Appeal details
Counselvise Citation
[2015] 140 COUNSELVISE.COM (IT) 91166 (ITAT-DELHI)
Assessee PAN
Bench
Appeal Number
Duration Of Justice
2 year(s) 5 month(s) 15 day(s)
Appellant
Respondent
Appeal Type
Income Tax Appeal
Pronouncement Date
16-06-2015
Appeal Filed By
Assessee
Order Result
Allowed
Bench Allotted
B
Next Hearing Date
02-06-2015
Assessment Year
2009-2010
Appeal Filed On
31-12-2012
Judgement Text
IN THE INCOME TAX APPELLATE TRIBUNAL DELHI BENCH: B NEW DELHI BEFORE SMT DIVA SINGH, JUDICIAL MEMBER AND SH. T .S. KAPOO R, ACCOUNTANT MEMBER I.T.A .NO. - 523 /DEL/201 3 (ASSESSMENT YEAR - 200 9 - 10 ) DCIT, CIRCLE - 11(1), ROOM NO. - 312, C.R. BUILDING, N EW DELHI (A PPELLANT) VS ESTER INDUSTRIES LTD., FLAT NO.33, 9 TH FLOOR, 10, HAILEY ROAD, DASHINESHWAR BUILDING, N EW DELHI. PAN - AAACE0119K (RESPONDENT) I.T.A .NO. - 6493 /DEL/201 2 (ASSESSMENT YEAR - 200 9 - 10 ) ESTER INDUSTRIES LTD., 33, DASHINESHWAR BUILDING, 10, HAILEY ROAD, N EW DELHI. PAN - AAACE0119K (A PPELLANT) VS ADDL.CIT, RANGE - 11, NEW DELHI (RESPONDENT) APPELLANT BY SMT. PARWINDER KAUR , SR. DR RESPONDENT BY SH.R.SANTHANAM, ADV. ORDER PER DIVA SINGH, JM THESE ARE CROSS APPEALS FILED BY THE ASSESSEE AND THE REVENUE ASSAILING THE CORRECTNESS OF THE ORDER DATED 20.11.2012 OF CIT(A) - XIII, NEW DELHI PERTAINING TO 200 9 - 10 ASSESSMENT YEAR ON THE FOLLOWING GROUNDS RESPECTIVELY: - I.T.A .NO. - 523/DEL/2013 1. ON THE FACTS AND CIRCUMSTANCES OF THE CASE AND IN LAW, THE LD. CIT(A) HAS ERRED IN DELETING THE ADDITION OF RS.76,34,951/ - MADE ON ACCOUNT OF PRIOR PERIOD EXPENSES. 2. THE APPELLANT CRAVES LEAVE TO ADD, ALTER OR AMEND ANY GROUND OF APPEAL RAISED ABOVE AT THE TIME OF HEARING. DATE OF HEARING 02 .0 6 .2015 DATE OF PRONOUNCEMENT 16 .0 6 .2015 I.T.A .NO. - 523 /DEL/201 3 & 6493/DEL/2012 PAGE 2 OF 10 IT IS PRAYED THAT THE ORDER OF THE LD. CIT(A) - XIII, BEING CONTRARY TO THE FACTS ON RECORD AND THE SETTLED POSITION OF LAW, BE SET ASIDE AND THAT OF THE ASSESSING OFFICER BE RESTORED. I.T.A .NO. - 6493/DEL/2012 ON THE FACTS AND IN THE CIRCUMSTANCES OF THE CASE, THE CIT(A) HAS ERRED IN UPHOLDING THE ILLEGAL ADDITION OF RS.11,83,407/ - IN RESPECT OF ADDITIONAL LIABILITY DUE TO FOREIGN EXCHANGE FLUCTUATIONS TOWARDS THE CAPITAL COST OF METALLIZER BY TREATING THE SAME AS INCOME LIABLE TO TAX AND THE ILLEGAL ADDITION IS LIABLE TO BE DELETED AND HELD AS UNSUSTAINABLE, BOTH ON FACTS AND IN LAW. 2. THE RELEVANT FACTS OF THE CASE ARE THAT THE ASSESSEE COMPANY ENGAGED IN MANUFACTURING AND SELLING OF POLYSTER CHIPS, POLYSTE R FILM AND ENGINEERING PLASTICS MANUFACTURED IN ITS UNIT AT KHATIMA IN THE STATE OF UTTRAKHAND FILED A NIL RETURN AS PER NORMAL PROVISION AND AS PER TAXABLE BOOK PROFIT U/S 115JB, THE INCOME WAS COMPUTED AT RS.4773.68 LACS. THE SAID RETURN WAS SUBJECTED T O SCRUTINY ASSESSMENT. THE AO CONSIDERING THE EXPENSES OF RS.76,34,951/ - UNDER THE HEAD DEBIT BALANCE WRITTEN REQUIRED THE ASSESSEE TO EXPLAIN THE NATURE AND BASIS OF THE CLAIM. THE EXPENDITURE WAS STATED TO BE A NORMAL BUSINESS TRANSACTION, THE DETAILS OF WHICH WERE AS UNDER: - S.NO. DATE PARTICULAR AMOUNT(RS.) 1. 