S.H. KELKAR AND COMPANY LTD, V. PR CIT 4, MUMBAI

ITA 3289/MUM/2017

• Counselvise Citation: [2017] 128 COUNSELVISE.COM (IT) 0384 (ITAT-MUMBAI)
• Duration Of Justice: 1 month(s) 15 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 20-06-2017
• Appeal Filed By: Assessee
• Order Result: Dismissed
• Bench Allotted: E
• Assessment Year: 2012-2013
• Appeal Filed On: 05-05-2017
• Result in Favour of: Revenue
• Court: TRIBUNAL
• Department Lawyers: SANJAY BAHADUR
• Keywords: Capital asset; Revenue expenditure; Capital expenditure
• Section: 143(3); 37; 263

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL, BENCH E, MU MBAI BEFORE SHRI G.S. PANNU, ACCOUNTANT MEMBER AND SHRI PAWAN SINGH, JUDICIAL MEMBER ITA NO. 3289/MUM/2017 (ASSESSMENT YEAR- 2012-13) M/S S.H. KELKAR AND COMPANY LTD., DEVKARAN MANSION, 36, MANGALDAS ROAD, MUMBAI-400002 PAN: AAACS9778G VS. PR. CIT-4, AAYAKAR BHAVAN, MUMBAI-400020. (APPELLANT) (RESPONDENT) ASSESSEE BY : NONE REVENUE BY : SH. SANJAY BAHADUR (CIT- DR) DATE OF HEARING : 20.06.2017 DATE OF PRONOUNCEMENT : 20.06.2017 ORDER UNDER SECTION 254(1) OF INCOME TAX ACT PER PAWAN SINGH, JUDICIAL MEMBER: 1. THIS APPEAL BY ASSESSEE U/S. 253 OF THE INCOME-TAX ACT (THE ACT) IS DIRECTED AGAINST THE ORDER OF LD. PRINCIPAL COMMISSIONER OF INCOME TAX (APPEALS)-4 [THE PCIT(A)], MUMBAI DATED 17.03.2017 FOR THE ASSE SSMENT YEAR 2012-13 PASSED U/S 263 OF THE INCOME TAX ACT. THE ASSESSEE HAS RAISED THE FOLLOWING GROUNDS OF APPEAL : 1. THE ORDER OF THE PRINCIPAL COMMISSIONER OF INCO ME-TAX - 4, MUMBAI [PCIT] DATED 17.03.2017 FOR THE ASSESSMENT YEAR 2012-13 IS ERRONEOUS, CONTRARY TO LAW, EQUITY, FACTS AND CIRCUMSTANCES OF THE PRESENT CASE AND THE MATERIALS AVAILABLE ON RECORD; 2. THE LEARNED PCIT ERRED IN SETTING ASIDE THE ASSE SSMENT ORDER OF THE ASSESSING OFFICER [AO] DATED 23.02.2015 HOLDING THAT THE ASSE SSMENT FRAMED BY THE AO FOR THE PRESENT ASSESSMENT YEAR 2012-13 IS ERRONEOU S AND PREJUDICIAL TO THE INTERESTS OF THE REVENUE; ITA NO.3289/M/2017- M/ S S.H. KELKAR AND COMPANY LTD. 2 3. THE LEARNED PCIT ERRED IN DIRECTING THE AO TO MA KE FRESH ASSESSMENT; 4. THE LEARNED PCIT FAILED TO CONSIDER THAT THE FOR EIGN EXCHANGE FLUCTUATION LOSS OF RS. 8,73,06,732/- WAS ALLOWABLE UNDER SECTION 37 OF THE INCOME-TAX ACT, 1961 AND HENCE, THE SAME OUGHT TO BE ALLOWED; 5. THE LEARNED PCIT FAILED TO APPRECIATE THAT THE A O HAD CONDUCTED