DCIT, New Delhi V. M/s. Filatex India Ltd., New Delhi

ITA 1267/DEL/2010

• Counselvise Citation: [2013] 120 COUNSELVISE.COM (IT) 1227 (ITAT-DELHI)
• Duration Of Justice: 2 year(s) 10 month(s) 23 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 15-02-2013
• Appeal Filed By: Department
• Order Result: Dismissed
• Bench Allotted: B
• Next Hearing Date: 21-01-2013
• Assessment Year: 2004-2005
• Appeal Filed On: 22-03-2010
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: DR SUDHA KUMARI
• Keywords: Capital asset; Depreciation; Income from undisclosed sources; Search and seizure; Cost of acquisition; Unabsorbed depreciation
• Section: 32

Judgement Text

ITA NOS. 798-802/DEL/2010 & I.T.A NOS. 963, 1931,1267-1269/DEL/2010 1 IN THE INCOME TAX APPELLATE TRIBUNAL DELHI BENCH B NEW DELHI BEFORE SHRI R.P. TOLANI, JUDICIAL MEMBER AND SHRI SHAMIM YAHYA, ACCOUNTANT MEMBER I.T.A. NOS. 798, 799, 800, 801 & 802/DEL/2010 A.YRS. : 2001-02, 2002-03, 2003-04, 2004-05 & 2005- 06 M/S FILATEX INDIA LTD., 42, COMMUNITY CENTRE, NEW FRIENDS COLONY, NEW DELHI (PAN: AAACF0027B) VS. DCIT, CIRCLE - 11(1), NEW DELHI AND I.T.A. NOS. 963, 1267, 1268 & 1269/DEL/2010 A.YRS. 2003-04, 2004-05, 2005-06 & 2006-07 DCIT, CIR. 11(1), VS. M/S FILATEX INDIA LTD., NEW DELHI 42, COMMUNITY CENTRE, CR BLDG., ROOM NO. 312, NEW FRIENDS COLONY, NEW DELHI 110002 NEW DELHI (APPELLANT) (APPELLANT) (APPELLANT) (APPELLANT) (RESPONDENT) (RESPONDENT) (RESPONDENT) (RESPONDENT) ASSESSEE BY : SH. A SHWANI KUMAR, CA DEPARTMENT BY : DR. SUDHA KUMARI, C.I.T. (D.R.) ORDER ORDER ORDER ORDER PER PER PER PER BENCH BENCH BENCH BENCH THESE APPEALS BY THE ASSESSEE AND REVENUE EMANATE OUT OF ORDERS OF THE LD. COMMISSIONER OF INCOME TAX (A) FOR THE CONCERNED ASSESSMENT YEARS. SINCE THE ISSUES ARE CONNECTED A ND THE APPEALS WERE HEARD TOGETHER. THESE ARE BEING CONSOLIDATED F OR THE SAKE OF CONVENIENCE BY THIS COMMON ORDER. 2. ONE COMMON ISSUE RAISED IN THE ASSESSEE APPEAL FRO M ASSTT. YEARS 2001-02 TO 2005-06 PERTAINS TO ADDITION AS I NCOME FROM ITA NOS. 798-802/DEL/2010 & I.T.A NOS. 963, 1931,1267-1269/DEL/2010 2 UNDISCLOSED SOURCES REPRESENTING SUPPRESSION OF S ALES ON ACCOUNT OF UNDER VALUATION OF SALES OF WASTE. 