M/s. Newman & Esser Compressor Application Centre Pvt. Ltd, Pune V. Income-tax Officer, Ward - 10(1), Pune

ITA 2656/PUN/2017

• Counselvise Citation: [2019] 117 COUNSELVISE.COM (IT) 2839 (ITAT-PUNE)
• Duration Of Justice: 1 year(s) 6 month(s) 21 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 07-06-2019
• Appeal Filed By: Assessee
• Order Result: Allowed
• Bench Allotted: A
• Next Hearing Date: 25-04-2019
• Assessment Year: 2012-2013
• Appeal Filed On: 16-11-2017
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: SHABHANA PARVEEN
• Assessee Lawyers: C V DESHPANDE
• Keywords: Capital asset; Capital expenditure
• Section: 143(3)

Judgement Text

] IN THE INCOME TAX APPELLATE TRIBUNAL PUNE BENCH A, PUNE BEFORE MS. SUSHMA CHOWLA, JM AND SHRI ANIL CHATURVEDI, AM . / ITA NOS.2656 & 2657/PUN/2017 / ASSESSMENT YEARS : 2012-13 & 2013-14 M/S. NEUMAN & ESSER COMPRESSOR APPLICATION CENTRE PVT. LTD., T-121, BHOSARI INDUSTRIAL ESTATE, BHOSARI, PUNE 411 026. PAN : AGRPP6429P. . / APPELLANT V/S THE DY. COMMISSIONER OF INCOME TAX, CIRCLE - 10, PUNE. . / RESPONDENT ASSESSEE BY : SHRI C.V. DESHPANDE. REVENUE BY : MS. SHABHANA PARVEEN. / ORDER PER ANIL CHATURVEDI, AM : 1. THESE TWO APPEALS FILED BY THE ASSESSEE ARE EMANATIN G OUT OF SEPARATE ORDERS OF COMMISSIONER OF INCOME TAX (APPEALS) 6, PUNE DATED 04.07.2017 AND 29.09.2017 FOR A.YS. 2012-13 AND 2013 -14, RESPECTIVELY. 2. BEFORE US, AT THE OUTSET, BOTH THE PARTIES SUBMITTED T HAT THOUGH THE APPEALS FILED BY THE ASSESSEE ARE FOR TWO DIFFERENT ASS ESSMENT YEARS BUT THE FACTS AND ISSUES INVOLVED IN BOTH THE APPEALS AR E IDENTICAL EXCEPT FOR THE ASSESSMENT YEAR AND THE AMOUNTS INVOLVE D AND THEREFORE THE SUBMISSIONS MADE BY THEM WHILE ARGUING ONE APPEAL WOULD BE EQUALLY APPLICABLE TO THE OTHER APPEAL ALSO AND THUS BOTH TH E / DATE OF HEARING : 25.04.2019 / DATE OF PRONOUNCEMENT: 07.06.2019 2 APPEALS CAN BE HEARD TOGETHER. IN VIEW OF THE AFORESAID SUBMISSIONS OF BOTH THE PARTIES, WE, FOR THE SAKE OF CONVENIENCE, PROCE ED TO DISPOSE OF BOTH THE APPEALS BY A CONSOLIDATED ORDER BUT HOWEVER, P ROCEED WITH NARRATING THE FACTS IN ITA NO.2656/PUN/2017 FOR ASSESSM ENT YEAR 2012-13. 3. THE RELEVANT FACTS AS CULLED OUT FROM THE MATERIAL ON RE CORD ARE AS UNDER :- ASSESSEE IS A COMPANY ENGAGED IN THE BUSINESS OF ENGIN EERING CONSULTANCY SERVICES. ASSESSEE FILED ITS ORIGINAL RETURN OF I NCOME FOR A.Y. 2012-13 ON 28.11.2012 DECLARING TOTAL INCOME AT RS.1,78,14,437/-. THE CASE WAS SELECTED FOR SCRUTINY AND THEREAFTER ASSESSMENT WAS FRAMED U/S 143(3) OF THE ACT VIDE ORDER DT.31.12.201 4 AND THE TOTAL INCOME WAS DETERMINED AT RS.1,99,43,112/-. AGGRIEVED BY THE ORDER OF AO, ASSESSEE CARRIED