Sivagami Holdings Private Limited, CHENNAI V. ACIT, CHENNAI

ITA 1325/CHNY/2016

• Counselvise Citation: [2017] 127 COUNSELVISE.COM (IT) 6092 (ITAT-CHENNAI)
• Duration Of Justice: 1 year(s) 4 month(s) 15 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 27-09-2017
• Appeal Filed By: Assessee
• Order Result: Partly Allowed
• Bench Allotted: C
• Next Hearing Date: 08-08-2017
• Assessment Year: 2010-2011
• Appeal Filed On: 12-05-2016
• Result in Favour of: Partly Allowed
• Court: TRIBUNAL
• Department Lawyers: ASHISH TRIPATHIJCIT
• Assessee Lawyers: R RAJASEKARAN
• Keywords: Capital asset; Rectification of order; Permanent establishment
• Section: 143(3); 147; 263; 154

Judgement Text

, / / / , IN THE INCOME TAX APPELLATE TRIBUNAL C BENCH : CHENNAI , ! ' #! ' $ . % & '( BEFORE SHRI CHANDRA POOJARI, ACCOUNTANT MEMBER AND SHRI DUVVURU RL REDDY , JUDICIAL MEMBER ./ I.T.A.NOS.1323, 1324 & 1325/MDS./2016 / ASSESSMENT YEARS : 2004-05, 2007-08 & 2010-11 M/S.SIVAGAMI HOLDINGS PVT LTD., 202 (OD NO.742), ANNA SALAI, CHENNAI-2. VS. THE ACIT, COMPANY CIRCLE VI(3), CHENNAI 600 034. [PAN AAECS 3279 A ] ( )* / APPELLANT) ( +,)* /RESPONDENT) / APPELLANT BY : MR.R.RAJASEKARAN, C.A /RESPONDENT BY : MR.ASHISH TRIPATHI,JCIT, DR / DATE OF HEARING : 21 - 09 - 2017 / DATE OF PRONOUNCEMENT : 27 - 09 - 2017 - / O R D E R PER BENCH THESE THREE APPEALS OF THE ASSESSEE ARE DIRECTED AGAINST THE DIFFERENT ORDERS OF THE COMMISSIONER OF INCOME -TAX (APPEALS)-15, CHENNAI PERTAINING TO ASSESSMENT YEARS 2004-05, 2007-08 AND 2010-11. SINCE ALL THESE APPEALS ARE FILED BY THE SAME ASSES SEE, THESE ITA NOS1323 TO 1325.MDS./16/ :- 2 -: APPEALS ARE CLUBBED TOGETHER, HEARD TOGETHER, DISPO SED OFF BY THIS COMMON ORDER FOR THE SAKE OF CONVENIENCE. 2. FIRST WE TAKE UP ITA NO.1323/MDS./16 (A.Y2009-10) THE MAIN GRIEVANCE OF THE ASSESSEE IN THIS APPEAL IS WITH REGARD TO SUSTAINING THE LEVY OF INTEREST OF ` 1,52,525/- U/S.234D OF THE ACT. 3. THE BRIEF FACTS OF THE CASE ARE THAT THE ASSES SEE IS A PRIVATE LIMITED COMPANY, WHICH IS PRIMARILY AN INVESTMENT C OMPANY REGISTERED AS AN NBFC UNDER RBI GUIDELINES, CARRYING ON ITS OP ERATIONS IN CHENNAI AND THROUGH ITS PERMANENT ESTABLISHMENT IN KULA LAM PUR, MALAYSIA. THE ASSESSEE HAS A BRANCH AT BALUPET, KARNATAKA, WH ERE IT IS MANAGING AN AGRICULTURAL PLANTATION GROWING COFFEE AND OTHER ALLIED PRODUCTS. THE ASSESSMENT U/S 143(3) READ WITH SECTION 147 OF THE WAS COMPLETED ON 31.12.2008. REFUND RAISED U/S143(1) FO R THE YEAR UNDER CONSIDERATION WAS ADJUSTED IN PARTS AGAINST