ACIT, Circle- 31(1), New Delhi V. Global Influence , New Delhi

ITA 713/DEL/2018

• Counselvise Citation: [2019] 118 COUNSELVISE.COM (IT) 3035 (ITAT-DELHI)
• Duration Of Justice: 1 year(s) 27 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 27-02-2019
• Appeal Filed By: Department
• Order Result: Dismissed
• Bench Allotted: C
• Assessment Year: 2014-2015
• Appeal Filed On: 31-01-2018
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: AMIT KUTOCH
• Assessee Lawyers: A K BATRA ADV
• Keywords: Business income; Business expenditure; Rule of consistency
• Section: 37(1); 37

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL (DELHI BENCH C : NEW DELHI) BEFORE SHRI SH. N.S. SAINI, ACCOUNTANT MEM BER AN D SHRI SHRI KULDIP SINGH, JUDICIAL MEMBER ITA NO.713/DEL./2018, A.Y. 2014-15 A.C.I.T VS. GLOBAL INFLUENCE CIRCLE -31(1), 119-120, RECTANGLE O NE, DISTRICT CENTRE, SAKET, NEW DELHI DELHI (APPELLANT) (RESPONDENT) ASSESSEE BY : SH.A.K.BATRA, ADV. FCA. REVENUE BY : SH. AMIT KUTOCH, SR. DR DATE OF HEARING : 17.01.2019 DATE OF ORDER : 27 .02.2019 O R D E R PER KULDIP SINGH, JUDICIAL MEMBER : THE APPELLANT ASSISTANT COMMISSIONER OF IN COME TAX, NEW DELHI (HEREINAFTER REFERRED TO AS 'THE REVENUE') BY FILIN G THE AFORESAID APPEAL, SOUGHT TO SET ASIDE THE IMPUGNED ORDER DATED 01/11 /2017 PASSED BY LD. COMMISSIONER OF INCOME TAX(APPEALS)-11, NEW DEL HI QUA THE ASSESSMENT YEAR 2014-15 ON THE GROUNDS INTER ALIA THAT : 1) WHETHER ON THE FACTS AND IN THE CIRCUMSTANCES O F THE CASE THE LD. CIT(A)-11, NEW DELHI WAS JUSTIFIED IN ITA NO. 713/DEL./2018 2 DELETING THE ADDITION OF RS. 53,32,012/- ON ACCOUNT OF DISALLOWANCE OF LOSS ARISING DUE TO RESTATEMENT OF FOREX ADVANCE. 2) WHETHER ON THE FACTS AND IN THE CIRCUMSTANCES OF THE CASE THE LD. CIT(A)-11, NEW DELHI WAS JUSTIFIED IN RELYING UPON THE ORDER OF CIT VS. WOODWARD GOVERNOR INDIA P VT. LTD. REPORTED AT 312 ITR 254? 3) WHETHER ON THE FACTS AND IN THE CIRCUMSTANCES OF THE CASE THE LD. CIT(A)-11, NEW DELHI WAS JUSTIFIED IN DELETING THE ADDITION OF RS. 28,17,674/- IN RESPECT OF DISALLOWANCE OF INTEREST U/S 36(1)(III) OF THE ACT. 4) THE DEPARTMENT CRAVES LEAVE TO ADD, ALTER OR AME ND THE GROUNDS OF APPEAL AT A LATER STAGE. 2. BRIEFLY STATED THAT FACTS NECESSARY FOR ADJUDICA TION OF THE CONTROVERSY AT HAND ARE : ASSESSING OFFICER HAS NO TICED FROM THE PERUSAL OF P & L ACCOUNT THAT THE ASSESSEE HAS DEBITED A SU M OF RS. 53,32,012/- TOWARDS DIFFERENCE IN EXCHANGE RATE ON ADVANCE AMOU NTING TO USD 903943.12 RECEIVED FROM FOREIGN BUYERS DURING THE E ARLIER YEARS. DECLINING THE CONTENTIONS RAISED BY THE ASSESSEE, A O PROCEEDED TO HOLD THAT THE AMOUNT HELD BY ASSESSEE AS ADVANCE IS NEIT HER CASH IN HAND NOR PAYABLE TO SOMEONE IN FOREIGN CURRENCY WHICH NEEDS TO BE RESTATED AS ON BALANCE SHEET DATE AND THE ASSESSEE HAS RECEIVED ADVANCES FROM ITS PROSPECTIVE BUYERS FOR THE GOODS OR SERVICES TO BE SUPPLIED AND THE SAME IS NOT PAYABLE IN MONETARY ITEMS AND AS SUCH L OSS ARISEN DUE TO RESTATEMENT OF FOREIGN EXCHANGE ON ADVANCE NOT PAY ABLE IN MONETARY ITA NO. 713/DEL./2018 3 ITEMS CANNOT BE BOOKED IN THE P & L ACCOUNT AND THE REBY DISALLOWED THE SAME. AO ALSO DISALLOWED AN AMOUNT OF RS. 28,17,674 /- CHARGED TO THE P & L ACCOUNT STATED TO BE PAID TO DHANLAXMI BANK ON THE LOAN TAKEN FOR PURCHASE OF FLATS BEARING NO. 121 AND 122 FIRST FLO OR, RECTANGLE 1, AT SAKET DISTRICT CENTRE, NEW DELHI, ON THE GROUND THA T INTEREST EXPENDITURE AGAINST THE PROPERTIES HELD UNDER THE H EAD INVESTMENT CANNOT BE ALLOWED AGAINST THE BUSINESS INCOME. 