ACIT, Circle - 12(2), Kolkata , Kolkata V. M/s. Uniworth Limited , Kolkata

ITA 73/KOL/2018

• Counselvise Citation: [2019] 115 COUNSELVISE.COM (IT) 9824 (ITAT-KOLKATA)
• Duration Of Justice: 1 year(s) 8 month(s) 7 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 20-09-2019
• Appeal Filed By: Department
• Order Result: Dismissed
• Bench Allotted: B
• Next Hearing Date: 17-09-2019
• Assessment Year: 2006-2007
• Appeal Filed On: 12-01-2018
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: RANU BISWAS
• Assessee Lawyers: M N BHANSALI
• Keywords: Depreciation; Valuation report; Assessment record
• Section: 143(3); 37(1)

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL KOLKATA A BENCH, KOLKATA (BEFORE SRI J. SUDHAKAR REDDY, ACCOUNTANT MEMBER & SRI S.S. GODARA, JUDICIAL MEMBER) I.T.A. NOS. 68, 72 & 73/KOL/2018 ASSESSMENT YEARS: 2003-04, 2004-05 & 2006-07 M/S. UNIWORTH LIMITED..................................................................................................................... APPELLANT [PAN : AAACW 2805 Q] VS. ACIT, CIRCLE- 12(2), KOLKATA.................................................................................RESPONDENT APPEARANCES BY: SMT. RANU BISWAS, ADDL. CIT, APPEARED ON BEHALF OF THE REVENUE. SH. M.N. BHANSALI, ADV., APPEARED ON BEHALF OF THE ASSESSEE. DATE OF CONCLUDING THE HEARING : SEPTEMBER 17 TH , 2019 DATE OF PRONOUNCING THE ORDER : SEPTEMBER 20 TH , 2019 ORDER PER J. SUDHAKAR REDDY, AM :- ALL THESE THREE APPEALS ARE FILED BY THE REVENUE DIRECTED AGAINST THE ORDER OF THE COMMISSIONER OF INCOME TAX (APPEALS)- 4, KOLKATA (CIT FOR SHORT) DATED 20.10.2017 U/S 143(3) OF THE INCOME TAX ACT, 1961 (THE ACT FOR SHORT). 2. THE ASSESSEE IS A COMPANY AND IS ENGAGED IN THE BUSINESS OF MANUFACTURE AND JOB PROCESSING OF WOOL, SYNTHETIC, SILK TEXTILE, CARPET AND FURNISHING YARN ETC. ONE COMMON ISSUE THAT ARISES IN ALL THE THREE ASSESSMENT YEARS IN THESE REVENUES APPEALS IS THE ALLOWABILITY OF THE CLAIM OF DEPRECIATION MADE BY THE ASSESSEE ON PLANT AND MACHINERY. THE ASSESSING OFFICER (AO FOR SHORT) HAS DISALLOWED THE CLAIM AND THE LD. CIT(A) HAS ALLOWED THE CLAIM. 3. THE SECOND COMMON ISSUE FOR THE ASSESSMENT YEARS (AY FOR SHORT) 2003-04 AND 2004-05 IS REGARDING ALLOWABILITY OF PRIOR PERIOD EXPENSES. 4. IN ADDITION TO THIS FOR THE AY 2004-05, ALLOWABILITY OF SUNDRY BALANCES WRITTEN OFF AS A DEDUCTION IS IN QUESTION. FOR THE AY 2006-07 THE ONLY OTHER ISSUE IS THE ALLOWABILITY OF LOSS ON ACCOUNT OF FOREIGN EXCHANGE FLUCTUATION. 