Anand Nishikawa Co. Ltd., New Delhi V. Jt. CIT, New Delhi

ITA 175/DEL/2009

• Counselvise Citation: [2009] 115 COUNSELVISE.COM (IT) 0841 (ITAT-DELHI)
• Duration Of Justice: 8 month(s) 21 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 07-10-2009
• Appeal Filed By: Assessee
• Order Result: Allowed
• Bench Allotted: A
• Next Hearing Date: 07-10-2009
• Assessment Year: 2003-2004
• Appeal Filed On: 16-01-2009
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: PRATIMA KAUSHIK
• Assessee Lawyers: MADAN MURARI
• Section: 28

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL DELHI BENCH A : NEW DELHI BEFORE SHRI I.P.BANSAL, JM AND SHRI R.C.SHARMA, AM ITA NO.175/DEL/2009 ASSESSMENT YEAR : 2003-04 M/S ANAND NISHIKAWA CO.LTD., 25/31, EAST PATEL NAGAR, NEW DELHI. PAN NO.AAACA0380L. VS. JOINT COMMISSIONER OF INCOME TAX, CIRCLE-1(1), NEW DELHI. (APPELLANT) (RESPONDENT) APPELLANT BY : SHRI MADAN MURARI, CA. RESPONDENT BY : MS.PRATIMA KAUSHIK, SR.DR. ORDER PER R.C.SHARMA, AM : THIS IS AN APPEAL FILED BY THE ASSESSEE AGAINST TH E ORDER OF CIT(A) DATED 17.10.2008 FOR AY 2003-04 WHEREIN FOLLOWING TWO GRO UNDS HAVE BEEN TAKEN BY THE ASSESSEE :- 1. THE LD. CIT(A) ERRED IN DISALLOWING FOREIGN EXC HANGE FLUCTUATION LOSS RS.531073/-. 2. THE LD.CIT(A) ERRED IN DISALLOWING IN BALANCES W RITTEN OFF FOR ADVANCES TO SUPPLIERS OF RS.372972/-. 2. WE HAVE GONE THROUGH THE ORDERS OF THE AUTHORITI ES BELOW AND FOUND THAT IN THE RETURN OF INCOME, THE ASSESSEE HAS CLAIMED FOLL OWING FOREIGN EXCHANGE LOSS:- I) SUMITOMO CORPORATION JAPAN RS.2,40,935 INTEREST II) NISHIKAWA RUBBER CO. JAPAN RS.2,90,138 TECHNIC AL KNOW HOW FEE TOTAL RS.5,31,073 3. THE ABOVE LOSS HAS BEEN DEBITED AS A RESULT OF R EVALUATION OF ITS LIABILITIES ON THESE ACCOUNTS BY THE ASSESSEE. THE AO DECLINED THE LOSS ON THE PLEA THAT LOSS HAS NOT BEEN ACTUALLY INCURRED/PAID BY THE ASSESSEE . THE AO FURTHER OBSERVED THAT LOSS ON FOREIGN EXCHANGE HAS NOT BEEN ACTUALLY INCU RRED AND IT STILL REMAINS ITA-175/D/2009 2 CONTINGENT LIABILITY. BY THE IMPUGNED ORDER, CIT(A ) CONFIRMED THE DISALLOWANCE MADE BY THE AO. 4. FROM THE RECORD, WE FOUND THAT ASSESSEE HAS CLAI MED FOREIGN EXCHANGE LOSS ON ACCOUNT OF INTEREST AND TECHNICAL KNOW-HOW FEE W HICH ARE REVENUE IN NATURE. IN THE CASE OF WOODWARD GOVERNOR INDIA LIMITED 294 I TR 451, IT WAS HELD BY HON'BLE DELHI HIGH COURT THAT INCREASE IN LIABILITY IN THE REVENUE ACCOUNT AS A RESULT OF FLUCTUATION IN RATE OF FOREIGN EXCHANGE I S NOT NOTIONAL OR CONTINGENT, THEREFORE SAME IS TO BE ALLOWED AS A DEDUCTION. TH IS DECISION OF HON'BLE DELHI HIGH COURT HAS BEEN CONFIRMED BY HON'BLE SUPREME CO URT AND REPORTED AT 312 ITR 254. RESPECTFULLY FOLLOWING THE VERDICT OF HON 'BLE JURISDICTIONAL HIGH COURT, WE DIRECT THE AO TO ALLOW CLAIM OF FOREIGN EXCHANGE LOSS WHICH WAS ACCOUNTED FOR BY THE ASSESSEE AS PER ACCOUNTING STANDARDS FOLLOWE D BY IT IN RESPECT OF EXPENDITURE ON REVENUE ACCOUNT. 5. THE AO ALSO DECLINED ASSESSEES CLAIM IN RESPECT OF THE AMOUNT WRITTEN OFF IN THE BOOKS, AMOUNTING TO RS.3,72,972/- BEING ADVA NCE TO THE SUPPLIERS, ON THE PLEA THAT SUCH WRITING OFF IS NOT COVERED U/S 36(1) (VII) READ WITH SECTION 36(2). FROM THE RECORD, WE FOUND THAT ASSESSEE HAS MADE CE RTAIN ADVANCE TO THE SUPPLIERS IN THE NORMAL COURSE OF BUSINESS WHICH COULD NOT BE RECOVERED. SUCH ADVANCE IS REQUIRED TO BE ALLOWED AS A BUSINESS LOSS. ACCORDI NGLY, WE DIRECT THE AO TO ALLOW SUCH LOSS U/S 28 OF THE IT ACT. WE DIRECT ACCORDIN GLY. 6. IN THE RESULT, THE APPEAL OF THE ASSESSEE IS ALL OWED. DECISION PRONOUNCED IN THE OPEN COURT ON 7 TH OCTOBER, 2009. SD/- SD/- (I.P.BANSAL) (R.C.SHARMA) JUDICIAL MEMBER ACCOUNTANT MEMBER DATED : 07.10.2009. VK. ITA-175/D/2009 3 COPY FORWARDED TO: - 1. APPELLANT 2. RESPONDENT 3. CIT 4. CIT(A) 5. DR, ITAT DEPUTY REGISTRAR