ACIT, Central Circle - 3(1), Kolkata, Kolkata V. M/s. Specialty Restaurants Ltd., Kolkata

ITA 1318/KOL/2017

• Counselvise Citation: [2018] 119 COUNSELVISE.COM (IT) 0761 (ITAT-KOLKATA)
• Duration Of Justice: 1 year(s) 5 month(s) 24 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 30-11-2018
• Appeal Filed By: Department
• Order Result: Dismissed
• Bench Allotted: B
• Assessment Year: 2011-2012
• Appeal Filed On: 05-06-2017
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: SANKAR HALDER JCITSRDR
• Assessee Lawyers: S K TULSIYAN
• Keywords: Capital asset; Depreciation; Earning of tax free income; Commercial expediency; Revenue expenditure; Capital expenditure
• Section: 143(3); 14A; 37(1); 37

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL KOLKATA BENCH B KOLKATA BEFORE SHRI P.M.JAGTAP, VICE-PRESIDENT AND SHRI S.S.GODARA, JUDICIAL MEMBER ITA NO.1318/KOL/2017 ASSESSMENT YEAR:2011-12 ACIT, CENTRAL CIRCLE- 3(1), AAYAKAR BHAWAN, POORVA, 110, SHANTIPLLY, KOLKATA-700 107 / V/S . M/S SPECIALTY RESTAURANTS LTD. UNIWORTH HOUSE3A, GURUSADAY ROAD, KOLKATA-700 019 [ PAN NO.AAECS 6802 M ] /APPELLANT .. /RESPONDENT /BY APPELLANT SHRI SANKAR HALDER, JCIT-SR-DR /BY RESPONDENT SHRI S.K. TULSIYAN, FCA /DATE OF HEARING 31-10-2018 /DATE OF PRONOUNCEMENT 30-11-2018 /O R D E R PER S.S.GODARA, JUDICIAL MEMBER:- THIS REVENUES APPEAL FOR ASSESSMENT YEAR 2011-12 ARISES AGAINST THE COMMISSIONER OF INCOME TAX (APPEALS)-17, KOLKATAS ORDER DATED 27.02.2013, PASSED IN CASE NO.432/CIT(A)-17/KOL/15-16 U/S 143(3) OF T HE INCOME TAX ACT, 1961; IN SHORT THE ACT HEARD BOTH THE PARTIES. CASE FILE PERUSED. 2. WE NOTICE AT THE OUTSET THAT THIS REVENUES APPE AL SUFFERS FROM 10 DAYS DELAY IN FILING THIS APPEAL. THE ASSESSING OFFICER HAS FILED HIS CONDONATION PETITION DATED 05.06.2017 ATTRIBUTING THE ABOVE DELAY TO COMPILATI ON OF NECESSARY PAPERS FOR THE ITA NO.1318/KOL/2017 A.Y.201 1-12 ACIT, CC-3(1), KOL. VS. M/S SPECIALTY R ESTAURANTS LTD. PAGE 2 PURPOSE OF FILING THE INSTANT APPEAL. THE ASSESSEE IS VERY FAIR IN NOT DISPUTING CORRECTNESS THEREOF. WE ACCORDINGLY CONDONE THE IMP UGNED DELAY OF 10 DAYS IN FILING OF THE INSTANT APPEAL. THE CASE IS NOW TAKEN UP FOR ADJUDICATION ON MERITS. 