2 I.T.A. NOS. 68, 72 & 73/KOL/2018 AYS: 2003-04, 2004-05 & 2006-07 M/S. UNIWORTH LIMITED 5. FOR THE SAKE OF CONVENIENCE, WE HAVE HEARD ALL THESE APPEALS TOGETHER AND ARE DISPOSED OFF THE SAME BY WAY OF THIS COMMON ORDER. 6. WE FIRST TAKE UP THE ISSUE OF ALLOWABILITY OF DEPRECIATION ON THE ADDITION OF ASSETS IN THE POWER DIVISION OF RAIPUR UNIT. THE FACTS OF THIS ISSUE ARE BROUGHT OUT AT PAGE 1 PARA 1 OF THE ASSESSMENT ORDER FOR THE AY 2003-04 EXTRACTED BELOW: DURING THE RELEVANT ASSESSMENT YEAR, THE ASSESSEE-COMPANY HAD CLAIMED DEDUCTION ON ACCOUNT OF DEPRECIATION AS PER I.T. ACT FOR RS.8,50,74,687/-. THE SAID DEPRECIATION AMOUNT IS A CONSOLIDATED DEPRECIATION AMOUNT OF THE DIFFERENT UNITS OF THE ASSESSEE-COMPANY. ONE OF SUCH UNIT IS RAIPUR POWER DIVISION. FOR THE RELEVANT ASSESSMENT YEAR, THE ASSESSEE-COMPANY HAD CLAIMED DEPRECIATION ON ACCOUNT OF RAIPUR POWER DIVISION FOR RS. 1,87,86,029/-. THE EXTRACTS OF SUCH DEPRECIATION SCHEDULE FOR RAIPUR POWER DIVISION, AS CLAIMED BY THE ASSESSEE-COMPANY ARE REPRODUCED AS BELOW: PARTICULARS W.D.V. AS ON 01.04.02 ADDITION/DEDUCTION TOTAL RATE DEPRECIATION FOR THE F.Y.02- 03 - A.Y.03-04 W.D.V. AS ON 31.03.03 RS. RS. RS. % RS. RS. BUILDING 1,96,71,968/ - - 1,96,71,968/- 10 19,67,197/- 1,77,04,772/- PLANT & MACHINERY 1,53,35,488/ - (+) 10.64.20.902/- (- ) 28,15,417/- 11,89,40,973/- 25 1,67,84,557/- 10,21,56,415/- ELECTRICAL EQUIPMENT 1,21,854/- - 1,21,854/- 25 30,464/- 91,390/- FURNITURE & FIXTURE 25,411/- - 25,411/- 15 3,811/- 21,599/- TOTAL DEPRECIATION CLAIMED = 1,87,86,029/- BUT ON PERUSAL OF THE ASSESSMENT RECORDS OF THE ASSESSEE, IT APPEARS THAT IN THE ASSESSMENT ORDER RELEVANT TO THE ASSESSMENT YEAR 2002-03, W.D.V. OF THE RAIPUR UNIT POWER DIVISION HAD BEEN RECONSIDERED AND DEPRECIATION WAS ALLOWED ON THE BASIS OF RE-SETTLED W.D.V. OF THE ASSETS AS ON 01.04.01. THE FACT OF THE CASE IS THAT INITIALLY THE ASSESSEE-COMPANY HAD TWO POWER UNITS AT RAIPUR AND AT NAGPUR. THE ASSESSEE-COMPANY MAINTAINED SEPARATE ACCOUNTS FOR EACH POWER UNIT BUT CLAIMED DEPRECIATION IN CONSOLIDATED WAY. DURING THE A.Y.2001-02, THE FIXED ASSET OF THE NAGPUR POWER UNIT WAS DISCARDED, SO THE ASSESSEE-COMPANY WAS ONLY ENTITLED DEPRECIATION IN RESPECT OF RAIPUR POWER UNIT. IN THE ASSESSMENT ORDER FOR THE A.Y.2002-03, THE W.D.V. OF THE ASSETS AS ON 01.04.01 IN RESPECT OF RAIPUR POWER DIVISION WAS DETERMINED AFTER APPLYING THE RATE OF