Assistant Commissioner of Income Tax Circle- 1(1), Ujjain V. M/s Cummins Turbo Technologies Ltd., Dewas

ITA 74/Ind/2018

• Counselvise Citation: [2019] 117 COUNSELVISE.COM (IT) 2477 (ITAT-INDORE)
• Duration Of Justice: 1 year(s) 4 month(s) 14 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 20-06-2019
• Appeal Filed By: Department
• Order Result: Dismissed
• Bench Allotted: DB
• Assessment Year: 2003-2004
• Appeal Filed On: 06-02-2018
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: K G GOYAL
• Assessee Lawyers: GIRISH AGRAWAL
• Keywords: Reopening of assessment; Depreciation; Business expenditure; Audit objection; Tax effect
• Section: 143(3); 148

Judgement Text

CUMMINS TURBO TECHNOLOGIES LTD ITA NO.74/IND/2018 & C.O.NO.24/IND/18 1 , , IN THE INCOME TAX APPELLATE TRIBUNAL, INDORE BENCH, INDORE BEFORE HON'BLE KUL BHARAT, JUDICIAL MEMBER AND HON'BLE MANISH BORAD, ACCOUNTANT MEMBER ITA NO. 74/IND/2018 ASSESSMENT YEAR 2003-04 PAN : AABCT2018B ASSISTANT COMMISSIONER OF V/S M/S CUMMINS TURBO INCOME TAX, TECHNOLOGIES LTD, CIRCLE-1(1), INDUSTRIAL AREA NO.2, UJJAIN A.B. ROAD, DEWAS (REVENUE) (RESPONDENT) C.O.NO.24/IND/2018 ASSESSMENT YEAR 2003-04 PAN : AABCT2018B M/S CUMMINS TURBO V/S ASSISTANT COMMISSIONE R TECHNOLOGIES LTD, OF INCOME TAX, INDUSTRIAL AREA NO.2, CIRCLE-1(1), A.B. ROAD, DEWAS U JJAIN (APPELLANT) (RESPONDENT) REVENUE BY SHRI K.G. GOYAL ASSESSEE BY SHRI GIRISH AGRAWAL & MISS NISHA LAHOTI, ADVOCATES DATE OF HEAR ING 1 8 . 06 . 201 9 DATE OF PRONOUNCEMENT 20 . 0 6 .2019 CUMMINS TURBO TECHNOLOGIES LTD ITA NO.74/IND/2018 & C.O.NO.24/IND/18 2 O R D E R PER MANISH BORAD. THE ABOVE CAPTIONED APPEAL FILED AT THE INSTANCE OF REVENUE AND CROSS OBJECTION FILED BY THE ASSESSED PERTAINING TO ASSESSMENT YEAR 2003-04 ARE DIRECTED AGAINST THE ORDERS OF LD. COMM ISSIONER OF INCOME TAX (APPEALS) (IN SHORT LD.CIT(A)], UJJAIN DATED 13.11.2017 WHICH IS ARISING OUT OF THE ORDER U/S 143(3)/147 DA TED 26.8.2010 FRAMED BY ACIT-1(1), UJJAIN. 2. AS THE ISSUES RAISED IN THESE APPEALS ARE COMMON THESE WERE HEARD TOGETHER AND THEREFORE ARE BEING DISPOSED OFF BY THIS COMMON ORDER FOR SAKE OF CONVENIENCE AND BREVITY. 