GMR VEMAGIRI POWER GENERATION LTD ( FORMERLY KNOWN AS VEMAGIRI POWER GENERATION LTD), MUMBAI V. DCIT CIR 3(3), MUMBAI

ITA 3082/MUM/2013

• Counselvise Citation: [2015] 140 COUNSELVISE.COM (IT) 88266 (ITAT-MUMBAI)
• Duration Of Justice: 1 year(s) 9 month(s) 21 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 13-02-2015
• Appeal Filed By: Assessee
• Order Result: Allowed
• Bench Allotted: G
• Next Hearing Date: 06-01-2015
• Assessment Year: 2007-2008
• Appeal Filed On: 22-04-2013
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: AJIT K SRIVASTAVA
• Assessee Lawyers: MANISH V SHAH
• Keywords: Depreciation; Revised return

Judgement Text

, IN THE INCOME TAX APPELLATE TRIBUNAL G BENCH, MUMBAI BEFORE HONBLE S/SHRI VIJAY PAL RAO (JM) , AND B.R.BASKARAN (AM) , . . , ./I.T.A. NO.3082/MUM/2013 ( / ASSESSMENT YEAR : 2007-08) GMR VEMAGIRI POWER GENERATION LIMITED, 25/1, SKIP HOUSE, MUSEUM ROAD, BANGALORE-560025 / VS. DY COMMISSIONER OF INCOME TAX , CIRCLE 3(3), MUMBAI ( / APPELLANT) .. ( / RESPONDENT) ./I.T.A. NO.3081/MUM/2013 ( / ASSESSMENT YEARS : 2008-09) GMR VEMAGIRI POWER GENERATION LIMITED, (FOPRMERLY KNOWN AS VEMAGIRI POWER GENERATION LTD) 25/1, SKIP HOUSE, MUSEUM ROAD, BANGALORE-560025 / VS. DY. COMMISSIONER OF INCOME TAX , CIRCLE 3(3), MUMBAI ( / APPELLANT) .. ( / RESPONDENT) ./I.T.A. NO.3083/MUM/2013 ( / ASSESSMENT YEAR : 2009-10) GMR VEMAGIRI POWER GENERATION LIMITED, (FOPRMERLY KNOWN AS VEMAGIRI POWER GENERATION LTD) 25/1, SKIP HOUSE, MUSEUM ROAD, BANGALORE-560025 / VS. DY. COMMISSIONER OF INCOME TAX , CIRCLE 3(3), MUMBAI ( / APPELLANT) .. ( / RESPONDENT) ./ ./PAN/GIR NO. :AABCV1684R ITA NO.3081, 3082 AND 3983/M/13 2 / ASSESSEE BY: SHRI MANISH V SHAH ! /REVENUE BY : SHRI AJIT K SRIVASTAVA ' # ! $% / DATE OF HEARING : 6.1.2015 &' ! $% /DATE OF PRONOUNCEMENT : 13.2.2015 / O R D E R PER B.R.BASKARAN, ACCOUNTANT MEMBER: THE ASSESSEE HAS FILED THESE THREE APPEALS CHALLENG ING THE ORDERS PASSED BY LD CIT(A) AND THEY RELATE TO THE ASSESSME NT YEARS 2007-08 TO 2009-10. ALL THESE THREE APPEALS WERE HEARD TOGETH ER AND HENCE THEY ARE BEING DISPOSED OF BY THIS COMMON ORDER, FOR THE SAK E OF CONVENIENCE. 