3. THE REVENUES FIRST SUBSTANTIVE GROUND CHALLENGI NG CORRECTNESS THE CIT(A)S APPELLATE ORDER REVERSING ASSESSMENT FINDINGS DISAL LOWING ASSESSEES EMPLOYEES CONTRIBUTION TO PROVIDENT FUND PAID BEYOND DUE DATE PRESCRIBED IN THE RESPECTIVE STATUTE. LEARNED DEPARTMENTAL REPRESENTATIVE FAILS TO REBUT THE CLINCHING FINDINGS IN THE CIT(A)S ORDER THAT ASSESSEE HAD PAID THE CONTR IBUTION IN ISSUE WELL BEFORE THE DUE DATE OF FILING RETURN U/S 139(1) OF THE ACT. HON'BL E JURISDICTIONAL HIGH COURTS DECISION IN ACIT VS. M/S VIJJAY SHREE LTD ITA NO.245 OF 2011 HELD THAT THE IMPUGNED DISALLOWANCE IN CASE OF EMPLOYEES CONTRIBUTION DEP OSITED BEFORE THE DUE DATE OF FILING OF RETURN U/S 139(1) OF THE ACT IS NOT SUSTA INABLE. THE CIT(A) HAS ALREADY FOLLOWED THE SAME IN HIS FINDING UNDER CHALLENGE. W E THUS DECLINE REVENUES INSTANT FIRST SUBSTANTIVE GROUND. 4. THE REVENUES SECOND SUBSTANTIVE GROUND PLEADS T HAT THE CIT(A) HAS ERRED IN LAW AS WELL AS ON FACTS IN DELETING THE DISALLOWANC E OF FOREIGN EXCHANGE LOSS OF 57,03,854/- THEREBY TREATING THE SAME AS BUSINESS L OSS ALLOWABLE U/S 37 OF THE ACT. THE ASSESSEE HAD DEBITED THE TOTAL SUM OF 58,10,210/- IN ITS PROFIT AND LOSS ACCOUNT TO HAVE BEEN ARISEN ON HEDGING FOREIGN CURRENCY NON-RE SIDENT LOAN (FCNR). THIS SUM INCLUDED LOSSES OF RESTATEMENT OF RECEIVABLE ON DEB TORS OF 1,06,356/-. THERE IS FURTHER IN DISPUTE ABOUT THE STATE BANK OF INDIA HAVING SAN CTIONED A TERM LOAN OF 22.50 CRORES TO THIS TAXPAYER FOR THE PURPOSE OF MEETING ITS WORKING CAPITAL REQUIREMENTS. THE ASSESSING OFFICERS ASSESSMENT DATED 28.03.2014 HELD THE IMPUGNED SUM TO BE REPRESENTING LOSSES INCURRED ON FOREIGN EXCHANGE FL UCTUATION TO PRINCIPAL AMOUNT AND THEREFORE, IT WAS HELD CAPITAL EXPENDITURE ONLY. 5. THE CIT(A) ACCEPTS ASSESSEES ARGUMENTS AGAINST THE IMPUGNED DISALLOWANCE AS FOLLOWS:- VI. GROUND 3: EXPENDITURE ON ACCOUNT OF FOREIGN EX CHANGE LOSS OF RS.57,03,853/- ITA NO.1318/KOL/2017 A.Y.201 1-12 ACIT, CC-3(1), KOL. VS. M/S SPECIALTY R ESTAURANTS LTD. PAGE 3 SUBMISSION OF THE ASSESSEE . DURING THE YEAR, THE APPELLANT DEBITED AN AMOUNT O F RS.58,10,210/- TO THE PROFIT AND LOSS A/C ON ACCOUNT OF FOREIGN EXCHANGE LOSS. DURING THE CO URSE OF ASSESSMENT PROCEEDINGS, THE APPELLANT WAS ASKED TO EXPLAIN WHY THIS DEDUCTION S HOULD NOT BE DISALLOWED AS IT IS IN THE NATURE OF LOSS INCURRED OF FOREIGN EXCHANGE FLUCTUA TION RELATED TO THE PRINCIPAL AMOUNT OF LOAN TAKEN AND THEREFORE, IT WAS IN THE NATURE OF CAPITA L