ACIT, CHENNAI V. Narmada Infrastructure Construction Enterprises Limited, CHENNAI

ITA 1560/CHNY/2016

• Counselvise Citation: [2016] 131 COUNSELVISE.COM (IT) 7968 (ITAT-CHENNAI)
• Duration Of Justice: 5 month(s) 26 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 25-11-2016
• Appeal Filed By: Department
• Order Result: Dismissed
• Bench Allotted: C
• Next Hearing Date: 17-11-2016
• Assessment Year: 2008-2009
• Appeal Filed On: 30-05-2016
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: A V SREEKANTH IRS
• Keywords: Capital asset; Cost of acquisition; Tax effect

Judgement Text

, , IN THE INCOME TAX APPELLATE TRIBUNAL C BENCH : CHENNAI . . . , ! . '#'$ , % !& ' [BEFORE SHRI N.R.S. GANESAN, JUDICIAL MEMBER AND SHRI ABRAHAM P. GEORGE, ACCOUNTANT MEMBER ] ./I.T.A. NOS.1559 & 1560/MDS/2016 / ASSESSMENT YEARS : 2004-05 & 2008-2009. THE ASSISTANT COMMISSIONER OF INCOME TAX CORPORATE CIRCLE 4(2) CHENNAI VS. M/S. NARMADA INFRASTRUCTURE CONSTRUCTION ENTERPRISES LIMITED, MOUNT POONAMALLEEE ROAD, MANAPAKKAM, TCTC BUILDING, CHENNAI 600 089. [PAN AAACN 3579L] ( () / APPELLANT) ( *+() /RESPONDENT) / APPELLANT BY : SHRI. A.V. SREEKANTH, IRS, JCIT. /RESPONDENT BY : NONE /DATE OF HEARING : 17-11-2016 !' /DATE OF PRONOUNCEMENT : 25-11-2016 / O R D E R PER ABRAHAM P. GEORGE, ACCOUNTANT MEMBER THESE ARE APPEALS FILED BY THE REVENUE ARE DIRECT ED AGAINST ORDERS DATED 05.2.2016 BY LD. COMMISSIONER OF INCOM E TAX (APPEALS)- 8, CHENNAI. ITA NO. 1559 & 1560/2016. :- 2 -: 2. APPEAL OF THE REVENUE FOR ASSESSMENT YEAR 2004-05 IS TAKEN UP FIRST FOR DISPOSAL. THE ONLY ISSUE RAISED BY THE REVENUE REGARDING DISALLOWANCE OF CLAIM ON FOREIGN EXCHANG E LOSS OF @2,16,70,381/-. 3. FACTS APROPOS ARE THAT ASSESSEE HAS AVAILED LOAN AG GREGATING TO @46,42,85,714.34 FROM IDFC FOR CONSTRUCTION AND MAINTENANCE OF THE BRIDGE, WHICH WAS CONSTRUCTED AND RUN UNDER BOT SCHEME. AS PER LD. ASSESSING OFFICER LOAN AVAILED BY THE ASSESSEE AND EXCHANGE LOSS ON ACCOUNT OF INTEREST PAYMENT, ALL WERE RELATED TO CREATION OF A CAPITAL ASSET. ACCORDING TO HIM, SEC. 43A OF THE A CT WAS ATTRACTED. A DISALLOWANCE OF @2,16,70,381/- WAS MADE FOR THE FOR EIGN EXCHANGE LOSS ON ACCOUNT OF INTEREST PAYMENT. 4. ARGUMENT OF THE ASSESSEE, IN ITS APPEAL BEFORE LD. CIT(A) IS THAT KEY CONDITION OF SEC. 43A OF THE ACT WAS THAT LOAN TAKEN SHOULD HAVE BEEN FOR ACQUIRING A FOREIGN ASSET. AS PER AS SESSEE IT HAD NOT IMPORTED ANY ASSET. CONTENTION OF THE ASSESSEE WAS THAT SEC. 43A OF THE ACT HAD NO APPLICATION. LD. COMMISSIONER OF I NCOME TAX (APPEALS) APPRECIATED THIS CONTENTION AND DELETED T HE ADDITION. 5. NOW BEFORE US, LD. DEPARTMENTAL REPRESENTATIVE STRO NGLY ASSAILING THE ORDERS OF THE LOWER AUTHORITIES SUBM ITTED THAT FOREIGN ITA NO. 1559 & 1560/2016. :- 3 -: EXCHANGE LOSS ON LOAN RAISED WAS FOR CANCELLATION/R OLL FORWARD OF FORWARD CONTRACTS AND THIS WAS NOT APPRECIATED BY THE LD. COMMISSIONER OF INCOME TAX (APPEALS). 6. NOBODY APPEARED ON BEHALF OF THE ASSESSEE. HOWEVER , ASSESSEE HAS FILED A WRITTEN SUBMISSION DATED 17 TH AUGUST, 2016, REQUESTING DISPOSAL OF THE APPEAL ON MERITS. 