3. BRIEFLY STATED FACTS AS CULLED OUT FROM THE RECO RDS ARE THAT THE ASSESSEE IS A LIMITED COMPANY ENGAGED IN BUSINESS. INCOME OF RS.14,72,41,630/- DECLARED IN THE INCOME TAX RETURN FILED ON 20.11.2003. CASE PICKED UP FOR SCRUTINY BY ISSUANC E OF NOTICE U/S 143(2) OF THE ACT. ASSESSMENT U/S 143(3) OF THE AC T COMPLETED ON 23.03.2006 AFTER MAKING DISALLOWANCE U/S 40(A)(I) OF THE ACT AT RS.5,02,417/- AND DISALLOWANCE OF DEPRECIATION AT R S.1,07,676/-. INCOME ASSESSED AT RS.14,78,51,720/-. SUBSEQUENTLY LD. A.O ON CUMMINS TURBO TECHNOLOGIES LTD ITA NO.74/IND/2018 & C.O.NO.24/IND/18 3 OBSERVING THAT THE ASSESSEE HAS WRONGLY CLAIMED DED UCTION FOR FOREIGN EXCHANGE FLUCTUATION LOSS AT RS.25,62,079/- WHICH WAS BROUGHT TO HIS KNOWLEDGE ON ACCOUNT OF REVENUE AUDI T OBJECTION, ISSUED NOTICE U/S 148 OF THE ACT AFTER DULY RECORDI NG THE REASONS. ASSESSMENT U/S 143(3) R.W.S. 147 OF THE ACT WAS COM PLETED ON 27.8.2010 DISALLOWING FOREIGN EXCHANGE FLUCTUATION LOSS OF RS.25,62,079/- AND ASSESSING THE INCOME AT RS.15,04 ,13,800/-. 4. AGGRIEVED ASSESSEE PREFERRED APPEAL BEFORE LD. C IT(A) CHALLENGING THE REOPENING OF THE ASSESSEES CASE U/ S 147 OF THE ACT AND ALSO CHALLENGING THE DISALLOWANCE OF FOREIGN EX CHANGE FLUCTUATION LOSS. LD. CIT(A) DISMISSED THE ASSESSEES GROUND C HALLENGING THE REOPENING OF THE ASSESSMENT AND DELETED THE DISALLO WANCE OF FOREIGN EXCHANGE FLUCTUATION LOSS AT RS.25,62,079/-. 5. AGGRIEVED REVENUE IS NOW IN APPEAL BEFORE THE TR IBUNAL AGAINST THE DELETION OF DISALLOWANCE AND ASSESSEE HAS FILED CROSS OBJECTION CHALLENGING THE REOPENING AS WELL AS CONTENDING THA T THE ASSESSEES CASE WAS COVERED BY CIRCULAR OF CENTRAL BOARD OF DI RECT TAXES NO.21/2015 DATED 10.12.2015 AS THE TAX EFFECT WAS R S.9,41,365/- WHICH WAS LESS THAN THE THRESHOLD LIMIT OF RS.10 LA KHS. CUMMINS TURBO TECHNOLOGIES LTD ITA NO.74/IND/2018 & C.O.NO.24/IND/18 4 6. WE FIRST TAKE UP THE REVENUES APPEAL RAISING FO LLOWING GROUNDS; WHETHER ON THE FACTS AND IN THE CIRCUMSTANCES OF T HE CASE, THE LD. CIT(A) WAS JUSTIFIED IN DELETING THE ADDITION OF RS.25,62, 079/- ON ACCOUNT OF FOREIGN EXCHANGE FLUCTUATION LOSS. (NOTE THE ISSUES ARE COVERED UNDER THE EXCEPTION MENTIONED IN PARA 8(C) OF CIRCULAR 21/2015 DUE TO REVENUE AUDIT OBJEC TION) THE APPELLANT RESERVES HIS RIGHT TO ADD, AMEND OR A LTER THE GROUNDS OF APPEAL ON OR BEFORE THE DATE; THE APPEAL IS FINALLY HEARD FOR DISPOSAL. 7. LD. DEPARTMENTAL REPRESENTATIVE VEHEMENTLY ARGUE D AND SUPPORTING THE ORDERS OF LD. A.O WHEREAS LD. COUNSE L FOR THE ASSESSEE SUPPORTED THE FINDINGS OF LD. CIT(A). 