Continuum Wind Energy (India) Pvt. Ltd., CHENNAI V. DCIT Corporate Circle 1(2), CHENNAI

ITA 1336/CHNY/2018

• Counselvise Citation: [2019] 112 COUNSELVISE.COM (IT) 4995 (ITAT-CHENNAI)
• Duration Of Justice: 1 year(s) 7 month(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 20-11-2019
• Appeal Filed By: Assessee
• Order Result: Dismissed
• Bench Allotted: D
• Assessment Year: 2014-2015
• Appeal Filed On: 20-04-2018
• Result in Favour of: Revenue
• Court: TRIBUNAL
• Department Lawyers: MRS R ANITA
• Assessee Lawyers: B RAMAKRISHNAN
• Keywords: Revenue expenditure
• Section: 143(3)

Judgement Text

, , IN THE INCOME TAX APPELLATE TRIBUNAL D BENCH: CHENNAI , ' # $ # % . ' ' , ( ) BEFORE SHRI INTURI RAMA RAO , ACCOUNT ANT MEMBER AND SHRI DUVVURU RL REDDY , JUDICIAL MEMBER ./ ITA NO.1336/CHNY/2018 ( * +* /ASSESSMENT YEAR: 2014-15 M/S. CONTINUUM WIND ENERGY (INDIA) PVT. LTD., SOUTH WING, 4 TH FLOOR, KAKANI TOWERS, NO.15, KHADER NAWZ KHAN ROAD, NUNGAMBAKKAM, CHENNAI 600 006. [PAN: AAKCS 8353F] VS. THE DY. COMMISSIONER OF INCOME TAX, CORPORATE CIRCLE-1(2), CHENNAI. ( ,- /APPELLANT) ( ./,- /RESPONDENT) ,- 0 1 / APPELLANT BY : SHRI B. RAMAKRISHNAN, CA ./,- 0 1 /RESPONDENT BY : MRS. R. ANITA, JCIT # 0 2 /DATE OF HEARING : 01.10.2019 34+ 0 2 /DATE OF PRONOUNCEMENT : 20.11.2019 5 / O R D E R PER INTURI RAMA RAO, ACCOUNTANT MEMBER : THIS IS AN APPEAL FILED BY THE ASSESSEE DIRECTED AG AINST THE ORDER OF THE LEARNED COMMISSIONER OF INCOME TAX (APPEALS) -1, CHENNAI (HEREINAFTER CALLED AS CIT(A)) DATED 29.03.2018 F OR THE ASSESSMENT YEAR (AY) 2014-15. ITA NO.1336/CHNY/2018 :- 2 -: 2. THE BRIEF FACTS OF THE CASE ARE AS UNDER: THE APPELLANT IS A COMPANY INCORPORATED UNDER THE PROVISIONS OF COMPANIES ACT, 1956. IT IS ENGAGED IN THE BUSINESS OF GENERATION OF WIND ENERGY. THE RETURN OF INCOME FOR THE A.Y 2014- 14 WAS FILED ON 29.11.2014 DISCLOSING NIL INCOME. AGAINST THE SAI D RETURN OF INCOME, THE ASSESSMENT WAS COMPLETED BY THE ASST. COMMISSIONER OF INCOME TAX, CORPORATE CIRCLE-1(2), CHENNAI (HEREINAFTER CALLED AO) VIDE ORDER DATED 30.11.2016 PASSED U/S. 143(3) OF THE INCOME TAX ACT , 1961 (IN SHORT THE ACT) AT NIL INCOME. WHILE DOING SO, THE AO DISA LLOWED THE CLAIM OF DEDUCTION OF PREMIUM ON FORWARD CONTRACT OF RS. 2,5 6,81,360/- HOLDING IT TO BE CAPITAL IN NATURE. THE BRIEF FACTS OF THE CA SE ARE THAT DURING THE PREVIOUS YEAR RELEVANT TO THE ASSESSMENT YEAR UNDER CONSIDERATION, THE APPELLANT PAID PREMIUM TOWARDS THE FORWARD CONTRACT S ENTERED INTO TO HEDGE AGAINST FOREIGN CURRENCY RATE FLUCTUATION IN RESPECT OF FCNR LOAN AVAILED BY IT FROM STATE BANK OF INDIA TO FUND ONE OF ITS PROJECTS AND THE PREMIUM WAS CLAIMED AS A DEDUCTION. THE AO DISALLOW ED THE SAME HOLDING IT TO BE CAPITAL IN NATURE. EVEN ON APPEAL BEFORE LD. CIT(A), THE CLAIM WAS DISALLOWED. BEING AGGRIEVED, THE APPELLA NT IS IN APPEAL BEFORE US IN THE PRESENT APPEAL. 