30.06.2004 FOREIGN TRAVEL A/C 4,47,186/ - 2. 30.06.2004 FOREIGN TRAVEL A/C 3,05,846/ - 3. 30.06.2004 LEGAL AND PROFESSIONAL A/C 7,99,320/ - 4. 30.06.2004 FOREIGN TRAVEL A/C 75,780/ - 5. 30.09.2004 FOREIGN TRAVEL A/C 1,60,586/ - 6. 30.09.2004 LEGAL AND PROFESSIONAL A/C 5,11,892/ - 7. 30.09.2004 RENT EXPENSES A./C 1,44,362/ - 8. 30.09.2004 FOREIGN TRAVEL A/C 1,85,049/ - 9. 31.12.2004 LEGAL AND PROFESSIONAL A/C 6,97,838/ - 10. 31.12.2004 FOREIGN TRAVEL A/C 1,16,276/ - 11. 31.12.2004 FOREIGN TRAVEL A/C 1,11,874/ - 12. 31.12.2004 FOREIGN TRAVEL A/C 39,540/ - 13. 31.03.2005 FOREIGN TRAVEL A/C 67,053/ - 14. 31.03.2005 FOREIGN TRAVEL A/C 1,22,639/ - 15. 31.03.2005 FOREIGN TRAVEL A/C 34,755/ - 16. 31.03.2005 CONSULTANCY FEE 3,00,000/ - 17. 16.08.2005 LEGAL FEE 1,30,626/ - TOTAL 42,20625/ - 2.1. IT WAS CLAIMED THAT THE EXPENSES WERE INCURRED IN 2005 - 06 ASSESSMENT YEAR FOR EXPLORING SOME BUSINESS OPPORTUNITIES IN THE OVERSEAS MARKET WHICH ULTIMATELY WAS NOT ESTABLISHED ACCORDINGLY THE EXPENDITURE INCURRED DESERVE S I.T.A .NO. - 523 /DEL/201 3 & 6493/DEL/2012 PAGE 3 OF 10 TO BE ALLOWED IN THE YEAR UNDER CONSIDERATION . HOWEVER SINCE THE DETAILS OF THE OVERSEAS LOCATIONS WHERE THE EXPENDITURE WAS INCURRED WERE NOT SUBMITTED AND MOREOVER SINCE OUT OF THE TOTAL CLAIM OF EXPENSES OF RS.76.35 LACS THE VOUCHERS FOR THE EXPENSES TO RS.14,20,887/ - WERE NOT FURNISHED THE AO DID NOT ACCE PT THE ASSESSEE S CLAIM. FURTHER REFERRING TO SECTION 145(1) OF THE INCOME TAX ACT, HE WAS OF THE VIEW THAT THE ASSESSEE WAS ENTITLED TO MAKE COMPUTATION OF INCOME IN ACCORDANCE WITH THE METHOD OF ACCOUNTING REGULARLY EMPLOYED WHICH AS PER THE AUDIT REPOR T WAS MERCANTILE SYSTEM OF ACCOUNTING. EVEN OTHERWISE, HE CONSIDERED THAT THE HYBRID METHOD OF ACCOUNTING WAS NO LONGER ACCEPTABLE SINCE THE AMENDMENT IN SECTION 145 W.E.F 01.04.1997 THUS THE SAID SYSTEM HAVING BEEN GIVEN UP IN 1997 - 98 ASSESSMENT YEAR, IT WAS CONCLUDED THAT THE EXPENSES COULD ONLY HAVE BEEN CLAIMED IN 2005 - 06 ASSESSMENT YEAR AND NOT IN THE YEAR UNDER CONSIDERATION. IN VIEW THEREOF ADDITION BY WAY OF A DISALLOWANCE OF THE EXPENSES WAS MADE. 3. AGGRIEVED BY THIS, THE ASSESSEE CAME IN APPEAL B EFORE THE FIRST APPELLATE AUTHORITY. WHERE IT WAS SUBMITTED THAT THE FOREIGN TRAVEL AND LEGAL PROFESSIONAL EXPENSES AMOUNTING TO RS.42,20,625/ - FOR THE PERIOD JUNE 2004 TO AUGUST 2005 WAS INCURRED TO EXPLORE MORE AVENUES ABROAD FOR BUYERS AND DEALERS ; AND THE REMAINING