ACIT, New Delhi V. M/s. The National Small Industries Corporation of India Ltd., New Delhi

ITA 2455/DEL/2013

• Counselvise Citation: 245520114 RSA 2013
• Duration Of Justice: 6 month(s) 4 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 31-10-2013
• Appeal Filed By: Department
• Order Result: Dismissed
• Bench Allotted: H
• Assessment Year: 2008-2009
• Appeal Filed On: 26-04-2013
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: SAMEER SHARMA
• Keywords: Business expenditure
• Section: 37(1); 37

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL IN THE INCOME TAX APPELLATE TRIBUNAL IN THE INCOME TAX APPELLATE TRIBUNAL IN THE INCOME TAX APPELLATE TRIBUNAL DELHI DELHI DELHI DELHI BENCH BENCH BENCH BENCH H HH H : NEW DELHI : NEW DELHI : NEW DELHI : NEW DELHI BEFORE SHRI G. BEFORE SHRI G. BEFORE SHRI G. BEFORE SHRI G.D.AGRAWAL, D.AGRAWAL, D.AGRAWAL, D.AGRAWAL, VICE PRESIDENT AND VICE PRESIDENT AND VICE PRESIDENT AND VICE PRESIDENT AND SHRI SHRI SHRI SHRI CHANDRA MOHAN GARG CHANDRA MOHAN GARG CHANDRA MOHAN GARG CHANDRA MOHAN GARG, ,, , JUDICIAL MEMBER JUDICIAL MEMBER JUDICIAL MEMBER JUDICIAL MEMBER ITA NO. ITA NO. ITA NO. ITA NO.2455/DEL/2013 2455/DEL/2013 2455/DEL/2013 2455/DEL/2013 ASSESSMENT YEAR ASSESSMENT YEAR ASSESSMENT YEAR ASSESSMENT YEAR : : : : 2008 2008 2008 2008- -- -09 0909 09 ASSISTANT COMMISSIONER OF ASSISTANT COMMISSIONER OF ASSISTANT COMMISSIONER OF ASSISTANT COMMISSIONER OF INCOME TAX, INCOME TAX, INCOME TAX, INCOME TAX, CIRCLE CIRCLE CIRCLE CIRCLE- -- -16(1), 16(1), 16(1), 16(1), NEW DELHI. NEW DELHI. NEW DELHI. NEW DELHI. VS. VS. VS. VS. M/S THE NATIONAL SMALL INDUSTRIES M/S THE NATIONAL SMALL INDUSTRIES M/S THE NATIONAL SMALL INDUSTRIES M/S THE NATIONAL SMALL INDUSTRIES CORPORATION OF INDIA LIMITED, CORPORATION OF INDIA LIMITED, CORPORATION OF INDIA LIMITED, CORPORATION OF INDIA LIMITED, NSIC BHAWAN, NSIC BHAWAN, NSIC BHAWAN, NSIC BHAWAN, OKHLA INDUSTRIAL ESTATE, OKHLA INDUSTRIAL ESTATE, OKHLA INDUSTRIAL ESTATE, OKHLA INDUSTRIAL ESTATE, PHASE PHASE PHASE PHASE- -- -II, II,II, II, NEW DELHI. NEW DELHI. NEW DELHI. NEW DELHI. PAN : AAACT0686N. PAN : AAACT0686N. PAN : AAACT0686N. PAN : AAACT0686N. (APPELLANT) (RESPONDENT) APPELLANT BY : SHRI SAMEER SHARMA, SR.DR. RESPONDENT BY : SHRI M.P. RASTOGI, ADVOCATE. ORDER ORDER ORDER ORDER PER G. PER G. PER G. PER G.D.AGRAWAL, D.AGRAWAL, D.AGRAWAL, D.AGRAWAL, VP VPVP VP : : : : THIS APPEAL BY THE REVENUE IS DIRECTED AGAINST THE O RDER OF LEARNED CIT(A)-XII, NEW DELHI DATED 7 TH JANUARY, 2013 FOR THE AY 2008- 09. 2. THE ONLY GROUND RAISED BY THE REVENUE READS AS UNDE R:- ON THE FACTS AND IN THE CIRCUMSTANCES OF THE CASE AND IN LAW THE LEARNED CIT(A) HAS ERRED IN DELETING THE ADD ITION OF RS.75,40,627/- MADE BY THE AO ON ACCOUNT OF FOREIGN EXCHANGE FLUCTUATION LOSS. 3. WE HAVE HEARD BOTH THE SIDES AND PERUSED THE MATERI AL PLACED BEFORE US. THE ISSUE UNDER APPEAL IS COVERED BY THE D ECISION OF HON'BLE JURISDICTIONAL HIGH COURT IN THE CASE OF CIT VS. WOODWARD GOVERNOR INDIA P.LTD. [2007] 294 ITR 451. THE FA CTS IN THAT CASE WERE ITA-2455/D/2013 2 THAT THE FIXED ASSETS WERE PURCHASED BY WAY OF IMPORT, PAYMENTS FOR WHICH WERE AGREED TO BE MADE IN FOREIGN EXCHANGE ON A DEFERRED PAYMENT BASIS, THE COST OF THE ASSETS WAS SHOWN IN THE ACCO UNTS OF THE ASSESSEE ON THE