7. WE HAVE CONSIDERED THE LD. DEPARTMENTAL REPRESENTAT IVE CONTENTION AND PERUSED THE ORDERS OF THE AUTHORITIE S BELOW. SEC. 43A OF THE ACT IS REPRODUCED HERE UNDER:- NOTWITHSTANDING ANYTHING CONTAINED IN ANY OTHER P ROVISION OF THIS ACT, WHERE AN ASSESSEE HAS ACQUIRED ANY ASS ET IN ANY PREVIOUS YEAR FROM A COUNTRY OUTSIDE INDIA FOR THE PURPOSES OF HIS BUSINESS OR PROFESSION AND, IN CONSEQUENCE O F A CHANGE IN THE RATE OF EXCHANGE DURING ANY PREVIOUS YEAR AFTER THE ACQUISITION OF SUCH ASSET, THERE IS AN IN CREASE OR REDUCTION IN THE LIABILITY OF THE ASSESSEE AS EXPRE SSED IN INDIAN CURRENCY (AS COMPARED TO THE LIABILITY EXIST ING AT THE TIME OF ACQUISITION OF THE ASSET) AT THE TIME OF MA KING 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 INDIRECTLY, IN ANY FOREIGN CURRENCY SPECIFICALLY FOR THE PURPOSE OF ACQUIRING THE ASSET ALONG WITH INTEREST, IF ANY, THE AMOUNT BY WHICH THE LIABILITY AS AFORESAID IS S O INCREASED OR REDUCED DURING SUCH PREVIOUS YEAR AND WHICH IS TAKEN INTO ACCOUNT AT THE TIME OF MAKING THE PAYMENT, IRRESPECTIVE OF THE METHOD OF ACCOUNTING ADOPTED BY THE ASSESSEE, SHALL BE ADDED TO, OR, AS THE CASE MAY BE, DEDUCTED FROM ITA NO. 1559 & 1560/2016. :- 4 -: (I) THE ACTUAL COST OF THE ASSET AS DEFINED IN CLAU SE (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 REFERRED TO IN CLAUSE (IX) OF SUB-SECTION (1) OF SECTION 36 ; OR (V) THE COST OF ACQUISITION OF A CAPITAL ASSET (NOT BEING A CAPITAL ASSET REFERRED TO IN SECTION 50) FO R THE PURPOSES OF SECTION 48, AND THE AMOUNT ARRIVED AT AFTER SUCH ADDITION OR DEDUCTION 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: AS NOTED BY THE LD. COMMISSIONER OF INCOME TAX (APP EALS), THE SECTION CAN BE INVOKED ONLY WHEN THERE IS AN ACQUI SITION OF ASSET FROM A COUNTRY OUTSIDE INDIA. FIXED ASSET SCHEDULE OF T HE ASSESSEE CONSISTED OF THE FOLLOWING ITEMS:- SL.NO FIXED ASSETS WRITTEN DOWN VALUE (CLOSING) (IN @) 1 BUILDING 99,58,85,138 2 PLANT AND MACHINERY 1,85,54,005 3 FURNITURE & FIXTURES AND OFFICE EQUIPMENT 10,32,217 4 VEHICLES 4,74,862 REVENUE COULD NOT SHOW ANY OF THE ASSETS TO HAVE BEEN ACQUIRED FROM A COUNTRY OUTSIDE INDIA. IN OUR OPINION THERE COULD HAVE BEEN NO ITA NO. 1559 & 1560/2016. :- 5 -: APPLICATION OF SEC. 43A OF THE ACT. WE DO NOT FIND ANY REASON TO INTERFERE WITH THE ORDER OF THE LD. CIT(A). 8. COMING TO THE APPEAL OF THE REVENUE FOR ASSESSMENT YEAR 2008-09, WE FIND THAT ADJUSTMENT THAT HAS BEEN ASS AILED BY THE REVENUE IS FOR A SUM OF @31,04,694/-. THE TAX EFF ECT THEREOF IS @9,59,351/-. BY VIRTUE OF CBDT CIRCULAR NO. 21/2015 , THE TAX EFFECT BEING BELOW @10,00,000/-, THE APPEAL BEFORE THIS TR IBUNAL WOULD NOT LIE. 9. IN THE RESULT BOTH APPEALS OF THE REVENUE ARE DISMI SSED. ORDER PRONOUNCED ON FRIDAY, THE 25TH DAY OF NOV EMBER, 2016, AT CHENNAI. SD/- SD/- ( . . . # ) (N.R.S. GANESAN) / JUDICIAL MEMBER ( ! . '#'$ ) (ABRAHAM P. GEORGE) % / ACCOUNTANT MEMBER $% / CHENNAI &' / DATED: 25TH NOVEMBER, 2016 KV '( )*+* / COPY TO: 1 . / APPELLANT 3. ,-# / CIT(A) 5. *./ 0 / DR 2. / RESPONDENT 4. , / CIT 6. /12 / GF