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ITA 6141/DEL/2017

• Counselvise Citation: [2021] 107 COUNSELVISE.COM (IT) 2799 (ITAT-DELHI)
• Duration Of Justice: 4 year(s) 17 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 20-10-2021
• Appeal Filed By: Assessee
• Order Result: Allowed
• Bench Allotted: F
• Assessment Year: 2014-2015
• Appeal Filed On: 03-10-2017
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: ANIL GANDHI SENIOR
• Keywords: Capital asset; Business income; Depreciation; Revenue expenditure; Set aside
• Section: 37

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL (DELHI BENCH F : NEW DELHI) BEFORE SHRI O.P. KANT, ACCOUNTANT MEMBER AND SHRI KULDIP SINGH, JUDICIAL MEMBER ITA NO.6141/DEL./2017 (ASSESSMENT YEAR : 2014-15) M/S. PARAMOUNT COMMUNICATIONS LTD., VS. DCIT, CIRCL E 19 (2), C-125, PARAMOUNT HOUSE, NEW DELHI. NARAINA INDL. AREA PHASE I, NEW DELHI 110 028. (PAN : AAACP0969Q) (APPELLANT) (RESPONDENT) ASSESSEE BY : SHRI A.T. PANDA, ADVOCATE REVENUE BY : SHRI ANIL GANDHI, SENIOR DR DATE OF HEARING : 11.10.2021 DATE OF ORDER : 20.10.2021 O R D E R PER KULDIP SINGH, JUDICIAL MEMBER : APPELLANT, M/S. PARAMOUNT COMMUNICATION PVT. LTD. (HEREINAFTER REFERRED TO AS THE ASSESSEE) BY FILI NG THE PRESENT APPEAL SOUGHT TO SET ASIDE THE IMPUGNED ORDER DATED 09.08.2017 PASSED BY THE COMMISSIONER OF INCOME - TAX (APPEALS )-7, NEW DELHI QUA THE ASSESSMENT YEAR 2014-15 ON THE GROUND S INTER ALIA THAT:- 1. THAT ON THE FACTS AND CIRCUMSTANCES OF THE CAS E AND IN LAW, THE COMMISSIONER OF INCOME-TAX (APPEALS)- 7; N EW DELHI [BRIEFLY 'THE CIT(A)'] HAS ERRED IN UPHOLDING DISAL LOWANCE OF ITA NO.6141/DEL./2017 2 DEPRECIATION OF RS.1,50,20,339/- ON ACCOUNT OF EXCH ANGE FLUCTUATIONS ON ASSETS ACQUIRED IN INDIA FROM THE F UNDS RAISED THROUGH FOREIGN CURRENCY CONVERTIBLE BONDS [FCCBS]. 2. THAT ON THE FACTS AND CIRCUMSTANCES OF THE CASE AND IN LAW, THE CIT(A) HAS ERRED IN NOT APPRECIATING THAT THE PROVISIONS OF SECTION 43A OF THE ACT WERE NOT APPLI CABLE TO THE INDIGENOUS ASSETS ACQUIRED OUT OF FCCB'S BROUGHT IN TO INDIA. 3. WITHOUT PREJUDICE, ON THE FACTS AND CIRCUMSTANC ES OF THE CASE AND IN LAW, FOREIGN EXCHANGE FLUCTUATIONS LOSS ATTRIBUTABLE TO ACQUISITION OF INDIGENOUS DEPRECIAB LE ASSETS WAS ALLOWABLE DEDUCTION UNDER SECTION 37 OF THE ACT IN COMPUTING THE BUSINESS INCOME.. 2. BRIEFLY STATED THE FACTS NECESSARY FOR ADJUDICAT ION OF THE CONTROVERSY AT HAND ARE : DURING THE SCRUTINY PROCE EDINGS, ASSESSING OFFICER (AO) NOTICED THAT THE ASSESSEE HA S CLAIMED EXCESSIVE DEPRECIATION OF PRORATA EXCHANGE FLUCTUAT ION LOSS PERTAINING TO INDIGENOUS/DOMESTIC FIXED ASSETS. AO BY FOLLOWING THE ASSESSMENT YEARS 2010-11, 2011-12 & 2012-13 DIS ALLOWED THE EXCESSIVE DEPRECIATION CLAIMED BY THE ASSESSEE TO T HE TUNE OF RS.1,50,20,339/- AND THEREBY FRAMED THE ASSESSMENT AT THE LOSS OF RS.51,98,87,909/- UNDER SECTION 143 (3) OF THE INCO ME-TAX ACT, 1961 (FOR SHORT THE ACT). 