EXPENDITURE. IN RESPONSE TO THE SAID QUERY, THE APPELLANT SUBMIT TED THAT THE SAID LOSS IS ON ACCOUNT OF HEDGING IN THE FOREIGN CURRENCY NON-RESIDENT LOAN ( FCNR), WHICH WAS INCLUSIVE OF LOSS ON RESTATEMENT OF RECEIVABLES ON DEBTORS OF RS.1,06,35 6/-. IN THIS RESPECT, IT WAS ALSO SUBMITTED THAT STE BANK OF INDIA HAD SANCTIONED A TERM LOAN O F RS.22.50 CORES TO THE APPELLANT FOR MEETING ITS WORKING CAPITAL REQUIREMENT VIDE ITS SA NCTION LETTER DATED 15-09-2008. A COPY OF THE SANCTION LETTER IS ENCLOSED AT PAGE 40-51 OF TH E PAPER BOOK. THE DETAILS OF LOAN GIVEN AND AMOUNT CONVERTED INTO FOREIGN CURRENCY LOAN IS GIVE BELOW: SR NO. PARTICULARS REMARKS 1 SANCTIONED AMOUNT OF RUPEE TERM LOAN 22.50 CR 2 SCHEDULE OF REPAYMENT THE TERM LOAN IS REPAYABLE IN 14 QUARTERLY INSTALMENTS COMMENCING FROM THE QUARTER ENDING DECEMBER 2009 3 CONVERTED AMOUNT OF RUPEE TERM LOAN INTO FCNR(B) RS.15 CRORES FOR ONE YEAR. 4 PURPOSE OF CONVERSION TO SAVE ON INTEREST COST FO R A PERIOD OF ONE YEAR ON THE TERM LOAN BY AVAILMENT OF FCNR LOAN 5 COST ELEMENT OF FCNR LOAN LIBOR PLUS HEDGING COST THE FOREIGN EXCHANGE LOSS/GAIN ACCOUNTED DURING THE YEAR PERTAINED TO THE INTEREST COST AND HEDGING RISKS ASSOCIATED WITH THE FOREIGN CURRENCY LOAN. FURTHER, IT WAS ALSO SUBMITTED THAT THE ENTIRE FCNR(B) LOAN WAS EXCLUDING OF LOSS ON RESTAT EMENT OF RECEIVABLES ON DEBTORS OF RS.1,06,356/-, SO INCURRED BY THE ASSESSEE ARE RELA TABLE TO THE PRINCIPAL AMOUNT OF LOAN TAKEN AND THEREFORE, ARE I THE NATURE OF CAPITAL EXPENDIT URE AND HENCE NOT AN ALLOWABLE DEDUCTION. TO REBUT THE CONTENTION OF THE LEARNED AO, IT IS HU MBLY SUBMITTED THAT THE TERM LOAN SANCTIONED BY THE SBI WAS FOR THE PURPOSE OF MEETIN G WORKING CAPITAL REQUIREMENTS AND NOT TO PURCHASE ANY CAPITAL ASSET. THE SAME IS EVIDENT FRO M THE SANCTION LETTER DATED 15-09-2008, RELEVANT PAGE 43 OF THE PAPER BOOK. THE RUPEE TERM LOAN WAS CONVERTED INTO FCNR(B) LOAN TO SAVE ON THE INTEREST COST SINCE THE INTERES T IS DIRECTLY LINKED TO LIBOR. DUE TO A FALL IN THE VALUE OF THE INDIAN RUPEE VIS--VIS THE US DOLL AR, IT SUFFERED FOREIGN EXCHANGE LOSSES ON LOANS REPAYABLE IN FOREIGN CURRENCY. AS SUCH, THE A LLEGATION OF THE LEARNED AO THAT THE FOREIGN EXCHANGE LOSS IS CAPITAL IN NATURE IS BASEL ESS. THE HEDGING LOSS IS REVENUE IN NATURE AND HENCE DEDUCTIBLE U/S. 37(1) OF THE ACT. TO BUTTRESS