SEJAL GLASS LTD, MUMBAI V. DCIT 9(3), MUMBAI

ITA 1168/MUM/2016

• Counselvise Citation: [2019] 118 COUNSELVISE.COM (IT) 5161 (ITAT-MUMBAI)
• Duration Of Justice: 2 year(s) 10 month(s) 24 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 01-02-2019
• Appeal Filed By: Assessee
• Order Result: Partly Allowed
• Bench Allotted: E
• Assessment Year: 2011-2012
• Appeal Filed On: 07-03-2016
• Result in Favour of: Partly Allowed
• Court: TRIBUNAL
• Keywords: Business expenditure; Additional evidence; Revenue expenditure
• Section: 143(3); 37(1); 10B

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL MUMBAI BENCHES E, MUMBAI BEFORE SHRI MAHAVIR SINGH, JUDICIAL MEMBER AND SHRI G. MANJUNATHA, ACCOUNTANT MEMBER ITA NO. 1168/MUM/2016 ASSESSMENT YEAR : 2011-12 M/S. SEJAL GLASS LTD., 173/174, SEJAL ENCASA, 3 RD FLOOR, S.V. ROAD, KANDIVALI (WEST), MUMBAI [PAN : AADCS8659M] VS. DY.CIT-9(3), MUMBAI (APPELLANT) (RESPONDENT) APPELLANT BY : SHRI PRATEEK JHA, AR RESPONDENT BY : SHRI MANOJ KUMAR SINGH, DR DATE OF HEARING : 17-12-2018 DATE OF PRONOUNCEMENT :01-02-2019 O R D E R PER G. MANJUNATHA, ACCOUNTANT MEMBER: THIS APPEAL FILED BY THE ASSESSEE IS DIRECTED AGAINS T THE ORDER OF THE COMMISSIONER OF INCOME TAX(APPEALS)-21, MUMBAI, DATED 11-12-2015 AND IT PERTAINS TO Y 2011-12. THE ASSESSEE HAS RAISED THE FOLLOWING GROUNDS OF APPEAL: 1. THE LEARNED CIT(A) ERRED IN CONFIRMING DIS ALLOWANCE OF FOREIGN EXCHANGE LOSS DUE TO CONVERSION OF FCNR LOA N TO RUPEE LOAN OF RS. 43,98,054/- AND TREATING IT AS CAPITAL EXPEN DITURE. ITA NO. 1168/MUM/2016 : 2 : 2. THE LEARNED CIT(A) ERRED IN CONFIRMING THE DISAL LOWANCE OF LOSS ON FOREIGN EXCHANGE FLUCTUATION OF RS. 12,90,8 04/- ON ACCOUNT OF MACHINERY PURCHASED FROM M/S. FIRE STEIN. 3. THE LEARNED CIT(A) ERRED IN CONFIRMING THE DISAL LOWANCE OF LOSS ON FOREIGN EXCHANGE FLUCTUATION OF RS. 20,88,9 00/- ON ACCOUNT OF MACHINERY PURCHASED FROM M/S. GRENZEBACH MCHINE BAL L. 4. THE LEARNED CIT(A) ERRED IN CONFIRMING THE DISAL LOWANCE OF LOSS ON FOREIGN EXCHANGE FLUCTUATION OF RS. 27,31,3 81/- ON ACCOUNT OF MACHINERY PURCHASED FROM M/S ZIPPE INDUSTRIAL GHMH. 5. THE LEARNED CIT(A) ERRED IN CONFIRMING THE DISAL LOWANCE OF LOSS ON FOREIGN EXCHANGE FLUCTUATION OF RS. 51,97,4 60/- ON ACCOUNT OF MACHINERY PURCHASED FROM M/S STEIN HEUTY FRANCE. 2. BRIEF FACTS OF THE CASE ARE THAT ASSESSEE-COMPANY IS ENGAGED IN THE BUSINESS OF PROCESSING OF GLASS INTO TO UGHED, INSULATED AND LAMINATED GLASS, FILED ITS RETURN OF INCO ME FOR THE AY. 2011-12 DECLARING LOSS OF RS. 211,46,57,525/ -. ASSESSMENT FOR THE AY. 2011-12 HAS BEEN COMPLETED U/S . 