2.1 IN THIS CASE THE SEARCH AND SEIZURE ACTIVITIES WERE CARRIED OUT AT THE OFFICE OF THE ASSESSEE COMPANY. DURING THE COUR SE OF SEARCH PROCEEDINGS, IT CAME UP THAT A SEARCH BY EXCISE DEPA RTMENT HAS BEEN CARRIED OUT AT THE FACTORY PREMISES OF THE ASSESSEE COMPANY. DURING THE COURSE OF SEARCH, IT WAS FOUND THAT THE ASSESS EE HAS SOLD OUT THE WASTE OF @%` 5.5 PER KG. WHEREAS THE ACTUAL SALES PRICE WAS ` 20/- PER KG. STATEMENT OF SHRI SANJAY AGRAWAL, GM (MARKETI NG) WAS RECORDED DURING THIS SEARCH WHEREIN HE ADMITTED TH AT THE WASTE YARN WAS BEING SHOWN TO BE SOLD @ ` 5.50 PER KG. WHERE AS REALITY IT WAS SOLD FOR ` 20/- PER KG. A SHOW CAUSE NOTICE WAS ISSUED BY THE JOINT DIRECTOR, DGCEI, REGIONAL UNIT, PUNE WHEREIN THE DIFFE RENTIAL VALUE OF SALES WAS WORKED OUT AT ` 91,81,006/- TO F.Y. 2000- 01 TO 2004-05 AS BELOW:- S.NO. FINANCIAL YEAR DIFFERENTIAL VALUE ON SALE OF WASTE (`) 1 2000-01 37,23,324/- 2 2001-02 17,88,990/- 3 2002-03 27,29,513/- 4 2003-04 31,71,944/- 5 2004-05 11,21,235/- TOTAL TOTAL TOTAL TOTAL 91,84,006/ 91,84,006/ 91,84,006/ 91,84,006/- -- - 2.2 IT WAS FURTHER NOTED THAT ASSESSEE HAS FILED A PETITION BEFORE THE CENTRAL EXCISE SETTLEMENT COMMISSION AND HAD PAID THE DUTY ON THE DIFFERENTIAL VALUE. IN THIS REGARD, ASSESSEE WA S ASKED TO EXPLAIN WHY ITA NOS. 798-802/DEL/2010 & I.T.A NOS. 963, 1931,1267-1269/DEL/2010 3 THE DIFFERENTIAL VALUE OF SALES OF WASTE SHOULD BE NOT BROUGHT TO TAX AS SUPPRESSION OF SALES. IN RESPONSE, ASSESSEE SUBMITTE D THAT THE EXCISE DUTY HAS BEEN PAID TO BUY PEACE OF MIND AND IT HAS NOT UNDER VALUED THE SALE OF WASTE. HOWEVER, THE ASSESSING OFFICER WAS NOT CONVINCED WITH THE ABOVE. HE OBSERVED THAT UNDER VALUATION IN SALES OF WASTE WAS DETECTED BY THE EXCISE DEPARTMENT DURING THE COU RSE OF SEARCH BY INTELLIGENCE WING. THE ASSESSEE HAS PAID ADDITIONA L EXCISE DUTY TO THE EXTENT OF ` 16,89,857/- ON THE UNDER INVOICING IN T HE SALE OF WASTE TO THE EXTENT OF ` 91,84,006/-. THIS DIFFERENCE OF ` 91,84,006/- WAS ASSESSED AND ADDED AS SUPPRESSION OF SALES AS BELOW :- S.NO. FINANCIAL YEAR ASSESSMENT YEAR DIFFERENTIAL VALUE ON SALE OF WASTE (`) 1 2000-01 2001-02 37,23,324/- 2 2001-02 2002-03 17,88,990/- 3 2002-03 2003-04 27,29,513/- 4 2003-04 2004-05 31,71,944/- 5 2004-05 2005-06 11,21,235/- TOTAL TOTAL TOTAL TOTAL 91,84,006/ 91,84,006/ 91,84,006/ 91,84,006/- -- - 3. BEFORE THE LD. COMMISSIONER OF INCOME TAX (A) ASS ESSEE SUBMITTED THAT THE ALLEGATIONS OF SUPPRESSION OF SA LES AGAINST THE ASSESSEE WAS ERRONEOUS. IT WAS SUBMITTED THAT CER TAIN DOCUMENTS WERE SEIZED BY THE EXCISE AUTHORITIES WHICH ALLEGE DLY INDICATED EVASION OF EXCISE DUTY. THAT THE ASSESSEE COMPANY WI TH THE PRIMARY OBJECTIVE TO AVOID PROLONGED LITIGATION, CONTINUE IT S BUSINESS UNHINDERED, BUY PEACE WITH THE AUTHORITIES, AMICABLY RESOLVE ALL DIFFERENCES AND DISPUTED, FILED AN APPLICATION FOR SETTLEMENT OF ITS CASE ITA NOS. 798-802/DEL/2010 & I.T.A NOS. 963, 1931,1267-1269/DEL/2010 4 WITH THE EXCISE SETTLEMENT COMMISSION, ON 22.2.2007. THE SETTLEMENT COMMISSION ACCEPTED THE APPLICATION IN TERMS OF ITS ORDER DATED 18.2.2007. THE ASSESSEE COMPANY PAID EXCISE DUTY OF ` 143,73,644/- ON ALLEGED SALES AGGREGATING ` 91,84,006/- DURING T HE INCOME TAX ASSESSMENT YEARS 2001-02 TO 2005-06. IT WAS SUBMITT ED THAT THE ASSESSEE COMPANY NEITHER ADMITTED NOR IN FACT SUPPRES SED ITS SALE, NOR RECEIVED ANY CASH MONEY, BUT IN ORDER TO RESOLVE DI SPUTES, IT PAID THE EXCISE DUTY AS AFORESAID. THUS, IT WAS PLEADED TH AT MERELY BECAUSE EXCISE DUTY HAS BEEN PAID, IT DOES NOT IMPLY THAT TH E ASSESSEE COMPANY HAS IN FACT EARNED UNACCOUNTED INCOME. 3.1 FURTHER, IT WAS WITHOUT PREJUDICE SUBMITTED THAT T HE ALLEGED SUPPRESSION OF SALES CAME TO LIGHT IN ASSESSMENT Y EAR 2008-09, THUS ALLEGEDLY SUPPRESSION OF SALES, IF AT ALL IS TO BE TREATED AS INCOME WITHOUT ADMITTING THE SAME BE CONSIDERED AS INCOME A SSESSABLE IN ASSTT. YEAR 2008-09. HOWEVER, LD. COMMISSIONER OF INCOME TAX (A) DID NOT ACCEPT THE SUBMISSIONS. HE HELD THAT ACCORD ING TO ASSESSEES OWN SUBMISSION THERE WAS UNDER VALUATION IN THE SALE OF WASTE AND THE SAME WAS DETECTED BY THE INTELLIGENCE WING OF THE E XCISE DEPARTMENT DURING THE COURSE OF SEARCH. ACCORDINGLY, LD. COMMIS SIONER OF INCOME TAX (A) CONFIRMED THE ACTION OF THE ASSESSING OFFIC ER. 4. AGAINST THE ABOVE ORDER THE ASSESSEE IS IN APPEA L BEFORE US. 5. WE HAVE HEARD THE RIVAL CONTENTIONS IN LIGHT OF THE MATERIAL PRODUCED AND PRECEDENT RELIED UPON. WE FIND THAT I N THIS CASE UNDER VALUATION IN SALE OF WASTE WAS DETECTED BY THE INTE LLIGENCE WING OF THE EXCISE DEPARTMENT DURING THE COURSE OF SEARCH ON 10 .12.2003. ASSESSEE HAS DULY FILED APPLICATION BEFORE THE EXCI SE SETTLEMENT COMMISSION. THE ASSESSEE ACCEPTED THAT AS PER THE AS SESSEES OWN ITA NOS. 798-802/DEL/2010 & I.T.A NOS. 963, 1931,1267-1269/DEL/2010 5 ADMISSION THERE WAS DIFFERENCE IN THE SALES FIGURE O F WASTE AMOUNTING TO ` 91,84,006/- PERTAINING TO ASSTT. YEAR 2001-02 TO 2005-06. ASSESSEE HAS ACCEPTED THE ORDER OF THE SETTLEMENT CO MMISSION IN THIS REGARD AND HAS DULY PAID EXCISE DUTY OF ` 143,73,64 4/- ON THE ALLEGED SALES AMOUNT OF ` 91,84,006/- FOR THE FINANCIAL YEA R 2001-02 TO 2004- 05. IN LIGHT OF THE ABOVE, WE FIND THAT NOW THE S UBMISSION OF THE ASSESSEE IS THAT IT HAS ACCEPTED THE VERDICT OF SET TLEMENT COMMISSION AND THE ORDERS OF THE AUTHORITIES IN EXCISE DEPARTME NT ONLY TO BUY PEACE OF MIND. THIS CONTENTION IN OUR CONSIDERED OP INION, DOES NOT HAVE ANY COGENCY. THE