THE CONTENTION OF THE APPELLANT, RELIAN CE IS PLACED ON THE JUDGMENT OF THE APEX COURT IN THE CASE OF SUTLEJ COTTON MILLS LTD VS. C IT (116 ITR 001), WHEREIN IT WAS HELD THAT, THE LAW MAY, THEREFORE, NOW BE TAKEN TO BE WELL SE TTLED THAT WHERE PROFIT OR LOSS ARISES TO AN ASSESSEE ON ACCOUNT OF APPRECIATION O R DEPRECIATION IN THE VALUE OF FOREIGN CURRENCY HELD BY IT, ON CONVERSION INTO ANO THER CURRENCY, SUCH PROFIT OR LOSS WOULD ORDINARILY BE A TRADING PROFIT OR LOSS IF THE FOREIGN CURRENCY IS HELD BY THE ASSESSEE ON REVENUE ACCOUNT OR AS A TRADING ASSET O R AS A PART OF CIRCULATING CAPITAL EMBARKED IN THE BUSINESS. BUT, IF ON THE OTHER HAND , THE FOREIGN CURRENCY IS HELD AS A CAPITAL ASSET OR AS FIXED CAPITAL, SUCH PROFIT OR L OSS WOULD BE OF CAPITAL NATURE. ITA NO.1318/KOL/2017 A.Y.201 1-12 ACIT, CC-3(1), KOL. VS. M/S SPECIALTY R ESTAURANTS LTD. PAGE 4 HERE, UNDISPUTEDLY, THE FCNR LOAN WAS A PART OF THE CIRCULATING CAPITAL FOR MEETING THE DAY TO DAY WORKING CAPITAL REQUIREMENTS OF THE BUSINESS AN D HENCE ANY PROFIT/LOSS ARISING FROM SUCH HEDGING IN FOREIGN CURRENCY WILL BE REVENUE PROFIT/ LOSS. HERE, IT IS ALSO RELEVANT TO MENTION THAT IN THE IM MEDIATELY PRECEDING YEAR FY 2009-10, THERE WAS FOREIGN EXCHANGE GAIN OF RS.13,30,647/- WHICH W AS ASSESSED TO TAX AS REVENUE PROFIT. HENCE, TREATING THE LOSS AS A CAPITAL LOSS IN THE C URRENT YEAR IS DEVIATION FROM THE POLICY FOLLOWED IN THE EARLIER YEAR BY THE DEPARTMENT, TAK ING INTO CONSIDERATION THAT THERE WAS NO CHANGE IN THE FACTS OF THE CASE. THIS CLEARLY TANTA MOUNT TO DOUBLE STANDARDS ADOPTED BY THE DEPARTMENT. THE SAID INCOME OF RS.1323,30,647/- WAS INCLUDED IN SCHEDULE 14-OTHER INCOME OF AUDITED ACCOUNTS OF FY 2009-10 AND WAS OFFERED FOR TAXATION. THE AUDITED ACCOUNTS FOR FY 2009-10 IS ENCLOSED AT PAGE 52-60 O F THE PAPER BOOK. A COPY OF THE ASSESSMENT ORDER OF AY 2010-11 IS ALSO ENCLOSED AT PAGE 61-66. IN THE YEAR, WHEN THERE WERE PROFITS ON ACCOUNT OF HEDGING IN FOREIGN CURRENCY, THE SAID ACTIVITY WAS TREATED AS A REVENUE PROFIT AND FOREIGN EXCHANGE GAIN WAS ASSESSED TO TA X AND IN THE IMMEDIATELY NEXT YEAR, SINCE THE APPELLANT SUFFERED FOREIGN EXCHANGE LOSS, THE L EARNED AO DISALLOWED THE SAME ON THE ALLEGED GROUND THAT THE AID LOSS IS A CAPITAL EXPEN DITURE. THERE BEING NO CHANGE IN THE FACTS OF THE CASE, THE LEARNED AO OUGHT