ACIT, Circle-14(1), Hyd, Hyderabad V. Sri Venkateswara Creations Pvt Ltd, Hyd, Hyderabad

ITA 621/HYD/2016

• Counselvise Citation: [2016] 131 COUNSELVISE.COM (IT) 5991 (ITAT-HYDERABAD)
• Duration Of Justice: 6 month(s) 25 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 24-11-2016
• Appeal Filed By: Department
• Bench Allotted: SMC
• Next Hearing Date: 24-11-2016
• Assessment Year: 2008-2009
• Appeal Filed On: 29-04-2016
• Court: TRIBUNAL
• Department Lawyers: U MINICHANDRAN
• Assessee Lawyers: P RAVI SESHAGIRI RAO
• Keywords: Revenue expenditure; Capital expenditure

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL HYDERABAD BENCHES B (SMC), HYDERABAD BEFORE SHRI D. KARUNAKARA RAO, ACCOUNTANT MEMBER I.T.A. NO. 621/HYD/2016 ASSESSMENT YEAR: 2008-09 THE ASST. COMMISSIONER OF INCOME TAX, CIRCLE-14(1), HYDERABAD VS M/S. SRI VENKATESWARA CREATIONS PVT. LTD., HYDERABAD [PAN: AALCS0724M] (APPELLANT) (RESPONDENT) FOR REVENUE : SMT. U. MINICHANDRAN, DR FOR ASSESSEE : SHRI P. RAVI SESHAGIRI RAO, AR DATE OF HEARING : 24-11-2016 DATE OF PRONOUNCEMENT : 24-11-2016 O R D E R THIS IS AN APPEAL BY REVENUE AGAINST THE ORDER OF THE COMMISSIONER OF INCOME TAX (APPEALS)-12, HYDERABAD DATED 10-12-2015 FOR THE AY. 2008-09. THE REVENUE RAISED SOLITARY GROUND RELATING TO CORRECTNESS IN DELETING THE DISALLOW ANCE MADE BY THE ASSESSING OFFICER (AO) IN CONNECTION WITH CLAIM OF DEDUCTION OF FOREIGN EXCHANGE VARIATION. ASSESSEE TOOK A LOAN IN FOREIGN EXCHANGE (JAPAN YEN ) AND THE ASSESSEE INCURRED LOSS ON THIS ACCOUNT. ASSESSEE DEBITED THE SAME TO THE P&L A/C. AO DISALLOWED THE SAME, HOLDING THAT IT IS A CAPITAL EXPENDITURE. HOW EVER, THE CIT(A) HELD THAT IT IS OF REVENUE EXPENDITURE. IN THE R ETURN OF INCOME, ASSESSEE DEBITED AN AMOUNT OF RS. 59,36,290/ - I.E., THE VARIATION IN THE FOREIGN EXCHANGE RELATABLE TO THE LOAN TAKEN BY THE ASSESSEE FROM IDBI IN JAPAN YEN. I.T.A. NO. 621/HYD/2016 M/S. SRI VENKATESWARA CREATIONS PVT LTD., :- 2 -: 2. IT IS MENTIONED THAT ASSESSEE IS A FILM PRODUCER AS PER THE OBJECTS AND OBTAINED LOAN OF 50 MILLION AS FOREIGN CU RRENCY LOAN FROM IDBI FOR THE PURPOSE OF OBTAINING THEATRICAL RIGHT S FROM SRI VENKATESWARA CREATIONS PVT. LTD., - A FILM FOR THE MOVI E NAMED PARUGU. 