THE DEM AND OF THE ASSESSEE COMPANY FOR THE ASSESSMENT YEAR 2003-04. THE SAID R EFUND AMOUNT OF ` 10, 51,913 WAS NOT CONSIDERED WHILE COMPUTING TAX FOR T HE ASSESSED INCOME AT THE TIME OF ASSESSMENT U/S 143(3) READ WITH SECTION 147 OF THE ACT. CORRESPONDING INTEREST U/S.234D OF THE ACT WAS ALSO NOT CHARGED. NOTICE U/S 154 DATED 02.02.2010 WAS ISSUED AND SERVED ON THE A SSESSEE COMPANY. THE ASSESSEE COMPANY THROUGH LETTER DATED 08.02.2010 SU BMITTED THAT THE DEMAND FOR ASSESSMENT YEAR 2003-04 STANDS DELETED A FTER GIVING EFFECT TO ITA NOS1323 TO 1325.MDS./16/ :- 3 -: THE ORDER OF CIT(A)-V, CHENNAI DATED 26.11.2007 OF THE ACT. THOUGH THE DEMAND FOR AY 2003-04 STANDS REDUCED TO NIL, THE AC TUAL COLLECTIBLE DEMAND ON THE DATE OF GIVING APPEAL EFFECT STANDS AT ` 12,90,099/-. THIS MISTAKE APPARENT FROM RECORDS WAS RECTIFIED. AGGRIEVED BY T HE ORDER OF LD. ASSESSING OFFICER, THE ASSESSEE CARRIED THE APPEAL BEFORE THE LD.CIT(A). 3.1 ON APPEAL, LD.CIT(A) OBSERVED THAT THE ASSESSE E HAD SUBMITTED THAT NO INTREST U/S.234D IS LEVIABLE SINCE THE WORDS USE D IN STATUTE IS ANY REFUND IS GRANTED AND THE AMOUNT REFUNDED IS NOT APPLIC ABLE. ACCORDING TO LD.CIT(A), THE LD. ASSESSING OFFICER WAS OF THE VIE W THAT THOUGH DEMAND FOR A.Y 2003-04 IS NIL, THERE IS ACTUAL COLLECTIBLE D EMAND OF ` 12,90,099/- BUT THE REFUND AMOUNT OF ` 10,51,913/- WAS NOT CONSIDERED WHILE COMPUTING TAX FOR ORDER U/S.143(3) R.W.S.147 OF THE ACT. FURTHER, THE LD.CIT(A) OBSERVED THAT AS THERE WAS A REFUND AMOUNT OF ` 10,51,913/- ON THE DATE OF PASSING THE ASSESSMENT ORDER WHICH WAS NOT CONSIDERED FOR T AX COMPUTATION. ACCORDINGLY, THE ACTION OF LD. ASSESSING OFFICER I N PASSING ORDER U/S.154 AND CHARGING INTEREST U/S.234D OF THE ACT WAS CONFIRMED BY THE LD.CIT(A). AGAINST THE ORDER OF LD.CIT(A), NOW THE ASSESSEE IS IN APPEAL BEFORE US. 4. BEFORE US, LD.A.R SUBMITTED THAT, AFTER GIVING EFFECT TO THE ORDER OF LD.CIT(A), THE INCOME OF ASSESSEE FOR ASSESSMENT YE AR 2003-04 IS ONLY LOSS AT ` 16,59,760/-. BEING SO, THERE IS NO QUESTION OF ADJU STING REFUND OF ` 10,51,913/- RELATING TO ASSESSMENT YEAR 2004-05 TOW ARDS OUTSTANDING TAX LIABILITY OF ASSESSMENT YEAR 2003-04. CONSEQUENTLY, THERE CANNOT BE ANY LEVY ITA NOS1323 TO 1325.MDS./16/ :- 4 -: OF INTEREST U/S.234D OF THE ACT VIDE RECTIFICATION PROCEEDINGS U/S.154 OF THE ACT DATED 10.02.2010. HE ALSO DREW OUR ATTENTION TO THE COPY OF PROCEEDINGS DATED 12.03.2008, WHICH IS GIVING EFFECT TO THE APP ELLATE ORDER NO.166/06-07 FOR ASSESSMENT YEAR 2003-04 BY ACIT, COMPANY CIRCLE VI(3),CHENNAI. 