NOT TO DISTURB THE P ROCEDURE FOLLOWED IN THE PRECEDING YEARS AS HELD BY THE APEX COURT IN THE CASE OF RADHASOAMISA TSANG V. CIT (1992) 193 ITR 321, WHEREIN IT WAS HELD THAT, STRICTLY SPEAKING, RES JUDICATA DOES NOT APPLY TO INCOME-TAX PROCEEDINGS. THOUGH, EACH ASSESSMENT YEAR BEING A UNIT, WHAT WAS DECIDED IN ONE YEAR MIGHT NOT APPLY IN THE FOLLOWING YEAR; WHERE A FUNDAMENTAL ASPECT PERM EATING THROUGH THE DIFFERENT ASSESSMENT YEARS HAS BEEN FOUND AS A FACT ONE WAY O R A THE OTHER AND PARTIES HAVE ALLOWED THAT POSITION TO BE SUSTAINED BY NOT CHALLE NGING THE ORDER, IT WOULD NOT BE T ALL APPROPRIATE TO ALLOW THE POSITION TO BE CHANGED IN A SUBSEQUENT YEAR. IN THIS REGARD, RELIANCE IN ALSO PLACED ON THE JUDG MENT OF THE APEX COURT IN THE CASE OF CIT VS. WOODWARD GOVERNOR INDIA PVT LTD (312 ITR 254) W HEREIN IT WAS HELD THAT, THERE IS NO DISPUTE THAT IN THE PREVIOUS YEARS WHE NEVER THE DOLLAR RATE STOOD REDUCED, THE DEPARTMENT HAD TAXED THE GAINS WHICH A CCRUED TO THE ASSESSEE ON THE BASIS OF ACCRUAL AND IT IS ONLY IN THE YEAR IN QUES TION WHEN THE DOLLAR RATE STOOD INCREASED, RESULTING IN LOSS THAT THE DEPARTMENT HA S DISALLOWED THE DEDUCTION/DEBIT.TIS FACT IS IMPORTANT. IT INDICATES THE DOUBLE STANDARD S ADOPTED BY THE DEPARTMENT. FURTHER RELIANCE IS PLACED ON THE RECENT JUDGMENT I N THE CASE OF COOPER CORPORATION PVT LTD VS. DCIT (TA NO.866/PN/2014) WHEREIN THE TRIBUNAL A FFIRMED THE TAXPAYERS ARGUMENT THAT THE IMPUGNED FLUCTUATION LOSS HAD DIRECT NEXUS WITH THE SAVING IN INTEREST COSTS WITHOUT BRINGING ANY NEW CAPITAL SET INTO EXISTENCE, AND TH E CONVERSION OF RUPEE TERM LOANS INTO FOREIGN CURRENCY LOANS HAD SERVED AS A HEDGING MECH ANISM AGAINST REVENUE RECEIPTS FROM EXPORTS, AND PORTRAYED COMMERCIAL EXPEDIENCY. THE T RIBUNAL PLACED RELIANCE IN THE HON'BLE SUPREME COURT'S RULING IN THE CASE OF WOODWARD GOVE RNOR INDIA (P) LIMITED AND HELD THAT THE LOSS ARISING ON FOREIGN EXCHANGE FLUCTUATION HAS BE EN RIGHTLY ACCOUNTED AS REVENUE EXPENSE IN THE PROFIT AND LOSS STATEMENT IN ACCORDANCE WITH AS -11. ACCORDINGLY, THE TRIBUNAL HELD THAT THE TAXPAYERS CLAIM THAT THE FOREIGN EXCHANGE FLUC TUATION LOSS WAS A REVENUE LOSS WAS JUSTIFIED. IN THE LIGHT OF THE ABOVE, THE HEDGING LOSS, SO INC URRED BY THE APPELLANT, HAVING BEEN INCURRED IN THE NORMAL COURSE OF BUSINESS IS ALLOWABLE U/S 3 7 OF THE ACT