 38 THE IMPUGNED O RDER. THE LD.CIT(A) THEREAFTER ACCEPTED THE CLAIM OF THE ASSESSEE. IN O RDER TO APPRECIATE THE CONTENTIONS OF THE ASSESSEE, WE DEEM IT APPROPRIATE TO TAKE NOTE OF RELEVANT EXPLANATION GIVEN TO THE CIT(A) AND REPRODUCED ON P AGE NOS. 20 TO 27, WHICH READS AS UNDER:- 4.1 REGARDING AMORTIZATION OF THE FCMITDA FOR RS. 1 ,74/27,501/-: DURING THE COURSE OF THE ASSESSMENT PROCEEDINGS, TH E LD. ASSESSING OFFICER VIDE NOTICE DATED 20.01.2016 ASKED THE APPE LLANT TO FURNISH DETAILS IN RESPECT OF AMORTIZATION OF FOREIGN CURRE NCY MONETARY TRANSITION DIFFERENCE IN RESPONSE TO THE WHICH THE REQUIRED DETAILS WERE SUBMITTED VIDE SUBMISSION DATED 27.01.2016 SUBMITTE D THE FOLLOWING FACTS: (I) THE APPELLANT COMPANY DURING THE YEAR UNDER CON SIDERATION HAS CAPITALIZED THE FOREIGN EXCHANGE LOSS OF RS. 1080.3 8 LAKHS TO THE COST OF FIXED ASSETS (THE SAME IS EVIDENT FROM NOTE 2.11 OF THE AUDITED FINANCIAL STATEMENTS) (II) FURTHER AS SUM OF RS. 80.63 LAKHS TO THE CAPIT AL WORK IN PROGRESS (THE SAME IS EVIDENT FROM NOTE 2.13 OF THE AUDITED FINANCIAL STATEMENTS). (III) FURTHER, IT HAS ALSO DEFERRED FOREIGN EXCHANG E LOSS OF RS. 168.82 LAKHS IN FOREIGN CURRENCY MONETARY ITEM TRANSACTIO N DIFFERENCE ACCOUNT (HEREIN AFTER REFERRED AS FCMITDA) IN ACCO RDANCE WITH THE ITA NO.57/AHD/2018 WITH C.O. NO. 29/AHD/2019 [DCIT VS. ADANI LOGISTICS LTD.] A.Y. 2014-15 - 7 - AMENDMENT DATED 28.12.2011 TO ACCOUNTING STANDARD ( AS 11) ON 'EFFECTS OF CHANGES IN FOREIGN EXCHANGE RATES' ISSU ED BY MINISTRY OF CORPORATE AFFAIRS (MCA) VIDE GSR NOTIFICATION DATED 29.12.201'!. THE ASSESSING OFFICER'S ATTENTION WAS BOUGHT TO THE NOT E 2.31 OF AUDITED FINANCIAL STATEMENTS WHEREIN THE FACT WAS CLEARLY M ENTIONED. (II) AS REGARDS TO FOREIGN EXCHANGE LOSS OF RS. 170 .45 LAKHS CHARGED TO PROFIT & LOSS ACCOUNT, IT WAS SUBMITTED THAT OUT OF SUCH AMOUNT THE FOREX LOSS AMOUNTING TO RS. 174.28 LAKHS PERTAINS T O THE AMORTIZATION OF THE FCMITDA WHICH REPRESENTS THE FOREIGN EXCHANGE L OSS ON THE PORTION OF FOREIGN CURRENCY BORROWINGS THAT WERE NO T UTILIZED FOR PURPOSE OF ACQUISITION OF ASSETS AND HENCE PARKED A S DEPOSITS WITH THE BANKS. HOWEVER, THE ID. ASSESSING OFFICER STRAIGHT AWAY RE JECTED THE APPELLANT'S CONTENTION AND DISALLOWED THE LOSS ON FOLLOWING GRO UNDS: (I) IT HAS FAILED TO PRODUCE ANY MATERIAL ON RECORD TO SHOW THAT THE SAID LOSS WAS NOT IN RELATION WITH THE FIXED ASSETS OR C WIP RATHER IT HAS ALREADY SUBMITTED THAT THE LOSS WAS ARISING OUT OF THE FOREIGN CURRENCY LOAN IN RESPECT OF FIXED ASSETS. (II) THE SAID LOSS WAS NOT A REALIZED ONE AND OCCUR RED ON ACCOUNT OF REVALUATION OF AMOUNT PARKED IN DEPOSITS AS PER THE