DEPRECIATION AS PER I.T. ACT. THE SAME HAS BEEN CONSIDERED HERE FOR THE PURPOSE OF DETERMINATION OF W.D.V. OF THE ASSETS AS ON 01.04.02. MOREOVER, ON EXAMINING OF THE RECORD, IT APPEARS THAT DURING THE RELEVANT PERIOD, THERE IS AN ADDITION OF ASSETS AMOUNTING TO RS. 10,64,20,902/- IN THE POWER DIVISION OF RAIPUR UNIT. FURTHER VERIFICATION REVEALS THAT THE SAME ASSETS I.E. 3 NO. D.G.SETS WITH ALL ACCESSORIES WERE PURCHASED FROM M/S. UNIWORTH INTERNATIONAL LTD. WHICH IS A SAME GROUP OF THE ASSESSEE- COMPANY. ON EXAMINATION OF THE ASSESSMENT RECORD FOR THE A.Y.2003-04 IN RESPECT OF M/S. UNIWORTH INTERNATIONAL LTD., ALSO AN ASSESSEE UNDER THIS JURISDICTION, IT WAS OBSERVED THAT THE W.D.V. AS ON 01.04.02 OF THE SAID ASSETS I.E. PLANT & MACHINERY WERE FOR RS.73,28,430/- AND THE SAME WERE CLAIMED TO BE SOLD OUT FOR RS. 10,64,20,902/- TO THE ASSESSEE-COMPANY. SINCE BOTH OF THE PARTIES BELONG TO THE ASSOCIATED GROUP OF COMPANY, IT IS HELD THAT THE ASSETS WERE TRANSFERRED AT HIGHER RATE ON THE GROUND THAT SUCH TRANSFER DOES NOT CORRESPOND TO THE MARKET 3 I.T.A. NOS. 68, 72 & 73/KOL/2018 AYS: 2003-04, 2004-05 & 2006-07 M/S. UNIWORTH LIMITED VALUE OF SUCH ASSETS AND THE MAIN PURPOSE OF SUCH TRANSFER AT HIGHER RATE IS REDUCTION OF AN INCOME-TAX LIABILITY IN RESPECT OF THE ASSESSEE-COMPANY. SO AS PER EXPLANATION-3 BELOW THE SEC.43(L), THE PREVIOUS APPROVAL OF ADDL.C.I.T., RANGE-11, KOL. WAS OBTAINED ON 30.03.06 AND IT IS CONSIDERED ACCORDINGLY THAT THE W.D.V. OF THE ASSETS OF THE TRANSFEROR COMPANY I.E. RS.73,28,430/- WOULD BE THE TRANSFER PRICE I.E. THE VALUE OF ADDITION OF SUCH ASSETS IN THE HANDS OF THE ASSESSEE-COMPANY. CONSIDERING THE ABOVE, THE DEPRECIATION ALLOWABLE FOR THE POWER DIVISION OF RAIPUR UNIT FOR THE 04 IS DETERMINED AS UNDER: W.D.V. AS ON 01.04.01 AS PER ASSESSMENT ORDER OF 2002- 03 DEPRECIA TION ALLOWED FOR THE A.Y.2002- 03 W.D.V. AS ON 01.04.02 ADDITION (+) TOTAL DEPRECI ATION ALLOWABL E FOR THE A.Y.200 3-04 W.D.V. AS ON 31.03.03 DEDUCTIO N(-) RS. RS. RS. RS. RS. RS. BUILDING @10% - 1,46,05,667 14,60,566 % 1,31,45,101 - 1,31,45,101 13,14,510 1,18,30,591 P & M@25% - 1,28,01,468 + 1.50.740 1,29,52,208 32,38,052 97,14,156 (+) 73,28,430 (AS DISCUSSED! (-) 28,15,417 1,42,27,169 26,40,738 1,15,86,431 E.I.