SUBMISSIONS OF THE ASSESSEE THAT NO ADDITION IN THE INCOME TAX ASSESSMENT CAN BE MADE IN THIS R EGARD AS NOTHING HAS BEEN FOUND BY THE INCOME TAX AUTHORITIES IN THIS REGARD IS ALSO NOT TENABLE. IT WAS ASSESSEES OWN ADMISSION BEFORE THE EXCISE DEPARTMENT THAT IT HAS SUPPRESSED THE SALES AMOUNTI NG TO ` 91,84,006/- PERTAINING TO ASSTT. YEAR 2001-02 TO 2005-06. THUS, WE FIND THAT THERE IS NO INFIRMITY IN THE ORDERS OF THE AUTHORITIES BELOW IN THIS REGARD. HENCE, WE AFFIRM THE ORDER OF THE LD. COMMISSIONER OF INCOME TAX (A) ON THIS ISSUE AND DECIDE THE CASE AG AINST THE ASSESSEE. 6. ANOTHER COMMON ISSUE RAISED IN THE REVENUE APP EALS ASSTT. YEAR 2003-04 TO 2006-07 IS THAT LD. COMMISSIONER OF INCOME TAX (A) HAS ERRED IN DELETING THE DISALLOWANCE ON ACCOUNT O F FOREIGN EXCHANGE FLUCTUATION LOSS WHICH REMAINED INCLUDED IN THE WDV I N THE PLANT AND MACHINERY WHICH WAS COVERED UNDER THE PROVISIONS OF SUB-SECTION 43A OF THE ACT. 7. ON THIS ISSUE ASSESSEE HAS CAPITALIZED ADVERSE IMPACT ON FOREIGN EXCHANGE FLUCTUATION, THE SAME WAS INCLUDED IN THE VALUE OF PLANT AND MACHINERY. THE DEPRECIATION ON THE SAID AMOUNT WAS DISALLOWED, AS ITA NOS. 798-802/DEL/2010 & I.T.A NOS. 963, 1931,1267-1269/DEL/2010 6 THE ASSESSING OFFICER CONSIDERED THAT THIS IS NOT IONAL LOSS. HENCE, DEPRECIATION ON THIS ACCOUNT WAS DISALLOWED. THE A SSESSING OFFICER RELIED UPON THE PROVISIONS OF SECTION 43A IN THIS R EGARD. IN THIS REGARD, ASSESSEE HAS CLAIMED THAT PRIOR AMENDMENT TO SECTION 43A, IT WAS PERMISSIBLE FOR THE ASSESSEE TO INCREASE THE VALUE OF ASSET BY AN AMOUNT DUE TO LOSS SUFFERED OUT OF THE FOREIGN EXCH ANGE FLUCTUATION. 8. BEFORE THE LD. COMMISSIONER OF INCOME TAX (A) ASSES SEE RELIED UPON THE DECISION OF THE HONBLE APEX COURT IN THE CASE OF ARVIND MILLS LTD. 193 ITR 255 AND SUBMITTED AS UNDER:- SO FAR AS DEPRECIATION ALLOWANCE IS CONCERNED THE POSITION IS PERHAPS A LITTLE SIMPLER BECAUSE IT IS A RECURREN T CLAIM. UNDER THE DEFINITION CONTAINED UNDER SECTION 32 RE AD WITH SECTION 43(1) AND (6) OF INCOME TAX ACT, THE DEPREC IATION AS TO BE ALLOWED ON THEREOF IN EARLIER YEARS, THUS, W HERE THE COST OF ASSETS SUBSEQUENTLY GOES UP BECAUSE OF DEVALUATION, WHATEVER MIGHT HAVE BEEN THE POSITION IN THE EARLIER YEAR, IT IS ALWAYS OPEN TO THE ASSESSEE TO INSIST, AND FOR THE INCOME TAX OFFICER TO AGREE, THAT THE WRITT EN DOWN VALUE IN THE YEAR IN WHICH THE INCREASED LIABILITY HAS ARISEN SHOULD BE TAKEN ON THE BASIS OF THE INCREASE COST MI NUS DEPRECIATION EARLIER ALLOWED ON THE BASIS OF OLD COST C.I.T. VS. WOODWARD GOVERNNOR INDIA (P) LTD. (2007) 162 TAX MAN 60 DELHI, IT WAS HELD IN CASE WHERE FOREIGN CURRENC Y IS HELD ON REVENUE ACCOUNTS. INCREASE IN LIABILITY ON AC COUNTS OF FLUCTUATION IN RATE OF FOREIGN EXCHANGE PREVAILING ON LAST DAY OF FINANCIAL YEAR IS NOT NOTIONAL OR CONTINGENT A ND THEREFORE, CAN BE ALLOWED AS DEDUCTION IN TERM, OF SECTION ITA NOS. 798-802/DEL/2010 & I.T.A NOS. 963, 1931,1267-1269/DEL/2010 7 37(1). THE AMENDMENT TO SECTION 43A PROVIDING TH AT AMOUNT BY WHICH LIABILITY IS INCREASED OR REDUCED A S A RESULT OF CHANGE IN RATE OF EXCHANGE DURING ANY PR EVIOUS YEAR AFTER ACQUISITION OF SUCH ASSETS WOULD BE TAKE N INTO ACCOUNT AT TIME OF MAKING PAYMENT IRRESPECTIVE OF MET HOD OF ACCOUNTING ADOPTED BY ASSESSEE IS PROSPECTIVE PR IOR TO SAID AMENDMENT IN THE CAPITAL ACCOUNT CASES WHERE CO ST OF ASSETS HAS BEEN EITHER PAID FULLY OR IN PART PRIOR TO FLUCTUATION IN RATE OF FOREIGN EXCHANGE, COST OF AS SETS WOULD CORRESPONDING BE PERMITTED TO BE REWORKED FOR PURP OSE OF REPAYMENT OR DEPRECIATION OR INVESTMENT ALLOWANC E AS THE CASE MAY BE WITH REFERENCE TO RATE PREVAILING ON LA ST DAYS OF FINANCIAL YEAR IN WHICH THAT FLUCTUATION OCCURS . 9. CONSIDERING THE ABOVE, LD. COMMISSIONER OF INCOME TAX (A) HELD THAT HE WAS OF THE OPINION THAT BEFORE AMENDMENT TO SECTION 43A ANY LOSS SUFFERED BY THE ASSESSEE ON ACCOUNT OF FOREIGN EXCHANGE FLUCTUATION HAS TO BE CAPITALIZED IN THE YEAR OF SU CH FLUCTUATIONS IF THE ASSTT. ORDER IS PRIOR TO ASSTT. YEAR 2003-04. ACC ORDINGLY, LD. COMMISSIONER OF INCOME TAX (A) ALLOWED THE ASSESSEE APPEAL ON THIS ISSUE. 10. AGAINST THE ABOVE ORDER THE REVENUE IS IN APPE AL BEFORE US. 11. WE FIND THAT IN THIS CASE THERE HAS BEEN ADVER SE IMPACT OF FOREIGN EXCHANGE FLUCTUATION ON THE COST OF ASSETS . THE COST OF ASSETS WENT UP BECAUSE DUE TO DEVALUATION. ASSESSING OFFI CER WAS OF THE OPINION THAT PROVISION OF SECTION 43A ARE APPLICABL E. ASSESSEE HAS SUBMITTED BEFORE THE ASSESSING OFFICER THAT PRIOR TO AMENDMENT TO SECTION 43A, IT WAS PERMISSIBLE FOR THE ASSESSEE TO INCREASE THE VALUE ITA NOS. 798-802/DEL/2010 & I.T.A NOS. 963, 1931,1267-1269/DEL/2010 8 OF ASSET BY AN AMOUNT DUE TO LOSS SUFFERED DUE TO F OREIGN EXCHANGE FLUCTUATION. HOWEVER, THIS PLEA WAS NOT ACCEPTED BY THE ASSESSING OFFICER. UPON ASSESSEES APPEAL LD. COMMISSIONER O F INCOME TAX (A) CONSIDERED THE ISSUE. HE OBSERVED THAT ON THIS IS SUE PROVISION OF SECTION 43A PRIOR TO AMENDMENT IS TO BE APPLIED. H E OPINED THAT BEFORE THE AMENDMENT TO SECTION 43A ANY LOSS SUFFERED BY THE ASSESSEE ON ACCOUNT OF FOREIGN FLUCTUATION HAS TO BE CAPITALIZED IN THE YEAR OF SUCH FLUCTUATION IF THE ASSESSMENT ORDER IS PRIOR TO ASSESSMENT YEAR 2003-04. 