8. WE HAVE HEARD RIVAL CONTENTIONS AND PERUSED THE RECORDS PLACED BEFORE US AND FIND THAT THE ASSESSEE BEING A DOMEST IC COMPANY IS REQUIRED TO COMPLY WITH THE ACCOUNTING STANDARD 11 ISSUED BY THE INSTITUTE OF CHARTERED ACCOUNTANTS OF INDIA AND AT THE YEAR END FOREIGN EXCHANGE LOSS/GAIN IN RESPECT OF SALES MADE IN FOREIGN CURRENCY TAKEN FOR REVENUE PURPOSES IS DEBITED/CRED ITED AS THE CASE MAY BE. LD. CIT(A) APPRECIATING THIS FACT DELETED T HE DISALLOWANCE OBSERVING AS FOLLOWS; 4.2 GROUND NO.2:- THROUGH THIS GROUND OF APPEAL THE APPELLANT HAS CHALLENGED THE ADDITION OF RS.25,62,079/- ON ACCOUN T OF FOREIGN EXCHANGE FLUCTUATION LOSS. THE APPELLANT MAINTAINED ACCOUNTS ON MERCANTILE SYSTEM OF CUMMINS TURBO TECHNOLOGIES LTD ITA NO.74/IND/2018 & C.O.NO.24/IND/18 5 ACCOUNTING, LOSS CLAIMED BY THE APPELLANT ON ACCOUN T OF FLUCTUATION IN THE RATE OF FOREIGN EXCHANGE AS ON THE DATE OF BALANCE SHEET IN RESPECT OF SALE MADE IN FOREIGN CURRENCY TAKEN FOR REVENUE PURPOSES IS ALLOWABLE AS EXPENDITURE UNDER S. 3 7( 1 ), NOTWITHSTANDING THE FACT THAT THE LIABILITY HAS NOT BEEN ACTUALLY DISCHARGED IN THE YEAR IN WHICH T HE FLUCTUATION IN THE RATE OF FOREIGN EXCHANGE HAS OCCURRED. THIS FOREX GAIN I LOSS IS NOTHING BUT PART OF RAW MATERIAL COST OR SALES SPLIT TO COMPLY WITH THE ACCOUNTING STANDARD 11 ISSUED BY THE INSTITUTE OF CHARTERED ACCOUNTANTS OF INDIA AND THERE IS NO IMPACT FOR THIS ITEM OVER THE VOLUME OF PROFIT OR L OSS OF THE COMPANY. THIS IS MERELY BOOKING OF THE DIFFERENTIAL AMOUNT OF TRANSA CTION UNDER A SEPARATE HEAD OF ACCOUNT. THE APPELLANT IN THE A.Y.2002-03, THE COMPANY HAD A GAIN OF RS.18,46,598/- WHICH WAS OFFERED TO TAXATION. AL SO FOR THE ASSESSMENT YEAR 2007-08 THERE WAS AN EXCHANGE GAIN OF RS.3,35, 97,558/- WHICH AGAIN HAS BEEN OFFERED FOR TAXATION. AS PER NORMAL BUSINE SS PRACTICES FOLLOWED BY THE APPELLANT SUCH EXPENDITURE AND CLAIMS ARE VERY COMMON IN DAY-TO-DAY COMMERCIAL OPERATIONS. THE AFOREMENTIONED FACTS AND JUSTIFICATION FOR OCCURRENCE OF FOREIGN EXCHANGE FLUCTUATION LOSS CLE ARLY STATES THAT IT IS A BUSINESS EXPENDITURE AND REVENUE IN NATURE AND HENC E SQUARELY ALLOWABLE FOR CALCULATION OF PROFIT FOR TAX PURPOSE. THEREFOR E, THE ADDITION MADE BY THE AO AMOUNTING TO RS.25,62,079/- IS DELETED. THEREFO RE THE APPEAL ON THIS GROUND IS ALLOWED. 