THE MATTER BEFORE LD.CIT(A), WHO VIDE ORDER DT.04.07.2017 (IN APPEAL NO.PN/CIT(A)-6/DCIT CIR- 10/650/2014-15) DISMISSED THE APPEAL OF ASSESSEE. AGGRIE VED BY THE ORDER OF LD.CIT(A), ASSESSEE IS NOW IN APPEAL BEFORE US AND HAS RAISED THE FOLLOWING GROUNDS : 1. ON THE FACTS & IN CIRCUMSTANCES OF THE CASE & I N LAW, THE LOWER AUTHORITIES HAVE ERRED IN INCORRECTLY DISALLOWING F OREIGN EXCHANGE LOSS AMOUNTING TO RS.25,28,675/- BY TREATING IT TO BE OF CAPITAL NATURE & BY INCORRECTLY INVOKING PROVISIONS OF SECTION 43A OF T HE INCOME TAX ACT, 1961 WITHOUT APPRECIATING THE FACTS OF THE CASE AND THE SUBMISSIONS MADE BY THE ASSESSEE BEFORE THE LOWER AUTHORITIES. 2. WITHOUT PREJUDICE TO THE ABOVE GROUND ON THE FAC TS & IN CIRCUMSTANCES OF THE CASE & IN LAW, THE LOWER AUTHO RITIES HAVE ERRED IN QUANTIFYING FOREIGN EXCHANGE LOSS TO BE DISALLOWED, WITHOUT APPRECIATING THE FACT THAT TOTAL FOREIGN EXCHANGE L OSS INCLUDES FOREIGN EXCHANGE LOSS ON REVENUE ITEMS TO THE TUNE OF RS.18 ,77,675/-. 3 4. SIMILAR GROUNDS HAVE BEEN RAISED IN ITA NO.2657/PUN/20 17 FOR A.Y. 2013-14. 5. BOTH THE GROUNDS BEING INTER-CONNECTED ARE CONSIDERED TOG ETHER. 6. FIRST GROUND IS WITH RESPECT TO INVOCATION OF SEC.43A OF THE ACT. 6.1. DURING THE COURSE OF ASSESSMENT PROCEEDINGS, IT WAS NOTICED THAT ASSESSEE HAD CLAIMED EXPENDITURE OF RS.25,28,675/- ON ACCOUNT OF FLUCTUATION OF FOREIGN EXCHANGE LOSS. THE ASSESSEE WAS ASKED TO EXPLAIN THE ADMISSIBILITY OF EXPENSES IN VIEW OF PROVISIONS OF SEC.43A OF THE ACT AND ALSO TO EXPLAIN AS TO WHY THE AMOUNT SHO ULD NOT BE CAPITALIZED. ASSESSEE INTER-ALIA SUBMITTED THAT IT HAD AVAILE D UNSECURED LOAN FROM THE HOLDING COMPANY FOR PURCHASE OF C APITAL ASSET. THE SUBMISSION OF THE ASSESSEE WAS NOT FOUND AC CEPTABLE TO THE AO. AO WAS OF THE VIEW THAT FOREIGN EXCHANGE WAS UTILIZED FOR THE PURCHASE OF CAPITAL EQUIPMENT AND THE PURPOSE OF SANCTION OF LOAN AND THE APPROVAL OF RBI WAS FOR THE PURCHASE OF CAPITAL ASSET . HE THEREFORE TREATED THE FOREIGN EXCHANGE LOSS AS CAPITAL IN NATURE W HICH SHOULD HAVE BEEN CAPITALIZED. HE THEREFORE DISALLOWED THE AMOUNT OF RS.25,28,675/- ON ACCOUNT OF FLUCTUATION OF FOREIGN EXCHANGE LOSS BY INVOKING THE PROVISIONS OF SEC.43-A OF THE ACT. AGGRIEVED BY THE ORDER OF AO, ASSESSEE CARRIED THE MATTER BEFORE LD.CIT(A), WHO UP HELD THE ORDER OF AO BY OBSERVING AS UNDER : 5.2. THE APPELLANT'S SUBMISSIONS WERE CONSIDERED A ND THE ISSUE IS HIGHLY DEBATABLE. THERE IS NO SPECIFIC PROVISION FO R ALLOWING SUCH DEDUCTIONS. THE ONLY ISSUE TO BE CONSIDERED IS WHET HER THE LOSS IS A RISING IN REVENUE OR CAPITAL FIELD. THE ACCOUNTING STANDARDS PROVIDE FOR SUCH DEDUCTION BUT HOWEVER, THEY HAVE NOT BEEN