@25%- 1,36,050 34,012 1,02,038 - 1,02,038 25,510 76,528 F&F @15%- 30,999 3,100 27,899 27,899 2,790 25,109 TOTAL =39,83,548 IN VIEW OF THE ABOVE, THE ASSESSEE-COMPANY IS ENTITLED TO CLAIM DEPRECIATION AMOUNTING TO RS.39,83,548/- FOR POWER DIVISION OF RAIPUR UNIT AGAINST ITS CLAIM FOR RS. 1,87,86,029/-. SO THE EXCESS CLAIM OF DEPRECIATION I.E. THE DIFFERENCE OF (RS. 1,87,86,029 - RS.39,83,548) = RS. 1,48,02,481/- IS DISALLOWED. CONSIDERING ABOVE, TOTAL CLAIM OF DEPRECIATION FOR THE RELEVANT ASSESSMENT YEAR 2003-04 IS RESTRICTED TO (RS.8,50,74,687 - RS.1,48,02,481) = RS.7,02,72,206/-. FOR THE RELEVANT FACT AS DISCUSSED ABOVE, IT IS HELD THAT THE ASSESSEE HAS CONCEALED THE PARTICULARS OF INCOME AND PENALTY PROCEEDINGS U/S.271(L)(C) IS BEING INITIATED SEPARATELY. 7. ON APPEAL THE LD. FIRST APPELLATE AUTHORITY ALLOWED THE CLAIM OF THE ASSESSEE BY HOLDING AS FOLLOWS: 3.3. FINDINGS OF THE CIT(A): I HAVE PERUSED THE ASSESSMENT ORDER AND GROUNDS RAISED BY THE LD. A/R OF THE APPELLANT. THE LD. A/R OF THE APPELLANT MADE SUBMISSION THAT THE APPELLANT WAS ALREADY HAVING HUGE LOSSES OF RS. 16,42,54,240/- AS PER RETURN AND THEREFORE THERE WAS NO NEED TO CLAIM DEPRECIATION ON THE HIGHER COST AND THE DEPRECIATION WAS CLAIMED ON THE ACTUAL COST OF PURCHASE. FURTHER, A PROFIT ON SALE OF THESE D.G. SETS HAS BEEN DECLARED BY THE SELLER IN ITS RETURN OF INCOME. THE A/R ALSO SUBMITTED A COPY OF VALUATION REPORT OF D.G. SETS IN QUESTION DATED 08.10.2002 FROM ENGINEER. IT HAS BEEN OBSERVED BY THE UNDERSIGNED THAT THE A.O. HAS NOT REFERRED THE CASE FOR VALUATION AND ALSO NOT BROUGHT ANY COGENT MATERIAL IN SUPPORT OF HIS ASSESSMENT. THEREFORE, CONTENTION OF THE A.O. IN TAKING VALUE OF THE D.G. SETS AT RS. 73,28,430/- INSTEAD OF RS. 10,64,20,902/- DOES NOT HOLD GOOD. HENCE, ADDITION MADE BY THE A.O. FOR AN AMOUNT OF RS. 1,48,02,481/- ON ACCOUNT OF DISALLOWANCE OF DEPRECIATION ON PURCHASE PRICE IS 4 I.T.A. NOS. 68, 72 & 73/KOL/2018 AYS: 2003-04, 2004-05 & 2006-07 M/S. UNIWORTH LIMITED HEREBY DIRECTED TO BE DELETED AND ALL GROUNDS OF THE APPELLANT IN THIS BEHALF ARE ALLOWED. 8. THE WRITTEN DOWN VALUE OF THE ASSET AS ON 01.04.2002 WAS RS. 73,28,430/- IN THE BOOKS OF THE SELLER COMPANY M/S. UNIWORTH INTERNATIONAL LTD. WHICH IS A SISTER CONCERN OF THE SAME GROUP. THIS PLANT AND MACHINERY WAS PURCHASED BY THE ASSESSEE AT RS. 10,64,20,902/-. THE VALUATION OF THE PLANT AND MACHINERY SO PURCHASED WAS DOUBTED BY THE AO. HE WAS OF THE OPINION THAT THIS PLANT AND MACHINERY IS OVERVALUED. HE TOOK THE VALUE OF THE ASSET AT RS. 73,28,430/-, I.E. THE WRITTEN DOWN VALUE IN THE BOOKS OF THE SELLER M/S. UNIWORTH INTERNATIONAL LTD. AS THE PURCHASE PRICE AND