2. WE HEARD THE PARTIES AND PERUSED THE RECORD. THE ASSESSEE IS ENGAGED IN THE BUSINESS OF GENERATION AND SUPPLY OF POWER. THE ASSESSEE COMMENCED ITS OPERATION DURING THE YEAR RELEVANT TO THE ASSESSMENT YEAR 2007-08. AFTER FILING THE RETURN OF INCOME OF THAT YEAR, THE ASSESSEE NOTICED CERTAIN MISTAKES, WHICH RESULTED IN ERRONEO US STATEMENT OF COST OF ASSETS RELEVANT FOR COMPUTING THE DEPRECIATION UN DER THE INCOME TAX ACT. THE MAJOR PORTION OF ERROR RELATED TO NON-DEDUCTION OF UNREALIZED FOREX GAIN IN TERMS OF SEC. 43A OF THE ACT. HENCE, THE A SSESSEE FILED A REVISED COMPUTATION OF DEPRECIATION ALONG WITH A LETTER EXP LAINING THE MISTAKES. HOWEVER, THE AO REFUSED TO ACCEPT THE SAID CLAIM BY PLACING RELIANCE ON THE DECISION OF HONBLE SUPREME COURT RENDERED IN T HE CASE OF GOETZE INDIA LTD (284 ITR 323), WHEREIN IT WAS STATED THAT THE ADDITIONAL CLAIMS ITA NO.3081, 3082 AND 3983/M/13 3 COULD ONLY BE MADE BY FILING REVISED RETURN OF INCO ME. ON MERITS ALSO, THE AO HELD THAT THE ASSESSEE IS NOT ENTITLED TO ELIMIN ATE THE EFFECT OF UNREALIZED THE FOREX GAINS, SINCE THE SAME HAS BEEN ADJUSTED IN TERMS OF THE MERCANTILE SYSTEM OF ACCOUNTING FOLLOWED BY THE ASSESSEE. IN ASSESSMENT YEAR 2008-09 AND 2009-10 ALSO, THE AO RE JECTED THE CLAIM FOR ELIMINATION OF UNREALIZED FOREX GAINS/LOSSES ON THE WDV OF THE ASSETS. THE LD CIT(A) CONFIRMED THE ASSESSMENT ORDER ON THESE I SSUES AND HENCE, THE ASSESSEE HAS FILED THESE APPEALS BEFORE US. 3. WE HAVE HEARD THE PARTIES AND PERUSED THE RECOR D. IT IS SEEN THAT THE ASSESSEE HAS PREPARED ITS FINANCIAL STATEMENTS IN ACCORDANCE WITH THE ACCOUNTING PRINCIPLES BY DULY COMPLYING WITH THE AC COUNTING STANDARDS. IN TERMS OF REQUIREMENTS OF MERCANTILE SYSTEM OF ACCOU NTING THE ASSESSEE HAS RESTATED THE FOREIGN EXCHANGE LOANS OUTSTANDING ON THE DATE OF BALANCE SHEET AND THE CORRESPONDING ADJUSTMENT HAS BEEN MADE ON THE COST OF ASSETS. IN AY 2007-08, THE ASSESSEE HAS CL AIMED THE DEPRECIATION ON THE COST OF ASSETS AS STATED IN THE BOOKS OF ACC OUNT. 4. HOWEVER, THE TOTAL INCOME IS REQUIRED TO BE COM PUTED IN ACCORDANCE WITH THE PROVISIONS OF THE INCOME TAX ACT. HENCE, I T IS WELL SETTLED PRINCIPLE THAT THE ACCOUNTING TREATMENT GIVEN IN THE BOOKS OF ACCOUNT IS NOT RELEVANT FOR THE PURPOSES OF COMPUTING INCOME UNDER THE INCO ME TAX ACT, I.E, WHEN THE ACCOUNTING SYSTEM CONTRADICTS WITH THE ACT , THEN THE ACT SHALL PREVAIL OVER THE BOOKS OF ACCOUNTS. IT IS PERTINENT TO NOTE THAT THE ITA NO.3081, 3082 AND 3983/M/13 4 PROVISIONS OF SEC.43A OF THE ACT SPECIFICALLY PROVI DES FOR THE MANNER OF ADJUSTMENT TO BE MADE WHEN THERE IS A CHANGE IN THE RATE OF EXCHANGE OF CURRENCY. A CAREFUL