EVEREST INDUSTRIES LTD., NOIDA V. DY CIT CIRCLE- 1, THANE

ITA 715/MUM/2020

AI Insights

The case involves multiple appeals by Everest Industries Limited and the DCIT concerning the assessment years 2008-09, 2009-10, 2012-13, and 2013-14. The primary issues revolved around the exclusion of sales tax incentives and excise duty exemptions from the computation of book profits under section 115JB, and the treatment of foreign exchange fluctuation losses on loans reinstated in the books. The Tribunal examined the legal provisions, accounting standards, and various judicial precedents to arrive at its decision. The Tribunal's ruling emphasized the distinction between capital and revenue receipts, and the appropriate treatment of foreign exchange fluctuations in the context of the assets acquired.

• Counselvise Citation: [2023] 140 COUNSELVISE.COM (IT) 123414 (ITAT-MUMBAI)
• Duration Of Justice: 3 year(s) 1 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 30-01-2023
• Appeal Filed By: Assessee
• Order Result: Dismissed
• Bench Allotted: E
• Next Hearing Date: 23-01-2023
• Assessment Year: 2008-2009
• Appeal Filed On: 28-01-2020
• Other Referred Cases: Apollo Tyres Ltd. vs. CIT, Sutlej Cotton Mills Ltd. vs. CIT, Tata Iron and Steel Co. Ltd. vs. CIT, Hyundai Motor India Ltd vs. DCIT, Cooper Corporation vs. DCIT, MFAR Hotels and Resorts Ltd vs. DCIT, V.S. Dempo & Co. Pvt. Ltd. vs. CIT
• Laws Referred To: Income Tax Act, 1961
• Result in Favour of: Revenue
• Court: TRIBUNAL
• Keywords: Capital asset converted into stock in trade; Capital asset; Depreciation; Opportunity of being heard; Additional depreciation; Retrospective amendment; Difference of opinion; Capital receipt; Revised return; Change of opinion; Revenue expenditure; Reassessment proceedings; Capital expenditure; Set aside
• Section: 147; 90; 43CA; 143(3); 115JB; 37(1); 43; 48; 13; 22

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL MUMBAI BENCH “E” MUMBAI BEFORE SHRI ABY T VARKEY (JUDICIAL MEMBER) AND SHRI OM PRAKASH KANT (ACCOUNTANT MEMBER) ITA No. 715/MUM/2020 Assessment Year: 2008-09 & ITA No. 718/MUM/2020 Assessment Year: 2009-10 & ITA No. 7793/MUM/2019 Assessment Year: 2012-13 & ITA No. 7794/MUM/2019 Assessment Year: 2013-14 Everest Industries Limited, D-206, Sector-63, Noida- 201301, Uttar Pradesh Vs. DCIT, Circle-1, Ashar I.T. Park, 6 th floor, B- Wing, 16-Z, Wagle Industrial Estate, Thane(W)- 400 604. PAN No. AAACE 7550 N Appellant Respondent ITA No. 1423/MUM/2020 Assessment Year: 2008-09 & ITA No. 1418/MUM/2020 Assessment Year: 2009-10 & ITA No. 654/MUM/2020 Assessment Year: 2012-13 & ITA No. 653/MUM/2020 Assessment Year: 2013-14 DCIT, Circle-1, Room No. 22, B-Wing 6 Ashar IT Park, Wagle Industrial Estate, Thane (W)-400 604. Appellant Assessee by Revenue by Date of Hearing Date of pronouncement PER OM PRAKASH KANT, AM These cross appeals by the assessee and assessment year 2008 directed against separate orders passed by the learne Commissioner of Income CIT(A)’]. As common issue therefore, same were hard together and disposed off by way of this consolidated order for convenience and avoid repetition of facts. 2. Firstly, we take up the cross appeals for assessment year 2008-09. The grounds under: ITA Nos. 715, 718/M/2020, 7793, 7794/M/2020 & 1423, 1418, 654, 653/M/2020 Wing 6 th floor, Ashar IT Park, Wagle Industrial 400 604. Vs. M/s Industrial Industries Limited, G-1, A-32, Genesis Mohan Coop. Industries, Mathura Road, New Delhi PAN No. AAACE 7550 N Respondent Assessee by : Mr. Yogesh Thar/ Mr. Chaitanya Joshi/Ansh Ajmera by : Smt. Nilu Jaggi, CIT-DR Date of Hearing : 24/01/2023 Date of pronouncement : 31/01/2023 ORDER PER OM PRAKASH KANT, AM These cross appeals by the assessee and assessment year 2008-09; 2009-10; 2012-13 and 2013 directed against separate orders passed by the learne Income-tax(Appeals)-1, Mumbai [in short ]. As common issue-in-dispute are involved in these appeals, same were hard together and disposed off by way of this consolidated order for convenience and avoid repetition of facts. Firstly, we take up the cross appeals for assessment year 09. The grounds raised by the Revenue are reproduced as Everest Industries Limited 2 ITA Nos. 715, 718/M/2020, 7793, 7794/M/2020 & 1423, 1418, 654, 653/M/2020 M/s Industrial Industries 32, Genesis Mohan Coop. Industries, Mathura Road, New Delhi-110044. AAACE 7550 N Mr. Chaitanya Joshi/Ansh Ajmera DR These cross appeals by the assessee and Revenue for 13 and 2013-14 are directed against separate orders passed by the learned 1, Mumbai [in short ‘the Ld. dispute are involved in these appeals, same were hard together and disposed off by way of this consolidated order for convenience and avoid repetition of facts. Firstly, we take up the cross appeals for assessment year are reproduced as 1. Whether the CIT (A) erred on the facts and in the circumstances of the case and in law, in directing the A to exclude Sales Tax incentive, while computing the book profits /s 115JB of the Act, without that they have not been specifically excluded in Explanation 1 to section 115JB of the Act. 2. 2. Whether the CIT (A) erred on the facts and in the circumstances of the case and in law, in directing the AO to exclude Sales Tax incentive, while computing the book profits /s 115B of the Act despite the fact that no adjustment other than the ones menti Sec.115JB is permissible as held by the Supreme Court in the case of Apollo Tyres Ltd. (255 IT 273) 2.1 The grounds raised by the assessee 1(a). That on the facts and in the circumstances of the case, the Ld. Commissioner o (here-in justified & grossly erred in confirming the action of the A.O. in initiating reassessment proceedings us 147/148 without appreciating the fact that the same has been done in ut provisions of the Act. 1(b). That on the facts and in the circumstances of the case, the Ld.CIT (Appeals) was not justified and rather grossly erred in not quashing the reassessment proceedings initiated beyond four years from the relevant assessment year without appreciating the fact that there was no failure on the part of the appellant to disclose truly and fully all material facts necessary for completion of assessment. 1(c). That on the facts and in the circumsta case, the Ld.CIT (Appeals) was not justified and rather grossly erred in notnot quashing the reassessment proceedings without appreciating the fact that there was fresh application of mind on the part of AO to the same set of facts as available assessment and leading to mere change of opinion. ITA Nos. 715, 718/M/2020, 7793, 7794/M/2020 & 1423, 1418, 654, 653/M/2020 Whether the CIT (A) erred on the facts and in the circumstances of the case and in law, in directing the A to exclude Sales Tax incentive, while computing the book profits /s 115JB of the Act, without appreciating that they have not been specifically excluded in Explanation 1 to section 115JB of the Act. 2. Whether the CIT (A) erred on the facts and in the circumstances of the case and in law, in directing the AO to exclude Sales Tax incentive, while computing the book profits /s 115B of the Act despite the fact that no adjustment other than the ones menti Sec.115JB is permissible as held by the Supreme Court in the case of Apollo Tyres Ltd. (255 IT 273) grounds raised by the assessee are reproduced as under: That on the facts and in the circumstances of the case, the Ld. Commissioner of Income Tax (Appeals) in-after referred to as 'Ld. CIT(Appeals)' was not justified & grossly erred in confirming the action of the A.O. in initiating reassessment proceedings us 147/148 without appreciating the fact that the same has been done in utter disregard of the express provisions of the Act. That on the facts and in the circumstances of the case, the Ld.CIT (Appeals) was not justified and rather grossly erred in not quashing the reassessment proceedings initiated beyond four years from the relevant assessment year without appreciating the fact that there was no failure on the part of the appellant to disclose truly and fully all material facts necessary for completion of assessment. That on the facts and in the circumsta case, the Ld.CIT (Appeals) was not justified and rather grossly erred in notnot quashing the reassessment proceedings without appreciating the fact that there was fresh application of mind on the part of AO to the same set of facts as available with him at the time of assessment and leading to mere change of opinion. Everest Industries Limited 3 ITA Nos. 715, 718/M/2020, 7793, 7794/M/2020 & 1423, 1418, 654, 653/M/2020 Whether the CIT (A) erred on the facts and in the circumstances of the case and in law, in directing the A to exclude Sales Tax incentive, while computing the appreciating that they have not been specifically excluded in 2. Whether the CIT (A) erred on the facts and in the circumstances of the case and in law, in directing the AO to exclude Sales Tax incentive, while computing the book profits /s 115B of the Act despite the fact that no adjustment other than the ones mentioned in Sec.115JB is permissible as held by the Supreme Court in the case of Apollo Tyres Ltd. (255 IT 273) reproduced as under: That on the facts and in the circumstances of the f Income Tax (Appeals) after referred to as 'Ld. CIT(Appeals)' was not justified & grossly erred in confirming the action of the A.O. in initiating reassessment proceedings us 147/148 without appreciating the fact that the same ter disregard of the express That on the facts and in the circumstances of the case, the Ld.CIT (Appeals) was not justified and rather grossly erred in not quashing the reassessment proceedings initiated beyond four years from the end of the relevant assessment year without appreciating the fact that there was no failure on the part of the appellant to disclose truly and fully all material facts That on the facts and in the circumstances of the case, the Ld.CIT (Appeals) was not justified and rather grossly erred in notnot quashing the reassessment proceedings without appreciating the fact that there was fresh application of mind on the part of AO to the with him at the time of assessment and leading to mere change of opinion. 2. That the appellant craves leave to add, to amend, modify, rescind, supplement or alter any of the Grounds stated here time of hearing of this ap 3. Briefly stated facts of the case are that the assessee filed return of income for the assessment year under consideration on 30/09/2009 declaring total loss of regular provisions of the Income whereas declared book profit of section 115JB of the 31/03/2010 declaring loss at Rs.37,97,34, provisions of the A Subsequently, the case of the assessee was selected and after consideration of the submission of the assessee examination of the details, the Assessing Officer pas assessment order under section 143(3) of the determining business loss at capital gain of ₹7,13,98, Act, however book profit was accepted as returned by the assessee in revised return of income at rupees appeal, the Ld. First appellate authority, allowed the claim of tax incentive’ as capital receipt under the normal provisions of the Act including set off of business loss against long gains, which resulted int at ₹18,21,26,459/- ₹2,88,27,166/-. ITA Nos. 715, 718/M/2020, 7793, 7794/M/2020 & 1423, 1418, 654, 653/M/2020 That the appellant craves leave to add, to amend, modify, rescind, supplement or alter any of the Grounds stated here-in-above, either before or at the time of hearing of this appeal. stated facts of the case are that the assessee filed return of income for the assessment year under consideration on 30/09/2009 declaring total loss of ₹36,28,84,497/ s of the Income-tax Act, 1961 (in short whereas declared book profit of ₹7,68,23,521/- for the purpose of section 115JB of the Act. The said return of income was revised on /03/2010 declaring loss at Rs.37,97,34,102/-under the normal Act and book profit at ₹ 2, 88 ,27, Subsequently, the case of the assessee was selected and after consideration of the submission of the assessee examination of the details, the Assessing Officer pas assessment order under section 143(3) of the Act on 23/12/2 determining business loss at ₹19,97,80,218/- ,13,98,483/- under the regular provisions of the however book profit was accepted as returned by the assessee turn of income at rupees ₹2,88,27,166/ . First appellate authority, allowed the claim of as capital receipt under the normal provisions of the ct including set off of business loss against long gains, which resulted into loss under normal provisions of the whereas book profit remained unchanged at Everest Industries Limited 4 ITA Nos. 715, 718/M/2020, 7793, 7794/M/2020 & 1423, 1418, 654, 653/M/2020 That the appellant craves leave to add, to amend, modify, rescind, supplement or alter any of the above, either before or at the stated facts of the case are that the assessee filed return of income for the assessment year under consideration on 497/-under the in short ‘the Act’), for the purpose of . The said return of income was revised on under the normal 2, 88 ,27, 166/-. Subsequently, the case of the assessee was selected for scrutiny and after consideration of the submission of the assessee and examination of the details, the Assessing Officer passed the ct on 23/12/2010 and long-term under the regular provisions of the however book profit was accepted as returned by the assessee 2,88,27,166/-. On further . First appellate authority, allowed the claim of ‘sales as capital receipt under the normal provisions of the ct including set off of business loss against long-term capital o loss under normal provisions of the Act whereas book profit remained unchanged at 3.1 Subsequently, reassessment proceedings were initiated under section 147 of the Act 148 of the Act dated 27/01/2014. In the reassessment order passed under section 143(3) read with section 147 of the 24/03/2015, the Assessing Officer determine ₹18,21,26,459 /- under the normal provisions of the denied exclusion of for the purpose of book profit and recomputed ₹8,25,71,890/- under the provisions of section 115 JB of the 4. On further appeal, the Ld. CIT(A) upheld the validity of reassessment, however, allowed the relief on merit of the addition. Aggrieved, both the revenue and assessee are before the Appellate Tribunal ( reproduced above. 5. The grounds raised by the CIT(A) for excluding the computing the book profit under section 115 JB of the 6. The briefly stated facts qua the issue in dispute of the assessee was reopened on one of the ground of s exemption/incentive profit under section 115 accepting it as a capital receipt. In the reassessment completed Assessing Officer observed that ITA Nos. 715, 718/M/2020, 7793, 7794/M/2020 & 1423, 1418, 654, 653/M/2020 Subsequently, reassessment proceedings were initiated under Act by way of the issue of notice under section ct dated 27/01/2014. In the reassessment order passed under section 143(3) read with section 147 of the 24/03/2015, the Assessing Officer determined under the normal provisions of the sion of sales tax incentive claimed by the assessee in for the purpose of book profit and recomputed under the provisions of section 115 JB of the On further appeal, the Ld. CIT(A) upheld the validity of , however, allowed the relief on merit of the addition. Aggrieved, both the revenue and assessee are before the (in short ‘the Tribunal’) raising grounds as The grounds raised by the Revenue relates to CIT(A) for excluding the ‘sales tax incentive’ computing the book profit under section 115 JB of the The briefly stated facts qua the issue in dispute of the assessee was reopened on one of the ground of s was wrongly reduced for the purpose o profit under section 115JB of the Act by the Assessing Officer accepting it as a capital receipt. In the reassessment completed Assessing Officer observed that for the purpose of section115 Everest Industries Limited 5 ITA Nos. 715, 718/M/2020, 7793, 7794/M/2020 & 1423, 1418, 654, 653/M/2020 Subsequently, reassessment proceedings were initiated under by way of the issue of notice under section ct dated 27/01/2014. In the reassessment order passed under section 143(3) read with section 147 of the Act on total loss at under the normal provisions of the Act and also claimed by the assessee in book profit at under the provisions of section 115 JB of the Act. On further appeal, the Ld. CIT(A) upheld the validity of , however, allowed the relief on merit of the addition. Aggrieved, both the revenue and assessee are before the Income-tax ) raising grounds as relates to finding of Ld. amount while computing the book profit under section 115 JB of the Act. The briefly stated facts qua the issue in dispute are that case of the assessee was reopened on one of the ground of sales-tax was wrongly reduced for the purpose of book by the Assessing Officer accepting it as a capital receipt. In the reassessment completed, the section115JB(2), every assessee being a company shall prepare its profit and loss account for the relevant previous year in accordance with the provisions of Part II and III of 1956. The first provisio to section 115JB that while preparing the annual accounts including the profit and loss account, the accounting policies, the accounting standard and method and rates adopted for calculating the depreciation shall be the same as adopted by the co such accounts including the profit and loss account and laid before the company at its annual general body meeting, to which permissible adjustment are to be made as mentioned in ‘Explanation-1’ to section 115 Assessing Officer, the item of capital receipt is not covered in the ‘Explanation-1’ to section 115 JB reduce the amount for the purpose of computation of the book profit as mentioned in only and cannot reduce any other amount for the purpose of computing book profit under section 115 JB of the Act. The Ld. Assessing Officer referred to the decision of the Hon’ble Bombay High Court Investment Co. Ltd 249 ITR 597 (Bom) Court in the case of NJ Jose and company Vs ACIT, 174 Taxman 141 (Kerala) ; decision of the Avenue Securities 126 ITD 179 ( Delhi ITA Nos. 715, 718/M/2020, 7793, 7794/M/2020 & 1423, 1418, 654, 653/M/2020 every assessee being a company shall prepare its profit and loss account for the relevant previous year in accordance with the II and III of Schedule VI to the Companies . The first provisio to section 115JB of the Act, further provides that while preparing the annual accounts including the profit and loss account, the accounting policies, the accounting standard and method and rates adopted for calculating the depreciation shall be the same as adopted by the company for the purpose of preparing such accounts including the profit and loss account and laid before the company at its annual general body meeting, to which permissible adjustment are to be made as mentioned in to section 115JB of the Act. According to the Assessing Officer, the item of capital receipt is not covered in the to section 115 JB of the Act. Thus, the assessee can reduce the amount for the purpose of computation of the book profit as mentioned in ‘Explanation-1’ of section 115 cannot reduce any other amount, even the capital receipt for the purpose of computing book profit under section 115 JB of Assessing Officer referred to the decision of the Hon’ble Bombay High Court in the case of CIT Vs Veekay Lal Investment Co. Ltd 249 ITR 597 (Bom); Hon’ble Kerala High NJ Jose and company Vs ACIT, 174 Taxman ; decision of the Tribunal in the case of Avenue Securities 126 ITD 179 ( Delhi-Trib); decision of the Everest Industries Limited 6 ITA Nos. 715, 718/M/2020, 7793, 7794/M/2020 & 1423, 1418, 654, 653/M/2020 every assessee being a company shall prepare its profit and loss account for the relevant previous year in accordance with the VI to the Companies Act , further provides that while preparing the annual accounts including the profit and loss account, the accounting policies, the accounting standard and method and rates adopted for calculating the depreciation shall be mpany for the purpose of preparing such accounts including the profit and loss account and laid before the company at its annual general body meeting, to which permissible adjustment are to be made as mentioned in . According to the Assessing Officer, the item of capital receipt is not covered in the the assessee can reduce the amount for the purpose of computation of the book n 115JB of the Act , even the capital receipt for the purpose of computing book profit under section 115 JB of Assessing Officer referred to the decision of the CIT Vs Veekay Lal Hon’ble Kerala High NJ Jose and company Vs ACIT, 174 Taxman in the case of Growth ; decision of the Tribunal in the case of DCIT Vs Bomb 456 (Mum-ITAT) ; Hyderabad in the case of 551 (Hyd-Trib-SB) Builder 50 SOT 198 ( claim of the assessee of reducing the amount of sales for the purpose of computation of the book profit. 7. On further appeal, the Ld. CIT(A) adjudicated the appeal on 03/12/2019, wherein allowed 8. Before us, the Ld order of the Assessing do not permit for excluding the sale book profit from the profit computed as VI of Companies Act, 1956. The other hand, submitted Ankit Metal & Power Ltd (2019) 416 ITR 591 favour of the assessee relied on the decision of the Tribunal in the case of in ITA No. 5883/Mum/2012 ITA No. 804 and 805/Mum/2018 9. We have heard rival submission of the party on the issue in dispute and perused ITA Nos. 715, 718/M/2020, 7793, 7794/M/2020 & 1423, 1418, 654, 653/M/2020 in the case of DCIT Vs Bombay Diamond Co. 32(1) ITCL decision of the Special bench of Hyderabad in the case of Rain Commodities Vs DCIT 4 ITR (Trib.) and decision of ITAT in the case Builder 50 SOT 198 (Mumbai -Trib). He accordingly rejected the claim of the assessee of reducing the amount of sales for the purpose of computation of the book profit. On further appeal, the Ld. CIT(A) adjudicated the appeal on 3/12/2019, wherein allowed part relief to the assessee. Ld. Departmental Representative order of the Assessing Officer and submitted that provisions of law do not permit for excluding the sales incentive for the purpose of book profit from the profit computed as Part II and III of VI of Companies Act, 1956. The Ld. counsel of the assessee submitted that identical issue in the case of Ankit Metal & Power Ltd (2019) 416 ITR 591 has been dec favour of the assessee by Hon’ble Calcutta High Court relied on the decision of the Coordinate bench of the Bombay case of Ambuja Cement Limited Vs Add CIT (LTU) in ITA No. 5883/Mum/2012 and Prism Cement Ltd Vs DCIT in No. 804 and 805/Mum/2018. We have heard rival submission of the party on the issue in d the relevant material on record. Everest Industries Limited 7 ITA Nos. 715, 718/M/2020, 7793, 7794/M/2020 & 1423, 1418, 654, 653/M/2020 ay Diamond Co. 32(1) ITCL pecial bench of Tribunal, Rain Commodities Vs DCIT 4 ITR (Trib.) and decision of ITAT in the case of Sumer Trib). He accordingly rejected the claim of the assessee of reducing the amount of sales-tax incentive On further appeal, the Ld. CIT(A) adjudicated the appeal on relief to the assessee. Representative relied on the and submitted that provisions of law s incentive for the purpose of II and III of Schedule of the assessee, on the that identical issue in the case of PCIT Vs has been decided in by Hon’ble Calcutta High Court. He also oordinate bench of the Bombay Vs Add CIT (LTU) Prism Cement Ltd Vs DCIT in We have heard rival submission of the party on the issue in the relevant material on record. However, on perusal of the order of the Ld. CIT(A), we find that Ld. CIT(A) had adjudicated on the issue that sal assessee under the capital in nature. The issue of reduction of the same from the profit and loss account for the purpose of computation of the book profit has not been adjudicated by the Ld. CIT(A). legal issue and all facts hav Officer, we proceeded to adjudicate in view of no objection of both the parties. 9.1 The Hon’ble Calcutta High Court in the case of Power Ltd (supra), has adjudicated the issue as under: “27. In this case since we ha relevant assessment year 2010 subsidy' and 'Power subsidy' is a 'capital receipt and does not fall within the definition of 'Income' under Section 2(24) of Income Tax Act, 1961 and when a receipt is not o character of income it cannot form part of the book profit under Section 115JB of the Act, 1961. In the case of AppolloTyres Lid. (supra) the income in question was taxable but was exempt under a specific provision of the Act as such it was to be But where a receipt is not in the nature of income at all it cannot be included in book profit for the purpose of computation under Section 115JB of the Income Tax Act, 1961. For the aforesaid reason, we hold that the and power subsidy under the schemes in question would have to be excluded while computing book profit under Section 115 JB of the Income Tax Act, 1961. 9.2 Further, the coordinate bench of the Ambuja cements Ltd (supra) a ITA Nos. 715, 718/M/2020, 7793, 7794/M/2020 & 1423, 1418, 654, 653/M/2020 perusal of the order of the Ld. CIT(A), we find that Ld. CIT(A) had adjudicated on the issue that sales-tax incentive received by the assessee under the Aegis of New Packages Scheme capital in nature. The issue of reduction of the same from the profit and loss account for the purpose of computation of the book profit has not been adjudicated by the Ld. CIT(A). But this being purely a legal issue and all facts having been reproduced by the Assessing Officer, we proceeded to adjudicate in view of no objection of both The Hon’ble Calcutta High Court in the case of has adjudicated the issue as under: 27. In this case since we have already held that in relevant assessment year 2010-11 the incentives 'Interest subsidy' and 'Power subsidy' is a 'capital receipt and does not fall within the definition of 'Income' under Section 2(24) of Income Tax Act, 1961 and when a receipt is not o character of income it cannot form part of the book profit under Section 115JB of the Act, 1961. In the case of AppolloTyres Lid. (supra) the income in question was taxable but was exempt under a specific provision of the Act as such it was to be included as a part of the book profit. But where a receipt is not in the nature of income at all it cannot be included in book profit for the purpose of computation under Section 115JB of the Income Tax Act, 1961. For the aforesaid reason, we hold that the and power subsidy under the schemes in question would have to be excluded while computing book profit under Section 115 JB of the Income Tax Act, 1961.” Further, the coordinate bench of the Tribunal Ambuja cements Ltd (supra) after considering the decision of the Everest Industries Limited 8 ITA Nos. 715, 718/M/2020, 7793, 7794/M/2020 & 1423, 1418, 654, 653/M/2020 perusal of the order of the Ld. CIT(A), we find that Ld. CIT(A) had tax incentive received by the Aegis of New Packages Scheme, 1993 was capital in nature. The issue of reduction of the same from the profit and loss account for the purpose of computation of the book profit But this being purely a produced by the Assessing Officer, we proceeded to adjudicate in view of no objection of both The Hon’ble Calcutta High Court in the case of Ankit Metal & has adjudicated the issue as under: ve already held that in 11 the incentives 'Interest subsidy' and 'Power subsidy' is a 'capital receipt and does not fall within the definition of 'Income' under Section 2(24) of Income Tax Act, 1961 and when a receipt is not on in the character of income it cannot form part of the book profit under Section 115JB of the Act, 1961. In the case of AppolloTyres Lid. (supra) the income in question was taxable but was exempt under a specific provision of the Act included as a part of the book profit. But where a receipt is not in the nature of income at all it cannot be included in book profit for the purpose of computation under Section 115JB of the Income Tax Act, 1961. For the aforesaid reason, we hold that the interest and power subsidy under the schemes in question would have to be excluded while computing book profit under Tribunal in the case of fter considering the decision of the Hon’ble Bombay High Court in the case of Harinagar Sugar Mills ltd (supra) and decision of the Hon’ble Calcutta High Court in the case of Ankit Metals and power Ltd (supra), held as under: “50. Ld. representatives fairly agree that the above issues are now covered, in favour of the assessee, by Hon'ble Calcutta High Court's judgment in the case of PCIT Vs Ankit metal & Power Lid 120197 416 ITR 591 (Call. by Hon 'ble jurisdictional High Court's judgm Mills Lid [ITA No 1132 of 2014, dated 4* January 2017] and by a coordinate bench decision in the case of ACIT Vs JSW Steel Limited [(2019) 112 taxmann.com 55 (Mum)]. Learned Departmental Representative, however, re of the authorities below. 51. We find that a coordinate bench of this Tribunal, in JSW Ltd's case (supra), has inter alia, 47. We further noted that Hon'ble Kolkata High Court, in the case of Pr. 109 taxmann.com 93/266 Taxman 237 Ltd. had considered an identical issue and after considering the decision of Hon'ble Supreme Court in the case of Apollo Tyres Lid. (supra) held that when a receipt is not in the character of income as the IT. Act, 1961, then it cannot form part of the book profit us 115JB of the IT. Act, 1961. The Hon'ble High court, further observed that sales tax subsidy received by the assessee is capital receipt and does not come within definition of income under section 2(24) of the IT. Act, 1961 and when, a receipt is not a in the nature of income, it cannot form part of book profit us 115JB of the IT. Act, 1961. The Court, further observed that the facts of case before the Hon'ble Su case of Apollo Tyres Ltd. (supra) were altogether difference, where the income in question was taxable, but was exempt under a specific provision of the Act, and as such it was to be included as a part of book profit, but where the recei income at all, it cannot be included in book profit for the purpose of computation u/s 115JB of the I.T. Act, 1961. ITA Nos. 715, 718/M/2020, 7793, 7794/M/2020 & 1423, 1418, 654, 653/M/2020 Hon’ble Bombay High Court in the case of Harinagar Sugar Mills ltd (supra) and decision of the Hon’ble Calcutta High Court in the case of Ankit Metals and power Ltd (supra), held as under: representatives fairly agree that the above issues are now covered, in favour of the assessee, by Hon'ble Calcutta High Court's judgment in the case of PCIT Vs Ankit metal & Power Lid 120197 416 ITR 591 (Call. by Hon 'ble jurisdictional High Court's judgment in the case of CIT Vs Harinagar Sugar Mills Lid [ITA No 1132 of 2014, dated 4* January 2017] and by a coordinate bench decision in the case of ACIT Vs JSW Steel Limited [(2019) 112 taxmann.com 55 (Mum)]. Learned Departmental Representative, however, relied upon the stand of the authorities below. We find that a coordinate bench of this Tribunal, in JSW Ltd's case (supra), has inter alia, observed as follows: 47. We further noted that Hon'ble Kolkata High Court, in the case of Pr. CIT v. Ankit Metal & Power Lid. |20191 109 taxmann.com 93/266 Taxman 237 Ltd. had considered an identical issue and after considering the decision of Hon'ble Supreme Court in the case of Apollo Tyres Lid. (supra) held that when a receipt is not in the character of income as defined under section 2(24) of the IT. Act, 1961, then it cannot form part of the book profit us 115JB of the IT. Act, 1961. The Hon'ble High court, further observed that sales tax subsidy received by the assessee is capital receipt and does not come n definition of income under section 2(24) of the IT. Act, 1961 and when, a receipt is not a in the nature of income, it cannot form part of book profit us 115JB of the IT. Act, 1961. The Court, further observed that the facts of case before the Hon'ble Supreme Court in the case of Apollo Tyres Ltd. (supra) were altogether difference, where the income in question was taxable, but was exempt under a specific provision of the Act, and as such it was to be included as a part of book profit, but where the receipt is not in the nature of income at all, it cannot be included in book profit for the purpose of computation u/s 115JB of the I.T. Act, 1961. Everest Industries Limited 9 ITA Nos. 715, 718/M/2020, 7793, 7794/M/2020 & 1423, 1418, 654, 653/M/2020 Hon’ble Bombay High Court in the case of Harinagar Sugar Mills ltd (supra) and decision of the Hon’ble Calcutta High Court in the case of Ankit Metals and power Ltd (supra), held as under: representatives fairly agree that the above issues are now covered, in favour of the assessee, by Hon'ble Calcutta High Court's judgment in the case of PCIT Vs Ankit metal & Power Lid 120197 416 ITR 591 (Call. by Hon 'ble jurisdictional ent in the case of CIT Vs Harinagar Sugar Mills Lid [ITA No 1132 of 2014, dated 4* January 2017] and by a coordinate bench decision in the case of ACIT Vs JSW Steel Limited [(2019) 112 taxmann.com 55 (Mum)]. Learned lied upon the stand We find that a coordinate bench of this Tribunal, in JSW observed as follows: 47. We further noted that Hon'ble Kolkata High Court, in & Power Lid. |20191 109 taxmann.com 93/266 Taxman 237 Ltd. had considered an identical issue and after considering the decision of Hon'ble Supreme Court in the case of Apollo Tyres Lid. (supra) held that when a receipt is not in the defined under section 2(24) of the IT. Act, 1961, then it cannot form part of the book profit us 115JB of the IT. Act, 1961. The Hon'ble High court, further observed that sales tax subsidy received by the assessee is capital receipt and does not come n definition of income under section 2(24) of the IT. Act, 1961 and when, a receipt is not a in the nature of income, it cannot form part of book profit us 115JB of the IT. Act, 1961. The Court, further observed that the preme Court in the case of Apollo Tyres Ltd. (supra) were altogether difference, where the income in question was taxable, but was exempt under a specific provision of the Act, and as such it was to be included as a part of book pt is not in the nature of income at all, it cannot be included in book profit for the purpose of computation u/s 115JB of the I.T. Act, 1961. 