11.1 WE HAVE CAREFULLY CONSIDERED THE SUBMISSIONS. WE FIND THAT SECTION 43A PROVIDES AS UNDER:- 43A. 43A. 43A. 43A. NOTWITHSTANDING ANYTHING CONTAINED IN ANY OTHE R PROVISION OF THIS ACT, WHERE AN ASSESSEE HAS ACQUIRED ANY ASS ET IN ANY PREVIOUS YEAR FROM A COUNTRY OUTSIDE INDIA FOR THE P URPOSES OF HIS BUSINESS OR PROFESSION AND, IN CONSEQUENCE OF A CHANGE IN THE RATE OF EXCHANGE DURING ANY PREVIOUS YEAR AFTER THE ACQUISITION OF SUCH ASSET, THERE IS AN INCREASE OR REDUCTION IN THE LIABILITY OF THE ASSESSEE AS EXPRESSED IN INDIAN CU RRENCY (AS COMPARED TO THE LIABILITY EXISTING AT THE TIME OF AC QUISITION OF THE ASSET) AT THE TIME OF MAKING PAYMENT (A) TOWARDS THE WHOLE OR A PART OF THE COST OF THE ASSET; OR (B) TOWARDS REPAYMENT OF THE WHOLE OR A PART OF THE MONEYS BORROWED BY HIM FROM ANY PERSON, DIRECTLY OR INDIREC TLY, IN ANY FOREIGN CURRENCY SPECIFICALLY FOR THE PURPOSE O F ACQUIRING THE ASSET ALONG WITH INTEREST, IF ANY, ITA NOS. 798-802/DEL/2010 & I.T.A NOS. 963, 1931,1267-1269/DEL/2010 9 THE AMOUNT BY WHICH THE LIABILITY AS AFORESAID IS SO INCREASED OR REDUCED DURING SUCH PREVIOUS YEAR AND WHICH IS TAKE N INTO ACCOUNT AT THE TIME OF MAKING THE PAYMENT, IRRESPECTI VE OF THE METHOD OF ACCOUNTING ADOPTED BY THE ASSESSEE, SHALL BE ADDED TO, OR, AS THE CASE MAY BE, DEDUCTED FROM (I) THE ACTUAL COST OF THE ASSET AS DEFINED IN CL AUSE (1) OF SECTION 43; OR (II) THE AMOUNT OF EXPENDITURE OF A CAPITAL NATURE REFERRED TO IN CLAUSE (IV) OF SUB-SECTION (1) OF SECTION 35; OR (III) THE AMOUNT OF EXPENDITURE OF A CAPITAL NATURE REFERRED TO IN SECTION 35A; OR (IV) THE AMOUNT OF EXPENDITURE OF A CAPITAL NATURE R EFERRED TO IN CLAUSE (IX) OF SUB-SECTION (1) OF SECTION 36; OR (V) THE COST OF ACQUISITION OF A CAPITAL ASSET (NO T BEING A CAPITAL ASSET REFERRED TO IN SECTION 50) FOR THE PU RPOSES OF SECTION 48, AND THE AMOUNT ARRIVED AT AFTER SUCH ADDITION OR DED UCTION SHALL BE TAKEN TO BE THE ACTUAL COST OF THE ASSET OR THE AMOUNT OF EXPENDITURE OF A CAPITAL NATURE OR, AS THE CASE MAY BE, THE COST OF ACQUISITION OF THE CAPITAL ASSET AS AFORESAID: PROVIDED PROVIDED PROVIDED PROVIDED THAT WHERE AN ADDITION TO OR DEDUCTION FRO M THE ACTUAL COST OR EXPENDITURE OR COST OF ACQUISITION HAS BEEN MADE UNDER THIS SECTION, AS IT STOOD IMMEDIATELY BEFORE ITS SUB STITUTION BY THE FINANCE ACT, 2002, ON ACCOUNT OF AN INCREASE OR REDUCTION IN ITA NOS. 798-802/DEL/2010 & I.T.A NOS. 963, 1931,1267-1269/DEL/2010 10 THE