READING OF THE PROVISIONS OF S EC. 43A OF THE ACT WOULD SHOW THAT THE ADJUSTMENT IS REQUIRED TO BE MADE ONL Y FOR THE DIFFERENCE IN THE LIABILITY OF FOREIGN CURRENCY ONLY AT THE TIME OF MAKING PAYMENT, IF SUCH DIFFERENCE IS TAKEN INTO ACCOUNT AT THE TIME OF MAK ING PAYMENT. WE NOTICE THAT THE ASSESSEE HAS CLAIMED DEPRECIATION ON THE C OST OF ASSETS BY ELIMINATING THE UNREALIZED FOREX GAINS/LOSSES IN TE RMS OF SEC. 43A OF THE ACT. HOWEVER, WE NOTICE THAT THE TAX AUTHORITIES H AVE NOT CONSIDERED THE EXPRESS PROVISIONS OF SEC. 43A OF THE ACT. ACCORDI NGLY, WE ARE OF THE VIEW THAT THIS ISSUE REQUIRES FRESH EXAMINATION AT THE E ND OF THE ASSESSING OFFICER. ACCORDINGLY, WE SET ASIDE THE ORDERS PASS ED BY THE LD CIT(A) ON THE ISSUE OF FOREIGN EXCHANGE ADJUSTMENT IN ALL THE THREE YEARS AND RESTORE THE SAME TO THE FILE OF THE ASSESSING OFFICER WITH THE DIRECTION TO EXAMINE THE SAME AFRESH BY DULY CONSIDERING THE PROVISIONS OF SEC. 43A OF THE ACT AND ALSO BY CONSIDERING THE INFORMATION AND EXPLANA TIONS THAT MAY BE FURNISHED BY THE ASSESSEE IN THIS REGARD. 5. IN ASSESSMENT YEAR 2007-08, THE ASSESSING OFFICE R HAS REFUSED TO ACCEPT THE ADDITIONAL CLAIMS MADE BY THE ASSESSEE O NLY FOR THE REASON THAT THEY ARE REQUIRED TO BE MADE THROUGH REVISED RETURN ONLY. HOWEVER, IN THE CASE OF GOETZ INDIA LTD (SUPRA), THE HONBLE SU PREME COURT HAS HELD THAT THE SAID DECISION SHALL NOT IMPINGE UPON THE P OWERS OF THE TRIBUNAL. ITA NO.3081, 3082 AND 3983/M/13 5 SINCE THE AO IS REQUIRED TO COMPUTE THE CORRECT TOT AL OF INCOME, WE DIRECT THE AO TO CONSIDER THE ADDITIONAL CLAIMS PUT FORTH BY THE ASSESSEE AND ACCORDINGLY DETERMINE THE AMOUNT OF DEPRECIATION AN D COMPUTE THE TOTAL INCOME ACCORDINGLY. THE ORDER OF LD CIT(A) ON THIS ISSUE STANDS SET ASIDE. 6. IN THE RESULT, ALL THE APPEALS FILED BY THE AS SESSEE ARE TREATED AS ALLOWED FOR STATISTICAL PURPOSES. THE ABOVE ORDER WAS PRONOUNCED IN THE OPEN COURT ON 13TH FEB, 2015 . &' ' () * + 13TH FEB, 2015 ' ! ,# - SD SD ( / VIJAY PAL RAO ) ( . . ,/ B.R. BASKARAN ) / JUDICIAL MEMBER / ACCOUNTANT MEMBER ( ' # MUMBAI: 13TH FEB,2015. . . ./ SRL , SR. PS !'#$ %$&' / COPY OF THE ORDER FORWARDED TO : 1. / THE APPELLANT 2. / THE RESPONDENT. 3. ' 0$ ( ) / THE CIT(A)- CONCERNED 4. ' 0$ / CIT CONCERNED 5. 6. 1, $ 2 , % 2 , ( ' # / DR, ITAT, MUMBAI CONCERNED ,3 4# / GUARD FILE. 5 ' / BY ORDER, TRUE COPY 6 (ASSTT. REGISTRAR) % 2 , ( ' # /ITAT, MUMBAI