48. We further noted that the ITAT special bench of Kolkata Tribunal, in the care of Sutlej Cotton mills Lad, v. Asset. CITIES 3EnS I ID 22 kaan, SEy, held that d particular receipt, which is admittedly not an income cannot be brought to tax under the deeming provisions of section 115J of the Act, as it defies the basic intention behind introduction of provisions of Act. The ITAT Jaipur bench, in case of Shree Cement Led. (supra) had considered an identical issue and held that incentives granted to the assessee is capital receipt and hence, cannot he part of book profit computed us 11SJB or the Ac the case of Sipea India (P) Lid. v. De. CIT I2017 80 taxmann.com 87 (Trib.) had considered an identical issue and held that when, subsidy in question is not in the nature of income, it cannot be regarded as income even for the purpose of book profit u/s 115JB of the Act, though credited in the profit and loss account and have to be excluded for arriving at the book profit us 115JB of the Act. 49. Insofar as, case laws relied upon by the department, we find that all t either considered by the Tribunal or Hich Court and came to conclusion that in those cases the capital receipt is in the nature of income, but by a specific provision, the same has been exempted and hence, the came to the conclusio routed through profit and loss account, then it should be part of book profit and cannot be excluded, while arriving at book profit u/s 115JB of the Act 1961. 50. In this view of the matter and considering the ratio of case laws discussed hereinabove, we are of the considered view that when a particular receipt is exempt from tax under the Income tax law, them the same cannot be considered for the purpose of computation of book profit w/s 115JB of the IT.Act 1961. Hence, w subsidy received by the assessee amounting to Rs. 36,15,49,828/ of the IT. Act, 1961. ITA Nos. 715, 718/M/2020, 7793, 7794/M/2020 & 1423, 1418, 654, 653/M/2020 48. We further noted that the ITAT special bench of Kolkata Tribunal, in the care of Sutlej Cotton mills Lad, Asset. CITIES 3EnS I ID 22 kaan, SEy, held that d particular receipt, which is admittedly not an income cannot be brought to tax under the deeming provisions of section 115J of the Act, as it defies the basic intention behind introduction of provisions of section 115JB of the Act. The ITAT Jaipur bench, in case of Shree Cement Led. (supra) had considered an identical issue and held that incentives granted to the assessee is capital receipt and hence, cannot he part of book profit computed us 11SJB or the Acr. Similarly. the ITAT Kolkata Bench, in the case of Sipea India (P) Lid. v. De. CIT I2017 80 taxmann.com 87 (Trib.) had considered an identical issue and held that when, subsidy in question is not in the nature of income, it cannot be regarded as income ven for the purpose of book profit u/s 115JB of the Act, though credited in the profit and loss account and have to be excluded for arriving at the book profit us 115JB of the Act. 49. Insofar as, case laws relied upon by the department, we find that all those case laws have been either considered by the Tribunal or Hich Court and came to conclusion that in those cases the capital receipt is in the nature of income, but by a specific provision, the same has been exempted and hence, the came to the conclusion that, once particular receipt is routed through profit and loss account, then it should be part of book profit and cannot be excluded, while arriving at book profit u/s 115JB of the Act 1961. 50. In this view of the matter and considering the ratio se laws discussed hereinabove, we are of the considered view that when a particular receipt is exempt from tax under the Income tax law, them the same cannot be considered for the purpose of computation of book profit w/s 115JB of the IT.Act 1961. Hence, we direct the Ld. AO to exclude sales tax subsidy received by the assessee amounting to Rs. 36,15,49,828/- from book profits computed w/s 115JB of the IT. Act, 1961. Everest Industries Limited 10 ITA Nos. 715, 718/M/2020, 7793, 7794/M/2020 & 1423, 1418, 654, 653/M/2020 48. We further noted that the ITAT special bench of Kolkata Tribunal, in the care of Sutlej Cotton mills Lad, Asset. CITIES 3EnS I ID 22 kaan, SEy, held that d particular receipt, which is admittedly not an income cannot be brought to tax under the deeming provisions of section 115J of the Act, as it defies the basic intention section 115JB of the Act. The ITAT Jaipur bench, in case of Shree Cement Led. (supra) had considered an identical issue and held that incentives granted to the assessee is capital receipt and hence, cannot he part of book profit computed us r. Similarly. the ITAT Kolkata Bench, in the case of Sipea India (P) Lid. v. De. CIT I2017 80 taxmann.com 87 (Trib.) had considered an identical issue and held that when, subsidy in question is not in the nature of income, it cannot be regarded as income ven for the purpose of book profit u/s 115JB of the Act, though credited in the profit and loss account and have to be excluded for arriving at the book profit us 115JB of 49. Insofar as, case laws relied upon by the hose case laws have been either considered by the Tribunal or Hich Court and came to conclusion that in those cases the capital receipt is in the nature of income, but by a specific provision, the same has been exempted and hence, the n that, once particular receipt is routed through profit and loss account, then it should be part of book profit and cannot be excluded, while arriving at book profit u/s 115JB of the Act 1961. 50. In this view of the matter and considering the ratio se laws discussed hereinabove, we are of the considered view that when a particular receipt is exempt from tax under the Income tax law, them the same cannot be considered for the purpose of computation of book profit w/s 115JB of the IT.Act e direct the Ld. AO to exclude sales tax subsidy received by the assessee amounting to Rs. from book profits computed w/s 115JB 52. We see no reasons to take any other view of the matter than the view so taken by the co following the same, we uphold the plea of the assessee and direct the Assessing Officer to exclude the sales tax incentive subsidy for computing book profit under section 115 JB of the Act. The assessee gets the relief accordin 9.3 The issue in the decisions cited by the Assessing officer is of capital income under the capital capital receipt in the case of the assessee has been held as not as part of income at all and not liable for ta case Ankit Metal and Powers ltd. (supra) , which has been followed in the case of Ambuja Cement Limited (supra) being squarely covered by the decision of the coordinate bench of the Tribunal (supra), the grou accordingly dismissed. 10. As far as grounds rais relates to challenging validity of the reassessment, we find that issue on merit has been decided in favour of the assessee and therefore adjudicating the issue on the validity of the reassessment has been rendered merely academic. Therefore adjudicating the grounds open to the assessee reversed by the higher appellate authorit appeal of the assessee ITA Nos. 715, 718/M/2020, 7793, 7794/M/2020 & 1423, 1418, 654, 653/M/2020 52. We see no reasons to take any other view of the matter than the view so taken by the coordinate bench. Respectfully following the same, we uphold the plea of the assessee and direct the Assessing Officer to exclude the sales tax incentive subsidy for computing book profit under section 115 JB of the Act. The assessee gets the relief accordingly.” The issue in the decisions cited by the Assessing officer is of capital income under the capital gain, which is liable for tax but the capital receipt in the case of the assessee has been held as not as part of income at all and not liable for tax in the decision in the case Ankit Metal and Powers ltd. (supra) , which has been followed in the case of Ambuja Cement Limited (supra). The being squarely covered by the decision of the coordinate bench of ribunal (supra), the grounds raised by the accordingly dismissed. As far as grounds raised by the assessee are concerned relates to challenging validity of the reassessment, we find that issue on merit has been decided in favour of the assessee and e adjudicating the issue on the validity of the reassessment has been rendered merely academic. Therefore adjudicating the grounds raised by the assessee and same are left open to the assessee to challenge in case the decision on merit is reversed by the higher appellate authorities. The ground assessee are accordingly dismissed as infructuous. Everest Industries Limited 11 ITA Nos. 715, 718/M/2020, 7793, 7794/M/2020 & 1423, 1418, 654, 653/M/2020 52. We see no reasons to take any other view of the matter ordinate bench. Respectfully following the same, we uphold the plea of the assessee and direct the Assessing Officer to exclude the sales tax incentive subsidy for computing book profit under section 115 JB of the The issue in the decisions cited by the Assessing officer is of which is liable for tax but the capital receipt in the case of the assessee has been held as not as in the decision in the case Ankit Metal and Powers ltd. (supra) , which has been followed issue in dispute being squarely covered by the decision of the coordinate bench of nds raised by the Revenue are concerned, which relates to challenging validity of the reassessment, we find that issue on merit has been decided in favour of the assessee and e adjudicating the issue on the validity of the reassessment has been rendered merely academic. Therefore, we are not by the assessee and same are left to challenge in case the decision on merit is The grounds of the accordingly dismissed as infructuous. 11. Now we take up the cross appeals for assessment year 2009 10. The grounds raised by the assessee reproduced as under: 1. That on the facts and in the circumstances of the case, the Ld. Commissioner of Income Tax (Appeals) (here referred to as 'Ld. CIT(Appeals) was not justified &rather grossly erred in confirming disall exchange fluctuation loss on reinstatement of CB loan as capital in nature computing total income 11.1 The grounds raised by the 1. (i) Whether the CIT (A) erred on the facts and in the circumstances of the case and in law, in deleting an amount of Rs. 5,83,36,300/ incentive. (ii) Whether the CIT (A) erred on the facts and in the circumstances of the case and in law, in holding that Sales Tax was embedded in the Sales prices charged by the assessee and the same was in the nature of capital receipt. The Ld. CIT(A) ignored the fact required to collect Sales Tax on the Sales made, yet it had worked out the notional Sales Tax so collected and had claimed the same as capital receipts. (iii) Whether the CIT (A) erred on the facts and in the circumstances of decision of ITAT, Mumbai and the decision of Bombay High Court (ITA No. 1299 of 2008) in the case of Reliance Industries Limited, even though subsequent to the Departmental appeal against the Order of High Court, the back to the Bombay High Court to decide afresh and the same is still pending for adjudication. 2. (i) Whether the CIT (A) erred on facts and in the circumstances of the case and in law in holding that the excise duty of Rs. 14,52,06 assessee was capital in nature without any evidence placed ITA Nos. 715, 718/M/2020, 7793, 7794/M/2020 & 1423, 1418, 654, 653/M/2020 Now we take up the cross appeals for assessment year 2009 raised by the assessee reproduced as under: That on the facts and in the circumstances of the case, the Ld. Commissioner of Income Tax (Appeals) (here referred to as 'Ld. CIT(Appeals) was not justified &rather grossly erred in confirming disallowance in respect of foreign exchange fluctuation loss on reinstatement of CB loan as capital in nature amounting to Rs.13,41,01,121/ computing total income under the normal provisions of the Act. grounds raised by the Revenue reproduced as un Whether the CIT (A) erred on the facts and in the circumstances of the case and in law, in deleting an amount of Rs. 5,83,36,300/- being disallowance of claim of sales tax ) Whether the CIT (A) erred on the facts and in the circumstances of the case and in law, in holding that Sales Tax was embedded in the Sales prices charged by the assessee and the same was in the nature of capital receipt. The Ld. CIT(A) ignored the fact that the assessee was legally required to collect Sales Tax on the Sales made, yet it had worked out the notional Sales Tax so collected and had claimed the same as capital receipts. ) Whether the CIT (A) erred on the facts and in the circumstances of the case and in law, in relying on the decision of ITAT, Mumbai and the decision of Bombay High Court (ITA No. 1299 of 2008) in the case of Reliance Industries Limited, even though subsequent to the Departmental appeal against the Order of High Court, the issue has been remitted back to the Bombay High Court to decide afresh and the same is still pending for adjudication. Whether the CIT (A) erred on facts and in the circumstances of the case and in law in holding that the excise duty of Rs. 14,52,06,708/- stated to be collected by the assessee was capital in nature without any evidence placed Everest Industries Limited 12 ITA Nos. 715, 718/M/2020, 7793, 7794/M/2020 & 1423, 1418, 654, 653/M/2020 Now we take up the cross appeals for assessment year 2009- raised by the assessee reproduced as under: That on the facts and in the circumstances of the case, the Ld. Commissioner of Income Tax (Appeals) (here-in-after referred to as 'Ld. CIT(Appeals) was not justified &rather owance in respect of foreign exchange fluctuation loss on reinstatement of CB loan as amounting to Rs.13,41,01,121/- in under the normal provisions of the Act. reproduced as under: Whether the CIT (A) erred on the facts and in the circumstances of the case and in law, in deleting an amount of being disallowance of claim of sales tax ) Whether the CIT (A) erred on the facts and in the circumstances of the case and in law, in holding that Sales Tax was embedded in the Sales prices charged by the assessee and the same was in the nature of capital receipt. that the assessee was legally required to collect Sales Tax on the Sales made, yet it had worked out the notional Sales Tax so collected and had ) Whether the CIT (A) erred on the facts and in the the case and in law, in relying on the decision of ITAT, Mumbai and the decision of Bombay High Court (ITA No. 1299 of 2008) in the case of Reliance Industries Limited, even though subsequent to the Departmental appeal issue has been remitted back to the Bombay High Court to decide afresh and the same Whether the CIT (A) erred on facts and in the circumstances of the case and in law in holding that the excise stated to be collected by the assessee was capital in nature without any evidence placed on record to establish that the said amount was actually collected on account of excise duty. (ii) Without prejudice to the ground at (i) above, whether the CIT (A) erred on facts and in the circumstances of the case and in law in holding that the excise duty of Rs. 14,52,06,708/ nature despite the fact that the same was collected by the assessee on goods which were e duty as per the Central Excise Department's Notification No. 50/2002-CE dated 10.06.2003 (iii) Whether the CIT (A) erred on facts and in the circumstances of the case and in law in holding that the excise duty of Rs. 14,52,06,708/ capital in nature by comparing the scheme of exemption under which the claim was made by the assessee by such other schemes wherein the mode of incentive was in the nature of refund/reimbursement or subsidy. 3. (i) Whether th circumstances of the case and in law, in directing the AO to exclude Sales Tax incentive and Excise Duty Exemption while computing the book profits us 115JB of the Act, without appreciating that they have not been sp Explanation 1 to section 115]B of the Act. (ii) Whether the CIT (A) erred on the facts and in the circumstances of the case and in law, in directing the AO to exclude Sales Tax incentive and Excise Duty Exemption, while computing the that no adjustment other than the ones mentioned in Sec.115JB is permissible as held by the Supreme Court in the case of Apollo Tyres Ltd. (255ITR 273) 12. The sole ground of the appeal of the assessee disallowance in respect of foreign reinstatement of E amounting to ₹13,41,01, ITA Nos. 715, 718/M/2020, 7793, 7794/M/2020 & 1423, 1418, 654, 653/M/2020 on record to establish that the said amount was actually collected on account of excise duty. ) Without prejudice to the ground at (i) above, whether the (A) erred on facts and in the circumstances of the case and in law in holding that the excise duty of Rs. 14,52,06,708/- collected by the assessee was not revenue in nature despite the fact that the same was collected by the assessee on goods which were exempted from levy of any duty as per the Central Excise Department's Notification No. CE dated 10.06.2003 ) Whether the CIT (A) erred on facts and in the circumstances of the case and in law in holding that the excise duty of Rs. 14,52,06,708/- collected by the assessee was capital in nature by comparing the scheme of exemption under which the claim was made by the assessee by such other schemes wherein the mode of incentive was in the nature of refund/reimbursement or subsidy. Whether the CIT (A) erred on the facts and in the circumstances of the case and in law, in directing the AO to exclude Sales Tax incentive and Excise Duty Exemption while computing the book profits us 115JB of the Act, without appreciating that they have not been specifically excluded in Explanation 1 to section 115]B of the Act. (ii) Whether the CIT (A) erred on the facts and in the circumstances of the case and in law, in directing the AO to exclude Sales Tax incentive and Excise Duty Exemption, while computing the book profits us 115JB of the Act despite the fact that no adjustment other than the ones mentioned in Sec.115JB is permissible as held by the Supreme Court in the case of Apollo Tyres Ltd. (255ITR 273) sole ground of the appeal of the assessee disallowance in respect of foreign-exchange fluctuations loss on the External Commercial Borrowing 13,41,01,121/- holding it as capital in nature Everest Industries Limited 13 ITA Nos. 715, 718/M/2020, 7793, 7794/M/2020 & 1423, 1418, 654, 653/M/2020 on record to establish that the said amount was actually ) Without prejudice to the ground at (i) above, whether the (A) erred on facts and in the circumstances of the case and in law in holding that the excise duty of Rs. collected by the assessee was not revenue in nature despite the fact that the same was collected by the xempted from levy of any duty as per the Central Excise Department's Notification No. ) Whether the CIT (A) erred on facts and in the circumstances of the case and in law in holding that the excise collected by the assessee was capital in nature by comparing the scheme of exemption under which the claim was made by the assessee by such other schemes wherein the mode of incentive was in the nature of e CIT (A) erred on the facts and in the circumstances of the case and in law, in directing the AO to exclude Sales Tax incentive and Excise Duty Exemption while computing the book profits us 115JB of the Act, without ecifically excluded in (ii) Whether the CIT (A) erred on the facts and in the circumstances of the case and in law, in directing the AO to exclude Sales Tax incentive and Excise Duty Exemption, while book profits us 115JB of the Act despite the fact that no adjustment other than the ones mentioned in Sec.115JB is permissible as held by the Supreme Court in the sole ground of the appeal of the assessee relates to exchange fluctuations loss on the orrowing (ECB) loan as capital in nature 13. The brief facts qua the issue in dispute that on this issue the assessee is before us in second round of proceedings. In first round, the Assessing Officer observed that duri consideration, the assessee availed a loan of US dollar 12 milli as external commercial borrowing (ECB) which was reinstated in the balance sheet at the end of the year on the basis of the exchange rate of US dollar prevai a loss of ₹13,41,01,121/ 13.1 In the books of accounts, the extent of ₹12,35.43 lakhs in accordance with accounting standard 11 as modified by the notification of Ministry of corporate affairs and balance amount of “Foreign Currency Monetary (FCMITDA)”following the notification issued by the Ministry of Corporate Affairs, and was proposed to be amortised over a period of three years. During the year assessee₹amortised Rs. 13.2 For the purpose of income tax, the assessee claimed entire loss of ₹13,41.01 lakhs as deduction treating it as business loss. The Tribunal while its order dated 20/01/2018 3849/Mum/2015 , after analyzing the decision of Court in the case of Sutlej Cotton Ltd other decisions including decision of Pune Bench of Tribunal in the ITA Nos. 715, 718/M/2020, 7793, 7794/M/2020 & 1423, 1418, 654, 653/M/2020 The brief facts qua the issue in dispute that on this issue the assessee is before us in second round of proceedings. In first round, the Assessing Officer observed that during the year under , the assessee availed a loan of US dollar 12 milli external commercial borrowing (ECB) which was reinstated in the balance sheet at the end of the year on the basis of the exchange rate of US dollar prevailing on the year, which 121/-. In the books of accounts, the assessee capitalised the loss to 35.43 lakhs in accordance with accounting standard 11 as modified by the notification of Ministry of corporate affairs and balance amount of ₹105.57 lakhs was transferred to Foreign Currency Monetary Item Translation Difference Account following the notification issued by the Ministry of ffairs, and was proposed to be amortised over a period During the year under consideration amortised Rs. 34.13 lakhs. For the purpose of income tax, the assessee claimed entire 41.01 lakhs as deduction treating it as business loss. ribunal while its order dated 20/01/2018 in ITA No. 3804 and 3849/Mum/2015 , after analyzing the decision of Hon’ble Sutlej Cotton Ltd Vs CIT ( 1979) 116 ITR 1, other decisions including decision of Pune Bench of Tribunal in the Everest Industries Limited 14 ITA Nos. 715, 718/M/2020, 7793, 7794/M/2020 & 1423, 1418, 654, 653/M/2020 The brief facts qua the issue in dispute that on this issue the assessee is before us in second round of proceedings. In first round, ng the year under , the assessee availed a loan of US dollar 12 million, external commercial borrowing (ECB) which was reinstated in the balance sheet at the end of the year on the basis of the , which resulted in the assessee capitalised the loss to 35.43 lakhs in accordance with accounting standard 11 as modified by the notification of Ministry of corporate 105.57 lakhs was transferred to Item Translation Difference Account following the notification issued by the Ministry of ffairs, and was proposed to be amortised over a period under consideration, the For the purpose of income tax, the assessee claimed entire 41.01 lakhs as deduction treating it as business loss. in ITA No. 3804 and Hon’ble Supreme Vs CIT ( 1979) 116 ITR 1, and other decisions including decision of Pune Bench of Tribunal in the case Cooper Corporation Ltd (2016) 159 ITD 165 Pune, restored the matter back to the Assessing Officer for relevant finding of the “49. We have heard rival contentions and perused the record. We notice that the Ld CIT(A) has confirmed the disallowance by taking the view that the foreign exchange valu notional loss and not actual business loss. The view so taken by Ld CIT(A) is apparently not in accordance with the decision rendered by Hon'ble Supreme Court in the case of Woodward Governor India P Ltd (2009)(312 ITR 254)(SC), wherein the Hon'ble Supreme Court has expressed the view that the valuation is a part of accounting system and that the loss suffered by the assessee on account of exchange difference (on revenue account) as on the date of balance sheet is an item of expenditure u/s 50. It is also pertinent to extract below the observations made by the Hon'ble Supreme Court in this regard in the above cited case:- "In the case of Sutlej Cotton Mills Ltd. v. CIT 1 this Court has observed as under: "The law may, therefore, now be taken to be well settled that where profit or loss arises to an assessee on account of appreciation or depreciation in the value of foreign currency held by it, on conversi would ordinarily be a trading profit or loss if the foreign currency is held by the assessee on revenue account or as a trading asset or as a part of circulating capital embarked in the business. But, if on the as a capital asset or as fixed capital, such profit or loss would be of capital nature." (emphasis supplied) ITA Nos. 715, 718/M/2020, 7793, 7794/M/2020 & 1423, 1418, 654, 653/M/2020 case Cooper Corporation Ltd (2016) 159 ITD 165 Pune, restored the matter back to the Assessing Officer for deciding afresh relevant finding of the Tribunal (supra) is reproduced as under: 49. We have heard rival contentions and perused the record. We notice that the Ld CIT(A) has confirmed the disallowance by taking the view that the foreign exchange valu notional loss and not actual business loss. The view so taken by Ld CIT(A) is apparently not in accordance with the decision rendered by Hon'ble Supreme Court in the case of Woodward Governor India P Ltd (2009)(312 ITR 254)(SC), wherein the Hon'ble Supreme Court has expressed the view that the valuation is a part of accounting system and that the loss suffered by the assessee on account of exchange difference (on revenue account) as on the date of balance sheet is an item of expenditure u/s 37(1) of the Act. 50. It is also pertinent to extract below the observations made by the Hon'ble Supreme Court in this regard in the above cited Sutlej Cotton Mills Ltd. v. CIT repo 1 this Court has observed as under: "The law may, therefore, now be taken to be well settled that where profit or loss arises to an assessee on account of appreciation or depreciation in the value of foreign currency held by it, on conversion into another currency, such profit or loss would ordinarily be a trading profit or loss if the foreign currency is held by the assessee on revenue account or as a trading asset or as a part of circulating capital embarked in the business. But, if on the other hand, the foreign currency is held as a capital asset or as fixed capital, such profit or loss would be of capital nature." (emphasis supplied) Everest Industries Limited 15 ITA Nos. 715, 718/M/2020, 7793, 7794/M/2020 & 1423, 1418, 654, 653/M/2020 case Cooper Corporation Ltd (2016) 159 ITD 165 Pune, restored deciding afresh. The reproduced as under: 49. We have heard rival contentions and perused the record. We notice that the Ld CIT(A) has confirmed the disallowance by taking the view that the foreign exchange valuation loss is a notional loss and not actual business loss. The view so taken by Ld CIT(A) is apparently not in accordance with the decision rendered by Hon'ble Supreme Court in the case of Woodward Governor India P Ltd (2009)(312 ITR 254)(SC), wherein the Hon'ble Supreme Court has expressed the view that the valuation is a part of accounting system and that the loss suffered by the assessee on account of exchange difference (on revenue account) as on the date of balance sheet is an item of 50. It is also pertinent to extract below the observations made by the Hon'ble Supreme Court in this regard in the above cited reported in 116 ITR "The law may, therefore, now be taken to be well settled that where profit or loss arises to an assessee on account of appreciation or depreciation in the value of foreign currency held on into another currency, such profit or loss would ordinarily be a trading profit or loss if the foreign currency is held by the assessee on revenue account or as a trading asset or as a part of circulating capital embarked in the other hand, the foreign currency is held as a capital asset or as fixed capital, such profit or loss would 21. In conclusion, we may state that in order to find out if an expenditure is deductible the following account (i) whether the system of accounting followed by the assessee is mercantile system, which brings into debit the expenditure amount for which a legal liability has been incurred before it is actually disbursed and brings into c due, immediately it becomes due and before it is actually received; (ii) whether the same system is followed by the assessee from the very beginning and if there was a change in the system, whether the change was bona fide; (iii) whether the assessee has given the same treatment to losses claimed to have accrued and to the gains that may accrue to it; (iv) whether the assessee has been consistent and definite in making entries in the account books in respect of losses and gains; (v) whether th making entries in the books both in respect of losses and gains is as per nationally accepted accounting standards; (vi) whether the system adopted by the assessee is fair and reasonable or is adopted only with a view t The Hon'ble Supreme Court has made a distinction between the circulating capital/ trading asset and Fixed capital/capital asset. While the loss arising on revaluation of foreign currency held in the former category is on revaluation of foreign currency held in later category is a capital loss. 51. The Hon'ble Bombay High Court had an occasion to examine an identical issue in the case of Ltd (206 ITR 291) and the Hon'ble Bombay High Court has laid down following principles: "15. The propositions that emerge from the above discussions may be summed up as follows : ITA Nos. 715, 718/M/2020, 7793, 7794/M/2020 & 1423, 1418, 654, 653/M/2020 21. In conclusion, we may state that in order to find out if an expenditure is deductible the following have to be taken into account (i) whether the system of accounting followed by the assessee is mercantile system, which brings into debit the expenditure amount for which a legal liability has been incurred before it is actually disbursed and brings into c due, immediately it becomes due and before it is actually received; (ii) whether the same system is followed by the assessee from the very beginning and if there was a change in the system, whether the change was bona fide; (iii) whether the assessee has given the same treatment to losses claimed to have accrued and to the gains that may accrue to it; (iv) whether the assessee has been consistent and definite in making entries in the account books in respect of losses and gains; (v) whether the method adopted by the assessee for making entries in the books both in respect of losses and gains is as per nationally accepted accounting standards; (vi) whether the system adopted by the assessee is fair and reasonable or is adopted only with a view to reducing the incidence of taxation." The Hon'ble Supreme Court has made a distinction between the circulating capital/ trading asset and Fixed capital/capital asset. While the loss arising on revaluation of foreign currency held in the former category is a trading loss and the loss arising on revaluation of foreign currency held in later category is a 51. The Hon'ble Bombay High Court had an occasion to examine an identical issue in the case of CIT Vs. V.S. Dempo and Co. P (206 ITR 291) and the Hon'ble Bombay High Court has laid down following principles:- "15. The propositions that emerge from the above discussions may be summed up as follows : Everest Industries Limited 16 ITA Nos. 715, 718/M/2020, 7793, 7794/M/2020 & 1423, 1418, 654, 653/M/2020 21. In conclusion, we may state that in order to find out if an have to be taken into account (i) whether the system of accounting followed by the assessee is mercantile system, which brings into debit the expenditure amount for which a legal liability has been incurred before it is actually disbursed and brings into credit what is due, immediately it becomes due and before it is actually received; (ii) whether the same system is followed by the assessee from the very beginning and if there was a change in the system, whether the change was bona fide; (iii) whether the assessee has given the same treatment to losses claimed to have accrued and to the gains that may accrue to it; (iv) whether the assessee has been consistent and definite in making entries in the account books in respect of losses and e method adopted by the assessee for making entries in the books both in respect of losses and gains is as per nationally accepted accounting standards; (vi) whether the system adopted by the assessee is fair and reasonable or is o reducing the incidence of taxation." The Hon'ble Supreme Court has made a distinction between the circulating capital/ trading asset and Fixed capital/capital asset. While the loss arising on revaluation of foreign currency a trading loss and the loss arising on revaluation of foreign currency held in later category is a 51. The Hon'ble Bombay High Court had an occasion to examine CIT Vs. V.S. Dempo and Co. P (206 ITR 291) and the Hon'ble Bombay High Court has laid "15. The propositions that emerge from the above discussions (i) A loss arising in the process of conve which is part of the trading asset of the assessee is a trading loss as any other loss. (ii) In determining the true nature and character of the loss, the cause which occasions the loss is immaterial; what is material is whether the loss has occurred in the course of carrying on the business or is incidental to it. (iii) If there is loss in a trading asset, it would be a trading loss, whatever be its cause because it would be a loss in the course of carrying on the business, (iv) Loss in respect of circulating capital is revenue loss whereas loss in respect of fixed capital is not. (v) Loss resulting from depreciation of the foreign currency which is utilised or intended to be utilised in business and is part of the circulating capi depreciation of fixed capital on account of alteration in exchange rate would be a capital loss. (vi) For determining whether devaluation loss is revenue loss or capital loss what is relevant is the utilisation of the amou the time of devaluation and not the object for which the loan had been obtained. Even if the foreign currency was intended or had originally been utilised for acquisition of fixed asset, if at the time of devaluation it had changed its character and assumed the new character of stock capital, the loss that occurred on account of devaluation shall be a revenue loss and not a capital loss. (vii) The way in which the entries are made by an assessee in the books of account is n whether the assessee has earned any profit or suffered any loss. What is necessary to be considered is the true nature of the transaction and whether in fact it has resulted in profit or loss to the assessee." 