AMOUNT OF RS.14,20,887/ - WAS INCURRED FOR FOREIGN TRAVEL EXPENSES AND CONSULTANCY CHARGES. THE REMAINING OF RS.19,93,438/ - IT WAS SUBMITTED RELATED TO DEPB BENEFIT, ADVANCE FOR REPAIRING, PREPAID INSURANCE WRITTEN OFF, ADVANCES TO PURCH ASE GOODS/INPUTS IN THE NORMAL COURSE OF BUSINESS. ALL THESE ITEMS IT WAS SUBMITTED WERE DISALLOWED ON THE GROUND THAT THE EXPENDITURE PERTAIN ED TO PRIOR PERIOD AND SHOULD HAVE BEEN CLAIMED IN THE PREVIOUS YEARS. ACCORDINGLY IT WAS CONTENDED THAT HAD THE BUSINESS FRUCTIFIED WHICH WAS SOUGHT TO BE SET UP ABROAD, THE EXPENSES WOULD HAVE BEEN CLUBBED AND CAPITALIZED BUT HOWEVER SINCE THE EFFORTS DID NOT RESULT IN ENLARGING THE BUSINESS IN THOSE COUNTRIES, THE ASSESSEE WAS LEFT WITH NO ALTERNATIVE BUT TO WRIT E OFF THE EXPENSES SO INCURRED IN THE YEAR IN WHICH THE PROJECT WAS CONSIDERED AS ABORTED. ACCORDINGLY T HE DEDUCTION U/S 37(1) R.W.S 28, IT WAS SUBMITTED CANNOT BE DENIED ON TECHNICAL GROUNDS. RELIANCE WAS PLACED UPON THE JUDGEMENT OF THE I.T.A .NO. - 523 /DEL/201 3 & 6493/DEL/2012 PAGE 4 OF 10 HON BLE DELHI HIGH COURT IN THE CASE OF CIT VS. SHRIRAM PISTON & RINGS LTD. (2008) 8 DTR (DEL.) 209 AND THE JUDGEMENT OF THE HON BLE BOMBAY HIGH COURT IN THE CASE OF CIT VS NAGRI MILLS CO. LTD. (1958) 33 ITR 681. APART FROM THAT VARIOUS OTHER DECISIONS NAMELY CIT VS PR IYA VILLAGE ROADSHOWS LTD. (2011) 332 ITR 594; DCIT VS ASSAM ASBESTORS LTD. (2003) 263 ITR 357; MAHARAJ SHRI UMAID MILLS LTD. NO.2 VS CIT (1989) 175 ITR 73; CIT VS TAMIL NADU CHEMICAL PRODUCTS LTD. (2003) 259 ITR 582; EID PARRY INDIA LTD. VS CIT (2002) 257 ITR 253; CIT VS MODI INDUSTRIES LTD. NO.3 (1993) 200 ITR 341 (DEL.) WERE ALSO RELIED UPON. CONSIDERING THESE SUBMISSIONS, THE CIT(A) CAME TO THE FOLLOWING CONCLUSIONS ON FACTS: - 5.3 DECISION I HAVE CONSIDERED THE SUBMISSION OF THE APPELLANT, OBSERVATION OF THE ASSESSING OFFICER AND VARIOUS CASE LAWS AVAILABLE ON THIS ISSUE. IT IS SEEN THAT APPELLANT HAS CLAIMED RS.76,34,9511 - AS PRIOR PERIOD EXPENSES IN THE PROFIT AND LOSS ACCOUNT. THESE EXPENSES HAVE BEEN CLAIMED AS REVENUE EXPENDITURE U/S 37 OF THE IT A CT. IT IS CLAIMED BY THE APPELLANT THAT APPELLANT HAD INCURRED EXPENSES FROM JUNE 2004 TO AUGUST 2005 ON FOREIGN TRAVELLING AND LEGAL & PROFESSIONAL EXPENSES AND CONSULTANCY CHARGES DURING THE F.Y. 2008 - 09. THE OTHER EXPENSES ALSO PRIOR PERIOD EXPENSES WER E RELATE TO DEPB BENEFIT, ADVANCE FOR REPAIRING, PREPAID INSURANCE WRITTEN OFF, ADVANCE TO PURCHASE GOODS/INPUTS IN NORMAL COURSE OF BUSINESS. THE EXPENSES ON FOREIGN TRAVELLING, LEGAL & PROFESSIONAL EXPENSES AND CONSULTANCY CHARGES WERE INCURRED FOR GETTI NG MORE CUSTOMERS AND MARKETS FOR THE PRODUCTS OF THE COMPANY IN FOREIGN MARKETS AND FOR EXPLORING ADDITIONAL MARKETS THROUGH DEALERS AND DISTRIBUTORS. THIS