3. ASSESSEE CARRIED THE MATTER BEFORE THE LD. CIT ( A) BY WAY OF FILING APPEAL WHO HAS UPHELD THE ADDITION BY DISMIS SING THE APPEAL. FEELING AGGRIEVED, THE ASSESSEE HAS COME UP BEFORE THE TRIBUNAL BY WAY OF FILING THE PRESENT APPEAL. ITA NO.6141/DEL./2017 3 4. WE HAVE HEARD THE LD. AUTHORIZED REPRESENTATIVES OF THE PARTIES TO THE APPEAL, GONE THROUGH THE DOCUMENTS R ELIED UPON AND ORDERS PASSED BY THE REVENUE AUTHORITIES BELOW IN T HE LIGHT OF THE FACTS AND CIRCUMSTANCES OF THE CASE. 5. LD. AR FOR THE ASSESSEE CHALLENGING THE IMPUGNED ORDER PASSED BY THE LD. CIT (A) DREW OUR ATTENTION TO PAR A 4.3 OF THE IMPUGNED ORDER PASSED BY THE LD. CIT (A), WHICH SHO WS THAT LD. CIT (A) HAS DECIDED THE ISSUE AGAINST THE ASSESSEE BY FOLLOWING AYS 2010-11 & 2011-12 AND FURTHER CONTENDED THAT TH IS ISSUE HAS ALREADY BEEN DECIDED IN FAVOUR OF THE ASSESSEE IN ASSESSEES OWN CASE IN AYS 2009-10 & 2010-11 AND 2011-12 BY THE TRIBUNAL VIDE ORDER PASSED IN ITA NOS.767/DEL/2014 & 1378/DE L/2017 AND ITA NO.1998/DEL/2017 VIDE ORDER DATED 15.06.202 1 & 17.08.2021 RESPECTIVELY. HOWEVER, ON THE OTHER HAND, LD. DR FOR THE REVENUE RELIED UPON THE ORDERS PASSED BY THE AO AS WELL AS LD. CIT (A). 6. WE HAVE PERUSED THE ORDER PASSED BY THE COORDINATE BENCH OF THE TRIBUNAL IN ASSESSEES OWN CASE FOR AYS 2009 -10 & 2010- 11 AND 2011-12 (SUPRA) WHICH IS ON IDENTICAL FACTS AND CIRCUMSTANCES. OPERATIVE PARA OF THE ORDER PASSED BY THE TRIBUNAL IN AYS 2009-10 & 2010-11 (SUPRA) IS EXTRACTED FOR READY PERUSAL AS UNDER :- ITA NO.6141/DEL./2017 4 23.12. WE FIND AN IDENTICAL ISSUE HAD COME UP BEF ORE THE TRIBUNAL IN THE CASE OF ACIT V. M/S. KEI INDUSTRIES LTD. IN ITA NO.1433/DEL/2014 & ITA NO.528/DEL/2016 ORDER DATED 3.12.2020, WHEREIN THE TRIBUNAL HAD ALLOWED DEPRECI ATION ON ENHANCED COST FOR THE ASSESSMENT YEARS 2009-10 AND 2012-13 BY OBSERVING AS UNDER:- 10. WE HAVE CONSIDERED THE RIVAL SUBMISSIONS. THE ASSESSEE EXPLAINED BEFORE THE AUTHORITIES BELOW THA T IN ASSESSMENT YEAR UNDER APPEAL, THE ASSESSEE HAD CAPITALIZED A SUM OF RS.27,37,25,941/- ON ACCOUNT O F EXCHANGE RATE FLUCTUATION IN RESPECT OF MACHINERIES BOUGHT IN INDIA FROM THE FOREIGN FUNDS RAISED THROU GH FCCBS. NO REPAYMENT OF LOAN BY WAY OF FCCBS WAS MADE DURING THE YEAR UNDER APPEAL. HOWEVER, INCREAS E IN ANY LIABILITY ON ACCOUNT OF PREVAILING EXCHANGE RAT E WAS SHOWN IN THE BALANCE-SHEET UNDER THE