52. The Hon'ble Supreme Court has also observed in the case of Woodward Governor India P Ltd (supra) that the profits and ITA Nos. 715, 718/M/2020, 7793, 7794/M/2020 & 1423, 1418, 654, 653/M/2020 (i) A loss arising in the process of conversion of foreign currency which is part of the trading asset of the assessee is a trading loss as any other loss. (ii) In determining the true nature and character of the loss, the cause which occasions the loss is immaterial; what is material he loss has occurred in the course of carrying on the business or is incidental to it. (iii) If there is loss in a trading asset, it would be a trading loss, whatever be its cause because it would be a loss in the course of carrying on the business, oss in respect of circulating capital is revenue loss whereas loss in respect of fixed capital is not. (v) Loss resulting from depreciation of the foreign currency which is utilised or intended to be utilised in business and is part of the circulating capital, would be a trading loss, but depreciation of fixed capital on account of alteration in exchange rate would be a capital loss. (vi) For determining whether devaluation loss is revenue loss or capital loss what is relevant is the utilisation of the amou the time of devaluation and not the object for which the loan had been obtained. Even if the foreign currency was intended or had originally been utilised for acquisition of fixed asset, if at the time of devaluation it had changed its character and assumed the new character of stock-in-trade or circulating capital, the loss that occurred on account of devaluation shall be a revenue loss and not a capital loss. (vii) The way in which the entries are made by an assessee in the books of account is not determinative of the question whether the assessee has earned any profit or suffered any loss. What is necessary to be considered is the true nature of the transaction and whether in fact it has resulted in profit or loss to the assessee." le Supreme Court has also observed in the case of Woodward Governor India P Ltd (supra) that the profits and Everest Industries Limited 17 ITA Nos. 715, 718/M/2020, 7793, 7794/M/2020 & 1423, 1418, 654, 653/M/2020 rsion of foreign currency which is part of the trading asset of the assessee is a trading (ii) In determining the true nature and character of the loss, the cause which occasions the loss is immaterial; what is material he loss has occurred in the course of carrying on the (iii) If there is loss in a trading asset, it would be a trading loss, whatever be its cause because it would be a loss in the course oss in respect of circulating capital is revenue loss whereas (v) Loss resulting from depreciation of the foreign currency which is utilised or intended to be utilised in business and is tal, would be a trading loss, but depreciation of fixed capital on account of alteration in exchange (vi) For determining whether devaluation loss is revenue loss or capital loss what is relevant is the utilisation of the amount at the time of devaluation and not the object for which the loan had been obtained. Even if the foreign currency was intended or had originally been utilised for acquisition of fixed asset, if at the time of devaluation it had changed its character and had trade or circulating capital, the loss that occurred on account of devaluation shall be (vii) The way in which the entries are made by an assessee in ot determinative of the question whether the assessee has earned any profit or suffered any loss. What is necessary to be considered is the true nature of the transaction and whether in fact it has resulted in profit or le Supreme Court has also observed in the case of Woodward Governor India P Ltd (supra) that the profits and gains of the previous year are required to be computed in accordance with the relevant accounting standard (paragraph 16). Hence the Hon'ble Suprem of AS-11 and finally upheld the view taken by the assessee, in the case before Hon'ble Supreme Court, that the foreign exchange fluctuation arising on valuation as on the date of balance sheet is required to be adjusted to u/s 43A of the Act 53. The Ld D.R took the support of sec. 43 accordingly supported the action of the AO in adjusti foreign exchange loss to the value of assets. However, a perusal of the provisions of sec. 43A would show that the said section shall have application only in a case where any asset is acquired in any previous year from a country outside India for the purposes of acquired in India, in our view, the provisions of sec. 43A shall not have application. 54. In the instant case, it is not clear as to whether the foreign currency loan availed by the assessee w asset from a country outside India. Hence to decide about the applicability or otherwise of provisions of sec. 43A, the details of purchase of assets are required. However, we notice that the assessee has taken a plea before Ld CIT(A the foreign currency loan for acquiring assets from a country outside India. However this submission of the assessee has not been examined by the tax authorities. Upon verification, if it is found to be correct, then the provisions o applicable to the assessee. 55. We have noticed earlier that the Hon'ble held that the profits and gains are required to be computed in accordance with the relevant accounting standard. We have also noticed that the loss arising on valuation of foreign exchange can either be on revenue account or on capital account, depending upon the fact of the case, i.e., whether the ITA Nos. 715, 718/M/2020, 7793, 7794/M/2020 & 1423, 1418, 654, 653/M/2020 gains of the previous year are required to be computed in accordance with the relevant accounting standard (paragraph 16). Hence the Hon'ble Supreme Court analysed various clauses 11 and finally upheld the view taken by the assessee, in the case before Hon'ble Supreme Court, that the foreign exchange fluctuation arising on valuation as on the date of balance sheet is required to be adjusted to the value of assets A of the Act. 53. The Ld D.R took the support of sec. 43A of the Act accordingly supported the action of the AO in adjusti foreign exchange loss to the value of assets. However, a perusal of the provisions of sec. 43A would show that the said section shall have application only in a case where any asset is acquired in any previous year from a country outside India for he purposes of his business or profession. If the assets were acquired in India, in our view, the provisions of sec. 43A shall not have application. 54. In the instant case, it is not clear as to whether the foreign currency loan availed by the assessee was used to acquire any asset from a country outside India. Hence to decide about the applicability or otherwise of provisions of sec. 43A, the details of purchase of assets are required. However, we notice that the assessee has taken a plea before Ld CIT(A) that it has not used the foreign currency loan for acquiring assets from a country outside India. However this submission of the assessee has not been examined by the tax authorities. Upon verification, if it is found to be correct, then the provisions of sec. 43A shall not be applicable to the assessee. 55. We have noticed earlier that the Hon'ble Supreme Court has held that the profits and gains are required to be computed in accordance with the relevant accounting standard. We have also noticed that the loss arising on valuation of foreign exchange can either be on revenue account or on capital ccount, depending upon the fact of the case, i.e., whether the Everest Industries Limited 18 ITA Nos. 715, 718/M/2020, 7793, 7794/M/2020 & 1423, 1418, 654, 653/M/2020 gains of the previous year are required to be computed in accordance with the relevant accounting standard (paragraph e Court analysed various clauses 11 and finally upheld the view taken by the assessee, in the case before Hon'ble Supreme Court, that the foreign exchange fluctuation arising on valuation as on the date of the value of assets A of the Act and accordingly supported the action of the AO in adjusting the foreign exchange loss to the value of assets. However, a perusal of the provisions of sec. 43A would show that the said section shall have application only in a case where any asset is acquired in any previous year from a country outside India for his business or profession. If the assets were acquired in India, in our view, the provisions of sec. 43A shall 54. In the instant case, it is not clear as to whether the foreign as used to acquire any asset from a country outside India. Hence to decide about the applicability or otherwise of provisions of sec. 43A, the details of purchase of assets are required. However, we notice that the ) that it has not used the foreign currency loan for acquiring assets from a country outside India. However this submission of the assessee has not been examined by the tax authorities. Upon verification, if it is f sec. 43A shall not be Supreme Court has held that the profits and gains are required to be computed in accordance with the relevant accounting standard. We have also noticed that the loss arising on valuation of foreign exchange can either be on revenue account or on capital ccount, depending upon the fact of the case, i.e., whether the loan has been used as circulating capital or as fixed capital. The Hon'ble Bombay High Court has held in the case of V.S.Dempo& Co. P Ltd (supra) that for determining whether devaluation loss is revenue loss or capital loss what is relevant is the utilisation of the amount at the time of devaluation and not the object for which the loan had been obtained, i.e., if the foreign currency loan was obtained to hold it a fixed capital and later on it converted into circulating capital, then the valuation loss shall be considered as on revenue account. These principles, in our view, would govern the nature of treatment to be accorded to the loss arising on account of restatement of foreign currency loans. 56. In the instant case, the nature of foreign currency loan availed by the assessee; whether it was held as fixed capital or circulating capital etc., have not been examined or brought on record. The assessee has simply taken the currency loan has been used for the purpose of business and hence the loss arising its revaluation is allowable. In our view, it may be difficult to accept the said proposition of the assessee without examining the nature of loan and its utilisation. 57. Further we notice that the assessee has capitalised a sum of Rs.1235.43 lakhs by following paragraph 46 of the Accounting Standard Affairs under the Companies (Accounting Standards) Rules, 2006. The accounting s relevant to determine the profits and gains of business. Hence, this aspect would also require consideration. 58. The Ld A.R took support from the decision rendered by Hon'ble Pune bench in the case of Cooper Corporat (2016)(69 taxmann.com 244) to support the claim of loss. However, following observations made by the Pune bench of Tribunal would show that the facts prevailing there is different: ITA Nos. 715, 718/M/2020, 7793, 7794/M/2020 & 1423, 1418, 654, 653/M/2020 loan has been used as circulating capital or as fixed capital. The Hon'ble Bombay High Court has held in the case of V.S.Dempo& Co. P Ltd (supra) that for determining whether devaluation loss s revenue loss or capital loss what is relevant is the utilisation of the amount at the time of devaluation and not the object for which the loan had been obtained, i.e., if the foreign currency loan was obtained to hold it a fixed capital and later on it converted into circulating capital, then the valuation loss shall be considered as on revenue account. These principles, in our view, would govern the nature of treatment to be accorded to the loss arising on account of restatement of foreign currency 56. In the instant case, the nature of foreign currency loan availed by the assessee; whether it was held as fixed capital or circulating capital etc., have not been examined or brought on record. The assessee has simply taken the plea that the for currency loan has been used for the purpose of business and hence the loss arising its revaluation is allowable. In our view, it may be difficult to accept the said proposition of the assessee without examining the nature of loan and its utilisation. 57. Further we notice that the assessee has capitalised a sum of Rs.1235.43 lakhs by following paragraph 46 of the Accounting Standard-11 inserted by the Ministry of Corporate Affairs under the Companies (Accounting Standards) Rules, 2006. The accounting standards, as we have seen earlier, are relevant to determine the profits and gains of business. Hence, this aspect would also require consideration. 58. The Ld A.R took support from the decision rendered by Hon'ble Pune bench in the case of Cooper Corporat (2016)(69 taxmann.com 244) to support the claim of loss. However, following observations made by the Pune bench of Tribunal would show that the facts prevailing there is different: Everest Industries Limited 19 ITA Nos. 715, 718/M/2020, 7793, 7794/M/2020 & 1423, 1418, 654, 653/M/2020 loan has been used as circulating capital or as fixed capital. The Hon'ble Bombay High Court has held in the case of V.S.Dempo& Co. P Ltd (supra) that for determining whether devaluation loss s revenue loss or capital loss what is relevant is the utilisation of the amount at the time of devaluation and not the object for which the loan had been obtained, i.e., if the foreign currency loan was obtained to hold it a fixed capital and later on it was converted into circulating capital, then the valuation loss shall be considered as on revenue account. These principles, in our view, would govern the nature of treatment to be accorded to the loss arising on account of restatement of foreign currency 56. In the instant case, the nature of foreign currency loan availed by the assessee; whether it was held as fixed capital or circulating capital etc., have not been examined or brought on plea that the foreign currency loan has been used for the purpose of business and hence the loss arising its revaluation is allowable. In our view, it may be difficult to accept the said proposition of the assessee without examining the nature of loan and its utilisation. 57. Further we notice that the assessee has capitalised a sum of Rs.1235.43 lakhs by following paragraph 46 of the 11 inserted by the Ministry of Corporate Affairs under the Companies (Accounting Standards) Rules, tandards, as we have seen earlier, are relevant to determine the profits and gains of business. Hence, 58. The Ld A.R took support from the decision rendered by Hon'ble Pune bench in the case of Cooper Corporation (P) Ltd (2016)(69 taxmann.com 244) to support the claim of loss. However, following observations made by the Pune bench of Tribunal would show that the facts prevailing there is different:- "10.9 We find that the decision in the case of Sutlej Cotton M Ltd. (supra) relied upon by the Ld. Departmental Representative is of no assistance to the Revenue. The Hon'ble Supreme Court therein stated the principle of law that where any profit or loss arises to an assessee on account of depreciation in foreign currency held by him on conversion from another currency, such profit and loss would ordinary be trading loss if the foreign currency held by the assessee on revenue account as trading asset or as a part of circulating capital embargo in business. However, if the foreign currency is held as a capital asset, the loss should be capital in nature. The aforesaid principle of law is required to be applied to the facts of case to determine whether the foreign currency is held by the assessee on revenue account or as a part of circulating capital. In the present case, fluctuation loss inflicted upon the assessee bears no nexus or relation to the acquisition to the assets. The action of the assessee is tied up to its underlying objective i.e. saving in interest costs, hedging its revenue receipts etc. which are undoubtedly on revenue account. Thus, the loss generated in impugned action bears the character of revenue expenditure." It can be noticed that the decision in the above said case has been rendered by Pune be prevailing in that case. Hence, we are of the view that the assessee cannot take support from the said decision. 58. Thus, we notice that the facts relating to the foreign currency loan of USD 12 million availed by the be examined in the light of principles discussed in the preceding paragraphs in order to arrive at a fair and just conclusion of the matter. We notice that neither the assessee nor the tax authorities have brought relevant facts on record absence of the same, it will not be possible for us to apply the legal principles discussed above. Under these set of facts, we are of the view that this issue requires fresh examination at the end of the assessing officer. Accordingly we restore the file of the assessing officer with the direction to examine the ITA Nos. 715, 718/M/2020, 7793, 7794/M/2020 & 1423, 1418, 654, 653/M/2020 "10.9 We find that the decision in the case of Sutlej Cotton M Ltd. (supra) relied upon by the Ld. Departmental Representative is of no assistance to the Revenue. The Hon'ble Supreme Court therein stated the principle of law that where any profit or loss arises to an assessee on account of depreciation in foreign currency held by him on conversion from another currency, such profit and loss would ordinary be trading loss if the foreign currency held by the assessee on revenue account as trading asset or as a part of circulating capital embargo in business. , if the foreign currency is held as a capital asset, the loss should be capital in nature. The aforesaid principle of law is required to be applied to the facts of case to determine whether the foreign currency is held by the assessee on revenue r as a part of circulating capital. In the present case, fluctuation loss inflicted upon the assessee bears no nexus or relation to the acquisition to the assets. The action of the assessee is tied up to its underlying objective i.e. saving in ts, hedging its revenue receipts etc. which are undoubtedly on revenue account. Thus, the loss generated in impugned action bears the character of revenue expenditure." It can be noticed that the decision in the above said case has been rendered by Pune bench of Tribunal on the basis of facts prevailing in that case. Hence, we are of the view that the assessee cannot take support from the said decision. 58. Thus, we notice that the facts relating to the foreign currency loan of USD 12 million availed by the assessee have to be examined in the light of principles discussed in the preceding paragraphs in order to arrive at a fair and just conclusion of the matter. We notice that neither the assessee nor the tax authorities have brought relevant facts on record absence of the same, it will not be possible for us to apply the legal principles discussed above. Under these set of facts, we are of the view that this issue requires fresh examination at the end of the assessing officer. Accordingly we restore the file of the assessing officer with the direction to examine the Everest Industries Limited 20 ITA Nos. 715, 718/M/2020, 7793, 7794/M/2020 & 1423, 1418, 654, 653/M/2020 "10.9 We find that the decision in the case of Sutlej Cotton Mills Ltd. (supra) relied upon by the Ld. Departmental Representative is of no assistance to the Revenue. The Hon'ble Supreme Court therein stated the principle of law that where any profit or loss arises to an assessee on account of depreciation in foreign currency held by him on conversion from another currency, such profit and loss would ordinary be trading loss if the foreign currency held by the assessee on revenue account as trading asset or as a part of circulating capital embargo in business. , if the foreign currency is held as a capital asset, the loss should be capital in nature. The aforesaid principle of law is required to be applied to the facts of case to determine whether the foreign currency is held by the assessee on revenue r as a part of circulating capital. In the present case, fluctuation loss inflicted upon the assessee bears no nexus or relation to the acquisition to the assets. The action of the assessee is tied up to its underlying objective i.e. saving in ts, hedging its revenue receipts etc. which are undoubtedly on revenue account. Thus, the loss generated in impugned action bears the character of revenue expenditure." It can be noticed that the decision in the above said case has nch of Tribunal on the basis of facts prevailing in that case. Hence, we are of the view that the assessee cannot take support from the said decision. 58. Thus, we notice that the facts relating to the foreign assessee have to be examined in the light of principles discussed in the preceding paragraphs in order to arrive at a fair and just conclusion of the matter. We notice that neither the assessee nor the tax authorities have brought relevant facts on record. In the absence of the same, it will not be possible for us to apply the legal principles discussed above. Under these set of facts, we are of the view that this issue requires fresh examination at the end of the assessing officer. Accordingly we restore this issue to the file of the assessing officer with the direction to examine the same afresh by duly analysing the nature of loan, manner of its utilisation, the present position of loan etc., in the light of legal principles discussed above. After afford opportunity of being heard to the assessee, the AO may take appropriate decision in accordance with the law. 13.3 The Assessing Officer examine concluded that loan had been sanctioned and utilised purchase/acquisition of plant and machinery therefore relying on the decision of the Hon’ble Supreme Court in the case of Sutlej Cotton Ltd (supra); Hon’ble Bombay High Court in the case of CIT Vs Dempo and Co. Pvt. Ltd (supra) and Hon’ble Supreme Co the case of Woodword treated the loss as capital expenditure and allowed the depreciation accordingly. 14. The Ld. CIT(A) following judicial precedents, upheld the disallowance observing as under: “8.2 It is seen that the Appellant has suffered Foreign Exchange Fluctuation Loss arising out of CB borrowing for assets acquired in India. The Appellant has claimed it as a "Revenue loss relying on various decisions, the AO has treated it as "capital loss". If the acquire any capital assets from outside India, Section 43CA of the I.T. Act, 1961 would be applicable However, in the case of the Appellant this is not so. Under the circumstances, judicial pronouncements need to be ex judicial pronouncements analogous to the issue under consideration, wherein such deductions has been denied holding to be "capital" in nature. In Shell Company of China Ltd [22 ITR 1(A)], it was held that "gains arising on deposit foreign currency) are capital receipts as the deposits were in essence loan/capital & not trading receipts". ITA Nos. 715, 718/M/2020, 7793, 7794/M/2020 & 1423, 1418, 654, 653/M/2020 same afresh by duly analysing the nature of loan, manner of its utilisation, the present position of loan etc., in the light of legal principles discussed above. After afford opportunity of being heard to the assessee, the AO may take appropriate decision in accordance with the law. The Assessing Officer examined the nature of the loan and concluded that loan had been sanctioned and utilised purchase/acquisition of plant and machinery therefore relying on the decision of the Hon’ble Supreme Court in the case of Sutlej Cotton Ltd (supra); Hon’ble Bombay High Court in the case of CIT Vs Dempo and Co. Pvt. Ltd (supra) and Hon’ble Supreme Co the case of Woodword Governer India Private Limited(supra), treated the loss as capital expenditure and allowed the depreciation The Ld. CIT(A) following judicial precedents, upheld the disallowance observing as under: s seen that the Appellant has suffered Foreign Exchange Fluctuation Loss arising out of CB borrowing for assets acquired in India. The Appellant has claimed it as a "Revenue loss relying on various decisions, the AO has treated it as "capital loss". If the proceeds of the CBs were utilized to acquire any capital assets from outside India, Section 43CA of the I.T. Act, 1961 would be applicable However, in the case of the Appellant this is not so. Under the circumstances, judicial pronouncements need to be examined. There are certain judicial pronouncements analogous to the issue under consideration, wherein such deductions has been denied holding to be "capital" in nature. In Shell Company of China Ltd [22 ITR 1(A)], it was held that "gains arising on deposit foreign currency) are capital receipts as the deposits were in essence loan/capital & not trading receipts". Everest Industries Limited 21 ITA Nos. 715, 718/M/2020, 7793, 7794/M/2020 & 1423, 1418, 654, 653/M/2020 same afresh by duly analysing the nature of loan, manner of its utilisation, the present position of loan etc., in the light of legal principles discussed above. After affording adequate opportunity of being heard to the assessee, the AO may take appropriate decision in accordance with the law. the nature of the loan and concluded that loan had been sanctioned and utilised for purchase/acquisition of plant and machinery therefore relying on the decision of the Hon’ble Supreme Court in the case of Sutlej Cotton Ltd (supra); Hon’ble Bombay High Court in the case of CIT Vs Dempo and Co. Pvt. Ltd (supra) and Hon’ble Supreme Court in Governer India Private Limited(supra), he treated the loss as capital expenditure and allowed the depreciation The Ld. CIT(A) following judicial precedents, upheld the s seen that the Appellant has suffered Foreign Exchange Fluctuation Loss arising out of CB borrowing for assets acquired in India. The Appellant has claimed it as a "Revenue loss relying on various decisions, the AO has treated proceeds of the CBs were utilized to acquire any capital assets from outside India, Section 43CA of the I.T. Act, 1961 would be applicable However, in the case of the Appellant this is not so. Under the circumstances, judicial amined. There are certain judicial pronouncements analogous to the issue under consideration, wherein such deductions has been denied holding to be "capital" in nature. In Shell Company of China Ltd [22 ITR 1(A)], it was held that "gains arising on deposits (in foreign currency) are capital receipts as the deposits were in Further in Sutlej Cotton Mills Ltd., (1979) 116 IT 1 (SC)] it was held by Supreme Court that, "the law may, therefore, now be taken to be wel an assessee on account of appreciation or depreciation in the value of foreign currency held by it, on conversion into anothercurrecny trading profit or loss if th assessee on revenue account or as a trading assetor as a part of circulating capital embarked in the business. But, if on the other hand, the foreign currency is held as a capital asset or as fixed capital, such profit or Also in Tata Locomotive & Engineering Co. Ltd. [TELCO (1966) 60 IT 405 (SC)] a similar view was again reiterated. The aforesaid decisions were later consistently followed by some High Courts in Bestobell (India) Ltd. Uni India, Oil India Limited ], Bharat General and Textile Industries Limited I. Groz Electric Lamp Manufacturers (India) Limited and V. S. Dempo& Co. (P) Ltd. in the context of CB holding that if the foreign exchang ECBs utilized for acquiring capital asset indigenously in India, then such loss will be capital in nature. Considering the facts brought on record and the judicial pronouncements on the issue the foreign exchange 13,41,01, 121/ AO is directed to give appropriate adjustment in depreciation on such fixed assets. Ground partly allowed. 