LIABILITY AS AFORESAID, THE AMOUNT TO BE ADDED TO, OR, AS THE CASE MAY BE, DEDUCTED UNDER THIS SECTION FROM, THE AC TUAL COST OR EXPENDITURE OR COST OF ACQUISITION AT THE TIME O F MAKING THE PAYMENT SHALL BE SO ADJUSTED THAT THE TOTAL AMOUNT ADD ED TO, OR, AS THE CASE MAY BE, DEDUCTED FROM, THE ACTUAL CO ST OR EXPENDITURE OR COST OF ACQUISITION, IS EQUAL TO THE INCREASE OR REDUCTION IN THE AFORESAID LIABILITY TAKEN INTO ACC OUNT AT THE TIME OF MAKING PAYMENT. 11.2 WE FIND THAT THE ABOVE SAID SECTION 43A WAS SU BSTITUTED BY THE FINANCE ACT, 2002 W.E.F. 1.4.2003. PRIOR TO ITS SUBS TITUTION SECTION 43A READ AS UNDER:- 43A. SPECIAL PROVISIONS CONSEQUENTIAL TO CHANGES I N RATE OF EXCHANGE OF CURRENCY. (1) NOTWITHSTANDING ANYTHING CONTAINED IN ANY OTHER P ROVISION OF THIS ACT, WHERE AN ASSESSEE HAS ACQUIRED ANY ASSET FROM A COUNTRY OUTSIDE INDIA FOR THE PURPOSE OF HIS BUSINESS OR PROFESSION AND, IN CONSEQUENCE OF A CHA NGE IN THE RATE OF EXCHANGE AT ANY TIME AFTER THE ACQUISITI ON OF SUCH ASSET, THERE IS AN INCREASE OR REDUCTION IN T HE LIABILITY OF THE ASSESSEE AS EXPRESSED IN INDIAN CURRENCY FOR MAKING PAYMENTS TOWARDS THE WHOLE OR A PART OF THE COST O F THE ASSET OR FOR REPAYMENT OF THE WHOLE OR A PART OF THE MONEYS BORROWED BY HIM FROM ANY PERSON, DIRECTLY OR INDIRE CTLY, IN ANY FOREIGN CURRENCY SPECIFICALLY FOR THE PURPOSE O F ACQUIRING THE ASSET (BEING IN EITHER CASE THE LIAB ILITY EXISTING IMMEDIATELY BEFORE THE DATE ON WHICH THE CHANGE ITA NOS. 798-802/DEL/2010 & I.T.A NOS. 963, 1931,1267-1269/DEL/2010 11 IN THE RATE OF EXCHANGE TAKES EFFECT), THE AMOUNT B Y WHICH THE LIABILITY AFORESAID IS SO INCREASED OR REDUCED DURING THE PREVIOUS YEAR SHALL BE ADDED TO, OR, AS THE CASE MAY BE, DEDUCTED FROM, THE ACTUAL COST OF THE ASSET AS DEFI NED IN CLAUSE (1) OF SECTION 43 OR THE AMOUNT OF EXPENDITUR E OF A CAPITAL NATURE REFERRED TO IN CLAUSE (IV) OF SUB-SE CTION (1) OF SECTION 35 OR IN SECTION 35A OR IN CLAUSE (IX) OF S UB-SECTION (1) OF SECTION 36, OR IN THE CASE OF A CAPITAL ASSE T (NOT BEING A CAPITAL ASSET REFERRED TO IN SECTION 50), THE COS T OF ACQUISITION THEREOF FOR THE PURPOSES OF SECTION 48 , AND THE AMOUNT ARRIVED AT AFTER SUCH ADDITION OR DEDUCTION S HALL BE TAKEN TO BE THE ACTUAL COST OF THE ASSET OR THE AMOUNT OF EXPENDITURE OF A CAPITAL NATURE OR, AS THE CASE MAY BE, THE COST OF ACQUISITION OF THE CAPITAL ASSET AS AFORESA ID. 11.3 UPON CAREFUL CONSIDERATION, WE FIND OURSELVES IN AGREEMENT WITH THE LD. COMMISSIONER OF INCOME TAX (A) THAT BEFORE THE AMENDMENT TO SECTION 43A ANY LOSS SUFFERED