SUBMISSION OF THE ASSESSEE, AND THEREFORE, THE SAME WAS NOTIONAL LOSS AND NOT ALLOWABLE. (III) THE CASE LAW RELIED UPON BY THE ASSESSEE IS N OT APPLICABLE IN THE CASE OF THE ASSESSEE, AS THE FACTS OF THE CASE OF T HE ASSESSEE COMPANY ARE DIFFERENT OF THE CASE IT HAS RELIED UPON. THE DIFFE RENCE ON ACCOUNT OF CONVERSION OF FOREIGN CURRENCY LOAN TAKEN IN RESPEC T OF FIXED ASSETS IS VERY MUCH LIABLE TO BE TREATED AS PER THE PROVISION S OF SECTION 43A OF THE I. T. ACT. AS CAN BE OBSERVED FROM THE ABOVE SUBMITTED FACTS S UBMITTED DURING OF THE COURSE OF ASSESSMENT PROCEEDINGS AND THE FACTS FORMING THE GERMANE OF ADDITION THE ID. ASSESSING OFFICER REJECTED THE APPELLANT'S CLAIM CONTENDING THAT IT IS NOT A REALIZED ONE AND OCCURR ED ON ACCOUNT OF REVALUATION OF AMOUNT PARKED IN DEPOSITS AND TREATE D THE SAME AS NOTIONAL LOSS. IN THIS RESPECT IT IS SUBMITTED THAT THAT THE ID. ASSESSING OFFICER FAILED TO CONSIDER THE FACT THAT THE FOREIG N EXCHANGE FLUCTUATION LOSS OF RS. 170.45 LAKHS IS NOT RELATED TO ANY FIXE D ASSETS OR CWIP. HOWEVER, THE ID. ASSESSING OFFICER CONSIDERED IT AS NOTIONAL LOSS CONTRARY TO THE FACT THAT THE ASSESSING OFFICER HAS HIMSELF FACTUALLY ACCEPTED THAT THE LOSS PERTAINS TO AMOUNTS PARKED A S FIXED DEPOSITS. 4.2 TREATMENT OF FOREIGN EXCHANGE LOSS IN ACCO RDANCE WITH THE AMENDED AS-11: IN LIGHT OF THE ABOVE EXPLAINED FACTUAL POSITION, T HE APPELLANT COMPANY FINDS IT NECESSARY TO EXPLAIN THE ENTIRE METHODOLOG Y IN ACCORDANCE TO ITA NO.57/AHD/2018 WITH C.O. NO. 29/AHD/2019 [DCIT VS. ADANI LOGISTICS LTD.] A.Y. 2014-15 - 8 - WHICH IT HAS CLAIMED THE FOREX LOSS AMOUNTING TO RS . 174.28 LAKHS DURING THE YEAR UNDER CONSIDERATION. HENCE, IN REGA RDS TO THE ABOVE ADDITION THE FOLLOWING FACTS EXPLAINING THE ACCOUNT ING TREATMENT OF THE FOREX LOSS IN ACCORDANCE WITH AMENDED AS-11 AND SUP PORTING THE CLAIM OF APPELLANT ARE SUBMITTED: (A) ON THE HARMONIOUS CONSIDERATION OF AMENDMEN T DATED 29.12.2011 TO ACCOUNTING STANDARD (AS 11) ON 'EFFECTS OF CHANG ES IN FOREIGN EXCHANGE RATES' ISSUED BY MINISTRY OF CORPORATE AFF AIRS (MCA) VIDE GSR NOTIFICATION DATED 29.12.2011 IT CAN BE DEDUCED THAT THE CORPORATE ARE ALLOWED TO AVAIL THE OPTION UNDER PARA 46A MENT IONED IN THE SAID NOTIFICATION IN ACCORDANCE TO WHICH THE FOREIGN EXC HANGE LOSS ARISING ON RESTATEMENT OF ANY FOREIGN CURRENCY BORROWING CAN B E ACCUMULATED IN FCMITDA AND DEFERRED OVER THE PERIOD OF LONG TERM L IABILITY, IF SUCH BORROWINGS ARE UTILIZED FOR THE PURPOSE OTHER THAN THAT RELATING TO THE FIXED ASSETS. THIS MEANS, THAT WHERE A COMPANY HAVE ACQUIRED ANY FOREIGN LOAN WITH A PURPOSE TO ACQUIRE OR CONSTRUCT THE ASSET AND IF DUE TO ANY MOVEMENT