5. ON THE OTHER HAND, LD.D.R SUBMITTED THAT ON PER USAL OF THE RECORDS, THOUGH OUTSTANDING LIABILITY FOR ASSESSMENT YEAR 20 03-04 WAS NIL, ACTUALLY, THERE WAS A DEMAND ON THE DATE OF GIVING EFFECT TO THE ORDER OF LD.CIT(A) AT ` 12,90,099/- RELATING TO A.Y 2003-04. ACCORDING TO H IM, THERE WAS AN ADJUSTMENT OF TAX REFUND VIDE INTIMATION U/S.143(1) OF THE ACT FOR ASSESSMENT YEAR 2004-05 AT ` 10,51,913/- TOWARDS OUTSTANDING LIABILITY FOR ASSESSMENT YEAR 2003-04. ACCORDING TO HIM, THE REC TIFICATION PROCEEDING IS VALID. THE LD.D.R RELIED ON THE ORDER OF LOWER AUT HORITIES. 6. WE HAVE HEARD BOTH THE PARTIES AND PERUSED THE MATERIAL ON RECORD. THE MAIN CONTROVERSY HEREIN IS THAT THERE IS NO OUT STANDING LIABILITY FOR ASSESSMENT YEAR 2003-04 SO AS TO ADJUST OUT OF REFU ND RELATING TO THE ASSESSMENT YEAR 2004-05. THE PRIMA FACIE, IT LOOKS THAT AS PER GIVING EFFECT TO THE ORDER OF FIRST APPELLATE AUTHORITY DATED 12. 03.2008 FOR ASSESSMENT YEAR 2003-04, THERE WAS A LOSS AT ` 16,59,760/-. HOWEVER, THE LD. ASSESSING OFFICER MENTIONED THAT OUTSTANDING LIABILITY AS ON 12.03.2008 STANDS AT ` 12,90,099/-. NEITHER THE DEPARTMENTAL REPRESENTATIV E NOR THE ASSESSEES COUNSEL PRODUCED ANY MATERIAL TO SUGGEST THE EXACT AMOUNT OF TAX OUTSTANDING FOR THE A.Y 2003-04 AT THE TIME OF PASS ING RECTIFICATION ORDER ITA NOS1323 TO 1325.MDS./16/ :- 5 -: DATED 10.02.2010 RELATING TO THE A.Y. 2004-05. HEN CE, IN THE INTEREST OF JUSTICE, WE REMIT THE ISSUE IN DISPUTE TO THE FILE OF LD. ASSESSING OFFICER TO ASCERTAIN THE EXACT OUTSTANDING LIABILITY RELATING TO ASSESSMENT YEAR 2003- 04, SO AS TO MAKE ADJUSTMENTS OUT OF REFUND OF TAX RELATING TO ASSESSMENT YEAR 2004-05. AT THIS STAGE, WE REFRAIN FROM GOING INTO OTHER GROUNDS OF APPEAL RAISED BY THE ASSESSEE AS THE ASSESSING OFFI CER HAS TO DECIDE WHETHER THERE IS OUTSTANDING FOR THE A.Y 2003-04 OR NOT. AC CORDINGLY, THIS ISSUE IS REMITTED TO THE FILE OF LD. ASSESSING OFFICER FOR F RESH CONSIDERATION AS INDICATED ABOVE. 6.1. IN THE RESULT, THE APPEAL OF THE ASSESSEE FOR ASSESSMENT YEAR 2004-05 IS PARTLY ALLOWED FOR STATISTICAL PURPOSES. 7. NEXT WE TAKE UP ITA NO.1324/MDS./16 (A.Y2009-10) THE MAIN GRIEVANCE OF THE ASSESSEE IN THIS APPEAL IS WITH REGARD TO CONFIRMING THE ASSESSMENT ORDER BY THE LD.CIT(A) WITHOUT INDICATING THAT UNDER WHAT PROVISIONS OF THE ACT O R THE ACCOUNTING STANDARD (AS)-11, THE FOREIGN EXCHANGE FLUCTUATION RESERVE, WHICH IS AKIN TO A REVALUATION RESERVE, ARISING ON RESTATEME NT OF THE ASSETS AND LIABILITIES OF THE