143(3) OF THE INCOME TAX ACT, 1961 (ACT) ON 26-03-20 14, DETERMINING TOTAL LOSS AT RS. 2,09,85,93,755/- BY MAK ING CERTAIN DISALLOWANCES, INCLUDING DISALLOWANCE OF LOS S ON FOREIGN EXCHANGE FLUCTUATION INCURRED TOWARDS CONVERS ION OF RUPEE LOAN INTO FOREIGN CURRENCY TERM LOAN AVAILED F ROM INDIAN OVERSEAS BANK. 2.1. AGGRIEVED BY THE ASSESSMENT ORDER, ASSESSEE FILE D AN APPEAL BEFORE THE CIT(A). ITA NO. 1168/MUM/2016 : 3 : 3. BEFORE THE CIT(A), ASSESSEE HAS CHALLENGED THE ADD ITIONS MADE BY THE AO TOWARDS FOREIGN EXCHANGE LOSS INCURRED DUE TO CONVERSION OF FCNR LOAN TO RUPEE LOAN ALONG WITH LOS S ON FOREIGN EXCHANGE FLUCTUATION ON ACCOUNT OF MACHINERY PURCHASED FROM CERTAIN SUPPLIERS. ASSESSEE HAS FILED ELABORATE WRITTEN SUBMISSIONS ON THE ISSUE IN THE LIGHT OF THE ACCOUNTING STANDARD 11, ISSUED BY THE ICAI AND ALSO U NDER THE PROVISIONS OF SECTION 43A OF THE ACT. LD. CIT(A) A FTER CONSIDERING THE WRITTEN SUBMISSIONS OF THE ASSESSEE, PA RTLY ALLOWED THE APPEAL, WHEREIN HE HAD CONFIRMED THE ADDI TIONS MADE BY THE AO TOWARDS FOREIGN EXCHANGE LOSS INCURRED ON CONVERSION OF RUPEE TERM LOAN TO FOREIGN CURRENCY L OAN AND LOSS ON FOREIGN EXCHANGE FLUCTUATION ON ACCOUNT OF PU RCHASE OF MACHINERY. 3.1. AGGRIEVED BY THE ORDER OF CIT(A), ASSESSEE FILE D AN APPEAL BEFORE US. 4. LD. AR FOR THE ASSESSEE, AT THE TIME OF HEARING SUB MITTED THAT HE DOES NOT WANT TO PRESS GROUND NOS. 2 TO 5 TAKEN TO CHALLENGE ADDITIONS MADE BY THE AO TOWARDS DISALLOWANC E OF LOSS ON FOREIGN EXCHANGE FLUCTUATION ON ACCOUNT OF MA CHINERY ITA NO. 1168/MUM/2016 : 4 : PURCHASED FROM CERTAIN PARTIES. THEREFORE, GROUND NO S. 2 TO 5 ARE DISMISSED, AS NOT PRESSED. 5. THE NEXT ISSUE THAT CAME UP FOR OUR CONSIDERATION IS DISALLOWANCE OF FOREIGN EXCHANGE LOSS DUE TO CONVERS ION OF FCNR LOAN TO RUPEE LOAN OF RS. 43,98,054/-. AO DISA LLOWED LOSS INCURRED OF CONVERSION OF LOAN INTO FOREIGN CUR RENCY LOAN ON THE GROUND THAT THE SAID EXPENDITURE IS IN CAPITAL NA TURE WHICH CANNOT BE ALLOWED AS DEDUCTION U/S. 37(1) OF THE ACT. IT IS THE CLAIM OF THE ASSESSEE BEFORE THE LOWER AUTHORI TIES THAT THE COMPANY HAD TAKEN FCNR LOAN FROM 10B DURING THE PREVIOUS YEAR FOR A SPECIFIC PERIOD AND ON EXPIRY O F THE SAID PERIOD, THE SAID LOAN HAS BEEN CONVERTED INTO A RUPEE LOAN. THE DIFFERENCE AMOUNT PAID ON ACCOUNT OF CONVERSION O F FCNR LOAN INTO RUPEE LOAN ON ACCOUNT OF FLUCTUATION IN FO REIGN CURRENCY HAS BEEN TREATED AS LOAN ON FOREIGN EXCHANG E FLUCTUATION AND THE SAME HAS BEEN CLAIMED AS ALLOWAB LE BUSINESS EXPENDITURE. 6. LD. AR FOR THE ASSESSEE AT THE TIME OF HEARING SUBMI TTED THAT THE ASSESSEE HAS CONTESTED THE ISSUE BUT COULD NOT FI LE CERTAIN CRUCIAL EVIDENCES WHICH IS VERY MUCH RELEVAN T TO DECIDE THE ISSUE WHETHER PARTICULAR AMOUNT IS CAPITAL IN ITA NO. 1168/MUM/2016 : 5 : NATURE OR REVENUE EXPENDITURE AND SUCH EVIDENCES COUL D NOT BE FILED BEFORE THE LOWER AUTHORITIES DUE TO THE FACT THA T THE COMPANY HAS INCURRED HUGE LOSSES AND THE ACCOUNTING S TAFF HAVE LEFT THE SERVICES. HE FURTHER SUBMITTED THAT THE ADDI TIONAL EVIDENCES FILED BY THE ASSESSEE IS VERY MUCH RELEVA NT TO DECIDE THE ISSUE AND THEREFORE THE ISSUE MAY BE SET ASIDE TO THE FILE OF AO TO GIVE ONE MORE OPPORTUNITY TO THE ASSESSEE. 