ACIT, New Delhi V. M/s. Ajanta Offset and Packaging Ltd., New Delhi

ITA 2097/DEL/2013

• Counselvise Citation: [2016] 133 COUNSELVISE.COM (IT) 7027 (ITAT-DELHI)
• Duration Of Justice: 2 year(s) 10 month(s) 7 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 17-02-2016
• Appeal Filed By: Department
• Order Result: Dismissed
• Bench Allotted: A
• Next Hearing Date: 15-02-2016
• Assessment Year: 2009-2010
• Appeal Filed On: 10-04-2013
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: VIDUR PURI
• Assessee Lawyers: S L ANURAGI
• Keywords: Depreciation; Revenue expenditure

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL DELHI BENCH A NEW DELHI BEFORE SHRI S.V. MEHROTRA : ACCOUNTANT MEMBER AND SHRI SUDHANSHU SRIVASTAVA: JUDICIAL MEMBER ITA NO. 2097/DEL/2013 ASSTT. YR: 2009-10 ACIT CIRCLE 1(1), VS. M/S AJANTA OFFSET AND PACK AGING LTD., NEW DELHI. 95-B, WAZIRPUR INDUSTRIAL AREA, NEW DELHI-110052. PAN: AAACA 0245 Q ( APPELLANT ) (RESPONDENT) APPELLANT BY : SHRI VIDUR PURI CA ASSESSEE BY : SHRI S.L. ANURAGI DR DATE OF HEARING : 15/02/2016. DATE OF ORDER : 17/02/2016. O R D E R PER S.V. MEHROTRA, A.M: THE CAPTIONED APPEAL, PREFERRED BY THE REVENUE, IS DIRECTED AGAINST CIT(A)-IV, NEW DELHIS ORDER DATED 28.1.2013 RELATI NG TO AY 2009-10. 2. BRIEF FACTS OF THE CASE ARE THAT IN THE RELEVANT ASSESSMENT YEAR THE ASSESSEE WAS ENGAGED IN THE BUSINESS OF OFFSET PRIN TING OF BOOKS, CALENDARS, DIARIES, STATIONERIES AND PUBLICITY MATERIALS. IT H AD FILED ITS RETURN OF INCOME DECLARING NIL INCOME. AO HAD COMPUTED THE TOTAL INC OME AT RS. 43,34,942/-, INTER ALIA, MAKING DISALLOWANCE OF FOREIGN EXCHANGE FLUCTUATION OF RS. 1,69,11,584/- AND DISALLOWANCE OF BANK CHANGES AGGR EGATING TO RS. 31,30,850/-. 2 3. LD. CIT(A) DELETED BOTH THE ADDITIONS. BEING AGG RIEVED THE DEPARTMENT IS IN APPEAL BEFORE US AND HAS TAKEN FO LLOWING GROUNDS OF APPEAL: 1. WHETHER THE LD. CIT (A) HAS ERRED IN LAW AND ON FACTS IN DELETING THE ADDITION OF RS. 142,80,450/- MADE ON A CCOUNT OF EXCHANGE FLUCTUATION LOSS ON LOANS TAKEN FOR FIXED ASSETS IGNORING THE FACT THAT THE FOREX LOSS WAS ON ACCOUN T OF LOAN TAKEN FOR PURCHASE OF PLANT AND MACHINERY WHICH SHO ULD HAVE BEEN CAPITALIZED INSTEAD OF CLAIMING AS REVENUE EXP ENDITURE. 2. WHETHER THE LD. (IT (A) HAS ERRED IN LAW AND ON FACTS IN DELETING THE DISALLOWANCE OF RS. 31,03,850/- MADE O N ACCOUNT OF BANK CHARGES IGNORING THE FACT THAT THE BANK CHA RGES WERE INCURRED FOR LOAN RAISED TO ACQUIRE PLANT AND MACHI NERY AND SHOULD HAVE BEEN CAPITALIZED INSTEAD OF CLAIMING AS REVENUE EXPENDITURE. 