3. THE LD. AUTHORIZED REPRESENTATIVE OF ASSESSEE SU BMITTED THAT THE PURPOSE OF ENTERING INTO THE FORWARD CONTRACTS IS I NSULATING ITSELF AGAINST ITA NO.1336/CHNY/2018 :- 3 -: THE FOREIGN EXCHANGE RATE FLUCTUATION, THE TRANSACT ION IS NOT IN THE NATURE OF SPECULATION SINCE, THE PURPOSE OF ENTERING INTO FORWARD CONTRACTS ONLY TO HEDGE ITSELF AGAINST FOREIGN EXCHANGE FLUCTUATIO N, THE PREMIUM PAID IS OF REVENUE AMOUNT AND SHOULD BE ALLOWED AS A DEDUCT ION. IN THIS CONNECTION, HE PLACED RELIANCE ON THE DECISION OF C O-ORDINATE BENCH OF THIS TRIBUNAL IN THE CASE OF HYUNDAI MOTOR INDIA LT D. VS. DY. CIT [2017] 81 TAXMANN.COM 5 (CHENNAI-TRIB.). ON THE OTHER HAN D, THE LD. SR. DR SUBMITTED THAT THE ISSUE IN THIS APPEAL IS COVERED AGAINST THE ASSESSEE IN HIS OWN CASE BY THE DECISION OF THIS TRIBUNAL FOR T HE AY 2013-14 IN ITA NO.3344/MDS/2016 DATED 16.06.2017. THE LD. DR FURT HER SUBMITTED THAT THE PREMIUM PAID IS A CAPITAL AMOUNT CANNOT BE CLAI MED AS A DEDUCTION. 4. WE HEARD THE RIVAL SUBMISSIONS AND PERUSED THE M ATERIAL ON RECORD. THE ISSUE IN THIS APPEAL RELATES TO THE AL LOWABILITY OF THE PREMIUM PAID ON FORWARDS CONTRACTS ENTERED INTO WITH THE IN TENTION OF HEDGING AGAINST THE FOREIGN EXCHANGE FLUCTUATION IN RESPECT OF FOREIGN CURRENCY LOAN AVAILED BY THE STATING BANK OF INDIA. ADMITTE DLY, THE FOREIGN CURRENCY LOAN WAS OBTAINED ON CAPITAL ACCOUNT AND T HE FORWARD CONTRACT ENTERED TO HEDGE AGAINST THE FOREIGN EXCHANGE FLUCT UATION IN RESPECT OF FOREIGN CURRENCY LOAN. THE FOREIGN CURRENCY LOAN W AS IN RESPECT OF FIXED ASSETS AND THEREFORE, THE FORWARD CONTRACTS ENTERED IN ORDER TO HEDGE AGAINST FOREIGN EXCHANGE RATE FLUCTUATION PARTAKES THE CHARACTER OF THE ITA NO.1336/CHNY/2018 :- 4 -: APPELLANT. IN VIEW OF THE DECISION OF THE HON'BLE S UPREME COURT IN THE CASE OF SUTLEJ COTTON MILLS VS. CIT [1979] 116 ITR 1 (SC) . EVEN THE CO- ORDINATE BENCH OF THIS TRIBUNAL IN ASSESSEES OWN C ASE TOOK THE SAME VIEW. ACCORDINGLY, WE HOLD THAT THE PREMIUM PAID O N FORWARD CONTRACTS ENTERED INTO TO HEDGE AGAINST FOREIGN EXCHANGE FLUC TUATION CANNOT BE ALLOWED AS REVENUE EXPENDITURE. HENCE, WE DISMISS THE APPEAL FILED BY THE ASSESSEE. 5. IN THE RESULT, APPEAL FILED BY THE ASSESSEE IS D ISMISSED. ORDER PRONOUNCED ON THE 20 TH DAY OF NOVEMBER, 2019 IN CHENNAI. SD/- SD/- ( . ) (DUVVURU RL REDDY) /JUDICIAL MEMBER ( ) (INTURI RAMA RAO) /ACCOUNTANT MEMBER /CHENNAI, 6 /DATED: 20 TH NOVEMBER, 2019. EDN, SR. PS 5 0 .(278 98+2 /COPY TO: 1. ,- /APPELLANT 2. ./,- /RESPONDENT 3. # :2 ( )/CIT(A) 4. # :2 /CIT 5. 8;< .(2( /DR 6. < * = /GF