INITIATIVE WAS STARTED IN F.Y. 2004 - 05 AND 2005 - 06 FOR EXPANDING THE COMPANY BUSINESS, WHICH CONTIN UED IN F.Y. 2007 - 08 AND 2008 - 09. HOWEVER, THE APPELLANT'S EFFORTS TO ENLARGE ITS BUSINESS IN FOREIGN COUNTRIES DID NOT GET TRANSFORMED INTO NEW BUSINESS VENTURE. IN SUCH SITUATION THE APPELLANT ABORTED ITS PROJECT AND WRITTEN OFF THE EXPENSES INCURRED FROM F.Y. 2004 - 05 AND 2005 - 06 & F.Y. 2007 - 08 AND 2008 - 09 AND CLAIMED SUCH EXPENSES AS INCURRED WHOLLY AND EXCLUSIVELY FOR THE BUSINESS PURPOSES OF THE APPELLANT COMPANY UNDER THE HEAD 'PRIOR PERIOD EXPENSES'. INITIALLY THE APPELLANT WANTED TO TREAT THESE EXPE NSES IN CAPITAL NATURE BUT THE PROJECT COULD NOT TAKE OFF, THEREFORE, SUCH EXPENSES HAVE BEEN CLAIMED DURING THE YEAR AS REVENUE EXPENDITURE AS THE PROJECT FOR EXPANSION OF BUSINESS WAS ABANDONED DURING THE YEAR. IT IS CLAIMED BY THE APPELLANT THAT THESE E XPENSES WERE INCURRED WHOLLY AND EXCLUSIVELY FOR THE BUSINESS PURPOSES OF THE APPELLANT BUSINESS AND DEDUCTION TO BE ALLOWED IN THE YEAR IN WHICH THE I.T.A .NO. - 523 /DEL/201 3 & 6493/DEL/2012 PAGE 5 OF 10 AMOUNT IS CLAIMED AND WRITTEN OFF IN THE BOOKS OF ACCOUNTS IN VIEW OF THE ABANDONMENT OF THE PROJECT DURIN G THE YEAR . 3.1. THE VIEW TAKEN WAS FORTIFIED BY RELYING UPON VARIOUS DECISIONS REFERRED TO IN THE FINDING UNDER CHALLENGE BY THE REVENUE. 4. ADDRESSING THE GRIEVANCE POSED IN THE GROUNDS, THE LD. SR. DR R EFERRING TO THE PROCEEDINGS DURING THE ASSESSM ENT AND THE APPELLATE STAGE VEHEMENTLY ARGUED THAT THE ORDER OF THE CIT(A) IS SILENT ON VITAL FACTS, IF ANY. INVITING ATTENTION TO THE ASSESSMENT ORDER AND THE IMPUGNED ORDER IT WAS SUBMITTED THAT ADMITTEDLY THE EXPENSES PERTAINED TO 2004 - 2005 FINANCIAL YEAR AND THE OCCASION TO ALLOW THE SAME IN THE YEAR UNDER CONSIDERATION BY THE CIT(A) HAS BEEN ON THE PLEA OF THE ASSESSEE THAT THE BUSINESS WAS NOT FINALLY SET UP WHERE ARE THE FACTS SUPPORTING THESE ARGUMENTS IT WAS QUESTIONED BY HER. REFERRING TO THE C HANGE IN THE POSITION OF LAW WITH THE AMENDMENT IN SECTION 145 OF THE ACT W.E.F 01.04.1997, IT WAS HER SUBMISSION THAT THE AO HAS ADEQUATELY BROUGHT OUT IN HIS ORDER THAT AS PER ASSESSEE S CLAIM IN THE AUDIT REPORT, THE SYSTEM OF ACCOUNTING WAS MERCANTILE AND AFTER THE SPECIFIC DATE OF 01.04.1997, THE HYBRID METHOD OF ACCOUNTING DOES NOT HAVE ANY STATUTORY RECOGNITION AND THE ASSESSEE CAN EITHER FOLLOW CASH SYSTEM OF ACCOUNTING OR MERCANTILE ACCORDINGLY IN SUCH A SITUATION THE CLAIM OF THE ASSESSEE HAS WRO NGLY BEEN ALLOWED AND THAT TOO ON NO FACTS . THE LD. AR, ON THE OTHER HAND HEAVILY RELYING UPON THE SUBMISSIONS ADVANCED BEFORE THE CIT(A) AND THE JUDICIAL PRECEDENT SITED THEREIN SUBMITTED THAT IN THE CASE OF THE ASSESSEE WHO IS A PUBLIC LIMITED COMPANY S UBJECTED TO THE SAME RATE OF TAX AND