AND IN VIEW OF THE SAME IT IS HUMBLY URGED BEFORE YOUR GOODSELF TO DIRECT THE LEA RNED AO TO DELETE THE DISALLOWANCE OF RS.57,03,854/-. DECISION : ON THIS ISSUE IT IS SUBMITTED THAT THE FOREIGN EX CHANGE GAIN OF RS.1330647/- FOR AYR. 201-11 WAS OFFERED BY THE ASSESSEE FOR TAXATIO N. THE ASSESSEE HAS BEEN FOLLOWING THE SAME METHOD OF ACCOUNTING AS IN THE EARLIER YEAR AS FAR A FOREIGN EXCHANGE GAIN/LOSS IS ITA NO.1318/KOL/2017 A.Y.201 1-12 ACIT, CC-3(1), KOL. VS. M/S SPECIALTY R ESTAURANTS LTD. PAGE 5 CONCERNED. IN THIS REGARD RELIANCE HAS BEEN PLACED ON THE DECISION OF APEX COURT IN RADHASOAMISATSANG V. CIT, (1992) 193 ITR 321, WHERE IN IT WAS HELD THAT: STRICTLY SPEAKING, RES JUDICATA DOES NOT APPLY TO INCOME-TAX PROCEEDINGS. THOUGH, EACH ASSESSMENT YEAR BEING A UNIT, WHAT WAS DECIDED IN ONE YEAR MIGHT NOT APPLY IN THE FOLLOWING YEAR; WHERE A FUNDAMENTAL ASPECT PERM EATING THOUGH THE DIFFERENT ASSESSMENT YEAR HAS BEEN FOUND AS A FACT ONE WAY OR THE OTHER AND PARTIES HAVE ALLOWED THAT POSITION TO BE SUSTAINED BY NOT CHALLE NGING THE ORDER, IT WOULD NOT BE AT ALL APPROPRIATE TO ALLOW THE POSITION TO BE CHANGED IN A SUBSEQUENT YEAR. IT IS SEEN THAT NO REASONS HAVE BEEN GIVE IN BY THE AO IN THE ASSESSMENT ORDER FOR DEVIATING FROM THE ACCOUNTING POLICY IN THE EARLIER YEARS. ST RICTLY SPEAKING RES-JUDICATA IS NOT APPLICABLE IN INCOME-TAX MATTERS HOWEVER THERE SHOULD B SIGNIF ICANT CHANGE IN FACTS WHICH SHOULD BE BROUGHT ON RECORD BY THE AO. NO SUCH CHANGE IN FACT S HAS BEEN DISCUSSED BY THE AO IN THE ASSESSMENT ORDER. FURTHER, THE AO CANNOT TAKE DIAME TRICALLY OPPOSITE STAND IN TWO ASSESSMENT YEARS. IN THIS CASE FOREIGN EXCHANGE GAIN HAS BEEN TREATED AS REVENUE IN NATURE IN A.YRS. 2010-11 AND THE FOREIGN EXCHANGE LOSS HAS BEEN TREA TED CAPITAL IN NATURE IN THE IMPUGNED ASSESSMENT YEAR. THIS IS NOT CORRECT AND THE AO IS REQUIRED TO FOLLOW UNIFORM ACCOUNTING POLICY. SR NO. PARTICULARS REMARKS 1 SANCTIONED AMOUNT OF RUPEE TERM LOAN 22.50 CR 2 SCHEDULE OF REPAYMENT THE TERM LOAN IS REPAYABLE IN 14 QUARTERLY INSTALMENTS COMMENCING FROM THE QUARTER ENDING DECEMBER 2009 3 CONVERTED AMOUNT OF RUPEE TERM LOAN INTO FCNR(B) RS.15 CRORES FOR ONE YEAR. 4 PURPOSE OF CONVERSION TO SAVE ON INTEREST COST FO R A PERIOD OF ONE YEAR ON THE TERM LOAN BY AVAILMENT OF FCNR LOAN 5 COST ELEMENT OF FCNR LOAN LIBOR PLUS