ALLOWED DEPRECIATION ON THIS AMOUNT ONLY. HE INVOKED EXPLANATION 3 TO SECTION 43(1) AND AFTER OBTAINING PREVIOUS APPROVAL OF ADDL. CIT, CONSIDERED THE WRITTEN DOWN VALUE OF THE PLANT AND MACHINERY IN THE BOOKS OF THE TRANSFEROR COMPANY I.E. M/S. UNIWORTH INTERNATIONAL LTD. OF RS. 73,28,430/- AS THE TRANSFER PRICE IN THE HANDS OF THE ASSESSEE COMPANY. IN VIEW OF THE ABOVE, HE CALCULATED THE DEPRECIATION ON THIS DEEMED PURCHASE PRICE AND DISALLOWED THE DIFFERENTIAL AMOUNT OF DEPRECIATION. THE LD. CIT(A) CONSIDERED THE SUBMISSIONS OF THE ASSESSEE THAT, THE SALE PRICE OF RS. 10,64,20,902/- WAS DECLARED AS INCOME BY THE SELLER COMPANY M/S. UNIWORTH INTERNATIONAL LTD. AND THAT THE VALUE OF THE ASSET HAS BEEN CERTIFIED BY A REGISTERED VALUER AND THAT THE AO HAS DISCARDED THE SAME, WITHOUT GIVING ANY REASON. 9. WE FIND THAT THE AO HAS RELIED ON EXPLANATION 3 TO SECTION 43(1) OF THE ACT. THIS EXPLANATION READS AS FOLLOWS: WHERE, BEFORE THE DATE OF ACQUISITION BY THE ASSESSEE, THE ASSETS WERE AT ANY TIME USED BY ANY OTHER PERSON FOR THE PURPOSES OF HIS BUSINESS OR PROFESSION AND THE ASSESSING OFFICER IS SATISFIED THAT THE MAIN PURPOSE OF THE TRANSFER OF SUCH ASSETS, DIRECTLY OR INDIRECTLY TO THE ASSESSEE, WAS THE REDUCTION OF A LIABILITY TO INCOME-TAX (BY CLAIMING DEPRECIATION WITH REFERENCE TO AN ENHANCED COST), THE ACTUAL COST TO THE ASSESSEE SHALL BE SUCH AN AMOUNT AS THE ASSESSING OFFICER MAY, WITH THE PREVIOUS APPROVAL OF THE JOINT COMMISSIONER, DETERMINE HAVING REGARD TO ALL THE CIRCUMSTANCES OF THE CASE. 10. THE LD. CIT(A) HAS NOT DISCUSSED THE EFFECT OF THIS EXPLANATION 3 TO SECTION 43(1) IN HIS ORDER. NOR HAS HE DISCUSSED AS TO WHETHER THE MAIN PURPOSE OF TRANSFER WAS THE REDUCTION OF LIABILITY TO INCOME TAX. THE ASSESSEE WAS ALREADY HAVING A LOSS AND SUCH CLAIM DEPRECIATION DOES NOT REDUCE THE INCOME TAX LIABILITY OF THE ASSESSEE. THE SELLER HAS INCLUDED THE ENHANCED SALE PRICE IN ITS RETURN OF INTEREST. THUS AFFIRM THE SAME TO TAX. THUS EXPLANATION 3 TO SECTION 43(1) OF THE ACT DOES NOT APPLY TO THE FACTS OF THE CASE. FOR THESE REASONS WE HAVE TO UPHOLD THE ORDERS OF LD. CIT(A) ON THIS ISSUE AND DISMISS THIS GROUND OF REVENUE FOR AYS 2003-04, 2004-05 AND 2006-07. 