15. Before us, the Ld. counsel of the Hon’ble Supreme Court in the case of Industrial Development Taxman 45 (SC) wherein it is held that for the purpose of ascertaining profit and accounting should be applied, so long as they don’t conflict with the express provision of the relevant statute. ITA Nos. 715, 718/M/2020, 7793, 7794/M/2020 & 1423, 1418, 654, 653/M/2020 Further in Sutlej Cotton Mills Ltd., (1979) 116 IT 1 (SC)] it was held by Supreme Court that, "the law may, therefore, now be taken to be well settled that where the profit or loss arises to an assessee on account of appreciation or depreciation in the value of foreign currency held by it, on conversion into currecny, such profit or loss would ordinarily be a trading profit or loss if the foreign currency is held by the assessee on revenue account or as a trading assetor as a part of circulating capital embarked in the business. But, if on the other hand, the foreign currency is held as a capital asset or as fixed capital, such profit or loss would be of capital nature." Also in Tata Locomotive & Engineering Co. Ltd. [TELCO (1966) 60 IT 405 (SC)] a similar view was again reiterated. The aforesaid decisions were later consistently followed by some High Courts in Bestobell (India) Ltd. Uni India, Oil India Limited ], Bharat General and Textile Industries Limited I. Groz-BeckertSaboo Ltd. Sandoz (India) Electric Lamp Manufacturers (India) Limited and V. S. Dempo& Co. (P) Ltd. in the context of CB holding that if the foreign exchange fluctuation loss arises on restatement of ECBs utilized for acquiring capital asset indigenously in India, then such loss will be capital in nature. Considering the facts brought on record and the judicial pronouncements on the issue the foreign exchange 13,41,01, 121/- is held to be capital in nature. However, the AO is directed to give appropriate adjustment in depreciation on such fixed assets. Ground partly allowed.” Ld. counsel of the assessee referred to decision e Hon’ble Supreme Court in the case of CIT Vs UP State Industrial Development Corporation reported in (1997) 92 wherein it is held that for the purpose of and gains, the ordinary principle of commercial accounting should be applied, so long as they don’t conflict with the express provision of the relevant statute. Everest Industries Limited 22 ITA Nos. 715, 718/M/2020, 7793, 7794/M/2020 & 1423, 1418, 654, 653/M/2020 Further in Sutlej Cotton Mills Ltd., (1979) 116 IT 1 (SC)] it was held by Supreme Court that, "the law may, therefore, now be l settled that where the profit or loss arises to an assessee on account of appreciation or depreciation in the value of foreign currency held by it, on conversion into , such profit or loss would ordinarily be a currency is held by the assessee on revenue account or as a trading assetor as a part of circulating capital embarked in the business. But, if on the other hand, the foreign currency is held as a capital asset or loss would be of capital nature." Also in Tata Locomotive & Engineering Co. Ltd. [TELCO - (1966) 60 IT 405 (SC)] a similar view was again reiterated. The aforesaid decisions were later consistently followed by some High Courts in Bestobell (India) Ltd. Union Carbide India, Oil India Limited ], Bharat General and Textile BeckertSaboo Ltd. Sandoz (India) Electric Lamp Manufacturers (India) Limited and V. S. Dempo& Co. (P) Ltd. in the context of CB holding that if the e fluctuation loss arises on restatement of ECBs utilized for acquiring capital asset indigenously in India, Considering the facts brought on record and the judicial pronouncements on the issue the foreign exchange loss of Rs. is held to be capital in nature. However, the AO is directed to give appropriate adjustment in depreciation of the assessee referred to decision CIT Vs UP State Corporation reported in (1997) 92 wherein it is held that for the purpose of gains, the ordinary principle of commercial accounting should be applied, so long as they don’t conflict with the 15.1 The Ld. counsel for the standard (AS)-11 (Revised accounting standard the foreign foreign currency is required to be recorded as income or loss in books of accounts. difference, the Ld. counsel referred to is reproduced as under: “13. Exchange differences arising on the settlement of monetary items or on reporting an enterprise's monetary items at rates different from those at which they were initially recorded during the perio financial statements, should be recognised as income or as expenses in the period in which they arise, with the exception of exchange differences dealt with in accordance with paragraph 15. " It may be noted that the Institute ha Announcement titled"Treatment of exchange differences under Accounting Standard (AS) 11 (revised2003), The Effects of Changes in Foreign Exchange Rates vis Schedule VI to the Companies Act, 1956. As per the Announcement, the requi of exchange differences contained in AS 11 (revised 2003), is different from Schedule VI to the Companies Act, 1956, since AS 11 (revised 2003) does not require the adjustment of exchange differences in the carrying amount of the fixed assets, in the situations envisaged in Schedule VI. It has been clarified that pending the amendment, if any, to Schedule VI to the Companies Act, 1956, in respect of the matter, a company adopting the treatment described in Schedule VI will st AS 11 (revised 2003) for the purposes of section 211 of the Act. Accordingly, the auditor of the company should not assert non-compliance with AS 11 (2003) under section 227(3)(d) of the Act in such a case and should his report in this regard on the true and fair view of the ITA Nos. 715, 718/M/2020, 7793, 7794/M/2020 & 1423, 1418, 654, 653/M/2020 counsel for the assessee referred to accounting Revised 2003) and submitted that as per normal accounting standard the foreign-exchange gain or loss on loans in is required to be recorded as income or loss in books of accounts. Regarding recognition of the exchange counsel referred to clause 13 of the AS is reproduced as under: 13. Exchange differences arising on the settlement of monetary items or on reporting an enterprise's monetary items at rates different from those at which they were initially recorded during the period, or reported in previous financial statements, should be recognised as income or as expenses in the period in which they arise, with the exception of exchange differences dealt with in accordance with paragraph 15. " It may be noted that the Institute has issued in 2003 an Announcement titled"Treatment of exchange differences under Accounting Standard (AS) 11 (revised2003), The Effects of Changes in Foreign Exchange Rates vis Schedule VI to the Companies Act, 1956. As per the Announcement, the requirement with regard to treatment of exchange differences contained in AS 11 (revised 2003), is different from Schedule VI to the Companies Act, 1956, since AS 11 (revised 2003) does not require the adjustment of exchange differences in the carrying amount f the fixed assets, in the situations envisaged in Schedule VI. It has been clarified that pending the amendment, if any, to Schedule VI to the Companies Act, 1956, in respect of the matter, a company adopting the treatment described in Schedule VI will still be considered to be complying with AS 11 (revised 2003) for the purposes of section 211 of the Act. Accordingly, the auditor of the company should not compliance with AS 11 (2003) under section 227(3)(d) of the Act in such a case and should not qualify his report in this regard on the true and fair view of the Everest Industries Limited 23 ITA Nos. 715, 718/M/2020, 7793, 7794/M/2020 & 1423, 1418, 654, 653/M/2020 referred to accounting submitted that as per normal exchange gain or loss on loans in is required to be recorded as income or loss in Regarding recognition of the exchange clause 13 of the AS-11, which 13. Exchange differences arising on the settlement of monetary items or on reporting an enterprise's monetary items at rates different from those at which they were d, or reported in previous financial statements, should be recognised as income or as expenses in the period in which they arise, with the exception of exchange differences dealt with in accordance s issued in 2003 an Announcement titled"Treatment of exchange differences under Accounting Standard (AS) 11 (revised2003), The Effects of Changes in Foreign Exchange Rates vis-a-vis Schedule VI to the Companies Act, 1956. As per the rement with regard to treatment of exchange differences contained in AS 11 (revised 2003), is different from Schedule VI to the Companies Act, 1956, since AS 11 (revised 2003) does not require the adjustment of exchange differences in the carrying amount f the fixed assets, in the situations envisaged in Schedule VI. It has been clarified that pending the amendment, if any, to Schedule VI to the Companies Act, 1956, in respect of the matter, a company adopting the treatment described ill be considered to be complying with AS 11 (revised 2003) for the purposes of section 211 of the Act. Accordingly, the auditor of the company should not compliance with AS 11 (2003) under section not qualify his report in this regard on the true and fair view of the state of the company's affairs and profit or loss of the company under section 227(2) of the Act. (published in "The Chartered Accountant', November, 2003, pp. 497.) The full text of th the section titled "Announcements of the Council regarding status of various documents issued by the Institute of Chartered Accountants of India' appearing at the beginning of this Compendium. 15.2 The Ld. counsel further referred to revise standards, which superseded came into effect in respect of accounting periods commencing on or after 01/04/2004. The learne 46 of said revised accounting standards and submitted that in respect of accounting periods commencing on or after 07/12/2006 and ending on or before 31/03/2011, at the option of the enterprise, exchange difference arising and reporting of long foreign currency monetary items at rates different from those at which they were initially recorded during the period, or reported in previous financial statements, insofar as they relate to the acquisition of an depr deduced from the cost of the asset and shall be balance life of the asset and in other “Foreign Currency Monetary Item Translation Difference Account (FCMITDA)in the enterprise over the balance life of beyond 31/03/2011. Chartered Accountants of India website to support that said ITA Nos. 715, 718/M/2020, 7793, 7794/M/2020 & 1423, 1418, 654, 653/M/2020 state of the company's affairs and profit or loss of the company under section 227(2) of the Act. (published in "The Chartered Accountant', November, 2003, pp. 497.) The full text of the Announcement has been reproduced in the section titled "Announcements of the Council regarding status of various documents issued by the Institute of Chartered Accountants of India' appearing at the beginning of this Compendium.” counsel further referred to revise superseded the accounting standard AS came into effect in respect of accounting periods commencing on or after 01/04/2004. The learned counsel particularly referred to para accounting standards and submitted that in respect of accounting periods commencing on or after 07/12/2006 and ending on or before 31/03/2011, at the option of the enterprise, exchange difference arising and reporting of long monetary items at rates different from those at which they were initially recorded during the period, or reported in previous financial statements, insofar as they relate to the depreciable capital asset, can be added to or he cost of the asset and shall be depreciated over the set and in other cases can be accumulated in a Foreign Currency Monetary Item Translation Difference Account in the enterprise’s financial statement and amortised life of such long-term asset/liability but not beyond 31/03/2011. The Ld. counsel further referred to Institute of ccountants of India website to support that said Everest Industries Limited 24 ITA Nos. 715, 718/M/2020, 7793, 7794/M/2020 & 1423, 1418, 654, 653/M/2020 state of the company's affairs and profit or loss of the company under section 227(2) of the Act. (published in "The Chartered Accountant', November, 2003, pp. 497.) e Announcement has been reproduced in the section titled "Announcements of the Council regarding status of various documents issued by the Institute of Chartered Accountants of India' appearing at the counsel further referred to revisedaccounting accounting standard AS-11 and came into effect in respect of accounting periods commencing on or counsel particularly referred to para accounting standards and submitted that in respect of accounting periods commencing on or after 07/12/2006 and ending on or before 31/03/2011, at the option of the enterprise, exchange difference arising and reporting of long-term monetary items at rates different from those at which they were initially recorded during the period, or reported in previous financial statements, insofar as they relate to the capital asset, can be added to or reciated over the cases can be accumulated in a Foreign Currency Monetary Item Translation Difference Account financial statement and amortised term asset/liability but not counsel further referred to Institute of ccountants of India website to support that said modification in the accounting standard was done by the Affairs ministry in March 2009 to ease accounting treatment on foreign exchange difference to help the companies global financial crisis in 2008 given an option to refrain from complying with the stipulated that exchange difference on foreign currency borrowing should be recognised only in the profit and loss account. 15.3 The Ld. counsel, submitted that following abo changes in the accounting foreign exchange difference loss in respect of the depreciable assets as capital expenditure standard were transitory and not principle. Therefore, for the purpose of income tax, claimed the said foreign exchange loss as revenue expenditure as per the normal accounting standard As 15.4 The Ld. counsel of the assessee further relied on the decision of theCoordinate bench of the Motor India Ltd 853/Chny/2014 and563/Chny/2015 for assessment year 2009 10 and 2010-11 to support that once the foreign exchange difference for subsequent period is to be treated as revenue expenditure in vi under section 36(1)(iii) of the ITA Nos. 715, 718/M/2020, 7793, 7794/M/2020 & 1423, 1418, 654, 653/M/2020 modification in the accounting standard was done by the ffairs ministry in March 2009 to ease accounting treatment on foreign exchange difference to help the companies global financial crisis in 2008-09 and therefore the India Inc was given an option to refrain from complying with the stipulated that exchange difference on foreign currency borrowing should be recognised only in the profit and loss account. counsel, submitted that following abo changes in the accounting standard, the assessee capitalised th foreign exchange difference loss in respect of the depreciable assets as capital expenditure, but these modification in the accounting standard were transitory and not falls under normal accounting , for the purpose of income tax, said foreign exchange loss as revenue expenditure as per the normal accounting standard As-11. counsel of the assessee further relied on the decision oordinate bench of the Tribunal in the case of Hyundai dia Ltd v. DCIT, LTU, Chennai in ITA No. 853/Chny/2014 and563/Chny/2015 for assessment year 2009 to support that once the asset is put to use the foreign exchange difference for subsequent period is to be treated as revenue expenditure in view of analogous treatment to interest under section 36(1)(iii) of the Act.The Tribunal (supra) relied on the Everest Industries Limited 25 ITA Nos. 715, 718/M/2020, 7793, 7794/M/2020 & 1423, 1418, 654, 653/M/2020 modification in the accounting standard was done by the Corporate ffairs ministry in March 2009 to ease accounting treatment on foreign exchange difference to help the companies to tie over the 09 and therefore the India Inc was given an option to refrain from complying with the AS 11, which stipulated that exchange difference on foreign currency borrowing should be recognised only in the profit and loss account. counsel, submitted that following above transitory the assessee capitalised the foreign exchange difference loss in respect of the depreciable assets these modification in the accounting normal accounting , for the purpose of income tax, the assessee said foreign exchange loss as revenue expenditure as counsel of the assessee further relied on the decision ribunal in the case of Hyundai DCIT, LTU, Chennai in ITA No. 853/Chny/2014 and563/Chny/2015 for assessment year 2009- set is put to use the foreign exchange difference for subsequent period is to be treated as ew of analogous treatment to interest (supra) relied on the decision of coordinate bench in the case of Private Limited Vs DCIT (2016) 159 165 (Pune) 15.5 The Ld. counsel also relied on the decision dated 16/03/2018 of the Tribunal Cochin Bench in the case of Resorts Ltd reported in (2019) 105 taxmann.com 335 is held that the Assessing Officer fluctuation in respect of foreign currency loan used for assets acquired outside India and of section 43A orAS-11 (2003) accordingly. 15.6 The Ld. counsel also bench of the Tribunal dated and Mahindra Ltd (2020) 117 taxmann.com 518 ( in support of the claim that foreign exchange loss should be allowed as revenue expenditure. 16. On the contrary, the CIT(A) and submitted gain/loss is arising from a fixed capital the Hon’ble Supreme Court in the cas (supra), same would be capital in nature, and thus decisio Tribunal cited by the learne acted upon keeping in view the judicial hierarchy. The submitted that complete details of application of foreign currency loan for purchase of assets were not provi ITA Nos. 715, 718/M/2020, 7793, 7794/M/2020 & 1423, 1418, 654, 653/M/2020 decision of coordinate bench in the case of Cooper Corporation Private Limited Vs DCIT (2016) 159 165 (Pune). counsel also relied on the decision dated 16/03/2018 ribunal Cochin Bench in the case of MFAR Ltd reported in (2019) 105 taxmann.com 335 is held that the Assessing Officer should bifurcate foreign n in respect of foreign currency loan used for assets acquired outside India and indigenous assets and apply provisions 11 (2003) accordingly. counsel also referred to the decision of the Mumbai ribunal dated 19/06/2020 in the case of td (2020) 117 taxmann.com 518 ( in support of the claim that foreign exchange loss should be allowed as revenue expenditure. On the contrary, the Ld.DR relied on the order of the Ld. and submitted thatin the case of the assessee, gain/loss is arising from a fixed capital, in view of the Hon’ble Supreme Court in the case of Sutlej Cotton Mils Limited same would be capital in nature, and thus decisio ribunal cited by the learned counsel of the assessee need not to be acted upon keeping in view the judicial hierarchy. The submitted that complete details of application of foreign currency loan for purchase of assets were not provided before the Assessing Everest Industries Limited 26 ITA Nos. 715, 718/M/2020, 7793, 7794/M/2020 & 1423, 1418, 654, 653/M/2020 Cooper Corporation counsel also relied on the decision dated 16/03/2018 MFAR Hotels and Ltd reported in (2019) 105 taxmann.com 335, wherein it should bifurcate foreign-exchange n in respect of foreign currency loan used for assets assets and apply provisions to the decision of the Mumbai 19/06/2020 in the case of Mahindra td (2020) 117 taxmann.com 518 (Mumbai-Trib) in support of the claim that foreign exchange loss should be allowed relied on the order of the Ld. assessee, the forex , in view of the decision of e of Sutlej Cotton Mils Limited same would be capital in nature, and thus decision of the counsel of the assessee need not to be acted upon keeping in view the judicial hierarchy. The ld.DR further submitted that complete details of application of foreign currency ded before the Assessing Officer even in the second round of assessment proceeding. She referred to the finding of the Assessing Officer in para 5.2 of the assessment order wherethe AO had provided bills of balance purchase for rupees 18.26 crores, out of the total loan amount of ₹ 48.37 whether the assets to the extent of or foreign assets is submitted that if at all, the assessee is allowed the claim then revenue expenditure should be restricted to the amount of crore only. 17. We have heard rival submission of the parties on the issue in dispute and perused the relevant material on record. dispute before us is fluctuation loss/gain in respect of the foreign loans, which according to the assessee have been utilised for purchase of assets from domestic market. The revenue has application of quantum of loan utilised for purchase of domestic assets in view of incomplete details filed by the assessee before Assessing Officer. 17.1 As far as any gain or loss due to foreign exchange fluctuation in respect of the foreign loan for purchase of capital asset from overseas market is concerned ITA Nos. 715, 718/M/2020, 7793, 7794/M/2020 & 1423, 1418, 654, 653/M/2020 Officer even in the second round of assessment proceeding. She referred to the finding of the Assessing Officer in para 5.2 of the wherethe AO has mentioned that the assessee had provided bills of ₹ 34.11 crores and not provided bills of purchase for rupees 18.26 crores, out of the total loan 48.37 crores. Thus according to the learne to the extent of Rs. 18.26 crore are indigenous not clear and therefore without prejudice she submitted that if at all, the assessee is allowed the claim then revenue expenditure should be restricted to the amount of We have heard rival submission of the parties on the issue in dispute and perused the relevant material on record. dispute before us is determination of character of foreign fluctuation loss/gain in respect of the foreign loans, which according to the assessee have been utilised for purchase of assets from domestic market. The revenue has also application of quantum of loan utilised for purchase of domestic assets in view of incomplete details filed by the assessee before As far as any gain or loss due to foreign exchange fluctuation in respect of the foreign loan for purchase of capital asset from overseas market is concerned, the section 43A of the Everest Industries Limited 27 ITA Nos. 715, 718/M/2020, 7793, 7794/M/2020 & 1423, 1418, 654, 653/M/2020 Officer even in the second round of assessment proceeding. She referred to the finding of the Assessing Officer in para 5.2 of the has mentioned that the assessee d not provided bills of purchase for rupees 18.26 crores, out of the total loan Thus according to the learnedDR , 18.26 crore are indigenous ore without prejudice she submitted that if at all, the assessee is allowed the claim then revenue expenditure should be restricted to the amount of ₹30.11 We have heard rival submission of the parties on the issue in dispute and perused the relevant material on record. The issue in foreign-exchange fluctuation loss/gain in respect of the foreign loans, which according to the assessee have been utilised for purchase of assets also disputed the application of quantum of loan utilised for purchase of domestic assets in view of incomplete details filed by the assessee before the As far as any gain or loss due to foreign exchange fluctuation in respect of the foreign loan for purchase of capital asset from , the section 43A of the Act which is effective from 01/04/1967, deals or loss are to be adjusted to the written down value (WDV) of the Asset as per the provisions of the section 43A of the 17.2 The question before us, is however in relation to gain or due to foreign exchange fluc for purchase of domestic assets. With effect from 01/04/2017, the legislation has introduced section 43AA of the the taxation of forex fluctuation. The said section prescribe that subject to the provisions of section 43A, any gain loss arising on account of any change in foreign exchange rates shall be treated as income or loss, as the case may be computed in accordance with Standard (ICDS) notified under section 145(2) of the section 43AA is applicable in respect of all forex transactions including those relating to monetary, non financial statement of foreign operations, forward exchange contract etc. thus, barring the situation of purchase of capital asset overseas, in all of the situations exchange transactions is to be dealt in accordance with section 43AA read with relevant ICDS. The section 145(2) of the notified 10 ICDS with effecting from assessment year 2017 ICDS-06, deals with effect of foreign has provided different treatment for foreign exchange fluctuation arising from monetary items and nonmonetary items. The p ITA Nos. 715, 718/M/2020, 7793, 7794/M/2020 & 1423, 1418, 654, 653/M/2020 effective from 01/04/1967, deals with the issue and any such gain or loss are to be adjusted to the written down value (WDV) of the set as per the provisions of the section 43A of the The question before us, is however in relation to gain or to foreign exchange fluctuation arising from the loans utilised for purchase of domestic assets. With effect from 01/04/2017, the legislation has introduced section 43AA of the Act, which deals with the taxation of forex fluctuation. The said section prescribe that provisions of section 43A, any gain loss arising on account of any change in foreign exchange rates shall be treated as income or loss, as the case may be and such gain or loss shall be computed in accordance with Income Computation and Disclosure notified under section 145(2) of the section 43AA is applicable in respect of all forex transactions including those relating to monetary, non-monetary, transactions of financial statement of foreign operations, forward exchange contract etc. thus, barring the situation of purchase of capital asset rseas, in all of the situations, the gain arising from foreign exchange transactions is to be dealt in accordance with section 43AA read with relevant ICDS. The section 145(2) of the notified 10 ICDS with effecting from assessment year 2017 06, deals with effect of foreign-exchange rates has provided different treatment for foreign exchange fluctuation arising from monetary items and nonmonetary items. The p Everest Industries Limited 28 ITA Nos. 715, 718/M/2020, 7793, 7794/M/2020 & 1423, 1418, 654, 653/M/2020 with the issue and any such gain or loss are to be adjusted to the written down value (WDV) of the set as per the provisions of the section 43A of the Act. The question before us, is however in relation to gain or loss tuation arising from the loans utilised for purchase of domestic assets. With effect from 01/04/2017, the ct, which deals with the taxation of forex fluctuation. The said section prescribe that provisions of section 43A, any gain loss arising on account of any change in foreign exchange rates shall be treated as such gain or loss shall be Income Computation and Disclosure notified under section 145(2) of the Act. The section 43AA is applicable in respect of all forex transactions monetary, transactions of financial statement of foreign operations, forward exchange contract etc. thus, barring the situation of purchase of capital asset , the gain arising from foreign- exchange transactions is to be dealt in accordance with section 43AA read with relevant ICDS. The section 145(2) of the Act has notified 10 ICDS with effecting from assessment year 2017-18. The exchange rates. The said ICDS has provided different treatment for foreign exchange fluctuation arising from monetary items and nonmonetary items. The para 2(k) of the ICDS-06 defines ‘ be received on liabilities to be paid in fixed or determinable amounts of money. Thus, the cash receivables and payables are monetary items. In the instant case before us the foreign fluctuation is relating to payables and therefore it is one of the monetary item. The para 5(i) of the ICDS respect of monetary items, exchange difference arising on the settlement thereof or on conversion thereof at the last day of the previous year shall previous year. Para 6 of the ICDS contained in para 5, recognition of the exchange difference shall be subject to the provision of section 43A of the above provisions of the circumstances as described i gain or loss arising from foreign items has to be treated as income with section 43AA of the 17.1 But, the assessment year involved era of pre-43AA of the Act. position of law emerging from the judicial precedentsdealing with the issue of gain or loss from fore respect of the monetary items. ITA Nos. 715, 718/M/2020, 7793, 7794/M/2020 & 1423, 1418, 654, 653/M/2020 06 defines ‘monetary items’ as money held in assets to be received on liabilities to be paid in fixed or determinable amounts of money. Thus, the cash receivables and payables are monetary items. In the instant case before us the foreign ng to payables and therefore it is one of the monetary item. The para 5(i) of the ICDS-06 prescribe that in respect of monetary items, exchange difference arising on the settlement thereof or on conversion thereof at the last day of the be recognised as income or expense in that previous year. Para 6 of the ICDS-06 notwithstanding anything , recognition of the exchange difference shall be subject to the provision of section 43A of the Act. In view of the ns of the Act, it is evident that except for the circumstances as described in section 43A, after 01/04/2017 gain or loss arising from foreign-exchange fluctuation on monitory items has to be treated as income or loss in terms of ICDS tion 43AA of the Act. he assessment year involved before us is 43AA of the Act. Therefore, we have to examine position of law emerging from the judicial precedentsdealing with the issue of gain or loss from foreign-exchange fluctuation in respect of the monetary items. Everest Industries Limited 29 ITA Nos. 715, 718/M/2020, 7793, 7794/M/2020 & 1423, 1418, 654, 653/M/2020 monetary items’ as money held in assets to be received on liabilities to be paid in fixed or determinable amounts of money. Thus, the cash receivables and payables are monetary items. In the instant case before us the foreign-exchange ng to payables and therefore it is one of the 06 prescribe that in respect of monetary items, exchange difference arising on the settlement thereof or on conversion thereof at the last day of the be recognised as income or expense in that 06 notwithstanding anything , recognition of the exchange difference shall be . In view of the is evident that except for the n section 43A, after 01/04/2017, the exchange fluctuation on monitory loss in terms of ICDS-06 read for the period of we have to examine the position of law emerging from the judicial precedentsdealing with exchange fluctuation in 17.2 We find that in the case of Co Ltd (1966) 60 ITR 405 (SC), manufacturing locomotive boilers and locomotive. The assessee also acting as a selling agent for locomotives of a USA company namely ‘Baldwin’. The assessee earned commission of UDS 36,123/- for sale of their products in India and requested the said company to deposit this amount with its agent New York’. The assessee intimated Control Regulator of India for purchase of capital goods purposes. The commission income earned was though offer in India in respective assessment years the devaluation of the Indian rupee, the assessee found purchase of capital goods from USA Government of India had put some sanctions on purchase of g from the USA. The assessee then with the permission of Control Regulator, brought the said amounts back According to the revenue fluctuation on the commission income retained in the USA was revenue in nature and subjected to tax, since it is a profit incidental to the business. The assessee however contended that since the amounts were retained outside India for the purpose of procurement of capital goods, any gain arising on foreign exchange fluctuation account pertained to fixed capital and accordingly not ITA Nos. 715, 718/M/2020, 7793, 7794/M/2020 & 1423, 1418, 654, 653/M/2020 n the case of Tata Locomotive and engineering (1966) 60 ITR 405 (SC),the assessee was in the business of manufacturing locomotive boilers and locomotive. The assessee acting as a selling agent for locomotives of a USA company . The assessee earned commission of UDS for sale of their products in India and requested the said company to deposit this amount with its agent namely . The assessee intimated this deposit to the of India (i.e. RBI) that said amount will be used for purchase of capital