PROPER INVESTIGATION AND ENQUIRY WITH REGARD TO THE FOREIG N EXCHANGE FLUCTUATION LOSS CLAIMED BY THE APPELLANT COMPANY AND HENCE, THE POW ERS UNDER SECTION 263 CANNOT BE EXERCISED; 6. THE ABOVE GROUNDS OF APPEAL ARE WITHOUT PREJUDIC E TO ONE ANOTHER AND THE APPELLANT CRAVES LEAVE TO ADD, ALTER, AMEND, DELETE OR MODIFY ANY OF THE ABOVE GROUNDS OF APPEAL. 2. BRIEF FACTS OF THE CASE ARE THAT THE ASSESSEE FILED RETURN OF INCOME FOR RELEVANT AY ON 29.11.2012 DECLARING TOTAL INCOME AT RS. 34,2 5,53,010/-. THE ASSESSING OFFICER (AO) COMPLETED THE ASSESSMENT UND ER SECTION 143(3) ON 23.02.2015. WHILE FRAMING THE ASSESSMENT ORDER THE ASSESSING OFFICER MADE THE CERTAIN DISALLOWANCE ON ACCOUNT OF COMMISSION T O DIRECTORS, CONSULTANCY CHARGES AND CONTRIBUTION OF ESI/PF. SUB SEQUENTLY, THE ASSESSMENT ORDER WAS REVISED BY LD. PCIT VIDE ORDER DATED 17.03.2017 HOLDING THAT AS PER SECTION 43A OF THE ACT, THE LOS S ON ACCOUNT OF FOREIGN EXCHANGE FLUCTUATION, INCURRED BY ASSESSEE IN CONNE CTION WITH ACQUISITION OF ASSET FROM A COUNTRY OUTSIDE INDIA IS LIABLE TO BE TREATED AS CAPITAL EXPENDITURE AND NOT REVENUE EXPENDITURE AS CLAIMED BY ASSESSEE. THE ASSESSING OFFICER ALLOWED THE SAID EXPENDITURE AS OF REVENUE EXPENDITURE IN THE ASSESSMENT ORDER. THUS, THE ORDER PASSED BY ASS ESSING OFFICER IS ERRONEOUS AND PREJUDICIAL TO THE INTEREST OF REVENU E. A SHOW-CAUSE NOTICE U/S 263 OF THE ACT DATED 31.08.2016 WAS ISSUED TO T HE ASSESSEE. THE ASSESSEE CONTESTED THE PROCEEDING BY FILING ITS DETAILED REP LY. IN THE REPLY, THE ITA NO.3289/M/2017- M/ S S.H. KELKAR AND COMPANY LTD. 3 ASSESSEE CONTENDED THAT THE TWIN CONDITIONS AS ENUN CIATED U/S 263 OF THE ACT ARE NOT SATISFIED. THE ASSESSEE FURTHER CONTENDED T HAT IT WAS COMMERCIALLY EXPEDIENT FOR THE ASSESSEE TO ACQUIRE PFW AROMA CHE MICALS BV, NETHERLANDS AND THERE WAS A DIRECT NEXUS BETWEEN TH E FOREIGN EXCHANGE LOSS IN ASSESSEES BUSINESS. THE CONTENTION OF ASSE SSEE WAS NOT ACCEPTED BY LD. PCIT. THE LD. PCIT FURTHER CONCLUDED THAT ASSES SEE ACQUIRED A COMPANY OUTSIDE INDIA BY WAY OF ACQUISITION OF SHARE OF KEV A UK LIMITED WHICH IS 100% HOLDING COMPANY OF PFW AROMA CHEMICALS BV, NET HERLANDS AND THAT THE CONTENTION OF THE ASSESSEE WAS THAT THIS ASSET IS ACQUIRED BY THE COMPANY FOR THE PURPOSE OF BUSINESS IS NOT ALLOWABLE. THE ASSESSEE CLAIMED FOREIGN EXCHANGE FLUCTUATION LOSS ON ACCOUNT OF LOAN TAKEN