IN THE EXCHANGE RATES OF THE FOREIG N CURRENCY AND THE REPORTING CURRENCY THE REVALUATION OF BALANCE OF LO AN IS MADE, THEN ANY GAIN OR LOSS ARISING OUT OF SUCH REVALUATION CAN BE ADJUSTED TO THE COST OF ASSET SO ACQUIRED OR CONSTRUCTED. HOWEVER, THE AMOU NT OF LOSS PERTAINING TO THE BALANCE OF LOAN NOT UTILIZED FOR ACQUISITION OR CONSTRUCTION OF FIXED ASSETS CAN BE ACCUMULATED IN FCMITDA AND DEFERRED O VER THE PERIOD OF LOAN AND THE PORTION OF ACCUMULATED LOSS CAN BE WRI TTEN OFF IN THE PROFIT & LOSS ACCOUNT ANNUALLY. (B) IN THE EARLIER YEARS THE APPELLANT HAS TAKEN TW O EXTERNAL COMMERCIAL BORROWINGS (ECB) FROM STATE BANK OF INDI A AND EXPORT IMPORT BANK OF INDIA. 1. THE LOAN TAKEN FROM EXPORT IMPORT BANK OF INDIA (EXIM) WAS ENTIRELY UTILIZED FOR THE PURPOSE OF ACQUISITION OF FIXED AS SETS. TOTAL LOSS ON ACCOUNT OF THE FOREIGN EXCHANGE FLUCTUATION AMOUNTE D TO RS. 5,28,77,147/- (WORKING OF THE SAME IS PROVIDED BELO W IN TABLE 2) AND AS THE ENTIRE LOAN PROCEEDS WERE UTILIZED FOR THE ACQU ISITION OF THE ASSET THEREFORE NO PORTION OF FOREIGN EXCHANGE LOSS ON TH E LOAN WAS TRANSFERRED TO FCMITDA DURING THE YEAR UNDER CONSID ERATION. 2. IN RESPECT OF LOANS FROM STATE BANK OF INDIA, IT IS STATED THAT THE TOTAL LOSS ON ACCOUNT OF THE FOREIGN EXCHANGE FLUCTUATION AMOUNTED TO RS. 8,01,05,450/- (WORKING OF THE SAME IS PROVIDED BELO W IN TABLE 3) AND AS THE APPELLANT H;ID PARTLY UTILIZED SUCH LOAN FOR AC QUISITION OR CONSTRUCTION OF FIXED ASSETS AND SUCH PORTION IS CA PITALIZED AND THE UNUTILIZED PORTION OF LOAN IS PARKED AS FIXED DEPOS ITS, THE FOREIGN EXCHANGE LOSS ARISING ON THIS ECB UTILIZED FOR PARK ING OF FIXED DEPOSIT WAS TRANSFERRED TO FCMITDA. ITA NO.57/AHD/2018 WITH C.O. NO. 29/AHD/2019 [DCIT VS. ADANI LOGISTICS LTD.] A.Y. 2014-15 - 9 - IN ACCORDANCE WITH THE ACCOUNTING TREATMENT MENTION ED IN PARA 46A AND THE FACTUAL MATRIX OF THE CASE, THE APPELLANT H AS ARRIVED AT THE QUANTUM OF THE FOREX LOSS DEBITED IN THE P&L ACCOUN T AT RS. 170.45 LAKHS IN THE FOLLOWING MANNER: 6. APART FROM THE ABOVE EXPLANATION, THE ASSESSEE H AS APPRAISED THE LD.CIT(A) ABOUT THE QUANTIFICATION OF SUCH LOSS. ALL THESE DETAILS IN TABULAR FORM HAVE BEEN PRODUCED BEFORE THE LD.CIT(A) AND AR E AVAILABLE ON PAGES NO.22 TO 33 OF THE CIT(A)S ORDER. WE HAVE GONE THROUGH THIS WORKING. IT IS ALSO PERTINENT TO OBSERVE THAT IN THE EXPLANATION EXTRAC TED (SUPRA), THE ASSESSEE HAS REPRODUCED REASONS ASSIGNED BY THE AO FOR REJECTING ITS CONTENTIONS AND DISALLOWING THE LOSS. THE LD. SR.DR RELIED UPON TH E ORDER OF THE AO. ON THE OTHER HAND, THE LD. COUNSEL FOR THE ASSESSEE SUBMIT TED THAT IDENTICAL LOSS WAS DISALLOWED TO THE ASSESSEE