goods from USA and not for any other purposes. The commission income earned was though offer in India in respective assessment years, but subsequently due to the devaluation of the Indian rupee, the assessee found purchase of capital goods from USA as more expensive and also noted that overnment of India had put some sanctions on purchase of g from the USA. The assessee then with the permission of egulator, brought the said amounts back According to the revenue, gain on account of foreign fluctuation on the commission income retained in the USA was enue in nature and subjected to tax, since it is a profit incidental to the business. The assessee however contended that since the amounts were retained outside India for the purpose of procurement of capital goods, any gain arising on foreign exchange uctuation account pertained to fixed capital and accordingly not Everest Industries Limited 30 ITA Nos. 715, 718/M/2020, 7793, 7794/M/2020 & 1423, 1418, 654, 653/M/2020 Tata Locomotive and engineering in the business of manufacturing locomotive boilers and locomotive. The assessee was acting as a selling agent for locomotives of a USA company . The assessee earned commission of UDS for sale of their products in India and requested the said namely ‘Tata Inc, to the Exchange that said amount will be used and not for any other purposes. The commission income earned was though offered to tax ubsequently due to the devaluation of the Indian rupee, the assessee found purchase of more expensive and also noted that overnment of India had put some sanctions on purchase of goods from the USA. The assessee then with the permission of Exchange egulator, brought the said amounts back into India. gain on account of foreign exchange fluctuation on the commission income retained in the USA was enue in nature and subjected to tax, since it is a profit incidental to the business. The assessee however contended that since the amounts were retained outside India for the purpose of procurement of capital goods, any gain arising on foreign exchange uctuation account pertained to fixed capital and accordingly not subjected to tax. The Hon’ble Supreme Court held that with the permission of RBI, the assessee retain the purpose of capital goods, capital even though the said capital goods were not ultimately purchased. The gain arising due to foreign action fluctuation was held as capital in nature and no tax was to be paid. 17.3 In the case of Sutlej cotton mi ITR 1 (SC), the assessee was engaged in the business of manufacturing and sales of cotton fabrics. The cotton mill of the assessee located in W profit for the period ended 31 accrual basis and included in the profit of the Indian company. At the time of offering profit for tax in India the exchange rate Pakistan and India was Indian rupees. Subsequent for repatriation of said amount of the profit lying in west Pakistan branch, the exchange rate changed to 100 Pakistan rupees being equal to hundred Indian rupee. The Indian company accordingly claimed loss of amount d section 10(1) of Income allow such deduction which fluctuation holding that such loss was due to state action and not relating to the business held that any devaluation of foreign ITA Nos. 715, 718/M/2020, 7793, 7794/M/2020 & 1423, 1418, 654, 653/M/2020 The Hon’ble Supreme Court held that with the permission of RBI, the assessee retained such amount for the purpose of capital goods, the same would obtain the nature of capital even though the said capital goods were not ultimately purchased. The gain arising due to foreign action fluctuation was held as capital in nature and no tax was to be paid. Sutlej cotton mills limited Vs CIT (1979) 116 the assessee was engaged in the business of manufacturing and sales of cotton fabrics. The cotton mill of the West Pakistan (i.e. present Bangladesh) profit for the period ended 31 st March, 1954, which accrual basis and included in the profit of the Indian company. At the time of offering profit for tax in India the exchange rate Pakistan and India was at 100 Pakistan rupees being equal to 144 Indian rupees. Subsequently, when the assessee company applied for repatriation of said amount of the profit lying in west Pakistan branch, the exchange rate changed to 100 Pakistan rupees being equal to hundred Indian rupee. The Indian company accordingly claimed loss of amount due to foreign action fluctuation under section 10(1) of Income-tax Act, 1922. The Assessing Officer did not allow such deduction which arose due to foreign holding that such loss was due to state action and not relating to the business of the assessee. The Hon’ble Supreme Court held that any devaluation of foreign-exchange on account of trading Everest Industries Limited 31 ITA Nos. 715, 718/M/2020, 7793, 7794/M/2020 & 1423, 1418, 654, 653/M/2020 The Hon’ble Supreme Court held that in the case such amount for the same would obtain the nature of capital even though the said capital goods were not ultimately purchased. The gain arising due to foreign action fluctuation was Vs CIT (1979) 116 the assessee was engaged in the business of manufacturing and sales of cotton fabrics. The cotton mill of the (i.e. present Bangladesh) earned which was taxed on accrual basis and included in the profit of the Indian company. At the time of offering profit for tax in India the exchange rate between at 100 Pakistan rupees being equal to 144 ly, when the assessee company applied for repatriation of said amount of the profit lying in west Pakistan branch, the exchange rate changed to 100 Pakistan rupees being equal to hundred Indian rupee. The Indian company accordingly ue to foreign action fluctuation under tax Act, 1922. The Assessing Officer did not due to foreign-exchange holding that such loss was due to state action and not of the assessee. The Hon’ble Supreme Court exchange on account of trading asset would be trading loss would be capital loss. The Hon’ble Supreme Court laid down the test that in order to decide whether a foreign gain or loss is taxable or allowable, the important question that need to be addressed is whether the gain or loss arising from fixed capital of circulating capital. If the gain or losses arising from fixe capital, the same wouldbe or taxed and if same is arising from circulating capital than it shall be accordingly allowed as deduction or taxed. Hon’ble Supreme Court has already been reprodu order of the Tribunal (supra) in first round of proceedings in the case of the assessee. 17.4 In the case of Tata iron and steel Co Ltd the Hon’ble Supreme Court held that the actual cost of depend upon the amount paid by the assessee to acquire the asset. The amount may have been borrowed by the assessee, but it will not alter the cost of the asset even if the assessee did not repay the loan. According to the Hon’ble Supreme Court the cost o and the cost of raising money for purchase of the asset different and independent transactions. The Hon’ble Supreme Court held that more of repayment of loan has nothing to do with the actual cost of the asset. The Hon’ble Supreme Court the matters other than matters falling under section 43A, the actual cost cannot be altered based on a subsequently event of foreign ITA Nos. 715, 718/M/2020, 7793, 7794/M/2020 & 1423, 1418, 654, 653/M/2020 set would be trading loss and on account of the capital asset would be capital loss. The Hon’ble Supreme Court laid down the r to decide whether a foreign-exchange fluctuation gain or loss is taxable or allowable, the important question that need to be addressed is whether the gain or loss arising from fixed capital of circulating capital. If the gain or losses arising from fixe wouldbe capital in nature and not allowed as loss or taxed and if same is arising from circulating capital than it shall be accordingly allowed as deduction or taxed.Relevant finding of the Hon’ble Supreme Court has already been reproduced above in the order of the Tribunal (supra) in first round of proceedings in the case of the assessee. Tata iron and steel Co Ltd (1998) 22 ITR 285 the Hon’ble Supreme Court held that the actual cost of depend upon the amount paid by the assessee to acquire the asset. The amount may have been borrowed by the assessee, but it will not alter the cost of the asset even if the assessee did not repay the loan. According to the Hon’ble Supreme Court the cost o and the cost of raising money for purchase of the asset different and independent transactions. The Hon’ble Supreme Court held that more of repayment of loan has nothing to do with the actual cost of the asset. The Hon’ble Supreme Court the matters other than matters falling under section 43A, the actual cost cannot be altered based on a subsequently event of foreign Everest Industries Limited 32 ITA Nos. 715, 718/M/2020, 7793, 7794/M/2020 & 1423, 1418, 654, 653/M/2020 on account of the capital asset would be capital loss. The Hon’ble Supreme Court laid down the exchange fluctuation gain or loss is taxable or allowable, the important question that need to be addressed is whether the gain or loss arising from fixed capital of circulating capital. If the gain or losses arising from fixed capital in nature and not allowed as loss or taxed and if same is arising from circulating capital than it shall Relevant finding of the ced above in the order of the Tribunal (supra) in first round of proceedings in the (1998) 22 ITR 285, the Hon’ble Supreme Court held that the actual cost of asset depend upon the amount paid by the assessee to acquire the asset. The amount may have been borrowed by the assessee, but it will not alter the cost of the asset even if the assessee did not repay the loan. According to the Hon’ble Supreme Court the cost of the asset and the cost of raising money for purchase of the asset are two different and independent transactions. The Hon’ble Supreme Court held that more of repayment of loan has nothing to do with the actual cost of the asset. The Hon’ble Supreme Court held that all the matters other than matters falling under section 43A, the actual cost cannot be altered based on a subsequently event of foreign action fluctuation. The relevant part of the decision of the Hon’ble Supreme Court is reproduced as under: “4. Coming to the questions raised, we find it difficult to follow how the manner of repayment of loan can affect the cost of the assets acquired by the assessee. What is the actual cost must depend on the amount paid by the assessee to acquire the asset. The amount may have been borrowed by the assessee. But even if the assessee did not repay the loan it will not alter the cost of the asset. If the borrower defaults in repayment of a part of the loan, cost of the asset will not change. What has to be borne in mind is that cost of an asset and cost of raising money for purchase of the asset are two different and independent transactions. Even if an asset is purchased with no repayable subsidy received from the Government, the cost of the asset will be the pri the asset. In the instant case, the allegation is that at the time of repayment of loan, there was a fluctuation in the rate of foreign exchange as a result of which, the assessee had to repay a much lesser amount than paid. In our judgment, this is not a factor which can alter the cost incurred by the assessee for purchase of the asset. The assessee may have raised the funds to purchase the asset by borrowing but what the assessee has paid for i the asset. That price cannot change by any event subsequent to the acquisition of the asset. In our judgment the manner or mode of repayment of the loan has nothing to do with the cost of an asset acquired by the assessee for the purpose business. We hold that the questions were rightly answered by the High Court. The appeals are dismissed. There will be no order as to costs. 17.5 In the case of Cooper Corporation (P) bench of Tribunal, observed that the Indian currency and later unconverted them to foreign currency in order to save interest acquired capital assets in India from the term loan and those assets ITA Nos. 715, 718/M/2020, 7793, 7794/M/2020 & 1423, 1418, 654, 653/M/2020 The relevant part of the decision of the Hon’ble Supreme Court is reproduced as under: 4. Coming to the questions raised, we find it difficult to follow how the manner of repayment of loan can affect the cost of the assets acquired by the assessee. What is the actual cost must depend on the amount paid by the assessee to acquire the he amount may have been borrowed by the assessee. But even if the assessee did not repay the loan it will not alter the cost of the asset. If the borrower defaults in repayment of a part of the loan, cost of the asset will not change. What has to in mind is that cost of an asset and cost of raising money for purchase of the asset are two different and independent transactions. Even if an asset is purchased with no repayable subsidy received from the Government, the cost of the asset will be the price paid by the assessee for acquiring the asset. In the instant case, the allegation is that at the time of repayment of loan, there was a fluctuation in the rate of foreign exchange as a result of which, the assessee had to repay a much lesser amount than he would have otherwise paid. In our judgment, this is not a factor which can alter the cost incurred by the assessee for purchase of the asset. The assessee may have raised the funds to purchase the asset by borrowing but what the assessee has paid for it, is the price of the asset. That price cannot change by any event subsequent to the acquisition of the asset. In our judgment the manner or mode of repayment of the loan has nothing to do with the cost of an asset acquired by the assessee for the purpose business. We hold that the questions were rightly answered by the High Court. The appeals are dismissed. There will be no order as to costs.” Cooper Corporation (P) Ltd. (supra), ribunal, observed that the assessee initially taken loan in Indian currency and later unconverted them to foreign currency in order to save interest. The Tribunal also observed that the assessee acquired capital assets in India from the term loan and those assets Everest Industries Limited 33 ITA Nos. 715, 718/M/2020, 7793, 7794/M/2020 & 1423, 1418, 654, 653/M/2020 The relevant part of the decision of the Hon’ble 4. Coming to the questions raised, we find it difficult to follow how the manner of repayment of loan can affect the cost of the assets acquired by the assessee. What is the actual cost must depend on the amount paid by the assessee to acquire the he amount may have been borrowed by the assessee. But even if the assessee did not repay the loan it will not alter the cost of the asset. If the borrower defaults in repayment of a part of the loan, cost of the asset will not change. What has to in mind is that cost of an asset and cost of raising money for purchase of the asset are two different and independent transactions. Even if an asset is purchased with no repayable subsidy received from the Government, the cost of ce paid by the assessee for acquiring the asset. In the instant case, the allegation is that at the time of repayment of loan, there was a fluctuation in the rate of foreign exchange as a result of which, the assessee had to he would have otherwise paid. In our judgment, this is not a factor which can alter the cost incurred by the assessee for purchase of the asset. The assessee may have raised the funds to purchase the asset by t, is the price of the asset. That price cannot change by any event subsequent to the acquisition of the asset. In our judgment the manner or mode of repayment of the loan has nothing to do with the cost of an asset acquired by the assessee for the purpose of his business. We hold that the questions were rightly answered by the High Court. The appeals are dismissed. There will be no (supra), the Pune assessee initially taken loan in Indian currency and later unconverted them to foreign currency in ribunal also observed that the assessee acquired capital assets in India from the term loan and those assets had already been pu fluctuation of foreign subsequent to the capital asset having been put to use. The Tribunal held that, whether the losses account has to be teste accounting principles, pronouncement and guidelines etc. Tribunal further observed that there is no provision or explanation in the Act which deals with any gain or loss on foreign currency loan acquired for purchas addition or reduction in the cost of the asset. Accordingly, the Tribunal held that nothing can be added or reduced to the actual cost of the asset except the situation envisaged in section 43A Act because of its non finding of Hon’ble Supreme Court in the case of Tata iron and steel Co Ltd (supra). 17.6 In the case of Hyundai motor India Ltd (supra) followed the finding in the case of Cooper Corporation (supra). 17.7 In the case of Tribunal held that section 43A is only relating to foreign rate fluctuation in respect of the assets outside India by using foreign currency loan, which is not applicable to the indigenous assets acquired out of foreign currency loan. Hence the Assessing Officer was directed to bifurcate the ITA Nos. 715, 718/M/2020, 7793, 7794/M/2020 & 1423, 1418, 654, 653/M/2020 had already been put to use. The Tribunal held that loss foreign currency loans so converted is post facto subsequent to the capital asset having been put to use. The ribunal held that, whether the losses are in revenue account has to be tested in the light of generally accepted accounting principles, pronouncement and guidelines etc. ribunal further observed that there is no provision or explanation which deals with any gain or loss on foreign currency loan acquired for purchase of indigenous assets which directs for reduction in the cost of the asset. Accordingly, the ribunal held that nothing can be added or reduced to the actual set except the situation envisaged in section 43A its non-obstinate clause. The Tribunal followed the finding of Hon’ble Supreme Court in the case of Tata iron and steel Hyundai motor India Ltd (supra) followed the finding in the case of Cooper Corporation (supra). In the case of MFAR Hotels & Resorts Ltd (supra) held that section 43A is only relating to foreign rate fluctuation in respect of the assets acquired from a outside India by using foreign currency loan, which is not applicable to the indigenous assets acquired out of foreign currency loan. Hence the Assessing Officer was directed to bifurcate the Everest Industries Limited 34 ITA Nos. 715, 718/M/2020, 7793, 7794/M/2020 & 1423, 1418, 654, 653/M/2020 ribunal held that loss from currency loans so converted is post facto subsequent to the capital asset having been put to use. The in revenue or capital d in the light of generally accepted accounting principles, pronouncement and guidelines etc. The ribunal further observed that there is no provision or explanation which deals with any gain or loss on foreign currency which directs for reduction in the cost of the asset. Accordingly, the ribunal held that nothing can be added or reduced to the actual set except the situation envisaged in section 43A of the ribunal followed the finding of Hon’ble Supreme Court in the case of Tata iron and steel Hyundai motor India Ltd (supra), the Tribunal followed the finding in the case of Cooper Corporation (supra). MFAR Hotels & Resorts Ltd (supra)the held that section 43A is only relating to foreign-exchange acquired from a country outside India by using foreign currency loan, which is not applicable to the indigenous assets acquired out of foreign currency loan. Hence the Assessing Officer was directed to bifurcate the foreign-exchange fluctuation in respect of the foreign c used for assets acquired outside India and the indigenous assets and apply the provision of section 43A or AS Regarding the application of AS under: “6.8 In view of the revision made in AS said that treatment of foreign exchange loss arising out of foreign currency fluctuations in respect of fixed assets acquired through loan in foreign currency shall required to be given in profit should be allowed as revenue expenditure in view of amended AS had followed treatment of exchange loss or gain as per AS 11 (1994). In view of revision made in AS shall be as per revised AS on foreign currency fluctuations in respect of foreign currency loan acquired for acquisition of fixed asset should be allowed as revenue expenditure.However, in the Preamble of AS Revised Standard supersedes AS respect of accounting for transactions in foreign currencies entered into by the reporting enterprise before the date of AS-11 (2004) comes into effect, AS to be applicable. 17.8 In the case of Tribunal observed assessee capitalised books of accounts, to the extent foreign for acquisition of the fixed assets in India, as part of cost of fixed assets/CWIP. To the extent foreign currency loans were utilised for acquiring other monetary items ( companies) the difference in exchange was debited to an account ITA Nos. 715, 718/M/2020, 7793, 7794/M/2020 & 1423, 1418, 654, 653/M/2020 exchange fluctuation in respect of the foreign c used for assets acquired outside India and the indigenous assets and apply the provision of section 43A or AS-11 (2003) respectively. Regarding the application of AS-11 (2003), the Tribunal 6.8 In view of the revision made in AS-11 in 2003, it can be said that treatment of foreign exchange loss arising out of foreign currency fluctuations in respect of fixed assets acquired through loan in foreign currency shall required to be given in profit and loss account. Said exchange loss should be allowed as revenue expenditure in view of amended AS-11 (2003). It may be noted that Apex Court had followed treatment of exchange loss or gain as per AS 11 (1994). In view of revision made in AS-11, now trea shall be as per revised AS-11 (2003). Exchange gain or loss on foreign currency fluctuations in respect of foreign currency loan acquired for acquisition of fixed asset should be allowed as revenue expenditure.However, in the Preamble of AS-11 (Revised 2003), it was stated that the Revised Standard supersedes AS-11(1994) except that in respect of accounting for transactions in foreign currencies entered into by the reporting enterprise before the date of 11 (2004) comes into effect, AS-11 (1994) will continue to be applicable.” the case of Mahindra and Mahindra Ltd (supra), observed that up to assessment year assessee capitalised foreign exchange fluctuation difference in the books of accounts, to the extent foreign currency loans were utilised for acquisition of the fixed assets in India, as part of cost of fixed . To the extent foreign currency loans were utilised for cquiring other monetary items ( i.e.basically investment in foreign erence in exchange was debited to an account Everest Industries Limited 35 ITA Nos. 715, 718/M/2020, 7793, 7794/M/2020 & 1423, 1418, 654, 653/M/2020 exchange fluctuation in respect of the foreign currency loan used for assets acquired outside India and the indigenous assets 11 (2003) respectively. Tribunal observed as 11 in 2003, it can be said that treatment of foreign exchange loss arising out of foreign currency fluctuations in respect of fixed assets acquired through loan in foreign currency shall required to and loss account. Said exchange loss should be allowed as revenue expenditure in view of 11 (2003). It may be noted that Apex Court had followed treatment of exchange loss or gain as per AS- 11, now treatment 11 (2003). Exchange gain or loss on foreign currency fluctuations in respect of foreign currency loan acquired for acquisition of fixed asset should be allowed as revenue expenditure.However, in the ed 2003), it was stated that the 11(1994) except that in respect of accounting for transactions in foreign currencies entered into by the reporting enterprise before the date of ll continue Mahindra and Mahindra Ltd (supra),the year 2008-09, the fluctuation difference in the currency loans were utilised for acquisition of the fixed assets in India, as part of cost of fixed . To the extent foreign currency loans were utilised for tment in foreign erence in exchange was debited to an account called “Foreign Currency Monetary Items T Account (FCMITDA). From assessment year 2009 notification amending accounting standard 11 dealing with accounting treatment for effec rates, the assessee charged the amount of difference in exchange to (i) fixed assets (ii) capital work in progress and (iii) carried forward certain amount in the FCMITDA account to be written of profit and loss account and later years over the life of the corresponding foreign currency loans. According to the assessee, there was no specific provision based on foreign action fluctuation for assets acquired India, the assessee claim ₹63,02,52,539/- to the fixed assets/capital work in progress and ₹56,34,75,052/-carried forward in the FCMITDA as deductible revenue expenditure. The Assessing Officer disallowed the act claiming fluctuation loss as notional to be capital in nature. The decided against the assessee by the order of the assessment year Ld.Authorised Representative stated that decision of the covers the claim of ₹63,02,52, the fixed assets/capital work in progress, for which at least depreciation should be granted to the assessee in any case and ITA Nos. 715, 718/M/2020, 7793, 7794/M/2020 & 1423, 1418, 654, 653/M/2020 called “Foreign Currency Monetary Items Translation Difference FCMITDA). From assessment year 2009 notification amending accounting standard 11 dealing with accounting treatment for effects of changes in foreign rates, the assessee charged the amount of difference in exchange to (i) fixed assets (ii) capital work in progress and (iii) carried forward certain amount in the FCMITDA account to be written of profit and loss account and later years over the life of the corresponding foreign currency loans. According to the assessee, there was no specific provision in the Act dealing with adjustment based on foreign action fluctuation for assets acquired India, the assessee claimed the difference in exchange of to the fixed assets/capital work in progress and carried forward in the FCMITDA as deductible . The Assessing Officer disallowed the act fluctuation loss as notional or contingent and also capital in nature. The Ld. DR submitted that issue was decided against the assessee by the order of the 2009-10 in assessee’s own case. The thorised Representative of the assessee on the other hand stated that decision of the Tribunal in assessment 63,02,52,539/-being exchange the fixed assets/capital work in progress, for which at least eciation should be granted to the assessee in any case and Everest Industries Limited 36 ITA Nos. 715, 718/M/2020, 7793, 7794/M/2020 & 1423, 1418, 654, 653/M/2020 ranslation Difference FCMITDA). From assessment year 2009-10, in view of notification amending accounting standard 11 dealing with ts of changes in foreign exchange rates, the assessee charged the amount of difference in exchange to (i) fixed assets (ii) capital work in progress and (iii) carried forward certain amount in the FCMITDA account to be written off to the profit and loss account and later years over the life of the corresponding foreign currency loans. According to the assessee, dealing with adjustment based on foreign action fluctuation for assets acquired locally in the difference in exchange of to the fixed assets/capital work in progress and carried forward in the FCMITDA as deductible . The Assessing Officer disallowed the action of contingent and also held it DR submitted that issue was decided against the assessee by the order of the Tribunal for 10 in assessee’s own case. The of the assessee on the other hand ribunal in assessment year 2009-10 loss relatable to the fixed assets/capital work in progress, for which at least eciation should be granted to the assessee in any case and requested for allowing loss debited to FCMITDA as revenue expenditure and direction for depreciation on loss to be adjusted to the cost of the capital assets. The under: “12.12 We have gone through the order of the Tribunal for A.Y. 2009-10 and we find force in the argument advanced by the Id. AR in this regard. We find that this Tribunal had held that the exchange loss need to be adiusted of fixed assets/cost of capital work hold that assessee is entitled for depreciation on such capital portion of the exchange fluctuation loss. 12.13 The another related issue involved in this regard is what is the period capitalised. In this regard, the ld. AR argued that under the Income-tax Act, any item that is added to the fixed asset need to be capitalised till the asset is put to use. This is supported by Explanation 8 to section 43(1) section 36(1)iii) of the Act. Any cost incurred beyond that period should be charged off as revenue expenditure. Accordingly, he argued that irrespective of the accounting treatment given by the assessee in the books, the exchange loss could be added to the cost of fixed assets only till such time, the assets were not put to use. Thereafter, such exchange loss should be allowed as revenue expenditure. We find that this line of argument was not taken up by the assessee for A.Y. 2009 before the Tribunal for A.Y. 2009 no occasion for this Tribunal to adjudicate this aspect of the issue.The Id AR submitted that this exchange loss that is debited to FCMITDA is not related to acquire fixed as and hence, the same should be allowed as revenue expenditure. The Id. AR further stated that, in any event, the process of capitalisation of such exchange loss should end with the commencement of overseas investments utilizing foreign currency loans. after acquisition of investments and therefore, be allowed as revenue expenditure according to the Id. AR. We find that the decision taken by this Tribunal in A.Y. 2009 ITA Nos. 715, 718/M/2020, 7793, 7794/M/2020 & 1423, 1418, 654, 653/M/2020 requested for allowing loss debited to FCMITDA as revenue expenditure and direction for depreciation on loss to be adjusted to the cost of the capital assets. The Tribunal in the case held as 12.12 We have gone through the order of the Tribunal for 10 and we find force in the argument advanced by the Id. AR in this regard. We find that this Tribunal had held that the exchange loss need to be adiusted to the cost of fixed assets/cost of capital work-in-progress. Hence, we hold that assessee is entitled for depreciation on such capital portion of the exchange fluctuation loss. 12.13 The another related issue involved in this regard is what is the period for which such loss should be capitalised. In this regard, the ld. AR argued that under the tax Act, any item that is added to the fixed asset need to be capitalised till the asset is put to use. This is supported by Explanation 8 to section 43(1) and proviso to section 36(1)iii) of the Act. Any cost incurred beyond that period should be charged off as revenue expenditure. Accordingly, he argued that irrespective of the accounting treatment given by the assessee in the books, the exchange be added to the cost of fixed assets only till such time, the assets were not put to use. Thereafter, such exchange loss should be allowed as revenue expenditure. We find that this line of argument was not taken up by the assessee for A.Y. 2009-10 while addressing this issue before the Tribunal for A.Y. 2009-10. Accordingly, there was no occasion for this Tribunal to adjudicate this aspect of the issue.The Id AR submitted that this exchange loss that is debited to FCMITDA is not related to acquire fixed as and hence, the same should be allowed as revenue expenditure. The Id. AR further stated that, in any event, the process of capitalisation of such exchange loss should end with the commencement of overseas investments utilizing foreign currency loans. Exchange loss for the period after acquisition of investments and therefore, be allowed as revenue expenditure according to the Id. AR. We find that the decision taken by this Tribunal in A.Y. 2009 Everest Industries Limited 37 ITA Nos. 715, 718/M/2020, 7793, 7794/M/2020 & 1423, 1418, 654, 653/M/2020 requested for allowing loss debited to FCMITDA as revenue expenditure and direction for depreciation on loss to be adjusted to in the case held as 12.12 We have gone through the order of the Tribunal for 10 and we find force in the argument advanced by the Id. AR in this regard. We find that this Tribunal had to the cost progress. Hence, we hold that assessee is entitled for depreciation on such 12.13 The another related issue involved in this regard is for which such loss should be capitalised. In this regard, the ld. AR argued that under the tax Act, any item that is added to the fixed asset need to be capitalised till the asset is put to use. This is and proviso to section 36(1)iii) of the Act. Any cost incurred beyond that period should be charged off as revenue expenditure. Accordingly, he argued that irrespective of the accounting treatment given by the assessee in the books, the exchange be added to the cost of fixed assets only till such time, the assets were not put to use. Thereafter, such exchange loss should be allowed as revenue expenditure. We find that this line of argument was not taken up by the ddressing this issue 10. Accordingly, there was no occasion for this Tribunal to adjudicate this aspect of the issue.The Id AR submitted that this exchange loss that is debited to FCMITDA is not related to acquire fixed assets and hence, the same should be allowed as revenue expenditure. The Id. AR further stated that, in any event, the process of capitalisation of such exchange loss should end with the commencement of overseas investments Exchange loss for the period after acquisition of investments and therefore, be allowed as revenue expenditure according to the Id. AR. We find that the decision taken by this Tribunal in A.Y. 2009-10 may not be fully applicable to the facts of the instant and we hold that the said decision would hold good with some modifications as suggested below based on factual developments that had happened later: (a) Foreign currency loans utilised for acquiring fixed assets and overseas investments is to be cap correspondingly depreciation need to be granted to the assessee. In this, the exchange loss pertaining to the period till the asset was put to use should alone be capitalised and thereafter, the same should be allowed as revenue expenditure. (b) Foreign exchange loss attributable to other monetary items debited to FCMITA as per AS 11 ofICAI should be allowed as revenue expenditure. Accordingly, the concise ground No. 10 raised by the assessee is disposed off in the aforesaid manner. 