THUS WHERE AS PER JUDICIAL PRECEDENT IT IS SETTLED WHETHER THE PARTICULAR EXPENSES ARE ALLOWED IN THIS YEAR OR SOME OTHER YEAR AS RATE OF TAX REMAINS THE SAME IT WAS HIS SUBMISSION THAT THE CLAIM OF THE ASSESSEE HAS RIG HTLY BEEN ALLOWED. RELYING UPON THE WELL - SETTLED LEGAL PRECEDENT ADDRESSED BY THE HON BLE DELHI HIGH COURT IN THE CASE OF SHRI RAM PISTON & RINGS LTD. (CITED SUPRA) AND THE DECISION OF THE HON BLE BOMBAY HIGH COURT IN THE CASE OF CIT VS NAGRI MILLS CO.LTD . (CITED SUPRA) AND THE DECISION OF THE APEX COURT IN THE CASE OF CIT VS EXCEL INDUSTRIES LTD. 358 ITR 295 (SC), IT WAS SUBMITTED THE CLAIM OF THE ASSESSEE DESERVES TO BE UPHELD. I.T.A .NO. - 523 /DEL/201 3 & 6493/DEL/2012 PAGE 6 OF 10 5. WE HAVE HEARD THE RIVAL SUBMISSIONS AND PERUSED THE MATERIAL AVAILABLE ON RECORD. ON A CONSIDERATION OF THE ENTIRE FACTS AND CIRCUMSTANCES, WE FIND THAT ALTHOUGH THE ASSESSEE AS PER THE SUBMISSIONS EXTRACTED IN THE IMPUGNED ORDER HAS ARGUED THAT THE EXPENSES WERE INCURRED FOR SETTING UP A NEW LINE OF BUSINESS OR ACTIVITIES INVOLVING JOINT VENTURE IN FOREIGN PROJECTS AND ALSO IN THE COURSE OF THE ARGUMENTS BEFORE US, THE LD. AR HAS CANVASSED THAT IN ORDER TO OVER - COME THE ANTI DUMPING POLICY OF THE UNITED STATES, THE ASSESSEE HAD EXPLORED THE POSSIBILITY OF OPENING BRANCH OFF ICE IN SOME OTHER COUNTRIES WHERE THE SAID EMBARGO DID NOT APPLY HOWEVER, SINCE NOTHING CAME OUT OF THOSE EFFORTS THE CLAIM WAS MADE WHEN THE VENTURES HAD TO BE ABORTED. ON A CONSIDERATION OF THE FINDING ARRIVED AT IN THE IMPUGNED ORDER, WE FIND THAT NO R EFERENCE TO ANY EVIDENCE WHATSOEVER ON FACTS HAS BEEN MADE LET ALONE CONSIDERED BY THE CIT(A) WHO HAS MERELY ACCEPTED THE PLEADINGS OF THE ASSESSEE WHO ALSO HAS NOT CARED TO REFER TO ANY FACTS OR EVIDENCES. IT IS SEEN THAT THIS SPECIFIC SHORT - COMING WAS P OINTED OUT BY THE AO IN HIS ORDER WHERE HE OBSERVED THAT ..AS PER THE CLAIM, THE ASSESSEE WAS DISCOVERING SOME BUSINESS OPPORTUNITIES IN OVERSEAS MARKET, BUT ULTIMATELY FAILED TO ESTABLISH THE BUSINESS IN SO CALLED OVERSEAS LOCATIONS. THE DETAILS OF LOCATIONS ARE NOT SUBMITTED. 5.1. WE ALSO FIND THAT EVEN BEFORE US NO DETAIL OF ANY LOCAT ION HAS BEEN MENTIONED EITHER B Y W A Y O F E V I D E N C E OR IN THE NARRATIONS GIVEN TO THE CIT(A) IN REGARD TO BY WHAT ACTS I T C A N B E S A I D T H A T THE ALLEGED EFFORTS WERE MADE AND BY WHAT EVIDENCE ON FA CT IT IS BEING SUBMITTED THAT THE PROJECT WAS ABANDONED. I N THE ABSENCE OF ANY DISCUSSION IN THE ORDER ON RELEVANT FACTS WHERE IT IS DIFFICULT TO SAY WHAT EVIDENCE IF ANY WAS PLACED BEFORE THE CIT(A) ON THE BASIS OF WHICH ASSESSEE S CLAIM HAS BEEN ALLOWED . WE DEEM IT APPROPRIATE TO SET ASIDE THE IMPUGNED ORDER . WHILE SO HOLDING, WE NOTE THAT THE DECISIONS RELIED UPON BY THE CIT(A) AT PAGES 8 - 10 ARE BASED ON THE FACT THAT WHERE THE EXPENSES WERE INCURRED FOR CREATING NEW ASSETS WHICH ULTIMATELY HAD TO BE ABANDONED AND THIS EVENT OF ABANDONING CRYSTALLIZED IN THE YEAR UNDER CONSIDERATION THE SAME WERE HELD TO BE ALLOWABLE AS CONSIDERED IN CIT VS PVR LTD. 332 ITR 594 (DELHI). SIMILARLY IN CIT VS MODIPAN LTD.