IN THE ASSTT. YEAR 2012- 13. THE DISPUTE TRAVELLED UPTO THE TRIBUNAL IN ITA NO.2007/AHD/2016. THIS AP PEAL OF THE REVENUE HAS BEEN DISMISSED VIDE ORDER DATED 29.3.2019. HE PLA CED ON RECORD COPY OF THE TRIBUNALS ORDER AND SUBMITTED THAT IN THE ASSTT. Y EAR 2011-12 THE LOSS OF RS.1.23 CRORES ON ACCOUNT FOREIGN EXCHANGE LOSS WAS CLAIMED. IT WAS ALLOWED BY THE CIT(A) AND TRIBUNAL HAS UPHELD THE ORDER OF THE CIT(A). 7. WE HAVE DULY CONSIDERED RIVAL CONTENTIONS AND GO NE THROUGH THE RECORD CAREFULLY. BASICALLY, THE STAND OF THE ASSESSEE IS THAT MINISTRY OF CORPORATE AFFAIRS (MCA), GOVT. OF INDIA HAS ISSUED A NOTIFICA TION ON 29.12.2011 EXPLAINING EFFECTS OF CHANGES IN FOREIGN EXCHANGE R ATES; HOW THESE FACTS ARE TO BE CONSIDERED UNDER ACCOUNTANT STANDARD 11 (AS-11). ACCORDING TO THIS NOTIFICATION, IF A COMPANY HAS ACQUIRED ANY FOREIGN LOAN WITH A PURPOSE TO ACQUIRE OR CONSTRUCT ASSET, AND IF DUE TO ANY MOVEM ENT IN THE EXCHANGE RATES OF THE FOREIGN CURRENCY AND THE REPORTING CURRENCY THE REVALUATION OF BALANCE OF LOAN IS MADE, THEN ANY GAIN OR LOSS ARISING OUT OF SUCH REVALUATION CAN BE ADJUSTED TO THE COST OF ASSET SO ACQUIRED OR CONSTR UCTED. HOWEVER, THE AMOUNT OF LOSS PERTAINING TO THE BALANCE OF LOSS NOT UTILI ZED FOR ACQUISITION OR CONSTRUCTION OF FIXED ASSETS CAN BE ACCUMULATED IN FOREIGN CURRENCY MONETARY ITEM TRANSITION DIFFERENCE ACCOUNT (FCMITDA). IT M AY BE DEFERRED OVER A PERIOD OF LOAN AND THE PORTION OF ACCUMULATED LOSS CAN BE WRITTEN OFF IN THE PROFIT & LOSS ACCOUNT ANNUALLY. ON THE STRENGTH OF THIS CIRCULAR, THE ASSESSEE HAS WORKED OUT UN-UTILISED LOAN FOR CAPITAL ASSETS, AND HOW THAT HAS BEEN ACCUMULATED AND DEFERRED OVER THE PERIOD OF LOAN. THIS WORKING HAS BEEN REPRODUCED BY THE LD.CIT(A) WHILE TAKING COGNIZANCE OF THE ASSESSEES SUBMISSION. IN THIS BACKGROUND, IF WE EXAMINE THE O RDER OF THE LD.CIT(A), THEN IT WOULD REVEAL THAT THE LD.CIT(A) HAS EXAMINED THE FA CTS IN RIGHT PROSPECTIVE WHILE DELETING THE DISALLOWANCE. THE AO WAS OF THE VIEW THAT SUCH LOSS AROSE OUT OF FOREIGN CURRENCY LOAN ACQUIRED IN RESPECT OF FIXED ASSETS. HE FAILED TO APPRECIATE REAL TRANSACTION, AND HOW THE LOSS HAS B EEN WORKED OUT BY THE ASSESSEE. IN EARLIER YEAR, THE TRIBUNAL HAS UPHELD DELETION, AND THEREFORE, WE DO NOT SEE ANY REASON TO INTERFERE IN THE ORDER OF THE LD.CIT(A). ITA NO.57/AHD/2018 WITH C.O. NO. 29/AHD/2019 [DCIT VS. ADANI LOGISTICS LTD.] A.Y. 2014-15 - 10 - 13. IN THE ABSENCE OF ANY CHANGE CIRCUMSTANCES RESP ECTIVELY RELYING UPON THE ORDER PASSED BY THE LD. TRIBUNAL W E DO NOT FIND ANY REASON TO INTERFERE WITH THE ORDER PASSED BY TH E LD. CIT(A) IN FAVOUR OF THE ASSESSEE ON THE IDENTICAL ISSUE AND H ENCE, THE SAME IS HEREBY CONFIRMED. IN THE RESULT, THIS GROUND OF APPEAL PREFERRED BY THE REVENUE IS DISMISSED. 