HEDGING COST THE ENTIRE FCNR LOAN WAS SQUARED OFF DURING THE YEA R BY WAY OF ADJUSTMENT IN RUPEE TERM LOAN. THE ASSESSEE HAS ALSO PLACED RELIANCE ON THE DECISION OF THE APEX COURT IN THE CASE OF CIT VS. WOODWARD GOVERNOR INDIA PVT LTD (312 ITR 25 4) WHEREIN IT WAS HELD THAT THERE IS NO DISPUTE THAT IN THE PREVIOUS YEARS WHEN EVER THE DOLLAR RATE STOOD REDUCED, THE DEPARTMENT HAD TAXED THE GAINS WHICH ACCRUED TO THE ASSESSEE ON THE BASIS OF ACCRUAL AND IT IS ONLY IN THE YEAR IN QUESTION WHEN THE DOLLAR RATE STOOD INCREASED, RESULTING IN LOSS THAT THE DEPARTMENT HAS DISALLOWE D THE DEDUCTION/DEBIT.TIS FACT IS IMPORTANT. IT INDICATES THE DOUBLE STANDARDS ADOPTE D BY THE DEPARTMENT. RESPECTFULLY FOLLOWING THE DECISION OF THE APEX COU RT IN RADHASOAMISATSANG (SUPRA) AND WOODWARD GOVERNOR INDIA PVT LTD (SUPRA) THE LOSS IN CURRED BY THE ASSESSEE ON ACCOUNT OF FOREIGN EXCHANGE IS TO BE TREATED AS BUSINESS LOSS U/S. 37 . 6. WE HAVE GIVEN OUR THOUGHTFUL CONSIDERATION TO RI VAL CONTENTIONS AGAINST AND IN SUPPORT OF CIT(A)S ACTION HOLDING THE ASSESSEES F OREIGN EXCHANGE LOSS IN ISSUE TO BE BUSINESS LOSS U/S.37 ALLOWABLE AS REVENUE EXPENDITU RE. LEARNED DEPARTMENTAL ITA NO.1318/KOL/2017 A.Y.201 1-12 ACIT, CC-3(1), KOL. VS. M/S SPECIALTY R ESTAURANTS LTD. PAGE 6 REPRESENTATIVE FAILS TO DISPUTE THE BASIC FACT FIRS T OF ALL THAT THIS QUESTION OF FOREIGN EXCHANGE GAIN / LOSS IS VERY MUCH A RECURRING ONE I N ASSESSEES CASE THROUGHOUT. TAKING FOR INSTANCE THE IMMEDIATE PRECEDING ASSESSM ENT YEAR 2010-11. THE ASSESSEES FOREIGN EXCHANGE GAIN OF 13,30,647/- IN SAID PRECEDING ASSESSMENT YEAR QUA T HE VERY LOANS HEDGING STOOD ASSESSED UNDER REVENUE HEAD. TH E REVNUES ENDEAVOUR IN THE IMPUGNED ASSESSMENT YEAR IS TO ADOPT AN INCONSISTEN CY POSITION WHICH IS NOT CORRECT IN THE EYES OF LAW AS PER HON'BLE APEX COURTS DECISIO N IN RADHASOAMISATDSANG VS. CIT (1992) 193 ITR 321 (SC). 7. IT FURTHER TRANSPIRES THAT THE ASSESSEE HAD CONV ERTED IT RUPEE TERM LOAN INTO FCNR LOAN IN ORDER TO SAVE THE INTEREST COST BEING LINKED TO LIBOR. THE IMPUGNED LOAN WAS PART OF CIRCULATING CAPITAL. THE LOSS IN ISSUE THEREFORE ARISES FROM FOREIGN CURRENCY HEDGING ONLY FORMING PART OF REVENUE HEAD IN PROFIT AND LOSS ACCOUNT WHICH IS NOT DISPUTED AT REVENUES BEHEST. 