4. ASSESSEE CARRIED THE MATTER BEFORE THE LD. CIT(A ) BY WAY OF FILING THE APPEAL WHO HAS DELETED THE ADDITION MADE BY AO BY ALLOWING THE APPEAL. 5. WE HAVE HEARD THE LD. DR FOR THE REVENUE, GONE THR OUGH THE ORDER PASSED BY THE LOWER REVENUE AUTHORITIES AND DOCUMEN TS RELIED UPON BY THE PARTIES TO THE APPEAL. GROUND NO. 1 & 2 6. UNDISPUTEDLY THE ASSESSEE HAS CLAIMED AN AMOUNT OF RS. 53,32,012/- IN THE P & L ACCOUNT ON ACCOUNT OF DIFF ERENCE IN EXCHANGE RATE AS ON 31.03.2014 ON ADVANCE RECEIVED FROM FOR EIGN BUYERS DURING THE EARLIER YEARS. IT IS ALSO NOT IN DISPUTE THAT T HE ASSESSEE HAS BEEN CONSISTENTLY FOLLOWING THE ACCOUNTING STANDARD AS-1 1. IT IS ALSO NOT IN DISPUTE THE ASSESSEE ALSO RELIED UPON ICDS STANDARD S NOTIFIED BY THE REVENUE DEPARTMENT. IT IS ALSO NOT IN DISPUTE THAT THE ASSESSEE HAD RECEIVED ADVANCES FROM FOREIGN BUYERS FOR SUPPLY OF GOODS AND THESE ADVANCES HAVE BEEN RESTATED BY THE ASSESSEE AS ON 3 1.03.2014 BASED ITA NO. 713/DEL./2018 4 UPON FOREIGN EXCHANGE RATE AS ON THAT DATE AND CLAI MED THE NOTIONAL LOSS OF RS. 53,32,012/-. 7. IN THE BACKDROP OF THE AFORESAID UNDISPUTED FACT S THE QUESTION ARISES FOR DETERMINATION ON THIS ISSUE IS AS TO WHE THER THE ASSESSEE IS ENTITLED TO CLAIM THE LOSS ARISEN ON ACCOUNT OF FOR EIGN EXCHANGE RATE DIFFERENCE IN RESPECT OF TRADE ADVANCES RECEIVED FR OM THE CUSTOMER U/S 37(1) OF THE ACT. 8. HONBLE SUPREME COURT OF INDIA IN CASE CITED AS COMMISSIONER OF INCOME TAX, DELHI VS. WOODWARD GOVERNOR INDIA PVT. LTD. 312 ITR 254, HELD THAT LOSS SUFFERED BY THE ASSESSEE ON ACCOUN T OF FLUCTUATION IN THE RATE OF FOREIGN EXCHANGE AS ON DATE OF BALANCE SHE ET IS AN ITEM OF EXPENDITURE U/S 37(1) OF THE ACT. 9. IN THE INSTANT CASE WHEN UNDISPUTEDLY ASSESSEE H AS BEEN CONSISTENTLY FOLLOWING THE ACCOUNTING STANDARD AS-1 1 AND ALSO SIMULTANEOUSLY RELIED UPON ICDS STANDARD NOTIFIED B Y THE DEPARTMENT, AND CLAIMING THE DIFFERENCE ARISEN DUE TO RESTATEME NT OF FOREX ADVANCES IS ALLOWABLE BUSINESS EXPENDITURE U/S 37 OF THE ACT . MOREOVER IT IS ALSO NOT DISPUTED BY THE AO THAT THE ASSESSEE HAD RECEIV ED ADVANCES FROM FOREIGN BUYERS FOR SUPPLY OF THE GOODS AND THESE AD VANCES HAVE BEEN RESTATED BY THE ASSESSEE AS ON 31.03.2004 BASED ON THE FOREIGN EXCHANGE RATE. CONSEQUENTLY, THE RESULT OF RESTATEM ENT OF ADVANCES RECEIVED IN FOREX ON MARK TO MARKET BASIS, THE ASS ESSEE HAS SUFFERED A LOSS OF RS. 53,32,012/- WHICH HAS BEEN CLAIMED IN T HE P & L ACCOUNT FOLLOWING THE ACCOUNTING STANDARD AS-11. IN THE GIV EN CIRCUMSTANCES, AO HAS ERRED IN DISALLOWING THE LOSS ON THE GROUND THAT THE ADVANCE IS NOT PAYABLE IN THE MONETARY ITEMS BUT ADJUSTED AGAI NST THE DELIVERY OF GOODS. ITA NO. 713/DEL./2018 5 10. THE LD. CIT(A) HAS