BY ASSESSEE ON AC COUNT OF FOREIGN EXCHANGE FLUCTUATION HAS TO BE CAPITALIZED IN THE Y EAR OF SUCH FLUCTUATIONS IF THE ASSTT. ORDER IS PRIOR TO ASSTT. YEAR 2003-04. THE AMENDMENT TO SECTION 43A HAS RIGHTLY BEEN CONSIDERED AS PROSPECTIVE IN NATURE. ACCORDINGLY, WE DO NOT FIND ANY INFIRMI TY IN THE ORDER OF THE LD. COMMISSIONER OF INCOME TAX (A). HENCE, WE UPHOLD THE SAME. 12. IN THE RESULT, THE REVENUE APPEALS ON THIS ISSU E STAND DISMISSED. ITA NOS. 798-802/DEL/2010 & I.T.A NOS. 963, 1931,1267-1269/DEL/2010 12 13. ANOTHER ISSUE RAISED IN THE ASSESSEES APPEAL FOR ASSESSMENT YEAR 2004-05 IS THAT LD. COMMISSIONER OF INCOME TAX ( A) ERRED WAS NOT JUSTIFIED IN UPHOLDING THE ACTION OF THE ASSESSING O FFICER IN NOT ALLOWING SET OFF OF ` 4,17,94,000/- BEING UNABSORBED DEPRECI ATION ON THE GROUND THAT NO ADJUSTMENT IS POSSIBLE IN VIEW OF BUSINESS LOSSES BEING NIL. 14. ON THIS ISSUE ASSESSING OFFICER HAS REJECTED T HE ASSESSEES CLAIM FOR ALLOWING SETTING OFF OF ` 4,17,94,000/- BEING U NABSORBED DEPRECIATION. 15. UPON ASSESSEES APPEAL LD. COMMISSIONER OF INCO ME TAX (A) OBSERVED THAT IN VIEW OF THE DECISION OF THE ITAT, MUMBAI IN THE CASE OF METMINE INVESTMENT & TRADING PVT. LTD. VS. I.T.O., THE ASSESSEE WAS NOT ENTITLED FOR SET OFF OF UNABSORBED DEPRECIATION . HENCE, LD. COMMISSIONER OF INCOME TAX (A) HELD THAT THE SET OFF OF UNABSORBED DEPRECIATION TO THE EXTENT OF ` 417.94 LACAS WAS NO T GRANTED TO THE ASSESSEE. 16. AGAINST THE ABOVE ORDER THE ASSESSEE IS IN APPE AL BEFORE US. 17. LD. COUNSEL OF THE ASSESSEE FAIRLY CONCEDED THA T THIS ISSUE IS TO BE DECIDED AGAINST THE ASSESSEE. ITA NOS. 798-802/DEL/2010 & I.T.A NOS. 963, 1931,1267-1269/DEL/2010 13 18. UPON CAREFUL CONSIDERATION, WE UPHOLD THE ORDER OF THE LD. COMMISSIONER OF INCOME TAX (A) AND DECIDE THE ISSUE AGAINST THE ASSESSEE. 19. IN THE RESULT, ALL THE APPEALS FILED BY THE A SSESSEE AND REVENUE STAND DISMISSED. ORDER PRONOUNCED IN THE OPEN COURT ON 15/2/2013. SD/- SD/- [R.P. TOLANI] [R.P. TOLANI] [R.P. TOLANI] [R.P. TOLANI] [SHAMIM YAHYA] [SHAMIM YAHYA] [SHAMIM YAHYA] [SHAMIM YAHYA] JUDICIAL MEMBER JUDICIAL MEMBER JUDICIAL MEMBER JUDICIAL MEMBER ACCOUNTANT MEMBER ACCOUNTANT MEMBER ACCOUNTANT MEMBER ACCOUNTANT MEMBER DATE:- 15/2/2013 SRBHATNAGAR SRBHATNAGAR SRBHATNAGAR SRBHATNAGAR COPY FORWARDED TO: COPY FORWARDED TO: COPY FORWARDED TO: COPY FORWARDED TO: - -- - 1. APPELLANT 2. RESPONDENT 3. CIT 4. CIT (A) 5. DR, ITAT TRUE COPY BY ORDER, ASSISTANT REGISTRAR, ITAT, DELHI BENCHES ITA NOS. 798-802/DEL/2010 & I.T.A NOS. 963, 1931,1267-1269/DEL/2010 14