17.9 In back ground of above precedents available, we find that there are two sets of decisions. One set of decisions Supreme Courts and Hon’ble High Court. The Another set is decisions of Tribunal, where mainly the decision in the case of Cooper Corporation (supra) 17.9.1 In the instant case, The Tribunal in the first round of proceeding, restored the matter back to directed to decide the issue in the lights of principles laid down in the case of Sutlaj Cotton Mills Ltd (supra) find the decision on the issue Mills Ltd (supra) and Tata Iron and Steel Ltd (supra) are contradictory. The Tribunal in the case of Ltd (supra)b has also made similar observations. ITA Nos. 715, 718/M/2020, 7793, 7794/M/2020 & 1423, 1418, 654, 653/M/2020 may not be fully applicable to the facts of the instant and we hold that the said decision would hold good with some modifications as suggested below based on factual developments that had happened later:- (a) Foreign currency loans utilised for acquiring fixed assets and overseas investments is to be capitalised and correspondingly depreciation need to be granted to the assessee. In this, the exchange loss pertaining to the period till the asset was put to use should alone be capitalised and thereafter, the same should be allowed as revenue expenditure. b) Foreign exchange loss attributable to other monetary items debited to FCMITA as per AS 11 ofICAI should be allowed as revenue expenditure. Accordingly, the concise ground No. 10 raised by the assessee is disposed off in the aforesaid manner.” ck ground of above precedents available, we find that there are two sets of decisions. One set of decisions Supreme Courts and Hon’ble High Court. The Another set is decisions of Tribunal, where mainly the decision in the case of (supra) has been followed. In the instant case, The Tribunal in the first round of restored the matter back to the Assessing Officer to decide the issue in the lights of principles laid down in Cotton Mills Ltd (supra) and other decisions. find the decision on the issue-in dispute in the case Sutlej Cotton Mills Ltd (supra) and Tata Iron and Steel Ltd (supra) are The Tribunal in the case of MFAR Hotels and Resorts has also made similar observations. Everest Industries Limited 38 ITA Nos. 715, 718/M/2020, 7793, 7794/M/2020 & 1423, 1418, 654, 653/M/2020 may not be fully applicable to the facts of the instant case and we hold that the said decision would hold good with some modifications as suggested below based on factual (a) Foreign currency loans utilised for acquiring fixed assets italised and correspondingly depreciation need to be granted to the assessee. In this, the exchange loss pertaining to the period till the asset was put to use should alone be capitalised and thereafter, the same should be allowed as revenue b) Foreign exchange loss attributable to other monetary items debited to FCMITA as per AS 11 ofICAI should be Accordingly, the concise ground No. 10 raised by the ” ck ground of above precedents available, we find that there are two sets of decisions. One set of decisions are of Hon’ble Supreme Courts and Hon’ble High Court. The Another set is decisions of Tribunal, where mainly the decision in the case of In the instant case, The Tribunal in the first round of the Assessing Officer and to decide the issue in the lights of principles laid down in and other decisions. We in dispute in the case Sutlej Cotton Mills Ltd (supra) and Tata Iron and Steel Ltd (supra) are MFAR Hotels and Resorts has also made similar observations. In such a situation of conflict in two decisions coordinate bench of Hon’ble Supreme Court, it is difficult for a subordinate authority to decide, which decision should be followed. in the caseHyder Consulting (UK) Ltd. v. State of Orissa (2015) 2 SCC 189and Indian Oil Corporation Limited v. Municipal Corporation and Another (1995) 4 SCC 96 decision on a point of law would continue to be a good law, especially when the latter especially when the latter decisions have not considered the earlier judgment could not have differed from the earlier decision, and it would have to be referred to a full bench. 18. We find that Hon’ble and steel Ltd (supra) has not discussed the earlier decision in the case of Sutlej Cotton Mills Ltd (supra), therefore, with due respect,we are bound to follow the decision of Hon’ble Supreme Court in the case of Sut that Tribunal in the case of Cooper Corporation (supra) distinguished the decision of the Hon’ble Supreme Court in the case of the” Sutlej cotton mills limited (supra) observing that in the case fluctuation loss inflicted upon the assessee bears no nexus of relation to the acquisition of the asset, and the action of the assessee was for saving in interest cost i.e. hedging its revenue receipts and therefore the foreign action fluctuation loss was on ITA Nos. 715, 718/M/2020, 7793, 7794/M/2020 & 1423, 1418, 654, 653/M/2020 of conflict in two decisions coordinate bench of Hon’ble it is difficult for a subordinate authority to decide, which decision should be followed. However, Hon’ble supre Hyder Consulting (UK) Ltd. v. State of Orissa (2015) 2 Indian Oil Corporation Limited v. Municipal Corporation and Another (1995) 4 SCC 96, held decision on a point of law would continue to be a good law, especially the latter especially when the latter decisions have not considered the earlier judgment – because had they considered, they could not have differed from the earlier decision, and it would have to be referred to a full bench. We find that Hon’ble Supreme Court in the case of Tata Iron Ltd (supra) has not discussed the earlier decision in the case of Sutlej Cotton Mills Ltd (supra), therefore, with due are bound to follow the decision of Hon’ble Supreme Court in the case of Sutlej Cotton Mills Ltd (supra). that Tribunal in the case of Cooper Corporation (supra) the decision of the Hon’ble Supreme Court in the case of the” Sutlej cotton mills limited (supra) observing that in the case nflicted upon the assessee bears no nexus of relation to the acquisition of the asset, and the action of the assessee was for saving in interest cost i.e. hedging its revenue receipts and therefore the foreign action fluctuation loss was on Everest Industries Limited 39 ITA Nos. 715, 718/M/2020, 7793, 7794/M/2020 & 1423, 1418, 654, 653/M/2020 of conflict in two decisions coordinate bench of Hon’ble it is difficult for a subordinate authority to decide, Hon’ble supreme Court Hyder Consulting (UK) Ltd. v. State of Orissa (2015) 2 Indian Oil Corporation Limited v. Municipal , held that the earliest decision on a point of law would continue to be a good law, especially the latter especially when the latter decisions have not because had they considered, they could not have differed from the earlier decision, and it would have to Supreme Court in the case of Tata Iron Ltd (supra) has not discussed the earlier decision in the case of Sutlej Cotton Mills Ltd (supra), therefore, with due are bound to follow the decision of Hon’ble Supreme lej Cotton Mills Ltd (supra). We also note that Tribunal in the case of Cooper Corporation (supra) the decision of the Hon’ble Supreme Court in the case of the” Sutlej cotton mills limited (supra) observing that in the case nflicted upon the assessee bears no nexus of relation to the acquisition of the asset, and the action of the assessee was for saving in interest cost i.e. hedging its revenue receipts and therefore the foreign action fluctuation loss was on revenue account. The relevant funding of the reproduced as under: “10.9 We find that the decision in the case of Sutlej Cotton Mills Ltd. (supra) relied upon by the Ld. Departmental Representative is of no assistance to the Revenue. The Hon'ble Supreme Court that where any profit or loss arises to an assessee on account of depreciation in foreign currency held by him on conversion from another currency, such profit and loss would ordinary be trading loss if the foreign curr by the assessee on revenue account as trading asset or as a part of circulating capital embargo in business. However, if the foreign currency is held as a capital asset, the loss should be capital in nature. The aforesaid principle of law is required to be applied to the facts of case to determine whether the foreign currency is held by the assessee on revenue account or as a part of circulating capital. In the present case, fluctuation loss inflicted upon the assessee bears no nexus or relation t The action of the assessee is tied up to its underlying objective i.e. saving in interest costs, hedging its revenue receipts etc. which are undoubtedly on revenue account. Thus, the loss generated in impugned action bears character of revenue expenditure. Similarly, decision of the Apex Court in the case of Tata Iron and Steel co. (supra) also weighs in favour of the assessee.We also note that reliance placed by the CIT(A) on Elecon Engineering Co.Ltd. (supra) is mispla S. 43A in the facts of that case and thus clearly distinguishable. 18.1 Thus, in our opinion, the the Ld Counsel of assessee, where ratio of Copper Corporation (supra) has been followed, corporation (supra) was also distinguished by the Tribunal in first round of proceedings. ITA Nos. 715, 718/M/2020, 7793, 7794/M/2020 & 1423, 1418, 654, 653/M/2020 . The relevant funding of the reproduced as under: 10.9 We find that the decision in the case of Sutlej Cotton Mills Ltd. (supra) relied upon by the Ld. Departmental Representative is of no assistance to the Revenue. The Hon'ble Supreme Court therein stated the principle of law that where any profit or loss arises to an assessee on account of depreciation in foreign currency held by him on conversion from another currency, such profit and loss would ordinary be trading loss if the foreign curr by the assessee on revenue account as trading asset or as a part of circulating capital embargo in business. However, if the foreign currency is held as a capital asset, the loss should be capital in nature. The aforesaid principle of law is ired to be applied to the facts of case to determine whether the foreign currency is held by the assessee on revenue account or as a part of circulating capital. In the present case, fluctuation loss inflicted upon the assessee bears no nexus or relation to the acquisition to the assets. The action of the assessee is tied up to its underlying objective i.e. saving in interest costs, hedging its revenue receipts etc. which are undoubtedly on revenue account. Thus, the loss generated in impugned action bears character of revenue expenditure. Similarly, decision of the Apex Court in the case of Tata Iron and Steel co. (supra) also weighs in favour of the assessee.We also note that reliance placed by the CIT(A) on Elecon Engineering Co.Ltd. (supra) is misplaced. The decision concerns applicability of S. 43A in the facts of that case and thus clearly distinguishable.” opinion, the decisions of Tribunal relied upon by the Ld Counsel of assessee, where ratio of Copper Corporation followed, are of no assistance. corporation (supra) was also distinguished by the Tribunal in first round of proceedings. As far as other decisions, where the issue of Everest Industries Limited 40 ITA Nos. 715, 718/M/2020, 7793, 7794/M/2020 & 1423, 1418, 654, 653/M/2020 . The relevant funding of the Tribunal is 10.9 We find that the decision in the case of Sutlej Cotton Mills Ltd. (supra) relied upon by the Ld. Departmental Representative is of no assistance to the Revenue. The therein stated the principle of law that where any profit or loss arises to an assessee on account of depreciation in foreign currency held by him on conversion from another currency, such profit and loss would ordinary be trading loss if the foreign currency held by the assessee on revenue account as trading asset or as a part of circulating capital embargo in business. However, if the foreign currency is held as a capital asset, the loss should be capital in nature. The aforesaid principle of law is ired to be applied to the facts of case to determine whether the foreign currency is held by the assessee on revenue account or as a part of circulating capital. In the present case, fluctuation loss inflicted upon the assessee o the acquisition to the assets. The action of the assessee is tied up to its underlying objective i.e. saving in interest costs, hedging its revenue receipts etc. which are undoubtedly on revenue account. Thus, the loss generated in impugned action bears the character of revenue expenditure. Similarly, decision of the Apex Court in the case of Tata Iron and Steel co. (supra) also weighs in favour of the assessee.We also note that reliance placed by the CIT(A) on Elecon Engineering Co.Ltd. ced. The decision concerns applicability of S. 43A in the facts of that case and thus clearly decisions of Tribunal relied upon by the Ld Counsel of assessee, where ratio of Copper Corporation are of no assistance. The Cooper corporation (supra) was also distinguished by the Tribunal in first As far as other decisions, where the issue of Forex gain or loss has been decided on the basis of accounting principles, is considered, first of all, the assessee itself has followed the accounting principles in operation during the relevant period and treated the forex loss as item of capital expenditure except small amount transferred to FCMITDA, which has been further written off in the books of account. The claim of the assessee that those accounting standard were issued for transitory period and not normally following acco should be allowed following accounting standard in exis prior period, is devoid of any merit circumstances in the case of Mahindra & Mahindra Ltd. (supra), the assessee accepted the loss as capital expenditure of the view that when the Hon’ble down the law on a particular issue then , the plea of the assessee that for the purpose of ascertaining profits and gains the ordinary principles of commercial accounting should be applied , so long as they do not conflict w statute [relying on the decision of the Hon’ble supreme Court in the CIT vs UP State Industrial Development Corporation (supra) ] is also of no assistance, accordingly, we reject said contention of the ld. Counsel of the assessee. 18.2 When we examine the facts of the instant case in the light of the above decisions, we find that assessee has made the accounting entries in respect of foreign ITA Nos. 715, 718/M/2020, 7793, 7794/M/2020 & 1423, 1418, 654, 653/M/2020 Forex gain or loss has been decided on the basis of accounting is considered, first of all, the assessee itself has followed the accounting principles in operation during the relevant period and treated the forex loss as item of capital expenditure except small amount transferred to FCMITDA, which has been further itten off in the books of account. The claim of the assessee that those accounting standard were issued for transitory period and not normally following accounting principles and therefore should be allowed following accounting standard in exis period, is devoid of any merit. In exactly identical circumstances in the case of Mahindra & Mahindra Ltd. (supra), the assessee accepted the loss as capital expenditure. of the view that when the Hon’ble Supreme Court has already laid down the law on a particular issue then , the plea of the assessee for the purpose of ascertaining profits and gains the ordinary principles of commercial accounting should be applied , so long as they do not conflict with any express provision of the relevant statute [relying on the decision of the Hon’ble supreme Court in the CIT vs UP State Industrial Development Corporation (supra) ] is also of no assistance, accordingly, we reject said contention of the ld. of the assessee. When we examine the facts of the instant case in the light of the above decisions, we find that assessee has made the accounting entries in respect of foreign-exchange fluctuation difference to the Everest Industries Limited 41 ITA Nos. 715, 718/M/2020, 7793, 7794/M/2020 & 1423, 1418, 654, 653/M/2020 Forex gain or loss has been decided on the basis of accounting is considered, first of all, the assessee itself has followed the accounting principles in operation during the relevant period and treated the forex loss as item of capital expenditure except small amount transferred to FCMITDA, which has been further itten off in the books of account. The claim of the assessee that those accounting standard were issued for transitory period and not unting principles and therefore, forex loss should be allowed following accounting standard in existence in In exactly identical circumstances in the case of Mahindra & Mahindra Ltd. (supra), the Further, we are Supreme Court has already laid down the law on a particular issue then , the plea of the assessee for the purpose of ascertaining profits and gains the ordinary principles of commercial accounting should be applied , so long as ith any express provision of the relevant statute [relying on the decision of the Hon’ble supreme Court in the CIT vs UP State Industrial Development Corporation (supra) ] is also of no assistance, accordingly, we reject said contention of the ld. When we examine the facts of the instant case in the light of the above decisions, we find that assessee has made the accounting exchange fluctuation difference to the fixed assets following the Ministr for modification of accounting standard As loss as capital expenditure. In the ratio of the Hon’ble Supreme Court in the case of Sutlej Cotton Mills Ltd (supra) , as reproduced above, if the loan is utilised for fixed capital, the forex gain or loss , will be capital in nature. We High Court in the case of CIT Vs V S Dempo and Co. Pvt Ltd (1994 ) 206 ITR 291(Bom), relying on the decision of Hon’ble Supreme Court in the case Sutlej Cotton Mills Ltd (supra) ; the decision of Calcutta High Court in the case of Oil India Co. Ltd Vs CIT (1982) 137 ITR 156 ; decision of Hon’ble Supreme Court in the case of CIT vs Tata Locomotive and Engineering Co. Ltd (supra) the decision in the case of CIT Vs V S Dempo and Co. Pvt Ltd (supra) has been discussed by the Tribunal in first round of proceedings. 18.3 In the case before the Assessing Officer in second of proceedings, the assessee has provided details of bills in support of purchase of assets of ₹ 48.37 corrodes and no details of the balance have been submitted. The assessee was required to provide all details before the assessing officer in second round of proceedings still incomplete detils have been filed. The ld Counsel of the assessee intimated that complete were provided and still all details are available with the asse ITA Nos. 715, 718/M/2020, 7793, 7794/M/2020 & 1423, 1418, 654, 653/M/2020 fixed assets following the Ministry of corporate affairs notification for modification of accounting standard As-11 and treated the forex loss as capital expenditure. In the ratio of the Hon’ble Supreme Court in the case of Sutlej Cotton Mills Ltd (supra) , as reproduced is utilised for fixed capital, the forex gain or loss , will be capital in nature. We also note that the Hon’ble High Court in the case of CIT Vs V S Dempo and Co. Pvt Ltd (1994 ) 206 ITR 291(Bom), relying on the decision of Hon’ble Supreme in the case Sutlej Cotton Mills Ltd (supra) ; the decision of Calcutta High Court in the case of Oil India Co. Ltd Vs CIT (1982) 137 ITR 156 ; decision of Hon’ble Supreme Court in the case of CIT vs Tata Locomotive and Engineering Co. Ltd (supra) the decision in the case of CIT Vs V S Dempo and Co. Pvt Ltd (supra) has been discussed by the Tribunal in first round of before the Assessing Officer in second of , the assessee has provided details of bills in support of purchase of assets of ₹ 30.11 crores out of the loan of 48.37 corrodes and no details of the balance Rs. been submitted. This is second round of proceeding before us. was required to provide all details before the assessing officer in second round of proceedings still incomplete detils have been filed. The ld Counsel of the assessee intimated that complete were provided and still all details are available with the asse Everest Industries Limited 42 ITA Nos. 715, 718/M/2020, 7793, 7794/M/2020 & 1423, 1418, 654, 653/M/2020 y of corporate affairs notification and treated the forex loss as capital expenditure. In the ratio of the Hon’ble Supreme Court in the case of Sutlej Cotton Mills Ltd (supra) , as reproduced is utilised for fixed capital, the forex gain or loss , note that the Hon’ble Bombay High Court in the case of CIT Vs V S Dempo and Co. Pvt Ltd (1994 ) 206 ITR 291(Bom), relying on the decision of Hon’ble Supreme in the case Sutlej Cotton Mills Ltd (supra) ; the decision of Calcutta High Court in the case of Oil India Co. Ltd Vs CIT (1982) 137 ITR 156 ; decision of Hon’ble Supreme Court in the case of CIT vs Tata Locomotive and Engineering Co. Ltd (supra) . The ratio of the decision in the case of CIT Vs V S Dempo and Co. Pvt Ltd (supra) has been discussed by the Tribunal in first round of before the Assessing Officer in second of , the assessee has provided details of bills and vouchers es out of the loan of Rs. 18.26 crores This is second round of proceeding before us. was required to provide all details before the assessing officer in second round of proceedings still incomplete detils have been filed. The ld Counsel of the assessee intimated that complete were provided and still all details are available with the assessee. Therefore , in facts and of substantial justice back to the file of the Assessing Officer assessee for providing evidence in support foreign loan ( ECB) has been utilised for what amount of loan has been utilised for acquiring assets outside India , and then the issue following the finding o of Sutlej Cotton Mills Ltd in the case of V S Dempo and Co Ltd (supra), in respect of assets purchased indigenously and as per the provisions of section 43A in respect of assets purchased from outside India. appeal of the assessee, is allowed for statistical purposes. 19. As far as ground No. concerned, the Ld. counsel that issue in dispute are covered in favour of the assessee by the order of the Tribunal reported in (2022) 141 taxmann.com 176(Mumbai DR also could not contro assessee. 20. As far as ground No. incentive as capital receipt is concerned (supra) has mentioned in para 9.1 that grounds of the appeal No. ITA Nos. 715, 718/M/2020, 7793, 7794/M/2020 & 1423, 1418, 654, 653/M/2020 Therefore , in facts and circumstances of the case and the interest of substantial justice, we feel it appropriate to restore this issue back to the file of the Assessing Officer with the for providing evidence in support as to what amount of has been utilised for assets indigenously what amount of loan has been utilised for acquiring assets then the Assessing Officer is directed to decide following the finding of Hon’ble Supreme Court in the case of Sutlej Cotton Mills Ltd (supra), which has been further followed in the case of V S Dempo and Co Ltd (supra), in respect of assets purchased indigenously and as per the provisions of section 43A in urchased from outside India. The ground of the appeal of the assessee, is allowed for statistical purposes. As far as ground No. 1 and 2 of the appeal of the Ld. counsel of the assessee, at the outset submitted that issue in dispute are covered in favour of the assessee by the Tribunal for assessment year 2010 reported in (2022) 141 taxmann.com 176(Mumbai DR also could not controvert the statement of Ld. counsel As far as ground No. 1 of the appeal concerning sales tax as capital receipt is concerned, we find the (supra) has mentioned in para 9.1 that grounds of the appeal No. Everest Industries Limited 43 ITA Nos. 715, 718/M/2020, 7793, 7794/M/2020 & 1423, 1418, 654, 653/M/2020 of the case and the interest , we feel it appropriate to restore this issue with the direction to the to what amount of the indigenously and what amount of loan has been utilised for acquiring assets from he Assessing Officer is directed to decide f Hon’ble Supreme Court in the case , which has been further followed in the case of V S Dempo and Co Ltd (supra), in respect of assets purchased indigenously and as per the provisions of section 43A in The ground of the appeal of the assessee, is allowed for statistical purposes. of the appeal of the Revenue are the outset submitted that issue in dispute are covered in favour of the assessee by the for assessment year 2010-11, which is reported in (2022) 141 taxmann.com 176(Mumbai-Trib.). The Ld. Ld. counsel of the of the appeal concerning sales tax , we find the Tribunal (supra) has mentioned in para 9.1 that grounds of the appeal No. 1(i) to 1(iv) of the Revenue packages scheme of incentives. The both the parties on the taxability of sales tax incentive held the same as capital receipt observing as under: “12. We have heard the submissions of b perused the material available on record. We find that the present issue is fully covered in assessee's own case in ITA.No. 814/Mum/2007 for the A.Y. 2003 allowed relief in respect of the matter in issue. Further Special Bench of the Tribunal in the case of Dy. CIT v. Reliance Industries Lid. (2004] 88 ITD 273 (Mum) held that sales tax subsidy received under the Package Scheme of Incentives, 1979 is for the purpose of industrial development of the backward districts as well as generation of employment, thus, establishing a direct nexus with the investment in fixed capital assets and hence, a capital receipt. Against this Special Bench order of the Tribunal, the Department filed an appeal before the Hon'ble High Court of Bombay which is pending for adjudication. In this connection, it is relevant to state that the Hon'ble Supreme Court in the case of Union of India v., Kamlakshi Finance Corpn. Lid., 1992 taxmann.com 16 has held that ' mere fact that the order of "acceptable" to the Department and is the subject matter of an appeal can furnish no ground for not following it unless its operation has been suspended by a competent court. We find that since the order of the Special Bench holds the field and in absence of any contrary decision brought to our notice by the Ld. D.R, and the order of the Ld. CIT(A) in deleting the addition made by the A.O, is in accordance with law, we find no reason to interfere with CIT(A) on this issue and, therefore, we hold that the amount of incentive is not a revenue receipt, but, it is a capital receipt and; therofore, we direct the A.O. to delete the addition. The Revenue fails in its grounds of appeal Nos grounds on this issue are dismissed.” 21. As far as ground incentive as capital receipt is concerned, the para 16, has held the same as capital receipt observing as ITA Nos. 715, 718/M/2020, 7793, 7794/M/2020 & 1423, 1418, 654, 653/M/2020 Revenue relates to sales tax incentive under new packages scheme of incentives. The Tribunal(supra) both the parties on the taxability of sales tax incentive held the same as capital receipt observing as under: “12. We have heard the submissions of both the parties and perused the material available on record. We find that the present issue is fully covered in assessee's own case in ITA.No. 814/Mum/2007 for the A.Y. 2003-04 wherein the Tribunal allowed relief in respect of the matter in issue. Further Special Bench of the Tribunal in the case of Dy. CIT v. Reliance Industries Lid. (2004] 88 ITD 273 (Mum) held that sales tax subsidy received under the Package Scheme of Incentives, 1979 is for the purpose of industrial development of the backward stricts as well as generation of employment, thus, establishing a direct nexus with the investment in fixed capital assets and hence, a capital receipt. Against this Special Bench order of the Tribunal, the Department filed an appeal before the h Court of Bombay which is pending for adjudication. In this connection, it is relevant to state that the Hon'ble Supreme Court in the case of Union of India v., Kamlakshi Finance Corpn. Lid., 1992 taxmann.com 16 has held that ' mere fact that the order of the appellate authority is not "acceptable" to the Department and is the subject matter of an appeal can furnish no ground for not following it unless its operation has been suspended by a competent court. We find that since the order of the Special Bench of the Tribunal is still holds the field and in absence of any contrary decision brought to our notice by the Ld. D.R, and the order of the Ld. CIT(A) in deleting the addition made by the A.O, is in accordance with law, we find no reason to interfere with the order of the Ld, CIT(A) on this issue and, therefore, we hold that the amount of incentive is not a revenue receipt, but, it is a capital receipt and; therofore, we direct the A.O. to delete the addition. The Revenue fails in its grounds of appeal Nos. 1(i) to 1(iv) and, therefore, the grounds on this issue are dismissed.” far as ground of the appeal concerning excise duty incentive as capital receipt is concerned, the Tribunal para 16, has held the same as capital receipt observing as Everest Industries Limited 44 ITA Nos. 715, 718/M/2020, 7793, 7794/M/2020 & 1423, 1418, 654, 653/M/2020 relates to sales tax incentive under new (supra) after hearing both the parties on the taxability of sales tax incentive held the oth the parties and perused the material available on record. We find that the present issue is fully covered in assessee's own case in ITA.No. 04 wherein the Tribunal allowed relief in respect of the matter in issue. Further, the Special Bench of the Tribunal in the case of Dy. CIT v. Reliance Industries Lid. (2004] 88 ITD 273 (Mum) held that sales tax subsidy received under the Package Scheme of Incentives, 1979 is for the purpose of industrial development of the backward stricts as well as generation of employment, thus, establishing a direct nexus with the investment in fixed capital assets and hence, a capital receipt. Against this Special Bench order of the Tribunal, the Department filed an appeal before the h Court of Bombay which is pending for adjudication. In this connection, it is relevant to state that the Hon'ble Supreme Court in the case of Union of India v., Kamlakshi Finance Corpn. Lid., 1992 taxmann.com 16 has held the appellate authority is not "acceptable" to the Department and is the subject matter of an appeal can furnish no ground for not following it unless its operation has been suspended by a competent court. We find of the Tribunal is still holds the field and in absence of any contrary decision brought to our notice by the Ld. D.R, and the order of the Ld. CIT(A) in deleting the addition made by the A.O, is in accordance with the order of the Ld, CIT(A) on this issue and, therefore, we hold that the amount of incentive is not a revenue receipt, but, it is a capital receipt and; therofore, we direct the A.O. to delete the addition. The Revenue . 