THRASHED THE ISSUE BY PERUSI NG THE UNDISPUTED FACTS IN THE LIGHT OF THE DECISION RENDERED BY HON BLE SUPREME COURT IN CASE OF COMMISSIONER OF INCOME TAX, DELHI VS. WOODWARD GOVE RNOR INDIA PVT. LTD. (SUPRA). SO, WE FIND NO ILLEGALITY OR PERVERSITY IN THE FINDINGS OF LD. CIT(A) IN ALLOWING THE LOSS ARISEN TO THE ASSESSEE ON ACCOUNT OF FOREIGN EXCHANGE RATE DIFFERENCE U/S 37( 1) OF THE ACT. CONSEQUENTLY GROUND NO. 1 AND 2 ARE DECIDED AGAINST THE REVENUE. GROUND NO. 3 11. UNDISPUTEDLY OUT OF THE INTEREST OF RS. 36,11, 390/- CLAIMED BY THE ASSESSEE IN P & L ACCOUNT , AN AMOUNT OF RS. 28,17, 674/- HAS BEEN PAID TO DHANLAXMI BANK FOR THE LOAN TAKEN FOR THE PURPOS E OF TWO FLATS. IT IS ALSO NOT IN DISPUTE THAT DURING THE EARLIER YEAR AS SESSEE HAS PURCHASED TWO FLATS BEARING NO. 121 AND 122 FIRST FLOOR, SAKE T DISTRICT CENTRE, NEW DELHI AND HAS SHOWN AS INVESTMENT UNDER THE HEAD I NVESTMENT. THE ASSESSING OFFICER DISALLOWED THE SAME BEING NOT SAT ISFIED WITH THE CONTENTION OF THE ASSESSEE THAT THE FLATS ARE BEING USED FOR BUSINESS PURPOSES AND INTEREST ON THIS LOAN HAS BEEN ALLOWED IN EARLIER YEARS. 12. THE LD. AR FOR THE ASSESSEE CONTENDED THAT INTE REST IS ALLOWABLE DESPITE THE FACT THAT ASSET IS SHOWN AS INVESTMENT OR AS A DEPRECIABLE ASSET AS LONG AS IT IS USED FOR THE PURPOSES OF BUS INESS AND RELIED UPON THE PROVISIONS CONTAINED U/S 36(1)(III). 13. WHEN IT IS NOT DISPUTED BY AO THAT THE FLATS PU RCHASED WITH THE LOAN AVAILED FROM M/S. DHANLAXMI BANK HAVE BEEN USE D FOR BUSINESS PURPOSES AND FLATS HAVE BEEN SHOWN IN THE BALANCE S HEET THE INTEREST IS AN ALLOWABLE BUSINESS DEDUCTION AS THE SAME HAS BEE N INCURRED IN RESPECT OF CAPITAL BORROWED AND USED FOR BUSINESS. MOREOVER, WHEN THE FLATS HAVE BEEN PURCHASED IN THE EARLIER YEARS AND INTEREST THEREON HAVE ITA NO. 713/DEL./2018 6 BEEN CONSISTENTLY ALLOWED IN EARLIER YEARS, THERE I S NO REASON TO DEPART FROM THE RULE OF CONSISTENCY. SO, IN VIEW OF THE MA TTER, LD. CIT(A) HAS RIGHTLY DELETED THE ADDITION. CONSEQUENTLY GROUND N O. 3 IS DETERMINED AGAINST THE REVENUE. 14. IN VIEW OF WHAT HAS BEEN DISCUSSED ABOVE PRESE NT APPEAL FILED BY THE REVENUE IS HEREBY DISMISSED. ORDER PRONOUNCED IN OPEN COURT ON THIS 27 TH FEBRUARY, 2019. SD/- SD/- (N.S.SAINI) (KUL DIP SINGH) ACCOUNTANT MEMBER JUDICIAL MEMBER D ATED 27/02/ 2019 *BR* COPY FORWARDED TO: 1. APPELLANT 2. RESPONDENT 3. CIT 4. CIT(A)-XXVI, NEW DELHI. 5. CIT(ITAT), NEW DELHI. AR, ITAT NEW DELHI ITA NO. 713/DEL./2018 7 DATE OF DICTATION 21.02.2019 DATE ON WHICH THE TYPED DRAFT IS PLACED BEFORE THE DICTATING MEMBER 22.02.2019 DATE ON WHICH THE TYPED DRAFT IS PLACED BEFORE THE OTHER MEMBER DATE ON WHICH THE APPROVED DRAFT COMES TO THE SR. PS/PS DATE ON WHICH THE FAIR ORDER IS PLACED BEFORE THE DICTATING MEMBER FOR PRONOUNCEMENT DATE ON WHICH THE FAIR ORDER COMES BACK TO THE SR. PS/PS DATE ON WHICH THE FINAL ORDER IS UPLOADED ON THE WEBSITE OF ITAT DATE ON WHICH THE FILE GOES TO THE BENCH CLERK DATE ON WHICH THE FILE GOES TO THE HEAD CLERK THE DATE ON WHICH THE FILE GOES TO THE ASSISTANT REGISTRAR FOR SIGNATURE ON THE ORDER DATE OF DISPATCH OF THE ORDER