HEAD UNSECURE D LOANS THE FLUCTUATIONS TO THE EXTENT OF ACQUISITIO N OF FIXED ASSETS IN INDIA BY UTILISING FCCBS WAS ADDED TO THE ACTUAL COST AND DEPRECIATION CHARGED THEREON. THUS, THE ASSESSEE PURCHASED THE MACHINERY IN INDIA FROM THE FOREIGN FUNDS THROUGH FCCBS WHICH FACT IS NOT DISPU TED BY THE AUTHORITIES BELOW. IT IS, THEREFORE, CLEAR T HAT THOUGH SECTION 43A APPLY TO THE ASSETS ACQUIRED FROM ABROA D, STILL THE A.O. WITHOUT JUSTIFICATION APPLIED SECTIO N 43A FOR MAKING THE DISALLOWANCE OF DEPRECIATION AGAINST THE ASSESSEE. SECTION 43A THUS COULD NOT APPLY IN THE CASE OF THE ASSESSEE WHICH IS ALSO HELD BY VARIOUS BENCHES OF THE TRIBUNAL IN THE DECISIONS QUOTED ABOVE. ACCOUNTING STANDARD-11 WOULD ALSO APPLY IN THE CASE OF THE ASS ESSEE. THE ASSESSEE HAS ALSO EXPLAINED THAT COMPANIES AMENDMENT RULES ALSO APPLY TO THE FACTS OF THE CASE BECAUSE OPTION IS GIVEN TO ASSESSEE AND IT PROVIDED WHERE LONG TERM FOREIGN CURRENCY MONETARY ITEMS RELATES TO ACQUISITION OF DEPRECIABLE CAPITAL ASSET , THE SAME SHALL BE ADDED/DEDUCTED FROM THE COST OF THE A SSET AND SHALL BE DEPRECIATED ACCORDINGLY OVER THE BALAN CE LIFE OF THE ASSET.. IT IS NOT IN DISPUTE THAT ASSESSEE FOLLOWED AS-11 REGULARLY. IN A.Y. 2010-2011 THE LD. CIT(A) ALLOWED SIMILAR CLAIM OF THE ASSESSEE, BUT, THE DEP ARTMENT DID NOT FILE ANY APPEAL AGAINST THE SAME ORDER. IN A.Y. 2011-2012 THOUGH THE DEPARTMENT FILED APPEAL BEFORE THE TRIBUNAL ON THIS ISSUE ON ALLOWING DEPRECIATION, BU T, THE SAME HAS BEEN DISMISSED VIDE ORDER DATED 21.10.2019 (SUPRA). THUS, THE LD. CIT(A) WAS BOUND TO FOLLOW R ULE OF CONSISTENCY AND SHOULD NOT HAVE TAKEN A CONTRARY VI EW IN A.Y. 2012- 2013. WE RELY UPON THE JUDGMENTS OF THE HONBLE SUPREME COURT IN THE CASE OF RADHASOAMI SATSUNG 193 ITR 321 (SC) AND EXCEL INDUSTRIES LTD., 358 ITR 295 (SC). THE ASSESSEE HAS ALSO FOLLOWED COMPAN IES ITA NO.6141/DEL./2017 5 RULES, 2009 BECAUSE IT HAS GIVEN OPTION TO THE ASSE SSEE TO DO SO. THE DECISION OF MUMBAI BENCH IN THE CASE OF DDIT V. STAUBIL A.G. INDIA BRANCH OFFICE (SUPRA), R ELIED UPON BY THE LD. CIT(A) IS ON IDENTICAL FACTS. THERE FORE, THERE IS NO INFIRMITY IN THE ORDER OF THE LD. CIT(A ) IN FOLLOWING THE SAME. IT MAY ALSO BE NOTED HERE THAT WHEREVER THERE WAS AN EXCHANGE GAIN TO THE ASSESSEE , THE SAME WAS REDUCED FROM THE WDV AND CLAIM WAS MADE ACCORDINGLY, THEREFORE, ASSESSEE IS FOLLOWING THE A S-11 CONSISTENTLY AND AS SUCH THE SAME SHOULD NOT HAVE B EEN DISPUTED BY THE AUTHORITIES BELOW. THE LD. D.R. HAS NOT POINTED-OUT ANY INFIRMITY IN THE ORDER OF THE LD. C IT(A) IN ALLOWING THE DEPRECIATION TO THE ASSESSEE AS PER LAW. WE, THEREFORE, DO NOT FIND ANY MERIT IN THIS GROUND NO.2 OF THE APPEAL OF THE REVENUE AND THE SAME IS ACCORD INGLY DISMISSED. 