1(i) to 1(iv) and, therefore, the the appeal concerning excise duty Tribunal(supra) in para 16, has held the same as capital receipt observing as under: “16. We have heard the rival submissions of both the parties and perused the material available on record. We find that the objective of grant of Excise Duty Incentive as envisaged in Office Memorandum dated 7 Page No. 245 & Industry is industrialization of backward area of Uttaranchal for generation of employment and utilization of local resources. Hence, the incentive received by assessee is on capital account. The Ld. CIT(A) also treated the sum as Judgment of Hon'ble Jammu & Kashmir High Court in the case of Shree Balaji Alloys (supra) which has been affirmed by Hon'ble Apex Court vide Civil appeal No. 10061 of 2011 dated 19 Jammu and Kashmeer High Court while rendering its Judgment in the case of Shree Balaji Alloys (supra) had relied on the principles laid down by the Hon'ble Apex Court in the case of Sahney Steel & Press Works v. CIT (1997) 94 Taxman 368/228 ITR 253 &Ponni Su Chemicals Ltd. (supra) and after analyzing the Office Memorandum dated 14 Incentive has held that Excise Duty refund granted with the object of creating avenues for Perpetual Employment, to eradicate the social problem of State by accelerated industrial development was a capital receipt. Further, the Departmental Appeal filed against the said High Court decision of Shree Balaji Alloys (supra) has also been dismissed by the Hon'ble Apex Court. So, this issue has attained finality. Since we find no infirmity in the order of the Ld. CIT(A) and the Ld. D.R. failed to put forth any contrary decision, we confirm the order of the Ld. CIT(A) on this issue and dismiss the grounds of appeal no. 2(i) to 2(w) of the 21.1 The issue in dispute involved in the year under consideration being identical to the issues decided by the therefore respectfully following the same, the ground No. the appeal of the Revenue ITA Nos. 715, 718/M/2020, 7793, 7794/M/2020 & 1423, 1418, 654, 653/M/2020 16. We have heard the rival submissions of both the parties and perused the material available on record. We find that the objective of grant of Excise Duty Incentive as envisaged in Office Memorandum dated 7-01-2003 [Refer Page No. 245-262 of FBI issued by Ministry of Commerce & Industry is industrialization of backward area of Uttaranchal for generation of employment and utilization of local resources. Hence, the incentive received by assessee is on capital account. The Ld. CIT(A) also treated the sum as capital receipt by taking strength from the Judgment of Hon'ble Jammu & Kashmir High Court in the case of Shree Balaji Alloys (supra) which has been affirmed by Hon'ble Apex Court vide Civil appeal No. 10061 of 2011 dated 19-04-2016. Further the Hon'ble mmu and Kashmeer High Court while rendering its Judgment in the case of Shree Balaji Alloys (supra) had relied on the principles laid down by the Hon'ble Apex Court in the case of Sahney Steel & Press Works v. CIT (1997) 94 Taxman 368/228 ITR 253 &Ponni Su Chemicals Ltd. (supra) and after analyzing the Office Memorandum dated 14-06-2002 behind the grant of Incentive has held that Excise Duty refund granted with the object of creating avenues for Perpetual Employment, to eradicate the social problem of unemployment in the State by accelerated industrial development was a capital receipt. Further, the Departmental Appeal filed against the said High Court decision of Shree Balaji Alloys (supra) has also been dismissed by the Hon'ble Apex Court. So, this ssue has attained finality. Since we find no infirmity in the order of the Ld. CIT(A) and the Ld. D.R. failed to put forth any contrary decision, we confirm the order of the Ld. CIT(A) on this issue and dismiss the grounds of appeal no. 2(i) to 2(w) of the Revenue.” issue in dispute involved in the year under consideration being identical to the issues decided by the Tribunal therefore respectfully following the same, the ground No. Revenue are dismissed. Everest Industries Limited 45 ITA Nos. 715, 718/M/2020, 7793, 7794/M/2020 & 1423, 1418, 654, 653/M/2020 16. We have heard the rival submissions of both the parties and perused the material available on record. We find that the objective of grant of Excise Duty Incentive as 2003 [Refer y Ministry of Commerce & Industry is industrialization of backward area of Uttaranchal for generation of employment and utilization of local resources. Hence, the incentive received by assessee is on capital account. The Ld. CIT(A) also treated capital receipt by taking strength from the Judgment of Hon'ble Jammu & Kashmir High Court in the case of Shree Balaji Alloys (supra) which has been affirmed by Hon'ble Apex Court vide Civil appeal No. 2016. Further the Hon'ble mmu and Kashmeer High Court while rendering its Judgment in the case of Shree Balaji Alloys (supra) had relied on the principles laid down by the Hon'ble Apex Court in the case of Sahney Steel & Press Works v. CIT (1997) 94 Taxman 368/228 ITR 253 &Ponni Sugars & Chemicals Ltd. (supra) and after analyzing the Office 2002 behind the grant of Incentive has held that Excise Duty refund granted with the object of creating avenues for Perpetual Employment, unemployment in the State by accelerated industrial development was a capital receipt. Further, the Departmental Appeal filed against the said High Court decision of Shree Balaji Alloys (supra) has also been dismissed by the Hon'ble Apex Court. So, this ssue has attained finality. Since we find no infirmity in the order of the Ld. CIT(A) and the Ld. D.R. failed to put forth any contrary decision, we confirm the order of the Ld. CIT(A) on this issue and dismiss the grounds of appeal no. issue in dispute involved in the year under consideration Tribunal(supra), therefore respectfully following the same, the ground No. 1 and 2 of 22. The ground No. excluding sales tax incentive and excise duty exemption while computing the book profit under section 115 JB of the 23. We find that identical issue has been decided by of the assessee for assessment year 2008 finding in assessment year 2008 revenue is dismissed. 24. Now, we take up the cross appeal 13. The grounds raised by the assessee 1. That on the facts and in the circumstances of the case, the Ld.Commissioner of Income Tax (Appeals) (here referred to as'Ld. CIT(Appeals)' was not justified & grossly erred in confirming disallowance in respect of provision leave encashment debited to Profit & Loss Account amounting to Rs. 45,22,238/ under the normal provisions of the Act. 2. That on the facts and in the circumstances of the case, the Ld.CIT (Appeals) was not justified &grossly confirming the action of the A.O. in not allowing additional depreciation u/s32(1) (iia) amounting to Rs. 7,26,59,325/ in respect of new Plant & Machinery acquired and installed after 31 24.1 The grounds raised by t 1. (i) Whether the CIT (A) erred on the facts and in the circumstances of the case and in law, in deleting an amount of Rs. 2,34,15,232/ of sales tax incentive. (ii) Whether the CIT (A) erred on the facts and in the circumstances of the case and in law, in holding that Sales ITA Nos. 715, 718/M/2020, 7793, 7794/M/2020 & 1423, 1418, 654, 653/M/2020 No.3 of the appeal of the Revenue excluding sales tax incentive and excise duty exemption while computing the book profit under section 115 JB of the We find that identical issue has been decided by essee for assessment year 2008-09, therefore following our finding in assessment year 2008-09, the ground of the appeal of the revenue is dismissed. we take up the cross appeals for assessment 13. The grounds raised by the assessee are reproduced as under: That on the facts and in the circumstances of the case, the Ld.Commissioner of Income Tax (Appeals) (here referred to as'Ld. CIT(Appeals)' was not justified & grossly erred in confirming disallowance in respect of provision leave encashment debited to Profit & Loss Account amounting to Rs. 45,22,238/-in computing total income under the normal provisions of the Act. That on the facts and in the circumstances of the case, the Ld.CIT (Appeals) was not justified &grossly confirming the action of the A.O. in not allowing additional depreciation u/s32(1) (iia) amounting to Rs. 7,26,59,325/ in respect of new Plant & Machinery acquired and installed after 31-03-2005 but before 01-04-2011. grounds raised by the revenue are reproduced as under: Whether the CIT (A) erred on the facts and in the circumstances of the case and in law, in deleting an amount of Rs. 2,34,15,232/- being disallowance of claim of sales tax incentive. ) Whether the CIT (A) erred on the facts and in the circumstances of the case and in law, in holding that Sales Everest Industries Limited 46 ITA Nos. 715, 718/M/2020, 7793, 7794/M/2020 & 1423, 1418, 654, 653/M/2020 Revenue relates to excluding sales tax incentive and excise duty exemption while computing the book profit under section 115 JB of the Act. We find that identical issue has been decided by us in the case 09, therefore following our 09, the ground of the appeal of the for assessment year 2012- reproduced as under: That on the facts and in the circumstances of the case, the Ld.Commissioner of Income Tax (Appeals) (here-in-after referred to as'Ld. CIT(Appeals)' was not justified & grossly erred in confirming disallowance in respect of provision for leave encashment debited to Profit & Loss Account in computing total income That on the facts and in the circumstances of the case, the Ld.CIT (Appeals) was not justified &grossly erred in confirming the action of the A.O. in not allowing additional depreciation u/s32(1) (iia) amounting to Rs. 7,26,59,325/- in respect of new Plant & Machinery acquired and 2011. he revenue are reproduced as under: Whether the CIT (A) erred on the facts and in the circumstances of the case and in law, in deleting an being disallowance of claim ) Whether the CIT (A) erred on the facts and in the circumstances of the case and in law, in holding that Sales Tax was embedded in the Sales prices charged by the assessee and the same was in the nature of capital receipt. The Ld. CIT(A) ignored the fact was legally required to collect Sales Tax on the Sales made, yet it had worked out the notional Sales Tax so collected and had claimed the same as capital receipts. (iii) Whether the CIT (A) erred on the facts and in the circumstances of decision of ITAT, Mumbai and the decision of Bombay High Court (ITA No. 1299 of 2008 in the case of Reliance Industries Limited, even though subsequent to the Departmental appeal against the Order of High Court, the issue has been remitted back to the Bombay High Court to decide afresh and the same is still pending for adjudication. (iv) Without prejudice to the above grounds, whether the CIT (A) erred on facts and in law, directing the AO that the Sales Tax Incentive cost of assets, if the same is treated as capital receipts by the A.O. ignoring the provisions of explanation 10 to section 43(1) of the Act? 2. (i) Whether the CIT (A) erred on facts and in the circumstances of the excise duty of Rs. 35,13,87,884/ the assessee was capital in nature without any evidence placed on record to establish that the said amount was actually collected on account of excise duty. (ii) Without prejudice to the ground at () above, whether the CIT (A) erred on facts and in the circumstances of the case and in law in holding that the excise duty of Rs. 35,13,87,884/ in nature despite the fact tha the assessee on goods which were exempted from levy of any duty as per the Central Excise Department's Notification No. 50/2002 (iii) Whether the CIT (A) erred on facts and in the circumstances of the case an excise duty of Rs. 35,13,87,884/ ITA Nos. 715, 718/M/2020, 7793, 7794/M/2020 & 1423, 1418, 654, 653/M/2020 Tax was embedded in the Sales prices charged by the assessee and the same was in the nature of capital receipt. The Ld. CIT(A) ignored the fact that the assessee was legally required to collect Sales Tax on the Sales made, yet it had worked out the notional Sales Tax so collected and had claimed the same as capital receipts. ) Whether the CIT (A) erred on the facts and in the circumstances of the case and in law, in relying on the decision of ITAT, Mumbai and the decision of Bombay High Court (ITA No. 1299 of 2008 in the case of Reliance Industries Limited, even though subsequent to the Departmental appeal against the Order of High Court, the ssue has been remitted back to the Bombay High Court to decide afresh and the same is still pending for adjudication. (iv) Without prejudice to the above grounds, whether the CIT (A) erred on facts and in law, directing the AO that the Sales Tax Incentive is not required to be deducted from the cost of assets, if the same is treated as capital receipts by the A.O. ignoring the provisions of explanation 10 to section 43(1) of the Act? (i) Whether the CIT (A) erred on facts and in the circumstances of the case and in law in holding that the excise duty of Rs. 35,13,87,884/- stated to be collected by the assessee was capital in nature without any evidence placed on record to establish that the said amount was actually collected on account of excise duty. ) Without prejudice to the ground at () above, whether the CIT (A) erred on facts and in the circumstances of the case and in law in holding that the excise duty of Rs. 35,13,87,884/- collected by the assessee was not revenue in nature despite the fact that the same was collected by the assessee on goods which were exempted from levy of any duty as per the Central Excise Department's Notification No. 50/2002-CE dated 10.06.2003 ) Whether the CIT (A) erred on facts and in the circumstances of the case and in law in holding that the excise duty of Rs. 35,13,87,884/- collected by the Everest Industries Limited 47 ITA Nos. 715, 718/M/2020, 7793, 7794/M/2020 & 1423, 1418, 654, 653/M/2020 Tax was embedded in the Sales prices charged by the assessee and the same was in the nature of capital that the assessee was legally required to collect Sales Tax on the Sales made, yet it had worked out the notional Sales Tax so collected and had claimed the same as capital receipts. ) Whether the CIT (A) erred on the facts and in the the case and in law, in relying on the decision of ITAT, Mumbai and the decision of Bombay High Court (ITA No. 1299 of 2008 in the case of Reliance Industries Limited, even though subsequent to the Departmental appeal against the Order of High Court, the ssue has been remitted back to the Bombay High Court to decide afresh and the same is still pending for (iv) Without prejudice to the above grounds, whether the CIT (A) erred on facts and in law, directing the AO that the is not required to be deducted from the cost of assets, if the same is treated as capital receipts by the A.O. ignoring the provisions of explanation 10 to (i) Whether the CIT (A) erred on facts and in the case and in law in holding that the stated to be collected by the assessee was capital in nature without any evidence placed on record to establish that the said amount was ) Without prejudice to the ground at () above, whether the CIT (A) erred on facts and in the circumstances of the case and in law in holding that the excise duty of Rs. collected by the assessee was not revenue t the same was collected by the assessee on goods which were exempted from levy of any duty as per the Central Excise Department's ) Whether the CIT (A) erred on facts and in the d in law in holding that the collected by the assessee was capital in nature by comparing the scheme of exemption under which the claim was made by the assessee by such other schemes wherein the mode of incentive was in th subsidy. (iv) Without prejudice to the above, whether the CIT (A) erred on facts and in law, directing the AO that the Excise duty exemption is not required to be deducted from the cost of assets, if the same is treated the A.O. ignoring the provisions of explanation 10 to section 43(1) of the Act? (v) Whether the CIT (A) erred on the facts and in the circumstances of the case and in law, in not appreciating the fact that the provision to explanatio of the IT .Act, was intended to cover any subsidy or grant or reimbursement directly or indirectly met by the Central or State Government or any authority established under any law and the asesseee's claim of excise duty exemption is cov 3. Whether the CIT (A) erred on facts and in law in allowing the foreign exchange fluctuation loss on reinstatement of loan without verifying whether the underlying transaction was on capital or revenue account and without verifyi was in US dollar and Japanese Yen. 5. (i) Whether the CIT (A) erred on the facts and in the circumstances of the case and in law, in directing the AO to exclude Sales Tax incentive and Excise Duty Exemption, while computing the book profits us 115JB of the Act, withoutappreciating that they have excluded in Explanation 1 to section 115JB of the Act . (ii) Whether the CIT (A) erred on the facts and in the circumstances of the case and in law, in directing the AO to exclude Sales Tax incentive and Excise Duty Exemption, while computing the book profits us 115JB of the Act despite the fact that no adjustment other than the ones mentioned in Sec.115JB is permissible as held by the ITA Nos. 715, 718/M/2020, 7793, 7794/M/2020 & 1423, 1418, 654, 653/M/2020 assessee was capital in nature by comparing the scheme of exemption under which the claim was made by the assessee by such other schemes wherein the mode of incentive was in the nature of refund/reimbursement or (iv) Without prejudice to the above, whether the CIT (A) erred on facts and in law, directing the AO that the Excise duty exemption is not required to be deducted from the cost of assets, if the same is treated as capital receipts by the A.O. ignoring the provisions of explanation 10 to section 43(1) of the Act? (v) Whether the CIT (A) erred on the facts and in the circumstances of the case and in law, in not appreciating the fact that the provision to explanation 10 section 43(1) of the IT .Act, was intended to cover any subsidy or grant or reimbursement directly or indirectly met by the Central or State Government or any authority established under any law and the asesseee's claim of excise duty exemption is covered in indirect subsidy? 3. Whether the CIT (A) erred on facts and in law in allowing the foreign exchange fluctuation loss on reinstatement of loan without verifying whether the underlying transaction was on capital or revenue account and without verifying whether the underlying transaction was in US dollar and Japanese Yen. Whether the CIT (A) erred on the facts and in the circumstances of the case and in law, in directing the AO to exclude Sales Tax incentive and Excise Duty Exemption, while computing the book profits us 115JB of the Act, withoutappreciating that they have not been specifically excluded in Explanation 1 to section 115JB of the Act . ) Whether the CIT (A) erred on the facts and in the circumstances of the case and in law, in directing the AO to exclude Sales Tax incentive and Excise Duty Exemption, omputing the book profits us 115JB of the Act despite the fact that no adjustment other than the ones mentioned in Sec.115JB is permissible as held by the Everest Industries Limited 48 ITA Nos. 715, 718/M/2020, 7793, 7794/M/2020 & 1423, 1418, 654, 653/M/2020 assessee was capital in nature by comparing the scheme of exemption under which the claim was made by the assessee by such other schemes wherein the mode of e nature of refund/reimbursement or (iv) Without prejudice to the above, whether the CIT (A) erred on facts and in law, directing the AO that the Excise duty exemption is not required to be deducted from the as capital receipts by the A.O. ignoring the provisions of explanation 10 to (v) Whether the CIT (A) erred on the facts and in the circumstances of the case and in law, in not appreciating n 10 section 43(1) of the IT .Act, was intended to cover any subsidy or grant or reimbursement directly or indirectly met by the Central or State Government or any authority established under any law and the asesseee's claim of excise duty 3. Whether the CIT (A) erred on facts and in law in allowing the foreign exchange fluctuation loss on reinstatement of loan without verifying whether the underlying transaction was on capital or revenue account ng whether the underlying transaction Whether the CIT (A) erred on the facts and in the circumstances of the case and in law, in directing the AO to exclude Sales Tax incentive and Excise Duty Exemption, while computing the book profits us 115JB of the Act, not been specifically excluded in Explanation 1 to section 115JB of the Act . ) Whether the CIT (A) erred on the facts and in the circumstances of the case and in law, in directing the AO to exclude Sales Tax incentive and Excise Duty Exemption, omputing the book profits us 115JB of the Act despite the fact that no adjustment other than the ones mentioned in Sec.115JB is permissible as held by the Supreme Court in the case of Apollo Tyres Ltd. (255 IT 273) 6. (i) Whether the CIT (A) erred on the f circumstances of the case and in law, in not following precedent in the decision of hon'ble ITAT vide order dated 31.01.2018 in assessee's own case for A.Y. 2009 wherein hon'ble ITAT rejected the grounds raised by the assessee in respect (ii) Whether the CIT (A) erred On the facts and in the circumstances of the case and in law, to appreciate that fact that the education cess has been levied under Finance Act as an item to increase income tax and it has been held to be part of"income tax" by Hon'ble Calcutta High Court in the case of Srei Infrastructure 25. As far as grounds of the appeal of the assessee is concerned, the learned counsel of the assessee raised and accordingly same are dismissed as infructuous. 26. As far as ground No. concerned, same are identical to ground No. one and two raised by the revenue for assessment our finding in assessment appeal of the Revenue 27. The ground No. foreign exchange fluctuation loss on the reinstatement of loan. We find that identical issue has been adjudicated by us in the appeal of the assessee for assessment finding in assessment revenue accordingly allowed for statistical purposes. ITA Nos. 715, 718/M/2020, 7793, 7794/M/2020 & 1423, 1418, 654, 653/M/2020 Supreme Court in the case of Apollo Tyres Ltd. (255 IT Whether the CIT (A) erred on the facts and in the circumstances of the case and in law, in not following precedent in the decision of hon'ble ITAT vide order dated 31.01.2018 in assessee's own case for A.Y. 2009 wherein hon'ble ITAT rejected the grounds raised by the assessee in respect of Education Cess. ) Whether the CIT (A) erred On the facts and in the circumstances of the case and in law, to appreciate that fact that the education cess has been levied under Finance Act as an item to increase income tax and it has been held part of"income tax" by Hon'ble Calcutta High Court in the case of Srei Infrastructure Finance Ltd. as grounds of the appeal of the assessee is concerned, l of the assessee did not press the grounds raised and accordingly same are dismissed as infructuous. As far as ground No. 1 and 2 of the appeal of the concerned, same are identical to ground No. one and two raised by assessment year 2009-10 and therefore following our finding in assessment year 2009-10, the ground Revenue for year under consideration are dismissed. The ground No.3 of the appeal of the Revenue fluctuation loss on the reinstatement of loan. We find that identical issue has been adjudicated by us in the appeal of the assessee for assessment year 2009-10, therefore following our finding in assessment year 2009-10, the ground of the appeal of the evenue accordingly allowed for statistical purposes. Everest Industries Limited 49 ITA Nos. 715, 718/M/2020, 7793, 7794/M/2020 & 1423, 1418, 654, 653/M/2020 Supreme Court in the case of Apollo Tyres Ltd. (255 IT acts and in the circumstances of the case and in law, in not following precedent in the decision of hon'ble ITAT vide order dated 31.01.2018 in assessee's own case for A.Y. 2009-10 wherein hon'ble ITAT rejected the grounds raised by the ) Whether the CIT (A) erred On the facts and in the circumstances of the case and in law, to appreciate that fact that the education cess has been levied under Finance Act as an item to increase income tax and it has been held part of"income tax" by Hon'ble Calcutta High Court in as grounds of the appeal of the assessee is concerned, did not press the grounds raised and accordingly same are dismissed as infructuous. of the appeal of the Revenue are concerned, same are identical to ground No. one and two raised by 0 and therefore following 10, the ground 1 and 2 of the under consideration are dismissed. Revenue is related to fluctuation loss on the reinstatement of loan. We find that identical issue has been adjudicated by us in the appeal of 10, therefore following our 10, the ground of the appeal of the evenue accordingly allowed for statistical purposes. 28. We find that assessee has also raised an additional ground stating that in case the foreign exchange loss is not allowed to the assessee as revenue expenditure, then depreciation in respect of the said foreign exchange expenditure we agree with the contention of the assessee, but restored this issue of foreign exchange loss Assessing Officer, this additional ground of the as allowed for statistical purpose to be decided by the Assessing Officer, accordingly. 29. The ground No. to exclusion of sales tax incentive and excise duty exemption for the purpose of computati Act. The identical issue has been adjudicated by the assessee for assessment year 2008 finding in assessment theRevenueis accordingly dismissed. 30. The ground No. 6 deduction in respect of education cess. 31. The relevant finding of the Ld. CIT(A) allowing the education cess to the assessee is reproduced as under : “15. I have duly considered the submissions of the appellant. The issue under consideration is covered in the favour of the appellant company by the appellate order dated 16.10.2019 in appeal No. NSK/CIT(A) ITA Nos. 715, 718/M/2020, 7793, 7794/M/2020 & 1423, 1418, 654, 653/M/2020 We find that assessee has also raised an additional ground stating that in case the foreign exchange loss is not allowed to the assessee as revenue expenditure, then depreciation in respect of the exchange expenditure, should be allowed. we agree with the contention of the assessee, but we have already of foreign exchange loss to the file of the learne Assessing Officer, this additional ground of the as allowed for statistical purpose to be decided by the Assessing No. 5 raised in the appeal of the to exclusion of sales tax incentive and excise duty exemption for the purpose of computation of book profit under section 115JB of the . The identical issue has been adjudicated by us the assessee for assessment year 2008-09, therefore following our finding in assessment year 2008-09, this ground of the accordingly dismissed. The ground No. 6 of the appeal of the Revenue eduction in respect of education cess. The relevant finding of the Ld. CIT(A) allowing the education cess to the assessee is reproduced as under : 15. I have duly considered the submissions of the appellant. The issue under consideration is covered in the favour of the appellant company by the appellate order dated 16.10.2019 in appeal No. NSK/CIT(A)-3/139/2017-18 for AY 2010 Everest Industries Limited 50 ITA Nos. 715, 718/M/2020, 7793, 7794/M/2020 & 1423, 1418, 654, 653/M/2020 We find that assessee has also raised an additional ground stating that in case the foreign exchange loss is not allowed to the assessee as revenue expenditure, then depreciation in respect of the , should be allowed. In principle, we have already to the file of the learned Assessing Officer, this additional ground of the assessee is also allowed for statistical purpose to be decided by the Assessing raised in the appeal of the Revenue relates to exclusion of sales tax incentive and excise duty exemption for the on of book profit under section 115JB of the us in the case of 09, therefore following our 09, this ground of the appeal of Revenue relates to The relevant finding of the Ld. CIT(A) allowing the education 15. I have duly considered the submissions of the appellant. The issue under consideration is covered in the favour of the appellant company by the appellate order dated 16.10.2019 in 18 for AY 2010-11 wherein elaborate dis para-15 as to why the education cess was an allowable expenditure. Under Section 40(a)(ji) of the Income Tax Act, any sum paid on account of any rate or tax levied on the profits or gains of any business or profession of or otherwise on the basis of, any such profits or gains, is not allowable as deduction. As per aforesaid provision, any tax levied on profits or gains of any business or profession in computing the gross total income of a ta allowable expenditure. While computing Book Profit under section 1151B of the Act (for MAT purpose), Explanation 2 to section 115]B(2) specifically states that for adding income tax paid/payable, income tax shall include inter alia, educa cess and Secondary & Higher education cess, if any, as levied by the Central Act. Section 40(a)(ji) states only tax whereas section 115JB states that for computing book profit, tax includes cess as levied by the Central Act. Hence it could be seen that where the legislature intended to disallow cess, it had provided specifically for the same. However in case of computation under regular provisions, the same had not been mentioned in section 40(a)(ji) of the Act. Further education cess was levied on the the profits or gains of any business or profession.Also it was not assessed at a proportion of or otherwise on the basis of any suchprofits or gains. Therefore education cess was not covered by section 40(a)(il) section 10(4) of the Income paid on account of any cess, rate or tax levied on the profits or gains of any business, profession or vocation or assessed at a proportion of or otherw gains was not an allowable expense. Thus the Legislators specifically added the word "cess" in aforesaid provision of old law whereas same was missing in the present law. The "cess" was not in the nature of a"tax". W of tax were used by the Government for general purposes and running of the state of affairs of the country, cess proceeds were collected and utilized separately with a specific purpose. As in the case of education cess, the pr to Consolidated Fund but to a non elementary education i.e. "Prarambhik Shiksha Kosh" and used only for that purpose. Reliance was also placed on the decision of Hon'ble Rajasthan High Court in case of Chambal Fer ITA Nos. 715, 718/M/2020, 7793, 7794/M/2020 & 1423, 1418, 654, 653/M/2020 wherein elaborate discussion was made by the undersigned in 15 as to why the education cess was an allowable expenditure. Under Section 40(a)(ji) of the Income Tax Act, any sum paid on account of any rate or tax levied on the profits or gains of any business or profession or assessed at a proportion of or otherwise on the basis of, any such profits or gains, is not allowable as deduction. As per aforesaid provision, any tax levied on profits or gains of any business or profession in computing the gross total income of a taxpayer, is not an allowable expenditure. While computing Book Profit under section 1151B of the Act (for MAT purpose), Explanation 2 to section 115]B(2) specifically states that for adding income tax paid/payable, income tax shall include inter alia, educa cess and Secondary & Higher education cess, if any, as levied by the Central Act. Section 40(a)(ji) states only tax whereas