MALAYSIAN BRANCH IN THE ASSESSEE S BALANCE SHEET IS TAXABLE. ITA NOS1323 TO 1325.MDS./16/ :- 6 -: 8. THE FACTS OF THE ISSUE ARE THAT ORIGINALLY THE ASSESSMENT IN THIS CASE FOR ASSESSMENT YEAR 2007-08 WAS COMPLETED U/S .143(3) OF THE ACT ON 03.12.2009 DETERMINING THE TOTAL INCOME OF ` 76,54,003/-. FROM THE PERUSAL OF THE BALANCE SHEET IN SCHEDULE-2:RESE RVE AND SURPLUS, IT IS SEEN THAT THE ASSESSEE HAS SHOWN A SUM OF ` 2,66,80,649/- AS ADDITION TOWARDS FOREIGN EXCHANGE FLUCTUATION RESER VE. IN THE CASE OF M/S.WOODWARD GOVERNOR INDIA PVT. LTD., VS. CIT IN 3 12 ITR 254 (SC) WHEREIN HELD THAT ANY ADDITION BYWAY OF FOREIGN EX CHANGE FLUCTUATION WAS TO BE TREATED AS REVENUE RECEIPT AND SHOULD BE SHOWN IN P&L A/C. BY FOLLOWING THE DECISION OF APEX COURT, ADDITION T OWARDS FOREIGN EXCHANGE FLUCTUATION RESERVE HAS TO BE TAXED. ACCO RDINGLY, THE ORDER U/S.263 OF THE ACT PASSED BY THE LD.CIT ON 30.03.20 12. AGGRIEVED BY THE ORDER OF LD. CIT, THE ASSESSEE CARRIED THE APPE AL BEFORE THIS TRIBUNAL IN ITA NO.1076/MDS./2012 FOR ASSESSMENT YE AR 2007-08 VIDE ORDER DATED 25.07.2012 WHEREIN THE TRIBUNAL HELD TH AT:- 5. WE HEARD SHRI S.THYAGARAJAN, LEARNED CHARTERED ACCOUNTANT APPEARING FOR THE ASSESSEE AND DR. S.MO HARANA, LD. COMMISSIONER OF INCOME TAX(APPEALS) APPEARING FOR T HE REVENUE. 6. IT IS THE CASE OF ASSESSEE THAT THE ADJUSTMENT IN THE RESERVE HAS BEEN MADE IN VIEW OF ACCOUNTING STANDARD-11, WH ICH IS MANDATORILY TO BE FOLLOWED BY THE ASSESSEE IN FINAL IZING ITS ACCOUNTS. IT IS THE CASE OF THE LEARNED CHARTERED ACCOUNTANT THAT IT IS NECESSARY FOR THE DISCLOSURE PURPOSE TO ACCOU NT FOR THE ITA NOS1323 TO 1325.MDS./16/ :- 7 -: EXCHANGE RATE FLUCTUATION IN THE BALANCE SHEET BY A DJUSTING THE RESERVE AMOUNT FOR THE PURPOSE. BUT THE COMMISSION ER ARGUES IN THE LIGHT OF THE JUDGEMENT OF HONBLE SUPREME CO URT IN THE CASE OF M/S.WOODWARD GOVERNOR INDIA PRIVATE LIMIT ED VS. CIT IN 312 ITR 254 THAT FOREIGN EXCHANGE RATE FLUCTUATI ON GAINS ARISING OUT OF REVENUE ITEMS MUST BE TREATED AS PAR T OF INCOME OF THE ASSESSEE. 7. AFTER HEARING BOTH SIDES, WE FIND THAT THIS ISS UE HAS NOT BEEN DISCUSSED BY THE ASSESSING AUTHORITY IN HIS ORDER. THE LEARNED CHARTERED ACCOUNTANT HAS VEHEMENTLY ARGUED THAT THE PARTICULARS RELATING TO THE ABOVE WERE FILED BEFORE THE ASSESSING OFFICER AND SO, IT IS NOT POSSIBLE TO HOLD THAT TH OSE PARTICULARS WERE NOT EXAMINED BY THE ASSESSING OFFICER, ONLY FO R THE REASONS THAT THE ISSUE IS NOT DISCUSSED BY THE ASSESSING OF FICER IN HIS ORDER. IN SUPPORT OF THE PROPOSITION, THE LEARNED CHARTERED ACCOUNTANT HAS RELIED ON THE JUDGEMENT OF THE HONB LE BOMBAY HIGH COURT IN THE CASE OF COMMISSIONER OF INCOME T AX VS. GABRIEL INDIA LTD. IN 203 ITR 108. 