7. LD. DR ON THE OTHER HAND STRONGLY SUPPORTING THE OR DER OF THE LD. CIT(A) SUBMITTED THAT THE ASSESSEE HAS NOT EXERCISED OPTION TO FILE NECESSARY DETAILS BEFORE THE LOWER AUTHORITIES WHEN SUFFICIENT TIME HAS BEEN FURNISHED BY THE AO AS WELL AS THE CIT(A). THEREFORE, THERE IS NO REASON TO GIVE FURTHER OPPORTUNITY TO ASSESSEE TO FILE EVIDENCES AND H ENCE THE FINDINGS RECORDED BY THE LD. CIT(A) MAY BE CONFIRMED . 8. WE HAVE HEARD BOTH THE PARTIES, PERUSED MATERIAL AVAILABLE ON RECORD AND GONE THROUGH THE ORDERS OF TH E AUTHORITIES BELOW. ASSESSEE HAS FILED CERTAIN ADDITION AL EVIDENCES VIDE PAPER BOOK DT. 14-12-2018 AND CONTENDE D THAT THE SAID DOCUMENTS GO TO ROOT OF THE MATTER AND WHICH AR E VERY RELEVANT TO DECIDE THE ISSUE, I.E. WHETHER FOREIGN EXCHANGE LOSS INCURRED ON CONVERSION OF FCNR LOAN INTO RUPEE LOAN IS IN ITA NO. 1168/MUM/2016 : 6 : FACT IN THE NATURE OF REVENUE EXPENDITURE, WHICH CAN B E ALLOWED AS DEDUCTION. ASSESSEE HAS GIVEN ITS OWN REA SON FOR NOT FILING THOSE DOCUMENTS BEFORE THE LOWER AUTHORITIES. ACCORDING TO THE ASSESSEE, THERE WAS NO ACCOUNTING STA FF IN THE COMPANY TO LOOK AFTER THE ISSUE AT THAT TIME, WHEN THE APPELLATE PROCEEDINGS WERE GOING BEFORE THE CIT(A). THEREFORE, THE SAID DOCUMENTS COULD NOT BE FURNISHED. WE FIND THA T THE ADDITIONAL DOCUMENTS FILED BY THE ASSESSEE IN THE FORM OF LETTERS ISSUED BY THE INDIAN OVERSEAS BANK FOR CONVE RSION OF RUPEE TERM LOAN IN TO FOREIGN CURRENCY LOAN IS A CR UCIAL DOCUMENT TO DECIDE THE PARTICULAR ISSUE WHETHER THE LOSS INCURRED ON FOREIGN EXCHANGE FLUCTUATION IS A CAPITAL OR REVENUE IN NATURE. THEREFORE, WE ARE OF THE CONSIDER ED VIEW THAT THE ISSUE NEEDS TO BE SET ASIDE TO THE FILE OF AO FO R FRESH CONSIDERATION IN THE LIGHT OF ADDITIONAL EVIDENCES FIL ED BY THE ASSESSEE. HENCE, WE SET ASIDE THE ISSUE TO THE FILE OF THE AO TO DECIDE THE ISSUE AFRESH IN ACCORDANCE WITH LAW. 9. IN THE RESULT, THE APPEAL OF ASSESSEE IS PARTLY ALLO WED FOR STATISTICAL PURPOSES. ITA NO. 1168/MUM/2016 : 7 : ORDER PRONOUNCED IN THE OPEN COURT ON 01 ST DAY OF FEBRUARY, 2019 SD/- SD/- (MAHAVIR SINGH) (G. MANJUNATHA) /JUDICIAL MEMBER /ACCOUNTANT MEMBER /MUMBAI; /DATED : 01 ST FEBRUARY, 2019 TNMM / COPY OF THE ORDER FORWARDED TO : 1. !' / THE APPELLANT 2. #!' / THE RESPONDENT 3. $ % ( ) / THE CIT(A), MUMBAI 4. $ % / CIT, MUMBAI 5. ()* +, , $ .+,$/ , / DR, ITAT, MUMBAI 6. *012 / GUARD FILE $ / BY ORDER, # //TRUE COPY// / $ (DY./ASST. REGISTRAR) $ .+,$/, / ITAT, MUMBAI