(NO.1) 334 ITR 102 I.T.A .NO. - 523 /DEL/201 3 & 6493/DEL/2012 PAGE 7 OF 10 (DEL) WHER E THE EXPENSES WERE BOOKED IN THE YEAR WHEN THE PAYMENT WAS SETTLED. IN THE FACTS OF THE PRESENT CASE THERE IS NO REFERENCE TO ANY EVIDENCE HAVING BEEN CONSIDERED BY THE CIT(A) TO HOLD THAT THE EXPENSES STATED TO BE INCURRED IN JUNE 2014 TO AUGUST 2005 AC TUALLY PERTAINED TO SETTING UP SOME NEW BUSINESS , REFERENCE THERE TO IS COMPLETELY MISSING IN THE PLEADINGS AND THE FINDING. SIMILARLY WHAT IS THE EVIDENCE TO SHOW THAT THE SPECIFIC VENTURE WAS ABANDONED IS ALSO FOUND MISSING. NOTHING IS BROUGHT OUT IN THE IMPUGNED ORDER NOR RELIED UPON BEFORE US IN SUPPORT OF THE FINDING . ACCORDINGLY BEING OF THE VIEW THAT THE DECISIONS WHILE APPLY TO FACTS WHICH ARE YET TO BE SETTLED, REFERENCE TO THE LEGAL PRINCIPLES LAID DOWN THEREIN WOULD BE OF NO RELEVANCE. 5.2. A CCORDINGLY IN VIEW OF THE ABOVE DETAILED REASONING THE IMPUGNED ORDER IS SET ASIDE AND THE ISSUE IS RESTORED BACK TO THE FILE OF THE AO WITH THE DIRECTIONS TO DECIDE THE SAME AFRESH IN ACCORDANCE WITH LAW AFTER GIVING THE ASSESSEE A REASONABLE OPPORTUNITY OF BEING HEARD. 6. IN THE RESULT THE APPEAL OF THE REVENUE IS ALLOWED FOR STATISTICAL PURPOSES. 7. THE FACTS RELATABLE TO THE ONLY ISSUE AGITATED BY THE ASSESSEE ARE FOUND ADDRESSED AT PAGE 6 - 8 OF THE ASSESSMENT ORDER AT PARA 1.6. A PERUSAL OF THE SAME SHOWS THAT THE ASSESSEE DEDUCTED AN AMOUNT OF RS.11,83,407/ - UNDER THE HEAD FOREIGN EXPENDITURE FLUCTUATION ON METALIZER. THE JUSTIFICATION FOR THE SAME GIVEN WAS THAT THE ASSESSEE HAD DISALLOWED THE EXCESS AMOUNT IN 2007 - 08 & 2008 - 09 ASSESSMENT YEARS AND ACCORDINGLY IT WAS CLAIMED IN THE YEAR UNDER CONSIDERATION. THE AO REJECTED THE EXPLANATION OF THE ASSESSEE IN VIEW OF THE FACT THAT THE ASSESSEE HAD IMPORTED SOME METALISER (FIXED ASSETS) DURING THE PRECEDENT YEAR AND DUE TO WEAK RUPEE IN COMPARIS ON TO DOLLAR, THE ASSESSEE HAD TO PAY EXCESS RESULTING IN FOREIGN EXPENDITURE FLUCTUATION LOSS WHICH IS CLAIMED AS AN EXPENDITURE. THE SAME WAS REJECTED BY THE AO HOLDING AS UNDER: - I HAVE CONSIDERED THE SUBMISSION OF THE ASSESSEE AND GONE THROUGH THE DE TAILS FILED. IN FACT DURING THE PRECEDING YEARS, THE ASSESSEE HAD IMPORTED SOME METALIZER (FIXED ASSET) AND DUE TO WEAK RUPEE IN COMPARISON TO DOLLAR THE ASSESSEE HAD TO PAY IN EXCESS RESULTING IN FOREIGN EXCHANGE FLUCTUATION LOSS WHICH IS CLAIMED AS EXPEN DITURE. IN I.T.A .NO. - 523 /DEL/201 3 & 6493/DEL/2012 