5 I.T.A. NOS. 68, 72 & 73/KOL/2018 AYS: 2003-04, 2004-05 & 2006-07 M/S. UNIWORTH LIMITED 11. ON THE SECOND COMMON ISSUE OF ALLOWABILITY OF PRIOR PERIOD EXPENDITURE FOR AYS 2003-04 AND 2004-05 WE HOLD AS FOLLOWS. THE LD. FIRST APPELLATE AUTHORITY AT PARA 6.3 HELD AS FOLLOWS: 6.3. FINDINGS OF THE CIT(A): I HAVE PERUSED THE ASSESSMENT ORDER AND GROUNDS RAISED BY THE LD. A/R OF THE APPELLANT. IN LIGHT OF THE SUBMISSION MADE BY THE LD. A/R, FOLLOWING OBSERVATIONS HAVE BEEN MADE:- A) ADDITION OF RS. 4,183/- HAS BEEN MADE ON ACCOUNT OF DISALLOWANCE OF EXPENSES RELATING TO PENALTY/FINE PAID IN RELATED TO EARLIER YEAR. AS PENALTY/FINE PAID UNDER ANY LAW IS NOT AN ALLOWABLE EXPENSE, ADDITION MADE BY THE A.O. FOR RS. 4,183/- IS HEREBY UPHELD. B) THE LD. A/R HAS SUBMITTED DETAILS OF ADJUSTMENT OF PRIOR PERIOD ITEMS AND MADE SUBMISSION THAT THOSE EXPENSES WERE SETTLED AND FINALIZED DURING THE YEAR UNDER CONSIDERATION AND THEREFORE CLAIMED IN THAT YEAR. ALSO, NO CLAIM WAS MADE IN RESPECT OF THOSE EXPENSES IN EARLIER YEARS. THE UNDERSIGNED HAS OBSERVED THAT THE APPELLANT IS A SICK COMPANY AND MAKING HUGE LOSSES. AS PER DETAILS SUBMITTED BY THE LD. A/R, AMOUNT OF INTEREST AND DISCONTINUING CHARGES PAID ON BILL OF COSTAL WARTSILA LTD. FOR RS. 12,60,795/- AND INTEREST RELATING TO THE YEAR 1999- 2000 TO 2001-02 ON AMOUNT PAYABLE TO M/S. PETROS TEXTILE (1969) LTD., U.K. FOR RS. 87,27,858/- HAVE BEEN CRYSTALLIZED IN THE YEAR UNDER CONSIDERATION. THEREFORE, ADDITION MADE BY THE A.O. ON ACCOUNT OF DISALLOWANCE OF PRIOR PERIOD EXPENSES FOR RS. 12,60,795/- AND RS. 87,27,858/- IS HEREBY DIRECTED TO BE DELETED. HENCE, GROUND OF THE APPELLANT IN THIS BEHALF IS PARTLY ALLOWED. 12. THE LD. DR COULD NOT POINT OUT ANY INFIRMITY IN THIS FINDING OF THE LD. CIT(A). THE FACTUAL FINDING OF THE LD. CIT(A) IS THAT, THE EXPENSES IN QUESTION CRYSTALLIZED DURING THE YEAR AND HENCE IS ALLOWABLE AS AN EXPENSE DURING THE YEAR. THE FACT OF YEAR OF CRYSTALLIZATION IS NOT DISPUTED BY LD. DR. WE UPHOLD THIS FINDING AND DISMISS THE GROUND OF REVENUE FOR THE AYS 2003-04 AND 2004-05. 13. FOR THE AY 2004-05 THE ONLY OTHER GROUND IS DISALLOWANCE OF SUNDRY BALANCE WRITTEN OFF. THE LD. CIT(A) AT PARA 12.3 OF HIS ORDER FOR THE AY 2004-05 HELD AS FOLLOWS: 12.3. FINDINGS OF THE CIT(A): I HAVE PERUSED THE ASSESSMENT ORDER AND GROUNDS RAISED BY THE LD. A/R OF THE APPELLANT. THE LD. A/R OF THE APPELLANT MADE SUBMISSION THAT THE AMOUNT OF RS. 49,43,592/- WAS DUE FROM TEXPRINT OVERSEAS LIMITED AND HAD BEEN WRITTEN-OFF AS THE SAID COMPANY HAD CLOSED ITS BUSINESS AND THERE WAS NO HOPE OF ANY RECOVERY THEREFROM. THE SECURED CREDITORS OF THE SAID COMPANY HAVE ALSO NOT RECEIVED THEIR DUES. CONTENTION OF THE A/R REGARDING CIRCUMSTANCES LEADING TO BAD DEBT HAS BEEN ACCEPTED HEREBY AND ADDITION MADE BY THE A.O. FOR RS. 49.32.592/- AS DISALLOWANCE OF SUNDRY BALANCE WRITTEN OFF IS DIRECTED TO BE DELETED. HENCE, GROUND OF THE APPELLANT IN THIS BEHALF IS ALLOWED. 