MADE MANDATORY BY THE I.T.ACT. IT IS ONLY THROUGH THE CBDT NOTIFICATI ON THE PROVISIONS OF AS- 11 HAVE BEEN INCORPORATED IN THE ICDS AND THEY ARE MADE APPLICABLE ONLY FOR A.Y. 17-18. AS THERE IS NO CLARITY FOR THE INTERVENING PERIOD, RELIANCE HAS TO BE PLACED ON THE VARIOUS JUDICIAL D ECISIONS FOR DECIDING 4 THIS ISSUE. THE DECISIONS RELIED UPON BY THE AO MOS TLY RELATE TO THE ASSETS PURCHASED FROM OUTSIDE INDIA. ONLY IN THE MA DRAS HIGH COURT DECISION IN THE CASE OF TUBE INVESTMENTS OF INDIA L TD VS. JCLT SPL. R-1 [2014] 45 TAXMANN.COM. 78 (MAD), IT WAS HELD THAT T HE LOSS ON FOREIGN CURRENCY FLUCTUATION ARISING ON THE RESTATEMENT OF THE LIABILITY AT THE END OF THE REPORTING PERIOD AS CAPITAL EXPENDITURE AS T HE FOREIGN CURRENCY LOAN WAS APPROVED BY THE RBI FOR THE PURPOSE OF CAP ITAL EXPENDITURE. THE COURT ALSO HELD THAT THE ASSET NEED NOT BE PURC HASED FROM OUTSIDE INDIA. IN VIEW OF THIS DECISION OF THE HIGH COURT A ND THERE ARE NO OTHER CONTRADICTORY DECISIONS, THE VIEW OF THE SAME HAS T O BE ADOPTED IN THE APPELLANT'S CASE ALSO. IN THE PRESENT CASE ALSO, TH E RBI HAD GRANTED PERMISSION FOR RAISING FOREIGN EXCHANGE LOAN OF PAR ENT COMPANY SUBJECT TO THE CONDITIONS STIPULATED THEREIN. THE FOREIGN L OAN WAS ALSO UTILIZED FOR THE PURCHASE OF CAPITAL ASSETS. AS THE FACTS AR E SIMILARLY PLACED, FOLLOWING THE DECISION OF THE MADRAS HIGH COURT, TH E LOSS HAS TO BE TREATED AS CAPITAL EXPENDITURE. 6. THE APPELLANT HAD CLAIMED THAT THE AO HAD ERRED IN NOT CONSIDERING THAT SOME OF THE FOREIGN EXCHANGE FLUCTUATION LOSS CLAIMED IS ON ACCOUNT OF REVENUE ITEMS. THE APPELLANT FILED LEDGER EXTRAC TS AND IT IS NOT CLEAR FROM THESE LEDGER EXTRACT AS TO THE AMOUNTS WHICH P ERTAIN TO THE REVENUE ITEMS. IT IS CLAIMED THAT AT ONE PLACE THE NET IMPACT OF ECB LOAN TO BE RS.11,16,756/- HOWEVER, IN THE SUBMISSIONS MA DE HE CLAIMED THE EXCHANGE LOSS TO BE ONLY RS.6,51,000/-. A CLOSE REA DING OF THE SUBMISSIONS INDICATES THAT THE LOSS OF RS.6,51,000/ - RELATES ONLY TO THE ECB LOAN AMOUNTS REPAID, THE APPELLANT DID NOT SUBM IT THESE REVENUE ITEMS EVEN BEFORE THE AO, AS CAN BEEN SEEN FROM THE ASSESSMENT ORDER. THE APPELLANT SHOULD HAVE PROVIDED ALL THE PARTICUL ARS TO ARRIVE AT THE LOSS DUE TO REVENUE ITEMS. IN THE ABSENCE OF COMPLE TE DETAILS, THE CLAIM CANNOT BE ALLOWED. 