8. HON'BLE APEX COURTS DECISION IN SUTLEJ COTTON MILLS LTD VS. CIT (116 ITR 001) MADE IT CLEAR LONG BACK THAT SUCH GAIN / LOSS FALLS UNDER TRADING HEAD OF FOREIGN CURRENCY IN QUESTION HELD IN REVENUE ACCOUNT OR A T RADING ASSET OR PART OF CIRCULATING CAPITAL. THEIR LORDSHIP LATTER DECISION IN CIT VS. WOODWARD GOVERNOR INDIA PVT LTD 312 ITR 254 (SC) ALSO DISCARDED REVENUES INCONSIST ENT STANDS IN ADOPTING A DIFFERENT APPROACH QUA THE VERY ISSUE IN PRECEDING AND SUCCEEDING ASSESSM ENT YEARS. WE TAKE INTO ACCOUNT ALL THESE FACTS AS WELL AS SETTLED LEG AL POSITION TO CONCLUDE THAT THE CIT(A) HAS RIGHTLY TREATED ASSESSEES FOREIGN CURRENCY ACC ORDINGLY LOSS TO BE REVENUE EXPENDITURE IS ALLOWABLE SEC. 37 OF THE ACT. 9. THIS LEAVES US WITH REVENUES THIRD AND LAST SUB STANTIVE GROUND SEEKING TO REVIVE SEC. 14A R.W.S 8D DISALLOWANCE OF 31,82,084/- PERTAINING TO ASSESSEES EXEMPT INCOME FROM DIVIDENDS AMOUNTING TO 1,13,35,140/-. THE ASSESSING OFFICER HAD INVOKED RULE 8D(2)(II) & (III) FOR COMPUTING PROPOR TIONATE INTEREST AND ADMINISTRATIVE EXPENDITURE DISALLOWANCE @ .5% OF AVERAGE VALUE OF INVESTMENTS INVOLVING SUMS OF 24,16,66/- AND 7,65,358/- AS AGAINST TAXPAYERS SUO MOTU DISALLOWA NCE OF 1,08,285/- RESULTING IN NET DISALLOWANCE OF 21,79,166/-. THE CIT(A) HAS DIRECTED THE ITA NO.1318/KOL/2017 A.Y.201 1-12 ACIT, CC-3(1), KOL. VS. M/S SPECIALTY R ESTAURANTS LTD. PAGE 7 ASSESSING OFFICER TO RECOMPUTE THE IMPUGNED DISALLO WANCE AFTER INCLUDING EXEMPT INCOME YIELDING INVESTMENTS ONLY AS PER THIS TRIBUN ALS ORDER IN REI AGRO LTD. VS. DCIT (2013) 35 TAXMAN.COM 404/144 TD 141 (KOL) AS UPHELD IN HON'BLE JURISDICTIONAL HIGH COURTS DECISION IN ITA NO.220/ 2013 DECIDED ON09.04.2013. WE THEREFORE FIND NO REASON TO DISTURB THE CIT(A)S DI RECTION HEREINABOVE TO THE ASSESSING OFFICER FOR RE-COMPUTATION OF SEC. 14A R. W.S 8D DISALLOWANCE IN ISSUE. 10. THIS REVENUES APPEAL IS DISMISSED ACCORDINGLY. ORDER PRONOUNCED IN OPEN COURT ON 30/11/2018 SD/- SD/- ( !) (#$ ') (P.M.JAGTAP) (S.S.GODARA) VICE PRESIDENT JUDICIAL MEMBER *DKP-SR.PS ( - 30/11/2018 / KOLKATA / COPY OF ORDER FORWARDED TO:- 1. /APPELLANT-ACIT, CENTRAL CIRCLE-3(1), AAYAKAR BHAWA NA, POORV, 110, SHANTI PALLY, KOLKATA-107 2. /RESPONDENT-M/S SPECIALTY RESTAURANTS LTD., UNIWOR TH HOUSE, 3A, GURUSADAY ROAD, KOLKATA-19 3. + . / CONCERNED CIT 4. . - / CIT (A) 5. / $$+ , + / DR, ITAT, KOLKATA 6. 3 / GUARD FILE. BY ORD ER/ , /TRUE COPY/ / +,