14. AS THE AMOUNT IN QUESTION IS A BAD DEBT AND WAS WRITTEN OFF BY THE ASSESSEE IN ITS BOOK OF ACCOUNT. WE APPLY THE JUDGEMENT OF THE HONBLE SUPREME COURT IN THE CASE OF TRF LTD. AND DISMISS THIS GROUND OF THE REVENUE FOR THE AY 2004-05. 6 I.T.A. NOS. 68, 72 & 73/KOL/2018 AYS: 2003-04, 2004-05 & 2006-07 M/S. UNIWORTH LIMITED 15. FOR THE AY 2006-07 THE ADDITIONAL ISSUE IS REGARDING THE DELETION OF DISALLOWANCE ON ACCOUNT OF FOREIGN EXCHANGE FLUCTUATION. AT PARA 5.3 THE LD. CIT(A) HELD AS FOLLOWS: 5.3. FINDINGS OF THE CIT(A): I HAVE PERUSED THE ASSESSMENT ORDER AND GROUNDS RAISED BY THE LD. A/R OF THE APPELLANT. THE LD. A/R OF THE APPELLANT HAS MADE SUBMISSION THAT THE LOSS ON ACCOUNT OF FOREIGN EXCHANGE FLUCTUATION HAS TO BE ACCOUNTED FOR ON MERCANTILE SYSTEM OF ACCOUNTING AND THE ALLEGATION OF THE A.O. THAT IT IS A NOTIONAL LOSS IS NOT CORRECT, AS THE LOSS IS DETERMINED ON THE BASIS OF FOREIGN EXCHANGE VALUE AS ON THE LAST DAY OF THE YEAR ON ACTUAL BASIS. IN THE CASE OF CZT VS. WOODWARD GOVERNOR, THE APEX COURT HELD THAT FOREIGN EXCHANGE FLUCTUATION LOSSES ARE ALLOWABLE ON ACCRUAL BASIS AS DEDUCTION U/S 37(1) OF THE ACT. THEREFORE, CONSIDERING THE FACTS OF THE CASE AND FOLLOWING THE JUDICIAL PRONOUNCEMENT MADE BY THE APEX COURT IN THE GIVEN CASE, ADDITION MADE BY THE A.O. FOR RS. 88,57,000/- ON ACCOUNT OF DISALLOWANCE OF LOSS ON FOREIGN EXCHANGE FLUCTUATION IS HEREBY DIRECTED TO BE DELETED AND GROUND OF THE APPELLANT IN THIS BEHALF IS ALLOWED. 16. THE LOSS IN QUESTION IS ON CURRENT ACCOUNT. THUS, WE DO NOT FIND ANY INFIRMITY IN THE ORDER OF THE LD. CIT(A). WE UPHOLD THE SAME AND DISMISS THIS GROUND OF REVENUE. 17. IN THE RESULT, THE APPEALS OF THE REVENUE FOR ALL THE ASSESSMENT YEARS ARE HEREBY DISMISSED. KOLKATA, THE 20 TH SEPTEMBER, 2019. SD/- SD/- [S.S. GODARA] [J. SUDHAKAR REDDY] JUDICIAL MEMBER ACCOUNTANT MEMBER DATED : 20.09.2019 BIDHAN COPY OF THE ORDER FORWARDED TO: 1. M/S. UNIWORTH LIMITED, 70A, SHAKESPEARE SARANI, KOLKATA- 700 017, WEST BENGAL, INDIA. 2. ACIT, CIRCLE- 12(2), KOLKATA. 3. CIT(A)- 4, KOLKATA. (SENT THROUGH MAIL) 4. CIT- 5. CIT(DR), KOLKATA BENCHES, KOLKATA. (SENT THROUGH MAIL) TRUE COPY BY ORDER ASSISTANT REGISTRAR ITAT, KOLKATA BENCHES