7. IN THE RESULT, THE APPEAL IS DISMISSED. AGGRIEVED BY THE ORDER OF LD.CIT(A), ASSESSEE IS NOW BEFORE US. 7. BEFORE US, LD.A.R. REITERATED THE SUBMISSIONS MADE BEFORE AO AND LD.CIT(A) AND FURTHER SUBMITTED THAT SEC.43A OF THE A CT BECOMES APPLICABLE WHEN THE ASSETS ARE ACQUIRED FROM A COUNTRY OUTSIDE INDIA AND DOES NOT APPLY TO ACQUISITION OF INDIGENOUS ASSETS. IN THE PRESENT CASE, HE SUBMITTED THAT THE ASSETS WERE ACQUIRED IN IND IA AND THEREFORE PROVISIONS OF SEC.43A OF THE ACT ARE NOT APPLICAB LE. HE ALSO PLACED RELIANCE ON THE DECISION OF PUNE TRIBUNAL IN THE CASE OF COOPER CORPORATION (P) LTD. VS. DCIT REPORTED IN (2016) 180 TTJ 072 7. HE ALSO PLACED ON RECORD THE COPY OF THE AFORESAID DECISION. LD.D. R. ON THE OTHER HAND, SUPPORTED THE ORDER OF LOWER AUTHORITIES. 5 8. WE HAVE HEARD THE RIVAL SUBMISSIONS AND PERUSED THE MATERIAL ON RECORD. THE ISSUE IN THE PRESENT GROUND IS WITH RES PECT TO INVOKING THE PROVISIONS OF SEC.43A OF THE ACT. IT IS AN UNDISPUTED FACT THAT ASSESSEE HAD OBTAINED A LOAN FROM A HOLDING COMPANY. IT IS ALSO A FACT THAT THE LOAN WAS UTILIZED FOR ACQUISITION OF CAPITAL ASSETS IN INDIA AND WAS NOT UTILIZED FOR ACQUISITION OF CAPITAL ASSET FROM OUTSIDE INDIA. WE FIND THAT SEC.43A OF THE ACT BECOMES APPLICABLE WHEN THE ASSETS ARE ACQUIRED FROM A COUNTRY OUTSIDE INDIA AND DOES NOT AP PLY TO ACQUISITION OF INDIGENOUS ASSETS. SIMILAR VIEW WAS TAKEN BY TH E CO- ORDINATE BENCH OF THE TRIBUNAL IN THE CASE OF COOPER CORP ORATION PVT. LTD. VS. DCIT (SUPRA). IN THE PRESENT CASE, SINCE ASSETS WERE ACQUIRED IN INDIA, WE ARE OF THE VIEW THAT PROVISIONS OF SEC.43A OF THE ACT ARE NOT APPLICABLE IN THE PRESENT FACTS. WE THEREFORE SET ASID E THE INVOCATION OF SEC.43-A OF THE ACT. THUS, THE GROUNDS OF T HE ASSESSEE ARE ALLOWED. 9. IN THE RESULT, THE APPEAL OF ASSESSEE IN ITA NO.2656/PUN/2017 FOR A.Y. 2012-13 IS ALLOWED. 10. NOW WE TAKE UP ASSESSEES APPEAL IN ITA NO.2657/PU N/2017 FOR A.Y 2013-14. 11. AS FAR AS THE GROUNDS RAISED IN APPEAL IN ITA NO.2657/PUN/2017 FOR A.Y. 2013-14 IS CONCERNED, IN VIEW O F THE SUBMISSION OF BOTH THE PARTIES THAT THE FACTS OF THE CA SE IN THE YEAR BEING IDENTICAL TO THE FACTS AND ISSUE OF THE CASE IN ITA NO.2656/PUN/2017 FOR A.Y. 2012-13, WE THEREFORE FOR THE R EASONS STATED HEREIN WHILE DISPOSING OF THE APPEAL IN ITA NO.2656/ PUN/2017 6 FOR A.Y. 2012-13, AND FOR SIMILAR REASONS, ALLOW THE GROUNDS OF ASSESSEE. THUS, THE GROUNDS OF THE ASSESSEE ARE ALLOWED. 12. IN THE RESULT, THE APPEAL OF ASSESSEE IN ITA NO.2657/PUN/2017 FOR A.Y. 2013-14 IS ALLOWED. 13. TO SUM UP BOTH THE APPEALS OF ASSESSEE ARE ALLOWED. ORDER PRONOUNCED ON 7 TH DAY OF JUNE, 2019. SD/- SD/- ( SUSHMA CHOWLA ) ( ANIL CHATURVEDI ) ! / JUDICIAL MEMBER '! / ACCOUNTANT MEMBER PUNE; DATED : 7 TH JUNE, 2019. YAMINI #$%&'('% / COPY OF THE ORDER FORWARDED TO : 1. / THE APPELLANT 2. / THE RESPONDENT 3. 4 5. 6. THE CIT(APPEALS)-6, PUNE. THE PCIT-5, PUNE. '#$ %%&',) &', / DR, ITAT, A PUNE; $,-./ GUARD FILE. / BY ORDER // TRUE COPY // /01%2&3 / SR. PRIVATE SECRETARY ) &', / ITAT, PUNE.