PAGE 8 OF 10 PRECEDING YEAR, THE ASSESSEE HAD DISALLOWED CERTAIN PART OF LOSS AS IT WAS NOT ADMISSIBLE IN THOSE YEARS ON THE GROUND THAT SAME RELATED TO IMPORT OF FIXED ASSET WHICH IS NOT AN ALLOWABLE EXPENDITURE IN REVENUE NATURE. AS PER ASSESSEE'S CLAIM WH ILE WORKING OUT THE QUANTUM OF DISALLOWANCE IN PRECEDING YEARS EXCESS DISALLOWANCE OF RS.11,83,407/ - WAS MADE WHICH IS BEING RECTIFIED DURING THE YEAR UNDER CONSIDERATION. 8 . RELYING UPON SECTION 43A OF THE ACT, AS MODIFIED BY THE FINANCE ACT, 2002, HE W AS OF THE VIEW THAT THE AMENDMENTS PROVIDED FOR INCREASE/DECREASE ONLY FOR CURRENCY FLUCTUATION AT THE TIME OF PAYMENT. FOR UNPAID CURRENCY LIABILITY, AS THE VALUE OF THE ASSESSEE OF THE SAME HA D TO BE INCREASED/DECREASED IN THE BOOKS OF ACCOUNTS IT WAS H ELD THIS WOULD NOT BE ELIGIBLE FOR DEPRECIATION UNDER THE INCOME TAX COMPUTATION. 9 . AGGRIEVED BY THIS, THE ASSESSEE WENT IN APPEAL BEFORE THE FIRST APPELLATE AUTHORITY. CONSIDERING THE SUBMISSIONS ADVANCED, THE CIT(A) CONCURRED WITH THE FINDING ARRIVED A T BY THE AO HOLDING AS UNDER: - 6.3 DECISION I HAVE CONSIDERED THE SUBMISSION OF THE APPELLANT AND OBSERVATION OF THE ASSESSING OFFICER. IT IS SEEN THAT ASSESSING OFFICER HAS DISALLOWED RS.11,83,407/ - IN RESPECT OF EXCESS DISALLOWANCE OF FOREIGN EXCHANGE LOSS IN EARLIER YEARS IN THE COMPUTATION OF INCOME. THE APPELLANT HAD IMPORTED METALLIZER MACHINES FOR WHICH THE EXCHANGE FLUCTUATION LOSS TO THE TUNE OF RS.86,58,034/ - WAS DISALLOWED IN EARLIER YEARS IN THE COMPUTATION OF INCOME. THE PAYMENT FOR THIS METAL LIZER MACHINE WAS MADE DURING THE YEAR AND THE ACTUAL FLUCTUATION LOSS COMES TO RS.74,74,627/ - WHICH WAS CHARGED TO THE METALLIZER MACHINE. HOWEVER, THE EXCESS DISALLOWANCE MADE IN EARLIER YEARS OF RS.11,83,407/ - WAS CHARGED TO THE PROFIT AND LOSS ACCOUNT AN D CLAIMED AS REVENUE EXPENDITURE. THIS LOSS CANNOT BE ALLOWED AS REVENUE EXPENDITURE AS SAME PERTAINS TO PURCHASE OF FIXED ASSETS AND SAME HAS TO BE CREDITED TO THE FIXED ASSETS ACCOUNT. THIS EXCHANGE FLUCTUATION LOSS IS NOT ON ACCOUNT OF REVENUE TRANSACTI ONS BUT SAME IS ON CAPITAL ACCOUNT. THEREFORE, SAME CANNOT BE CLAIMED AS REVENUE EXPENDITURE. HENCE, THE DISALLOWANCE MADE BY THE ASSESSING OFFICER WAS JUSTIFIED AND SAME IS CONFIRMED. 10 . AGGRIEVED BY THIS, THE ASSESSEE IS IN APPEAL BEFORE THE TRIBUNAL. THE LD. AR INVITING ATTENTION TO THE FINDING ARRIVED IN THE IMPUGNED ORDER SUBMITTED THAT THE CONCLUSION ARRIVED AT BY THE CIT(A) IS NOT CORRECT AS FACTS HAVE NOT BEEN CORRECTLY APPRECIATED . IT WAS HIS SUBMISSION THAT IN THE YEAR I.T.A .NO. - 523 /DEL/201 3 & 6493/DEL/2012 PAGE 9 OF 10 UNDER CONSIDERATION AS A RESULT OF FLUCTUATION IN THE FOREIGN EXCHANGE, THE ACTUAL COST OF THE METALISER MACHINE TO THE ASSESSEE WAS RS.74,74,627/ - HOWEVER AT