section 115JB states that for computing book profit, tax includes cess as levied by the Central Act. Hence it could be t where the legislature intended to disallow cess, it had provided specifically for the same. However in case of computation under regular provisions, the same had not been mentioned in section 40(a)(ji) of the Act. Further education cess was levied on the amount of income-tax, it was not levied on the profits or gains of any business or profession.Also it was not assessed at a proportion of or otherwise on the basis of any suchprofits or gains. Therefore education cess was not covered by section 40(a)(il) of the Act. Under the old income Tax Act, section 10(4) of the Income-tax Act, 1922 stated that any sum paid on account of any cess, rate or tax levied on the profits or gains of any business, profession or vocation or assessed at a proportion of or otherwise on the basis of any such profits or gains was not an allowable expense. Thus the Legislators specifically added the word "cess" in aforesaid provision of old law whereas same was missing in the present law. The "cess" was not in the nature of a"tax". While proceeds from collection of tax were used by the Government for general purposes and running of the state of affairs of the country, cess proceeds were collected and utilized separately with a specific purpose. As in the case of education cess, the proceeds were not credited to Consolidated Fund but to a non-lapsable Fund for elementary education i.e. "Prarambhik Shiksha Kosh" and used only for that purpose. Reliance was also placed on the decision of Hon'ble Rajasthan High Court in case of Chambal Fer Everest Industries Limited 51 ITA Nos. 715, 718/M/2020, 7793, 7794/M/2020 & 1423, 1418, 654, 653/M/2020 cussion was made by the undersigned in 15 as to why the education cess was an allowable expenditure. Under Section 40(a)(ji) of the Income Tax Act, any sum paid on account of any rate or tax levied on the profits or or assessed at a proportion of or otherwise on the basis of, any such profits or gains, is not allowable as deduction. As per aforesaid provision, any tax levied on profits or gains of any business or profession in xpayer, is not an allowable expenditure. While computing Book Profit under section 1151B of the Act (for MAT purpose), Explanation 2 to section 115]B(2) specifically states that for adding income tax paid/payable, income tax shall include inter alia, education cess and Secondary & Higher education cess, if any, as levied by the Central Act. Section 40(a)(ji) states only tax whereas section 115JB states that for computing book profit, tax includes cess as levied by the Central Act. Hence it could be t where the legislature intended to disallow cess, it had provided specifically for the same. However in case of computation under regular provisions, the same had not been mentioned in section 40(a)(ji) of the Act. Further education cess tax, it was not levied on the profits or gains of any business or profession.Also it was not assessed at a proportion of or otherwise on the basis of any suchprofits or gains. Therefore education cess was not covered of the Act. Under the old income Tax Act, tax Act, 1922 stated that any sum paid on account of any cess, rate or tax levied on the profits or gains of any business, profession or vocation or assessed at a ise on the basis of any such profits or gains was not an allowable expense. Thus the Legislators specifically added the word "cess" in aforesaid provision of old law whereas same was missing in the present law. The "cess" hile proceeds from collection of tax were used by the Government for general purposes and running of the state of affairs of the country, cess proceeds were collected and utilized separately with a specific purpose. oceeds were not credited lapsable Fund for elementary education i.e. "Prarambhik Shiksha Kosh" and used only for that purpose. Reliance was also placed on the decision of Hon'ble Rajasthan High Court in case of Chambal Fertilisers and Chemicals Limited Vs. JCIT in ITA No. 52/2018, wherein it was held that education cess was not a tax, therefore the same was not required to be disallowed under section 40(a)(i), in computing profits and gains from business as part of total income of the taxpayer. The Hon'ble High Court further held that education cess cannot be treated at par with tax and hence it is an allowable expenditure. It was the only available decision of a High Court on the issue and was binding on the appellate autho specifically referred to the CDT Circular issued in the year 1967. It also held that CBDT Circulars are binding on the Department. The issue under consideration is also covered in the favour of the assessee rendered in the case of Atlas Copco (India) Pvt. Ltd. Vs. DCIT in ITA No.732 & 736/Pun/2011 for AY 2005 also placed on the decision of the Hon'ble Apex Court in the case of JaipuriaSamla Amalgamated Col that section 10(4) of the Income Tax Act, 1922 (parimateria to section 40(a)(ii) of the Income Tax Act,1961) provides only for disallowance of rates and taxes levied on profits or gains of any business or profession computed in acc provisions of section 10 of Income Tax Act, 1922. Since 'education cess' was not levied on profits or gains of any business or profession, the same did not fall within the purview of section 40(a)(ii) of the Act. In view of the above facts the AO to delete the addition of This ground of appeal is accordingly allowed.” 32. We find that legislat provisions of section the income tax retrospectively w.e.f 1/4/2005, deduction is not allowable. The said amendment is reproduced as under : “(ii) any sum paid on account of any rate or tax levied on the profits or gains of any business or profession or assessed at proportion of, or otherwise on the basis of, any such profits or gains. ITA Nos. 715, 718/M/2020, 7793, 7794/M/2020 & 1423, 1418, 654, 653/M/2020 and Chemicals Limited Vs. JCIT in ITA No. 52/2018, wherein it was held that education cess was not a tax, therefore the same was not required to be disallowed under section 40(a)(i), in computing profits and gains from business as part of total come of the taxpayer. The Hon'ble High Court further held that education cess cannot be treated at par with tax and hence it is an allowable expenditure. It was the only available decision of a High Court on the issue and was binding on the appellate authorities. While deciding the issue, the High Court specifically referred to the CDT Circular issued in the year 1967. It also held that CBDT Circulars are binding on the Department. The issue under consideration is also covered in the favour of the assessee by the decision of Hon'ble Pune ITAT rendered in the case of Atlas Copco (India) Pvt. Ltd. Vs. DCIT in ITA No.732 & 736/Pun/2011 for AY 2005-06. Reliance was also placed on the decision of the Hon'ble Apex Court in the case of JaipuriaSamla Amalgamated Collieries (82 IT 580) held that section 10(4) of the Income Tax Act, 1922 (parimateria to section 40(a)(ii) of the Income Tax Act,1961) provides only for disallowance of rates and taxes levied on profits or gains of any business or profession computed in accordance with the provisions of section 10 of Income Tax Act, 1922. Since 'education cess' was not levied on profits or gains of any business or profession, the same did not fall within the purview 40(a)(ii) of the Act. In view of the above facts the AO to delete the addition of ₹66,31,870/- made by him. This ground of appeal is accordingly allowed.” We find that legislature has brought an amendment to the provisions of section 40(a)(ii) treating the education cess as part of retrospectively w.e.f 1/4/2005, and therefore not allowable. The said amendment is reproduced as ) any sum paid on account of any rate or tax levied on the profits or gains of any business or profession or assessed at proportion of, or otherwise on the basis of, any such profits or Everest Industries Limited 52 ITA Nos. 715, 718/M/2020, 7793, 7794/M/2020 & 1423, 1418, 654, 653/M/2020 and Chemicals Limited Vs. JCIT in ITA No. 52/2018, wherein it was held that education cess was not a tax, therefore the same was not required to be disallowed under section 40(a)(i), in computing profits and gains from business as part of total come of the taxpayer. The Hon'ble High Court further held that education cess cannot be treated at par with tax and hence it is an allowable expenditure. It was the only available decision of a High Court on the issue and was binding on the rities. While deciding the issue, the High Court specifically referred to the CDT Circular issued in the year 1967. It also held that CBDT Circulars are binding on the Department. The issue under consideration is also covered in by the decision of Hon'ble Pune ITAT rendered in the case of Atlas Copco (India) Pvt. Ltd. Vs. DCIT in 06. Reliance was also placed on the decision of the Hon'ble Apex Court in the lieries (82 IT 580) held that section 10(4) of the Income Tax Act, 1922 (parimateria to section 40(a)(ii) of the Income Tax Act,1961) provides only for disallowance of rates and taxes levied on profits or gains of ordance with the provisions of section 10 of Income Tax Act, 1922. Since 'education cess' was not levied on profits or gains of any business or profession, the same did not fall within the purview 40(a)(ii) of the Act. In view of the above facts, I direct made by him. amendment to the reating the education cess as part of and therefore said not allowable. The said amendment is reproduced as ) any sum paid on account of any rate or tax levied on the profits or gains of any business or profession or assessed at a proportion of, or otherwise on the basis of, any such profits or [Explanation 1. For the removal of doubts, it is hereby declared that for the purposes of this sub account of any rate or tax levied includes and shall be dee always to have included any sum eligible for relief of tax under section 90 or, as the case may be, deduction from the Indian income-tax payable under section 91. [Explanation 2. that for the purposes of this sub account of any rate or tax levied includes any sum eligible for relief of tax under section 90A.] [Explanation 3. For the removal of doubts, it is h that for the purposes of this sub include and shall be deemed to have always included any surcharge or cess, by whatever name called, on such tax;] 32.1 Further, we find Hon’ble Supreme Court in the case COMMISSIONER OF INCOME TAX vs M/S. CHAMBAL FERTILISERS & CHEMICALS LIMITED (2022) TAXSCAN (SC) 212, in view of the amendment vide the Finance Act, 2022 with retrospective effect from 01.04.2005 to Section 40(a) (ii) of Act, allowed the appeal of th the Supreme Court (supra), t issue in dispute are appeal of the revenue 33. Now, we take up cross appeals for assessment year 2013 The grounds raised by the assessee 1. That on the facts and in the circumstances of the case, the Ld. Commissioner of Income Tax (Appeals) (here referred to as 'Ld. CIT (Appeals)' was not justified & grossly erred in confirming disallowance in respect of provision for leave encashment ITA Nos. 715, 718/M/2020, 7793, 7794/M/2020 & 1423, 1418, 654, 653/M/2020 [Explanation 1. For the removal of doubts, it is hereby declared that for the purposes of this sub-clause, any sum paid on account of any rate or tax levied includes and shall be dee always to have included any sum eligible for relief of tax under section 90 or, as the case may be, deduction from the Indian tax payable under section 91.] [Explanation 2. For the removal of doubts, it is hereby declared that for the purposes of this sub-clause, any sum paid on account of any rate or tax levied includes any sum eligible for relief of tax under section 90A.] [Explanation 3. For the removal of doubts, it is hereby clarified that for the purposes of this sub-clause, the term "tax" shall include and shall be deemed to have always included any surcharge or cess, by whatever name called, on such tax;] Further, we find Hon’ble Supreme Court in the case COMMISSIONER OF INCOME TAX vs M/S. CHAMBAL FERTILISERS & CHEMICALS LIMITED (2022) TAXSCAN (SC) 212, in view of the amendment vide the Finance Act, 2022 with retrospective effect from 01.04.2005 to Section 40(a) (ii) of Act, allowed the appeal of the Revenue. Therefore, respectfully following the Supreme Court (supra), the finding of the Ld. CIT(A) on the accordingly set aside. The ground No. 6 of the appeal of the revenue is accordingly allowed. we take up cross appeals for assessment year 2013 The grounds raised by the assessee are reproduced as under: That on the facts and in the circumstances of the case, the Ld. Commissioner of Income Tax (Appeals) (here referred to as 'Ld. CIT (Appeals)' was not justified & grossly erred in confirming disallowance in respect of provision for leave encashment debited to Profit & Loss Account amounting Everest Industries Limited 53 ITA Nos. 715, 718/M/2020, 7793, 7794/M/2020 & 1423, 1418, 654, 653/M/2020 [Explanation 1. For the removal of doubts, it is hereby declared clause, any sum paid on account of any rate or tax levied includes and shall be deemed always to have included any sum eligible for relief of tax under section 90 or, as the case may be, deduction from the Indian For the removal of doubts, it is hereby declared clause, any sum paid on account of any rate or tax levied includes any sum eligible for ereby clarified clause, the term "tax" shall include and shall be deemed to have always included any surcharge or cess, by whatever name called, on such tax;]” Further, we find Hon’ble Supreme Court in the case of JOINT COMMISSIONER OF INCOME TAX vs M/S. CHAMBAL FERTILISERS & CHEMICALS LIMITED (2022) TAXSCAN (SC) 212, in view of the amendment vide the Finance Act, 2022 with retrospective effect from 01.04.2005 to Section 40(a) (ii) of Act, has Therefore, respectfully following he finding of the Ld. CIT(A) on the The ground No. 6 of the we take up cross appeals for assessment year 2013-14. reproduced as under: That on the facts and in the circumstances of the case, the Ld. Commissioner of Income Tax (Appeals) (here-in-after referred to as 'Ld. CIT (Appeals)' was not justified & grossly erred in confirming disallowance in respect of provision for debited to Profit & Loss Account amounting to Rs. 1,02,01,402/ provisions of the Act. 2. That on the facts and in the circumstances of the case, the Ld.CIT(Appeals) was not justified & grossly erred in confirming the action of the A.O. in not allowing additional depreciation u/s 32(1) (ia) amounting to Rs. 6,08,94,395/ & Machinery acquired and installed after 31 before 01-04 33.1 The assessee also raised additional ground, wh reproduced as under: “1. Additional Ground No. 1: 1.1 In case Ground No. 2 of Department's appeal is decided against the Assessee reinstatement of foreign currency loan is held to be disallowable, in that event, the Appellant Assessee be allowed to claim depreciation on the same for the year under consideration as also the depreciation on the adjuste written down value of the related block of assets and that the Id. AO be directed accordingly. 33.2 The grounds raised 1. (i) Whether the CIT (A) erred on facts and in the circumstances of the case and in l duty of Rs. 46,09,77,123/ assessee was capital in nature without any evidence placed on record to establish that the said amount was actually collected on account ofexcise duty. (ii) Without prej (A) erred on facts and in the circumstances of the case and in law in holding that the excise duty of Rs. 46,09,77,123/ collected by the assessee was not revenue in nature despite the fact that the same wa which were exempted from levy of any duty as per the Central Excise Department's Notification No. 50/2002 10.06.2003 ITA Nos. 715, 718/M/2020, 7793, 7794/M/2020 & 1423, 1418, 654, 653/M/2020 to Rs. 1,02,01,402/-in computing total income under the normal provisions of the Act. That on the facts and in the circumstances of the case, the Ld.CIT(Appeals) was not justified & grossly erred in confirming the action of the A.O. in not allowing additional depreciation u/s 32(1) (ia) amounting to Rs. 6,08,94,395/- in respect of Plant & Machinery acquired and installed after 31 04-2012. assessee also raised additional ground, wh reproduced as under: 1. Additional Ground No. 1: In case Ground No. 2 of Department's appeal is decided against the Assessee and the foreign exchange loss on reinstatement of foreign currency loan is held to be disallowable, in that event, the Appellant Assessee be allowed to claim depreciation on the same for the year under consideration as also the depreciation on the adjuste written down value of the related block of assets and that the Id. AO be directed accordingly.” grounds raised by theRevenue are reproduced as under: (i) Whether the CIT (A) erred on facts and in the circumstances of the case and in law in holding that the excise duty of Rs. 46,09,77,123/- stated to be collected by the assessee was capital in nature without any evidence placed on record to establish that the said amount was actually collected on account ofexcise duty. (ii) Without prejudice to the ground at (i) above, whether the CIT (A) erred on facts and in the circumstances of the case and in law in holding that the excise duty of Rs. 46,09,77,123/ collected by the assessee was not revenue in nature despite the fact that the same was collected by the assessee on goods which were exempted from levy of any duty as per the Central Excise Department's Notification No. 50/2002 Everest Industries Limited 54 ITA Nos. 715, 718/M/2020, 7793, 7794/M/2020 & 1423, 1418, 654, 653/M/2020 in computing total income under the normal That on the facts and in the circumstances of the case, the Ld.CIT(Appeals) was not justified & grossly erred in confirming the action of the A.O. in not allowing additional depreciation in respect of Plant & Machinery acquired and installed after 31-03-2005 but assessee also raised additional ground, which is In case Ground No. 2 of Department's appeal is decided and the foreign exchange loss on reinstatement of foreign currency loan is held to be disallowable, in that event, the Appellant Assessee be allowed to claim depreciation on the same for the year under consideration as also the depreciation on the adjusted opening written down value of the related block of assets and that the reproduced as under: (i) Whether the CIT (A) erred on facts and in the aw in holding that the excise stated to be collected by the assessee was capital in nature without any evidence placed on record to establish that the said amount was actually collected udice to the ground at (i) above, whether the CIT (A) erred on facts and in the circumstances of the case and in law in holding that the excise duty of Rs. 46,09,77,123/- collected by the assessee was not revenue in nature despite the s collected by the assessee on goods which were exempted from levy of any duty as per the Central Excise Department's Notification No. 50/2002-CE dated (iii) Whether the CIT (A) erred on facts and in the circumstances of the case and in law in h 46,09,77,123/ by comparing the scheme of exemption under which the claim was made by the assessee by such other schemes wherein the mode of incentive was in the nature of r or subsidy. (iv) Without prejudice to the above, whether the CIT (A) erred on facts and in law, directing the AO that the Excise duty exemption is not required to be deducted from the cost of assets, if the same is treated as capital re ignoring the provisions of explanation 10 to section 43(1) of the Act? (v) Whether the CIT (A) erred on the facts and in the circumstances of the case and in law, in not appreciating the fact that the provision to explanation 10 section .Act, was intended to cover any subsidy or grant or reimbursement directly or indirectly met by the Central or State Government orany authority established under any law and the asesseee's claim of excise du exemption is covered in indirect subsidy? 2. Whether the CIT (A) erred on facts and in law in allowing the foreign exchang fluctuation loss on reinstatement of loan without verifying whether the underlyir transaction was on capital or revenue account and without verifying whether tr underlying transaction was in US dollar and Japanese Yen. 3. (i) Whether the CIT (A) erred on the facts and in the circumstances of the case al in law, in directing the AO to exclude Excise Duty Exemption, while computing ti book profits u/s 115JB of the be specifically excluded in Explanation 1 to section 115JB of the Act. (ii) Whether the CIT (A) erred on the facts and in the circumstances of the ca and in law, in directing the AO to exclude Excise Duty Exempt us 115JB of the Act despite the fact that no adjustment other th the ones mentioned in Sec.115JB is permissible as held by the Supreme Court the case of Apollo Tyres Ltd. (255 IT 273) ITA Nos. 715, 718/M/2020, 7793, 7794/M/2020 & 1423, 1418, 654, 653/M/2020 ) Whether the CIT (A) erred on facts and in the circumstances of the case and in law in holding that the excise duty of Rs. 46,09,77,123/- collected by the assessee was capital in nature by comparing the scheme of exemption under which the claim was made by the assessee by such other schemes wherein the mode of incentive was in the nature of refund/reimbursement (iv) Without prejudice to the above, whether the CIT (A) erred on facts and in law, directing the AO that the Excise duty exemption is not required to be deducted from the cost of assets, if the same is treated as capital receipts by the A.O. ignoring the provisions of explanation 10 to section 43(1) of the (v) Whether the CIT (A) erred on the facts and in the circumstances of the case and in law, in not appreciating the fact that the provision to explanation 10 section 43(1) of the IT .Act, was intended to cover any subsidy or grant or reimbursement directly or indirectly met by the Central or State Government orany authority established under any law and the asesseee's claim of excise du exemption is covered in subsidy? 2. Whether the CIT (A) erred on facts and in law in allowing the foreign exchang fluctuation loss on reinstatement of loan without verifying whether the underlyir transaction was on capital or revenue account and without verifying whether tr underlying transaction was in US dollar and Japanese Yen. (i) Whether the CIT (A) erred on the facts and in the circumstances of the case al in law, in directing the AO to exclude Excise Duty Exemption, while computing ti book profits u/s 115JB of the Act, without appreciating that they have not be specifically excluded in Explanation 1 to section 115JB of ) Whether the CIT (A) erred on the facts and in the circumstances of the ca and in law, in directing the AO to exclude Excise Duty Exemption, while computi the book profits us 115JB of the Act despite the fact that no adjustment other th the ones mentioned in Sec.115JB is permissible as held by the Supreme Court the case of Apollo Tyres Ltd. (255 IT 273) Everest Industries Limited 55 ITA Nos. 715, 718/M/2020, 7793, 7794/M/2020 & 1423, 1418, 654, 653/M/2020 ) Whether the CIT (A) erred on facts and in the circumstances olding that the excise duty of Rs. collected by the assessee was capital in nature by comparing the scheme of exemption under which the claim was made by the assessee by such other schemes wherein the efund/reimbursement (iv) Without prejudice to the above, whether the CIT (A) erred on facts and in law, directing the AO that the Excise duty exemption is not required to be deducted from the cost of ceipts by the A.O. ignoring the provisions of explanation 10 to section 43(1) of the (v) Whether the CIT (A) erred on the facts and in the circumstances of the case and in law, in not appreciating the 43(1) of the IT .Act, was intended to cover any subsidy or grant or reimbursement directly or indirectly met by the Central or State Government orany authority established under any law and the asesseee's claim of excise du exemption is covered in 2. Whether the CIT (A) erred on facts and in law in allowing the foreign exchang fluctuation loss on reinstatement of loan without verifying whether the underlyir transaction was on capital or revenue account and without verifying whether tr underlying transaction was in US dollar and Japanese Yen. (i) Whether the CIT (A) erred on the facts and in the circumstances of the case al in law, in directing the AO to exclude Excise Duty Exemption, while computing ti book profits Act, without appreciating that they have not be specifically excluded in Explanation 1 to section 115JB of ) Whether the CIT (A) erred on the facts and in the circumstances of the ca and in law, in directing the AO to ion, while computi the book profits us 115JB of the Act despite the fact that no adjustment other th the ones mentioned in Sec.115JB is permissible as held by the Supreme Court the case of Apollo Tyres Ltd. (255 IT 273) 4. (i) Whether the CIT (A) erred on circumstances of the c and in law, in not following precedent in the decision of hon'ble ITAT vide or dated 31.01.2018 in assessee's own case for A.Y. 2009 rejected the grounds raised by the assessee in respect of Education Cess. (i) Whether the CIT (A) erred On the facts and in the circumstances of the c and in law, to appreciate that fact that the education cess has been levied un Finance Act as an item to increase income tax and it has been held to be par"incom tax" by Hon'ble Calcutta High Court Infrastructure 34. We find that the grounds and original ground raised by the assessee in the year under consideration are identical to grounds raised in assessment been pressed by the assessee infructuous. The identical has been allowed for statistical purpose, same, the additional ground for the ye allowed for statistical purpose 35. The ground No. duty exemption as capital receipt. The identical ground of the revenue has been dismissed in assessment Accordingly, following our finding in assessment ground of the appeal of 36. The ground no.2 exchange fluctuation loss on the reinstatement of the loan. The identical ground raised by the ITA Nos. 715, 718/M/2020, 7793, 7794/M/2020 & 1423, 1418, 654, 653/M/2020 ) Whether the CIT (A) erred on the facts and in the circumstances of the c and in law, in not following precedent in the decision of hon'ble ITAT vide or dated 31.01.2018 in assessee's own case for A.Y. 2009-10 wherein hon'ble IT rejected the grounds raised by the assessee in respect of Education Cess. ) Whether the CIT (A) erred On the facts and in the circumstances of the c and in law, to appreciate that fact that the education cess has been levied un Finance Act as an item to increase income tax and it has been held to be par"incom tax" by Hon'ble Calcutta High Court in the case of Srei Infrastructure Finance Ltd. find that the grounds and original ground raised by the assessee in the year under consideration are identical to grounds raised in assessment year 2012-13. The grounds raised pressed by the assessee, therefore same are dismissed as identical additional ground raised in AY has been allowed for statistical purpose, therefore , the additional ground for the year under consideration allowed for statistical purpose. The ground No. 1 of the appeal of the revenue relates to excise duty exemption as capital receipt. The identical ground of the revenue has been dismissed in assessment following our finding in assessment year appeal of Revenue is dismissed. 2 of the appeal of the Revenue relates to foreign fluctuation loss on the reinstatement of the loan. The identical ground raised by the revenue in assessment Everest Industries Limited 56 ITA Nos. 715, 718/M/2020, 7793, 7794/M/2020 & 1423, 1418, 654, 653/M/2020 the facts and in the circumstances of the c and in law, in not following precedent in the decision of hon'ble ITAT vide or dated 31.01.2018 in 10 wherein hon'ble IT rejected the grounds raised by the assessee in respect of ) Whether the CIT (A) erred On the facts and in the circumstances of the c and in law, to appreciate that fact that the education cess has been levied un Finance Act as an item to increase income tax and it has been held to be par"income in the case of Srei find that the grounds and original ground raised by the assessee in the year under consideration are identical to grounds raised have not same are dismissed as ed in AY 2012-13, therefore following the ar under consideration is of the appeal of the revenue relates to excise duty exemption as capital receipt. The identical ground of the revenue has been dismissed in assessment year 2009-10. year 2009-10, the relates to foreign fluctuation loss on the reinstatement of the loan. The revenue in assessment year 2012-13, has been allowed for statistical purposes, accordingly following our finding in assessment year 2012 appeal of the assessee for y statistical purposes. 37. The ground No. 3 exclusion of excise duty exemption for the purpose of computation of book profit under section 115 JB of the of the revenue has been dism therefore following our finding in assessment ground of the appeal of the revenue is accordingly dismissed. 38. The ground No. education cess, which we have already allowed in the case of the assessee for assessment year 2012 finding in assessment year 2012 and 13, this ground of the appeal of the revenue is allowed. 37. In the result, the under: AY ITA No. 2008-09 715/M/2020 2008-09 1423/M/2020 2009-10 718/M/2020 2009-10 1418/M/2020 ITA Nos. 715, 718/M/2020, 7793, 7794/M/2020 & 1423, 1418, 654, 653/M/2020 has been allowed for statistical purposes, accordingly following our finding in assessment year 2012-13, the ground appeal of the assessee for year under consideration is all No. 3 of the appeal of the Revenue exclusion of excise duty exemption for the purpose of computation of book profit under section 115 JB of the Act. The identical of the revenue has been dismissed in assessment therefore following our finding in assessment year ground of the appeal of the revenue is accordingly dismissed. The ground No. 4 of the,the Revenue relates to , which we have already allowed in the case of the assessee for assessment year 2012-13, therefore following our finding in assessment year 2012 and 13, this ground of the appeal of the revenue is allowed. In the result, the assessee and Revenue are Revenue /assessee Result 715/M/2020 Assessee Dismissed 1423/M/2020 Revenue Dismissed 718/M/2020 Assessee Allowedfor statistical purpose 1418/M/2020 Revenue Dismissed. Everest Industries Limited 57 ITA Nos. 715, 718/M/2020, 7793, 7794/M/2020 & 1423, 1418, 654, 653/M/2020 has been allowed for statistical purposes, accordingly following our No. two of the r under consideration is allowed for Revenue relates to exclusion of excise duty exemption for the purpose of computation . The identical ground issed in assessment year 2012-13, year 2012-13, this ground of the appeal of the revenue is accordingly dismissed. relates to deduction of , which we have already allowed in the case of the 13, therefore following our finding in assessment year 2012 and 13, this ground of the appeal are educated as Allowedfor statistical purpose 2012-13 7793/M/2019 2012-13 654/M/2020 2013-14 7794/M/2019 2013-14 653/M/2020 Order pronounced in the open Court/under Rule 34( the ITAT Rules, 1963 on Sd/- (ABY T VARKEY) JUDICIAL MEMBER Mumbai; Dated: 31/01/2023 Dragon Legal/Rahul Sharma, Sr. P.S. Copy of the Order forwarded to 1. The Appellant 2. The Respondent. 3. The CIT(A)- 4. CIT 5. DR, ITAT, Mumbai 6. Guard file. //True Copy// ITA Nos. 715, 718/M/2020, 7793, 7794/M/2020 & 1423, 1418, 654, 653/M/2020 7793/M/2019 Assessee Allowed partly for statistical purpose 654/M/2020 Revenue Allowed partly for statistical purpose 7794/M/2019 Assessee Allowed partly for statistical purpose 653/M/2020 Revenue Allowed partly for statistical purpose Order pronounced in the open Court/under Rule 34( s, 1963 on 31/01/2023. Sd/- (ABY T VARKEY) (OM PRAKASH KANT JUDICIAL MEMBER ACCOUNTANT MEMBER Rahul Sharma, Sr. P.S. Copy of the Order forwarded to : BY ORDER, (Sr. Private Secretary) ITAT, Mumbai Everest Industries Limited 58 ITA Nos. 715, 718/M/2020, 7793, 7794/M/2020 & 1423, 1418, 654, 653/M/2020 Allowed partly for statistical Allowed partly for statistical Allowed partly for statistical Allowed partly for statistical Order pronounced in the open Court/under Rule 34(4) of - OM PRAKASH KANT) ACCOUNTANT MEMBER BY ORDER, (Sr. Private Secretary) ITAT, Mumbai