3. DURING THE PROCEEDINGS BEFORE US, BOTH THE PARITIE S FAIRLY SUBMITTED THAT THE EXACT CASH FLOW OF THE SAID LOAN ON THE UTILISATION OF THE SAME FOR THE PURPOSE OF THE BUSINESS I.E., EITHER IT IS FOR ACQUISITION OF THE CAPITAL RIGHTS OR EXPENDITUR E FOR REVENUE FIELD WERE NOT MADE OUT IN THE ORDER OF THE AO AND THE CIT(A). UNLESS THE FACTS OF THE CASE ARE PROPERLY ANALYSED, THE APPLICABILITY OF THE APEX COURT JUDGMENT IN THE CASE OF OIL AND NATUR AL GAS CORPORATION VS. CIT [322 ITR 180] IS NOT APPRECIATED. 4. ON HEARING BOTH THE PARTIES, AFTER GOING THROUGH T HE CONTENTS OF THE ORDER OF CIT(A) IN GENERAL, AND THE CONTENTS IN PARAS 6.2 AND 6.3, I FIND THAT THE CIT(A)S CONCLUSION HOLDING THAT TH E SAID EXPENDITURE IS FALLS IN THE CAPITAL FIELD IS PREMATURE. THEREFORE, I AM OF THE CONSIDERED OPINION THAT THE MATTER SHOULD RE- VISIT THE FILE OF THE CIT(A), WHO SHALL EXAMINE IN THE REMAND PROCEE DINGS, THE ACTUAL FLOW OF FUNDS OF THE LOANS FROM ASSESSEE, THE F ILM PRODUCER TO SRI VENKATESWARA CREATIONS PVT. LTD., WHO OWNS THEAT RICAL RIGHTS. IT APPEARS TO BE THE CLAIM OF THE ASSESSEE THA T THE SAID LOAN EVENTUALLY TRAVELLED TO THE ACCOUNT OF SRI VENKATESWARA CREATIONS PVT. LTD. IN THE REMAND PROCEEDINGS, THE ASSESSEE IS DIRECTED TO PRODUCE RELEVANT DETAILS DEMONSTRATING THE FLOW OF THE SA ID LOAN FUNDS/UTILISATION OF THE INTEREST BEARING LOAN FUNDS. HE SHALL EXAMINE, IF THE SAID FUNDS WERE UTILISED EITHER FOR PR ODUCTION OF I.T.A. NO. 621/HYD/2016 M/S. SRI VENKATESWARA CREATIONS PVT LTD., :- 3 -: LOAN OR OTHERWISE. IT IS NOT CLEAR AS TO WHO IS THE A CTUAL PRODUCER OF THE FILM AND IF THE FUNDS ARE DIRECTLY/INDIRECTLY UTI LISED FOR THE PURPOSE OF PRODUCING THE FILM SO THAT THE APPLICABILIT Y OF RULE 9B IS TO BE CONSIDERED IN THE CASE OF THE PRESENT ASSESSEE. ACCORDINGLY, WE REMAND THIS ISSUE TO THE FILE OF CIT(A), WHO SHALL PASS A SPEAKING ORDER ON THE ISSUE RAISED ABOVE. ACCORDING LY, THE GROUND RAISED BY REVENUE IS ALLOWED FOR STATISTICAL PURPOSES. 5. IN THE RESULT, APPEAL OF THE REVENUE IS ALLOWED FOR STATISTICAL PURPOSES. ORDER PRONOUNCED IN THE OPEN COURT ON 24 TH NOVEMBER, 2016 SD/- (D. KARUNAKARA RAO) ACCOUNTANT MEMBER HYDERABAD, DATED 24 TH NOVEMBER, 2016 TNMM COPY TO : 1. THE ASST. COMMISSIONER OF INCOME TAX, CIRCLE-14( 1), HYDERABAD. 2. M/S. SRI VENKATESWARA CREATIONS PVT LTD., PLOT N O. 98, SHALIVAHANA NAGAR, SRINAGAR COLONY, HYDERABAD. 3. COMMISSIONER OF INCOME TAX(APPEALS)-12, HYDERABA D 4. PR. COMMISSIONER OF INCOME TAX (CENTRAL), HYDERA BAD. 5. D.R. ITAT, HYDERABAD. 6. GUARD FILE.