8. ACCOUNTING STANDARDS-11 MANDATES THAT THE ASSES SEE SHOULD MAINTAIN FOREIGN EXCHANGE FLUCTUATION RESERVE WHERE VER NECESSARY AND TRANSMIT THE EXCHANGE FLUCTUATION GAI NS OR LOSSES TO THAT RESERVE. THIS IS NECESSARY FOR A TRUE AND FAIR DISCLOSURE OF THE STATE OF AFFAIRS OF AN ASSESSEE AS ON THE BALAN CE SHEET DATE AND NECESSITATED AS THE ASSESSEE RE-STATES OF ITS A SSETS OF THE FOREIGN BRANCH IN TERMS OF INDIAN RUPEE. 9. BUT, IT IS ALSO NECESSARY TO EXAMINE THE TAX IM PLICATIONS OF THIS DISCLOSURE EXERCISE. ASSESSEE IS BASICALLY AN INVES TMENT COMPANY. THE ASSESSEE IS INVESTING IN ALL SORTS OF PORTFOLIOS. IT IS NECESSARY, THEREFORE TO EXAMINE THE COMPONENTS O F THE ASSETS AND HOLDINGS RE-STATED BY THE ASSESSEE IN TERMS OF INDIAN RUPEE ITA NOS1323 TO 1325.MDS./16/ :- 8 -: SO AS TO SEE WHETHER ANY REVENUE ITEM IS RE-STATED AND IF SO, WHETHER THE GAINS WOULD BE EXIGIBLE TO TAX. THE L EARNED CHARTERED ACCOUNTANT HAS STATED THAT THE DECISION R ELIED ON BY THE COMMISSIONER OF INCOME TAX IS DISTINGUISHABLE A S THE FACTS OF THE ASSESSEES CASE ARE DIFFERENT. BUT THE PROB LEM IS THAT THE ASSESSING AUTHORITY HAS NOT AT ALL DISCUSSED ANYTHI NG IN HIS ORDER ON THIS IMPORTANT ISSUE. THEREFORE, IT IS NOT POSS IBLE TO HOLD AT PRESENT THAT WHETHER THE ASSESSING AUTHORITY HAD IN FACT EXAMINED THIS ASPECT OF THE CASE AND FINALLY COME T O A CONCLUSION THAT ASSESSEES CASE IS DIFFERENT FROM THE CASE CONSIDERED BY THE HONBLE SUPREME COURT. EVERYTHING REMAINS IN LOOSE ENDS. 10. THEREFORE, AS A MATTER OF FACT, WE FIND THAT T HE ASSESSMENT ORDER IS ERRONEOUS AND PREJUDICIAL TO TH E INTERESTS OF THE REVENUE AS FAR AS THE ADDITION TO THE FOREIGN C URRENCY FLUCTUATION RESERVE ACCOUNT IS CONCERNED. ACCORDIN GLY, WE HOLD THAT THE COMMISSIONER OF INCOME TAX IS JUSTIFIED IN PASSING THE IMPUGNED REVISION ORDER UNDER SECTION 263 OF THE IN COME TAX ACT, 1961. 11. IN RESULT, THE APPEAL FILED BY ASSESSEE IS DIS MISSED. 8.1 CONSEQUENT TO THIS, THE LD. ASSESSING OFFICER PASSED THE ORDER U/S.143(3) OF THE ACT R.W.S. 263 OF THE ACT ON 19.0 3.2013. AGGRIEVED BY THE ORDER OF LD. ASSESSING OFFICER, THE ASSESSEE CARRIE D THE APPEAL BEFORE THE LD.CIT(A). 