14. IN THE RESULT, REVENUES APPEAL IS DISMISSED. CROSS OBJECTION NO. 29/AHD/201(A.Y. 2014-15):- 15. BY AND UNDER THE CROSS OBJECTION THE ASSESSEE H AS CHALLENGED THE ORDER PASSED BY THE LD. FIRST APPELLATE AUTHORI TY IN CONFIRMING THE FINDING OF THE AO THAT THE EMPLOYEES CONTRIBUTION AMOUNTING TO RS. 2,55,876/- TO PROVIDENT FUND AND E SIC ACT NOT ALLOWABLE UNDER SECTION 36(1)(VA) OF THE ACT. THE ASSESSEE, IN THIS REGARD, RELIED UPON THE JUDGMENT PASSED BY THE HONBLE TRIBUNAL IN ITA NO. 1585/AHD/2018 FOR A.Y. 2015-16 PASSED BY THE CO-ORDINATE BENCH. 16. ON THE OTHER HAND, THE LD. DR RELIED UPON THE O RDER PASSED BY THE AUTHORITIES BELOW. 17. HEARD THE PARTIES, PERUSED THE RELEVANT MATERIA LS AVAILABLE ON RECORD. IT HAS ALREADY BEEN DECIDED BY THE JURISDICTIONAL HIGH COURT IN THE MATTER OF CIT VS. GUJARAT STATE ROAD TRANSPO RT CORPORATION THAT EMPLOYEES PROVIDENT FUND AND ESIC WELFARE FUN D CONTRIBUTION IS ONLY ALLOWABLE AS A DEDUCTION UNDER SECTION 36 (1)(VA) IN THE EVENT IF IT IS PAID BY THE DUE DATE PRESCRIBED IN THE ITA NO.57/AHD/2018 WITH C.O. NO. 29/AHD/2019 [DCIT VS. ADANI LOGISTICS LTD.] A.Y. 2014-15 - 11 - CONCERNED ACT. IN THAT VIEW OF THE MATTER THE AUTH ORITIES BELOW HAS DISALLOWED SUCH CONTRIBUTION MADE BY THE ASSESS EE. ARGUMENT HAS BEEN ADVANCED BY THE LD. COUNSEL APPEARING FOR THE ASSESSEE THAT SINCE THE ISSUE IS PENDING ADJUDICATION BEFORE THE HONBLE SUPREME COURT THIS MATTER MAY BE REMITTED TO THE LD . AO FOR ADJUDICATION OF THE SAME AFRESH AFTER THE ISSUE IS DECIDED BY THE HONBLE APEX COURT AND, THEREFORE, THE ORDER PASSED BY THE CO- ORDINATE BENCH HAS BEEN RELIED UPON. HOWEVER, WE FIND NO SUCH JUSTIFICATION IN PASSING SUCH AN ORDER SINCE THE MA TTER AT THE PRESENT MOMENT IS COVERED AGAINST THE ASSESSEE BY T HE JURISDICTIONAL HIGH COURT IN THE MATTER OF CIT VS. GUJARAT STATE ROAD TRANSPORT CORPORATION REPORTED IN 366 ITR 170A S DISCUSSED ABOVE. HENCE, WE FIND NO MERIT IN THE CROSS OBJECT ION PREFERRED BY THE ASSESSEE. THUS, THE SAME IS HEREBY DISMISSE D. 18. IN THE COMBINED RESULT, BOTH THE APPEAL FILED B Y THE REVENUE AND THE CROSS OBJECTION FILED BY THE ASSESSEE, ARE DISMISSED. SD/- SD/- (WASEEM AHMED) (MADHUM ITA ROY) ACCOAUNTANT MEMBER JUDICIAL MEMBE R AHMEDABAD: DATED 22/10/2019 TANMAY TRUE COPY !' #' / COPY OF ORDER FORWARDED TO:- 1. / REVENUE 2. ! / ASSESSEE 3. ()* + / CONCERNED CIT 4. +- / CIT (A) 5. /01 22)*, )* , 45!(! / DR, ITAT, AHMEDABAD 6. 178 9 / GUARD FILE. BY ORDER / !' , :/4 )* , 45!(! < THIS ORDER PRONOUNCED IN OPEN COURT ON 2 2/10/2019