24. SINCE, THE ASSESSEE IN THE INSTANT CASE HAS AT TRIBUTED THE INCREASED LIABILITY OF RS.12,65,54,992/- TO THE COS T OF THE ASSETS AND THE DEPRECIATION WAS ALLOWED, THEREFORE, ALTHOU GH THE ASSESSEE HAS A GOOD CASE TO ARGUE THAT EXCHANGE FLU CTUATION LOSS ATTRIBUTABLE TO DEPRECIABLE ASSETS ACQUIRED IN INDI A IS AN ALLOWABLE REVENUE EXPENDITURE, HOWEVER, IT WOULD RE QUIRE TEDIOUS EXERCISE OF MODIFYING ASSESSMENTS FOR NUMBER OF YEA R. THEREFORE, WE HOLD THAT THE ASSESSEE IS ENTITLED TO DEPRECIATI ON ON EXCHANGE LOSS AND THE ADDITIONAL GROUNDS RAISED BY THE ASSES SEE FOR AY 2009-10 BECOMES IN-FRUCTUOUS. IT IS HELD IN THE CAS E OF CIT V. INDUSTRIAL FINANCE CORP OF INDIA LTD. (2009) 185 TA XMAN 296, THAT REVENUE EXPENDITURE (LOSS) IS ALLOWABLE IN THE YEAR IN WHICH IT IS INCURRED BUT WHERE THE ASSESSEE HAS SPREAD IT OVER, THE COURT WOULD ALLOW THE BENEFIT. WE FIND MERIT IN THE ARGUM ENT OF THE LEARNED COUNSEL FOR THE ASSESSEE THAT IT CANNOT BE HELD THAT NEITHER DEPRECIATION ON ENHANCED COST DUE TO EXCHAN GE FLUCTUATION IS TO BE ALLOWED NOR THE LOSS ITSELF WA S TO BE ALLOWED MORE SO BECAUSE CLAIM TO THIS EFFECT WAS RAISED BOT H BEFORE THE ASSESSING OFFICER AS WELL AS THE CIT(A). ACCORDINGL Y, GROUND NO.3 RAISED BY THE ASSESSEE IS ALLOWED AND ADDITION AL GROUND BEING INFRUCTUOUS IS DISMISSED. 7. SO, FOLLOWING THE DECISION RENDERED BY THE COORD INATE BENCH OF THE TRIBUNAL IN ASSESSEES OWN CASE IN THE IDENT ICAL FACTS AND CIRCUMSTANCES OF THE CASE, WE ARE OF THE CONSIDERED VIEW THAT AO AS WELL AS LD. CIT (A) HAVE ERRED IN DISALLOWING TH E DEPRECIATION ON ENHANCED COST DUE TO EXCHANGE FLUCTUATION AND ALSO DISALLOWING THE ITA NO.6141/DEL./2017 6 LOSS, BECAUSE WHEN IT IS AN UNDISPUTED FACT THAT TH E ASSESSEE HAS ACQUIRED PREMISES IN INDIA OUT OF FOREIGN CURRENCY LOANS AND IN THE COMPUTATION OF INCOME, ENHANCED LIABILITY ON ACCOUN T OF CURRENCY FLUCTUATION WAS ADDED TO THE FIXED ASSETS STATING T HAT ADDITION TO THE FIXED ASSETS INCLUDE LOSS OF FOREIGN EXCHANGE RATES AT THE YEAR-END WHICH IS WRITTEN DOWN VALUE OF BLOCK OF ASSETS. AC CORDINGLY, WE DIRECT THE AO TO ALLOW THE DEPRECIATION ON ENHANCED LIABILITY ON EXCHANGE RATE FLUCTUATION BY DELETING THE ADDITION AMOUNTING TO RS.1,50,20,339/-. CONSEQUENTLY, THE APPEAL FILED B Y THE ASSESSEE IS ALLOWED. ORDER PRONOUNCED IN OPEN COURT ON THIS 20 TH DAY OF OCTOBER, 2021. SD/- SD/- (O.P. KANT) (KULDIP SINGH) ACCOUNTANT MEMBER JUDICIAL MEMBER DATED THE 20 TH DAY OF OCTOBER, 2021 TS COPY FORWARDED TO: 1.APPELLANT 2.RESPONDENT 3.CIT 4.CIT(A)-3, NEW DELHI. 5.CIT(ITAT), NEW DELHI. AR, ITAT NEW DELHI.