3. THE APPELLANT CRAVES LEAVE FOR RESERVING THE RIG HT TO AMEND, MODIFY, ALTER, ADD OR FOREGO ANY GROUND(S) O F APPEAL AT ANY TIME BEFORE OR DURING THE HEARING OF THIS APPEA L. 4. BRIEF FACTS APROPOS GROUND NO. 1 ARE THAT IN COU RSE OF ASSESSMENT PROCEEDINGS THE ASSESSEE WAS REQUIRED TO PROVIDE DE TAILS OF FOREIGN EXCHANGE LOSS DEBITED IN THE P&L A/C DURING AY 2009-10. THE AO NOTICED THAT A PORTION OF FOREX FLUCTUATION LOSS PERTAINED TO LOAN S TAKEN BY THE ASSESSEE FOR PURCHASE OF PLANT AND MACHINERY AND ADVANCING LOAN TO ONE OF ITS SUBSIDIARY IN UNITED KINGDOM FOR ACQUIRING BUSINESS OF ANOTHER COMPANY IN THAT COUNTRY. 5. AFTER CONSIDERING THE ASSESSEES REPLY IN DETAIL THE AO CONCLUDED THAT LOSS ON ACCOUNT OF FOREIGN EXCHANGE FLUCTUATION OF RS. 1,42,80,450/- IN RESPECT OF LOAN FROM LBBW AND EXIM BANK WAS FOR P URCHASE OF PLANT AND MACHINERY AND LOSS OF RS. 56,15,531/- ON LOAN TO SU BSIDIARY COMPANY WAS TOWARDS ACQUIRING ASSETS ABROAD AGGREGATING TO RS. 1,98,95,981/- AND THUS IN 3 CAPITAL FIELD. HE, THEREFORE, DISALLOWED THE ASSESS EES CLAIM AND ALLOWED ONLY DEPRECIATION @ 15% ON LOSS OF RS. 1,98,95,981/-. TH US, HE MADE ADDITION OF RS. 1,69,11,584/-. 6. IN APPEAL, THE LD. CIT(A) IN PARA 4.3 OBSERVE D AS UNDER: 4.3 I HAVE CAREFULLY CONSIDERED THE SUBMISSIONS OF THE ID. AR AND PERUSED THE ORDER PASSED BY THE AO AND REMAND R EPORT OF THE AO. AS ADMITTED BY THE AO IN THE REMAND REPORT, THE APPELLANT ITSELF HAS NOT CLAIMED THE EXCHANGE FLUCT UATION LOSS OF RS.1 ,42,80,450/- AS THE SAME PERTAINS TO THE LOANS TAKEN FOR FIXED ASSETS, THE AO WAS NOT JUSTIFIED IN ALLOWING THE DEPRECIATION @ 15% AND MAKING THE ADDITION FOR THE BALANCE AMOUNT. THE ADDITION MADE BY THE AO CANNOT BE SUSTA INED AND HENCE THE SAME IS DIRECTED TO BE DELETED. HOWEVER, THE DEPRECIATION ALLOWED BY AO WILL ALSO NOT BE ALLOWED . THIS GROUND OF THE APPEAL IS ALLOWED . 7. AT THE OUTSET WE MAY POINT OUT THAT THERE IS NO DISPUTE AS REGARDS THE DISALLOWANCE OF RS. 56,15,531/-. AS REGARDS THE FOR EX LOSS OF RS. 1,42,80,450/-, SINCE AO HIMSELF HAD ADMITTED IN THE REMAND REPORT THAT ASSESSEE HAD NOT CLAIMED THE EXCHANGE FLUCTUATION LOSS OF RS. 1,42,80,450/-, THEREFORE, THE ADDITION MADE BY AO WAS RIGHTLY DELE TED BY LD. CIT(A) ON THE BASIS OF REMAND REPORT. WE DO NOT FIND ANY REASON T O INTERFERE WITH THE ORDER OF LD. CIT(A) ON THIS COUNT. GROUND IS DISMISSED. 8. APROPOS GROUND NO. 2 THE AO IN PARA 7 HAS OBSERV ED AS UNDER: 7. DURING THE ASSESSMENT PROCEEDINGS, IT IS SEEN T HAT THE ASSESSEE HAS PAID BANK CHARGES WHICH INCLUDES DOCUM ENTATION FEES OF RS. 35000/-, PROCESSING FEES OF RS. 15006/- AND SERVICE FEES OF RS. 4,25,000/-, TOTALING RS. 4,75,000/-ON T HE TERM LOAN FROM EXIM BANK. FURTHER, THE ASSESSEE HAS PAID DOCU MENTATION FEES OF RS. 70,000(1000 EUROS) AND