THE TIME OF SETTLING ACCOUNTS IN THE EARLIER YEARS, THE EXCHANGE FLUCTUATION LOSS WAS HIGHER I.E RS.86,58,034/ - . AS A RESULT OF THIS, THE DIFFERENCE OF RS.11,83,407/ - HAS OCCURRED. IT WAS HIS SUBMISSION THAT IN TERMS OF SECTION 43A OF THE ACT, IT WAS THE CLAIM OF THE ASSESSEE THAT IT HAS TO BE ADJUSTED AGAIN ST THE FIXED ASSETS AND THE REVENUE HAD MADE A MISTAKE AND CONSIDERED THE ISSUE AS THOUGH THE ASSESSEE IS CLAIMING A REVENUE EXPENDITURE WHICH IS NOT THE CASE. IT WAS ALSO HIS SUBMISSION THAT KEEPING THE MANDATE OF SECTION 43A OF THE ACT IMPACT ON THE DEP RECIATION ALSO NEEDS TO BE KEPT IN MIND. IN THESE CIRCUMSTANCES, KEEPING THE FACT IN MIND THAT THE ASSESSEE IS A PUBLIC COMPANY HAVING THE SAME RATE OF TAX WHEREIN IT IS IMMATERIAL WHETHER THE DEDUCTION IS ALLOWED IN THIS YEAR OR OTHER YEARS, IT WAS HIS A RGUMENT THAT RELYING ON THE DECISION OF THE DELHI HIGH COURT AND MUMBAI HIGH COURT IN THE CASE OF SHRI RAM PISTON (CITED SUPRA) AND CIT VS NAGRI MILLS (CITED SUPRA) THE CLAIM OF THE ASSESSEE DESERVES TO BE ALLOWED. 1 1 . THE LD. SR. DR, ON THE OTHER HAND, R ELYING UPON THE CONSIST ENT FINDINGS OF THE TAX AUTHORITIES ON FACTS SUBMITTED THAT THE CLAIM OF THE ASSESSEE UNDER THE STATUTE CANNOT BE ALLOWED AND RELIANCE WAS PLACED UPON THE FINDING OF THE CIT(A). 1 2 . WE HAVE HEARD THE RIVAL SUBMISSIONS AND PERUS ED THE MATERIAL AVAILABLE ON RECORD. ON A CONSIDERATION THEREOF IN THE FACE OF THE ARGUMENTS OF THE ASSESSEE THAT ON FACTS, THE CIT(A) HAS NOT APPRECIATED THE ISSUE AS IT WAS NEVER THE CASE OF THE ASSESSEE THAT IT IS A REVENUE EXPENDITURE. THE CASE OF TH E ASSESSEE HAS ALWAYS BEEN THAT THIS IS A LOSS ON ACCOUNT OF A CAPITAL ASSET AND SHOULD BE ADJUSTED AGAINST THE CAPITAL ACCOUNT. IN THE ABOVE MENTIONED FACTUAL BACKGROUND, WE ARE OF THE VIEW THAT IN THESE PECULIAR FACTS AND CIRCUMSTANCES, IT WOULD BE APPR OPRIATE TO SET ASIDE THE IMPUGNED ORDER AND RESTORE THE ISSUE BACK TO THE FILE OF THE AO TO ADDRESS THE ISSUES ON FACTS AFRESH. THE AO IS HEREBY DIRECTED TO PASS A SPEAKING ORDER IN ACCORDANCE WITH LAW A FTER GIVING THE ASSESSEE A REASONABLE OPPORTUNITY OF BEING HEARD. THE ARGUMENTS OF THE LD. AR THAT ISSUE SHOULD BE DECIDED ON THE PRINCIPLE I.T.A .NO. - 523 /DEL/201 3 & 6493/DEL/2012 PAGE 10 OF 10 THAT IRRESPECTIVE OF THE YEAR THE TAX RATE IS THE SAME CANNOT BE ACCEPTED AS RELEVANT FACTS NEED TO BE ADDRESSED. 1 3 . IN THE RESULT, THE APPEALS OF THE ASSESSEE AND TH E REVENUE ARE ALLOWED FOR STATISTICAL PURPOSES. THE ORDER IS PRONOUNCED IN THE OPEN COURT ON 1 6 T H OF JUNE 2015. S D / - S D / - ( T .S. KAPOOR ) (DIVA SINGH) ACCOUNTANT MEMBER JUDICIAL MEMBER DATED: 1 6 /0 6 /2015 *AMIT KUMAR* COPY FORWARDED TO: 1. APPELLANT 2. RESPONDENT 3. CIT 4. CIT(APPEALS) 5. DR: ITAT ASSISTANT REGISTRAR ITAT NEW DELHI