8.2 ON APPEAL, THE LD.CIT(A) OBSERVED VIDE ORDER D ATED 25.02.2016 AS FOLLOWS:- AFTER CONSIDERING THE ORDER U/S.263, DETAILED SUBMISSION OF THE APPELLANT, REMAND REPORT BY LD. ASSESSING OFFICER A ND APPELLANTS ITA NOS1323 TO 1325.MDS./16/ :- 9 -: COMMENTS ON REMAND REPORT, I AM OF THE VIEW THAT TH E AO HAS PASSED ORDER U/S.143(3) R.W.S.263 FOLLOWING THE DIRECTIONS GIVEN BY CIT IN ORDER U/S.263. THEREFORE, THE ACTION OF AO IN ADDING ` 2,66,80,649/- IS CONFIRMED. THESE GROUNDS OF APPEAL ARE DISMISSED. AGAINST THE ORDER OF LD.CIT(A), NOW THE ASSESSEE IS AGAIN IN APPEAL BEFORE US. 9. BEFORE US, LD.A.R SUBMITTED THAT THE LOWER AUTH ORITIES DECISION BASED ON THE JUDGEMNET OF SUPREME COURT IN THE CASE OF M/ S.WOODWORD GOVERNOR INDIA PVT LTD., VS. CIT (SUPRA), IT CANNOT BE APPLI ED TO THE FACTS OF THE CASE AS THAT CASE DEALS WITH THE FOREIGN EXCHANGE FLUCTUATION WITH REFERENCE TO THE TRANSACTION. ACCORDING TO LD.A.R, THE FOREI GN EXCHANGE FLUCTUATION ARISING IN THE CASE OF ASSESSEE ONLY WI TH REFERENCE TO TRANSACTION WITH THE BRANCH, AS SUCH IT CANNOT BE A PPLIED TO THE ASSESSEES CASE. IN OUR OPINION, IN THE ASSESSEES CASE THE ISSUE IS RELATED TO FOREIGN CURRENCY TRANSLATIONS OF MALAYSI AN BRANCH ASSETS AND LIABILITIES IN THE FINANCIAL STATEMENT OF THE HEAD OFFICE, IN ACCORDANCE WITH THE REVISED AS-11, PARTICULARLY, PARAS 24 & 26 OF THEREIN. IN OTHER WORDS, THE ASSESSEE CREDITED THE GAIN DUE TO FOREIGN EXCHANGE FLUCTUATION WITH REFERENCE TO ASSETS OF MALAYSIA BR ANCH TO FOREIGN EXCHANGE FLUCTUATION RESERVE ACCOUNT. IT WAS STATED BY THE LD.A.R THAT THE GAIN HAS BEEN CALCULATED BY THE ASSESSEE ON ACC OUNT OF RESTATEMENT OF ASSETS OF MALAYSIAN BRANCH, WHICH IS BY DEBITING RESPECTIVE ASSETS OF MALAYSIAN BRANCH AND CREDITING THE FOREIGN ITA NOS1323 TO 1325.MDS./16/ :- 10 - : EXCHANGE FLUCTUATION RESERVE ACCOUNT. FURTHER, IT WAS STATED THAT THE TRIBUNAL IN EARLIER OCCASION, CONFIRMED THE FINDING OF THE LD. CITS ORDER PASSED U/S.263 OF THE ACT VIDE ORDER CITED SUPRA. B EING SO, IT CANNOT BE SAID THAT THERE IS A FINAL QUANTIFICATION OF THE TA XABLE GAIN ON ACCOUNT OF EXCHANGE RATE FLUCTUATION IN RESPECT OF ASSETS O F FOREIGN BRANCH. TO THAT EXTENT, WE ARE IN AGREEMENT WITH THE ARGUMENTS OF LD.A.R. HOWEVER, IN OUR CONSIDERED VIEW, THE GAIN ON ACCOUN T OF RESTATEMENT OF THE VALUE OF ASSETS ON ACCOUNT OF FOREIGN EXCHAN GE FLUCTUATION COULD BE IN CAPITAL FIELD OR IN REVENUE FIELD. IF IT IS IN CAPITAL FIELD, IT CANNOT BE BROUGHT TO TAX. ON THE OTHER HAND, IF IT IS IN R EVENUE FIELD, IT IS AN INCOME CHARGEABLE TO TAX. THE AO WHILE PASSING A CO NSEQUENTIAL ORDER TO THE ORDER OF CIT PASSED U/S.263, BROUGHT ENTIRE AMOUNT INTO TAX, CONSIDERING THE GAIN IN THE NATURE OF