BY ASSESSEE TO ACQUIRE CAPITAL ASSET. THUS, ALL CONDITION REQUIRED FOR APP LICABILITY OF SECTION 43A ARE FULFILLED. THUS, THE FOREIGN EXCHANGE FLUCTUATION L OSS ON ACCOUNT OF LOAN AVAILED BY ASSESSEE IS TREATED TO BE TREATED AS CAP ITAL EXPENDITURE AND NOT AS REVENUE EXPENDITURE. WITH THESE ABOVE OBSERVATIONS, THE ASSESSMENT ORDER WAS SET-ASIDE WITH A DIRECTION TO THE ASSESSING OFF ICER TO PASS FRESH ASSESSMENT AFTER CONDUCTING DETAILED ENQUIRY. AGGRI EVED BY THE ORDER OF LD. PCIT, THE PRESENT APPEAL IS FILED BEFORE US. 3. NONE APPEARED BEFORE US ON BEHALF OF ASSESSEE DESPI TE THE SERVICE OF NOTICE FOR HEARING OF APPEAL FOR 20.06.2017. WE HAD WAITED FOR SUFFICIENT TIME AFTER PASS OVER OF THE CASE. WE LEFT NO OPTION EXCEPT TO HEAR THE LD. DR FOR THE ITA NO.3289/M/2017- M/ S S.H. KELKAR AND COMPANY LTD. 4 REVENUE AND TO PROCEED ON THE BASIS OF MATERIAL AVA ILABLE ON RECORD. THE LD. DR FOR THE REVENUE SUPPORTED THE ORDER OF LD. PCIT. IT WAS FURTHER ARGUED THAT THE AO ALLOWED THE CLAIM OF ASSESSEE WITHOUT M AKING ANY ENQUIRY OR DISCUSSING ANYTHING IN THE ASSESSMENT ORDER. THE AS SESSMENT ORDER PASSED BY AO IS ERRONEOUS AND PREJUDICIAL TO THE INTEREST OF REVENUE. THE LD. PCIT SET- ASIDE THE ASSESSMENT ORDER WITH A DIRECTION TO THE AO TO PASS THE FRESH ASSESSMENT ORDER AFTER CONDUCTING DETAILED ENQUIRY AND VERIFICATION. 4. WE HAVE CONSIDERED THE SUBMISSION OF LD. DR FOR THE REVENUE AND PERUSED THE ASSESSMENT ORDER. ON PERUSAL OF ASSESSMENT ORDE R, WE FIND MERIT IN THE SUBMISSION OF LD. DR FOR THE REVENUE. THE AO HAS NO T DISCUSSED ABOUT THE CLAIM OF FOREIGN EXCHANGE FLUCTUATION LOSS WHILE PA SSING THE ASSESSMENT ORDER ON 23.02.2015. THE ASSESSEE HAS NEITHER FILED ANY DOCUMENTARY EVIDENCE NOR CAME FORWARD TO SUBSTANTIATE THEIR C ONTENTION RAISED IN THE GROUNDS OF APPEAL. THUS, WE DO NOT FIND ANY MERIT I N THE GROUNDS OF APPEAL RAISED BY ASSESSEE AND THE SAME ARE DISMISSED. . 5. IN THE RESULT, APPEAL OF THE ASSESSEE IS DISMISSED. ORDER PRONOUNCED IN THE OPEN COURT ON 20 TH DAY OF JUNE 2017. SD/- SD/- (G.S. PANNU) (PAWAN SINGH) ACCOUNTANT MEMBER JUDICIAL MEMBER MUMBAI; DATED 20 /06/2017 S.K.PS COPY OF THE ORDER FORWARDED TO : 1. THE APPELLANT 2. THE RESPONDENT. 3. THE CIT(A), MUMBAI. ITA NO.3289/M/2017- M/ S S.H. KELKAR AND COMPANY LTD. 5 BY ORDER, (ASS TT.REGISTRAR) IT AT, MUMBAI 4. CIT 5. DR, ITAT, MUMBAI 6. GUARD FILE. //TRUE COPY/