MANAGEMENT FEES OF RS. 2558850/-(1% ON TOTAL LOAN AMOUNT) TOTALING RS. 26, 28,850/-. SINCE THESE EXPENSES HAVE BEEN INCURRED ON CAPITAL A/C FOR 4 ACQUIRING PLANT AND MACHINERY, HENCE THE AMOUNT IS CAPITALIZED. THE SAID EXPENSES PAID BY THE ASSESSEE CANNOT BE CLAIMED AS REVENUE EXPENDITURE. THEREFORE A SUM OF RS. 3103850/- IS BEING DISALLOWED AND IS ADDED TO THE T OTAL INCOME OF THE ASSESSEE. 9. BEFORE LD. CIT(A) IT WAS, INTER ALIA, POINTED OU T THAT ASSESSEE HAD PAID RS. 29,05,543/- WHICH WERE INCURRED AND CHARGED/ CA PITALIZED IN THE BOOKS OF A/C FOR AY 2005-06. IT WAS SUBMITTED THAT THE AMOUN T OF RS. 2,90,55,433/- WAS NOT CLAIMED BY THE ASSESSEE DURING THE YEAR AND , THEREFORE, THERE WAS NO JUSTIFICATION FOR MAKING THE DISALLOWANCE. AS REGAR DS THE SUM OF RS. 4,75,000/- IT WAS POINTED OUT THAT THE SAME WAS INC URRED FOR WORKING CAPITAL LOAN AND NOT FOR ACQUISITION OF PLANT & MACHINERY. THE ASSESSEE HAD GIVEN ENTIRE DETAILS IN REGARD TO THE SUM OF RS. 1,45,23, 822.56, WHICH HAVE BEEN REPRODUCED AT PAGES 14 & 15 OF CIT(A)S ORDER AND A FTER CONSIDERING THE SAME LD. CIT(A), IN PARA 8.2, HAS OBSERVED AS UNDER : 8.2. I HAVE CAREFULLY CONSIDERED THE SUBMISSIONS O F THE ID. AR AND PERUSED THE ORDER PASSED BY THE AO. I FIND FORC E IN THE SUBMISSIONS OF THE ID. AR THAT THE APPELLANT COMPAN Y HAS NOT TAKEN ANY LOAN DURING THE YEAR FOR ACQUISITION OF P LANT AND MACHINERY AS IS CLEAR FROM PAGE NO. 23 AND 25 OF TH E PAPER BOOK. THEREFORE, THE DISALLOWANCE OF RS.29,05,543/- WHICH WAS NOT CLAIMED BY THE APPELLANT DURING THE YEAR CANNOT BE DISALLOWED. I FURTHER FIND THAT THE AMOUNT OF RS.4, 75,000/- WAS INCURRED FOR WORKING CAPITAL LOAN FROM EXIM BANK AN D NOT FOR ACQUISITION OF PLANT AND MACHINERY. THEREFORE, THE ADDITION MADE BY THE AO CANNOT BE SUSTAINED AND HENCE THE SA ME IS DELETED. THE GROUND OF APPEAL IS ALLOWED. 10. THESE FINDINGS OF LD. CIT(A) HAVE NOT AT ALL BE EN CONTROVERTED BY THE DEPARTMENT AND, THEREFORE, THE DISALLOWANCE OF RS. 29,05,543/- WHICH WAS NOT CLAIMED BY THE ASSESSEE DURING THE YEAR, COULD NOT BE DISALLOWED. THERE 5 IS NO DISPUTE THAT THE SUM OF RS. 4,75,000/- WAS IN CURRED FOR WORKING CAPITAL LOAN FROM EXIM BANK AND NOT FOR ACQUISITION OF PLAN T AND MACHINERY. THEREFORE, THERE WAS NO REASON FOR MAKING ANY DISAL LOWANCE ON THIS COUNT. ACCORDINGLY, ORDER OF LD. CIT(A), DELETING THE ADDI TION IN QUESTION IS UPHELD. 11. IN THE RESULT, REVENUES APPEAL IS DISMISSED. ORDER PRONOUNCEMENT IN OPEN COURT ON 17/02/2016. SD/- SD/- (SUDHANSHU SRIVASTAVA ) (S.V. MEHROTRA) JUDICIAL MEMBER ACCOUNTANT MEMBER DATED: 17/02/2016. *MP* COPY OF ORDER TO: 1. ASSESSEE 2. AO 3. CIT 4. CIT(A) 5. DR, ITAT, NEW DELHI.