BASIS OF THE EXCHANGE RATE ON THE DATE OF THE FILING OF THE BILL OF ENTRY. THE CONTENTION OF THE ASSESSEE WAS T HAT THE FLUCTUATION IN FOREIGN EXCHANGE RATES WOULD GO TO IN CREASE OR DECREASE THE LIABILITY ON REVENUE ACCOUNT. IT WOULD QUALIFY AS BUSINESS EXPENDITURE ALLOWABLE UNDER SECTION 37 OF THE INCOME -TAX ACT, 1961, DESPITE THE FACT THAT THE LIABILITY HAD NOT BEEN DISC HARGED IN THE CONCERNED PREVIOUS YEAR. THE ASSESSING OFFICER DID NOT ACCEPT THE ASSESSEES CONTENTION AND DISALLOWED THE LIABILITY WHICH WAS ALLOWED BY THE ITAT. ON APPEAL BY THE REVENUE, HON'BLE JURISDI CTIONAL HIGH COURT HELD AS UNDER:- (I) THAT THE LIABILITY AROSE OUT OF CONTRACTS ALREAD Y CONCLUDED. THE LIABILITY ALREADY STOOD ACCRUED THE MINUTE THE CONTRACT WAS ENTERED INTO. THE MERE POSTPONEMENT OF THE PAYMENT TO A DIFFERENT DATE COULD NOT EXTINGUIS H THE LIABILITY AND RENDER IT NOTIONAL OR CONTINGENT. EV EN IF THE LIABILITY WAS DISCHARGED AT A FUTURE DATE, IT WOULD NEVERTHELESS BE A LIABILITY WHICH WAS CERTAIN AND NOT CONTINGENT. THE MAIN INGREDIENT OF A CONTINGENT LI ABILITY WAS THAT IT DEPENDED UPON THE HAPPENING OF A CERTAIN EVENT. THE CHANGE IN THE VALUE OF FOREIGN CURRENCY IN RELATION TO INDIAN CURRENCY BY THE ASSESSEE WAS A FAIT ACCOMPLI AND NOT A NOTIONAL ONE. THEREFORE THE INC REASE IN LIABILITY DUE TO FOREIGN EXCHANGE FLUCTUATION AS PER THE EXCHANGE RATE PREVAILING ON THE LAST DATE OF THE FIN ANCIAL YEAR WAS ALLOWABLE AS A DEDUCTION AND WAS NOT NOTIONAL OR CONTINGENT. 4. THAT THE ABOVE DECISION OF HON'BLE JURISDICTIONAL HIGH COURT IS AFFIRMED BY HONBLE APEX COURT IN THE CASE OF CIT VS . WOODWARD GOVERNOR INDIA P.LTD. [2009] 312 ITR 254, WHEREIN THEIR LORDSHIPS HELD AS UNDER:- ITA-2455/D/2013 3 LOSS SUFFERED BY THE ASSESSEE ON ACCOUNT OF FLUCTUATION IN THE RATE OF FOREIGN EXCHANGE AS ON THE DATE OF TH E BALANCE-SHEET IS AN ITEM OF EXPENDITURE UNDER SECTION 37(1) OF THE INCOME-TAX ACT, 1961. 5. IN VIEW OF THE ABOVE, WE DO NOT FIND ANY INFIRMI TY IN THE ORDER OF LEARNED CIT(A). THE SAME IS SUSTAINED. 6. IN THE RESULT, THE APPEAL OF THE REVENUE IS DISMISSED . DECISION PRONOUNCED IN THE OPEN COURT ON 31 ST OCTOBER, 2013. SD/- SD/- ( (( (CHANDRA MOHAN GARG CHANDRA MOHAN GARG CHANDRA MOHAN GARG CHANDRA MOHAN GARG) )) ) (G.D.AGRAWAL) (G.D.AGRAWAL) (G.D.AGRAWAL) (G.D.AGRAWAL) JUDICIAL JUDICIAL JUDICIAL JUDICIAL MEMBER MEMBER MEMBER MEMBER VICE PRESIDENT VICE PRESIDENT VICE PRESIDENT VICE PRESIDENT DATED : 31.10.2013 VK. COPY FORWARDED TO: - 1. APPELLANT : ASSISTANT COMMISSIONER OF INCOME TAX, ASSISTANT COMMISSIONER OF INCOME TAX, ASSISTANT COMMISSIONER OF INCOME TAX, ASSISTANT COMMISSIONER OF INCOME TAX, CIRCLE CIRCLE CIRCLE CIRCLE- -- -16(1),NEW DELHI. 16(1),NEW DELHI. 16(1),NEW DELHI. 16(1),NEW DELHI. 2. RESPONDENT : M/S THE NATIONAL SMALL I M/S THE NATIONAL SMALL I M/S THE NATIONAL SMALL I M/S THE NATIONAL SMALL INDUSTRIES NDUSTRIES NDUSTRIES NDUSTRIES CORPORATION OF INDIA LIMITED, NSIC BHAWAN, CORPORATION OF INDIA LIMITED, NSIC BHAWAN, CORPORATION OF INDIA LIMITED, NSIC BHAWAN, CORPORATION OF INDIA LIMITED, NSIC BHAWAN, OKHLA INDUSTRIAL ESTATE, PHASE OKHLA INDUSTRIAL ESTATE, PHASE OKHLA INDUSTRIAL ESTATE, PHASE OKHLA INDUSTRIAL ESTATE, PHASE- -- -II, NEW DELHI. II, NEW DELHI. II, NEW DELHI. II, NEW DELHI. 3. CIT 4. CIT(A) 5. DR, ITAT ASSISTANT REGISTRAR