REVENUE FIELD . THERE WAS NO DISCUSSION ABOUT GAIN IN THE NATURE OF CAPITAL FIEL D. SO, WHEN THE ISSUE IS REMITTED BY LD.CIT VIDE ORDER U/S.263 OF THE ACT , IT IS INCUMBENT UPON THE AO TO EXAMINE THE ISSUE IN ITS ENTIRETY, W HETHER IT IS IN CAPITAL FIELD OR IN REVENUE FIELD AND THEREAFTER BRING THE GAIN WHICH IS IN NATURE OF REVENUE INTO TAX. AS PER AS-11, THE EFFECT OF EXCHANGE DIFFERENCE HAS TO BE RECORDED ON THE YEAR END I.E.31 ST MARCH AS ON THE DATE OF BALANCE SHEET AND IT HAS TO BE DEBITED/CREDITED TO PROFIT OR LOSS A/C IN RESPECT OF TRADING ASSETS. ON THE OTHER HAND, IF IT IS RELATING TO CAPITAL ASSET, IT HAS TO GO TO THE RESERVE ACCOUNT. SINCE, THIS ISSUE WAS NOT ITA NOS1323 TO 1325.MDS./16/ :- 11 - : EXAMINED BY THE LOWER AUTHORITIES, IN THE INTEREST OF JUSTICE, WE REMIT THE ISSUE TO THE FILE OF LD. ASSESSING OFFICER FOR THE PURPOSE OF QUANTIFICATION OF GAIN AND TO BRING THAT PORTION OF GAIN, WHICH IS IN THE NATURE OF REVENUE TO TAX. WITH THIS OBSERVATION, W E REMIT THIS ISSUE TO THE FILE OF LD. ASSESSING OFFICER FOR FRESH CONSIDE RATION. THIS APPEAL IS PARTLY ALLOWED FOR STATISTICAL PURPOSES. 10. LASTLY WE TAKE UP ITA NO.1325/MDS./16 (A.Y 2010-1 1) THE ASSESSEE RAISED THE GROUND THAT THE LD.CIT(A) E RRED IN CONFIRMING THE ASSESSMENT ORDER WITHOUT INDICATING UNDER WHAT PROVISIONS OF THE ACT OR THE ACCOUNTING STANDARD (AS)-11, THE FOREIGN EXCHANGE FLUCTUATION RESERVE, WHICH IS AKIN TO A REVALUATION RESERVE, ARISING ON RESTATEMENT OF THE ASSETS AND LIABILITIES OF THE MA LAYSIAN BRANCH IN THE ASSESSEES BALANCE SHEET IS TAXABLE. 11. THE ONLY DIFFERENCE IN THIS ASSESSMENT YEAR IS THAT THE ASSESSING OFFICER TAXED THE FOREIGN EXCHANGE FLUCTU ATION RESERVE WHILE FRAMING THE ASSESSMENT U/S.143(3) OF THE ACT, WHICH WAS CONFIRMED BY THE LD.CIT(A) IN HIS ORDER DATED 25.02.2016 PASSED U/S.250(6) OF THE ACT. ITA NOS1323 TO 1325.MDS./16/ :- 12 - : 11.1 SINCE THE ISSUE RAISED BY THE ASSESSEE IS SIM ILAR TO THE A.Y 2007- 08, THIS IS ALSO REMITTED TO THE ASSESSING OFFICER ON SIMILAR DIRECTION. THIS APPEAL IS PARTLY ALLOWED FOR STATISTICAL PURPO SES. 12. IN THE RESULT, ALL THE ABOVE APPEALS OF THE AS SESSEE ARE ALLOWED FOR STATISTICAL PURPOSES ORDER PRONOUNCED ON 27 TH SEPTEMBER, 2017, AT CHENNAI. SD/ - SD/ - ! ' # . $ %& ' ( DUVVURU RL REDDY ) ) & / JUDICIAL MEMBER ( ) (CHANDRA POOJARI) / ACCOUNTANT MEMBER () / CHENNAI *+ / DATED: 27 TH SEPTEMBER, 2017. K S SUNDARAM +,-- ./-0/ / COPY TO: - 1 . / APPELLANT 3. - 1-!' / CIT(A) 5. /23- 4 / DR 2. / RESPONDENT 4. - 1 / CIT 6. 3&-5 / GF