9. THE ABOVE DETAILED FINDING OF LD. CIT(A) HAS NOT BEEN CONTROVERTED BY THE LD. DEPARTMENTAL REPRESENTATIVE . WE THEREFORE IN THE GIVEN FACTS AND CIRCUMSTANCES OF THE CASE FI ND NO REASON TO INTERFERE IN THE FINDING OF LD. CIT(A) DELETING THE DISALLOWANCE OF FOREIGN EXCHANGE FLUCTUATION LOSS OF RS.25,62,079/- . ACCORDINGLY GROUND NO.1 OF THE REVENUE IS DISMISSED. CUMMINS TURBO TECHNOLOGIES LTD ITA NO.74/IND/2018 & C.O.NO.24/IND/18 6 10. NOW WE TAKE UP THE CROSS OBJECTION OF THE ASSES SEE WHEREIN RAISING FOLLOWING GROUNDS; 1. THAT ON THE FACTS AND IN THE CIRCUMSTANCES OF THE C ASE AND IN LAW THE LEARNED COMMISSIONER OF INCOME TAX APPEALS, UJJAIN HAS ERRED IN DISMISSING THE GROUND OF REOPENING OF ASSESSMENT PROCEEDINGS U NDER SECTION 148 OF INCOME TAX ACT. 2. THAT ON THE FACTS AND UNDER CIRCUMSTANCES OF THE CA SE AND IN LAW THE APPEAL FILED BY THE DEPARTMENT IS BARRED BY LIMITAT ION OF LAW AND HENCE SHOULD NOT BE ADMITTED. ON THE FACTS AND IN THE CIRCUMSTANCES OF THE CASE A ND IN LAW THE APPEAL FILED BY THE DEPARTMENT NEEDS TO BE QUASHED IN VIEW THAT THE GROSS TAX DEMAND OF RS. 9,41,365/- IS LESS THAN THE THRESHOLD LIMIT OF RS. 10,00,000/- AS PER MONETARY LIMIT PRESCRIBED UNDER THE GUIDELINES ISSU ED BY THE CENTRAL BOARD OF DIRECT TAXES CIRCULAR NO. 211/2015 DT. 10.12.2015 F OR PREFERRING SECOND APPEAL TO THE HON'BLE TRIBUNAL AGAINST THE ORDER OF LEARNED COMMISSIONER OF INCOME TAX APPEALS. THE RESPONDENT RESERVES RIGHT TO ADD, AMEND OR ALTE R ALL OR ANY OF THE GROUNDS OF THIS CROSS OBJECTION ON OR BEFORE THE DATE OF FI NAL HEARING IN THE APPEAL. ALL THE ABOVE GROUNDS ARE INDEPENDENT AND NOT RELEV ANT TO EACH OTHER. 11. AT THE OUTSET THE LD. COUNSEL FOR THE ASSESSEE REQUESTING FOR NOT PRESSING GROUND NO.1 CHALLENGING THE ISSUANCE OF NO TICE U/S 148 OF THE ACT. WE THEREFORE DISMISS GROUND NO.1 AS NOT P RESSED. CUMMINS TURBO TECHNOLOGIES LTD ITA NO.74/IND/2018 & C.O.NO.24/IND/18 7 12. APROPOS GROUND NO.2 OF THE CROSS OBJECTION REFE RRED ABOVE, WE FIND THAT THE CASE OF THE ASSESSEE HAVE BEEN REOPEN ED ON THE BASIS OF REVENUE AUDIT OBJECTION INDICATING THAT FOREIGN EXC HANGE FLUCTUATION LOSS HAS BEEN WRONGLY CLAIMED. SUCH ISSUES RELATIN G TO THE REOPENING OF THE REVENUE AUDIT OBJECTION ARE COVERED UNDER TH E EXCEPTION CLAUSE MENTIONED IN PARA 8(C) OF THE CBDT CIRCULAR NO.21/2015 DATED 10.12.2015 AND THEREFORE DISMISSING REVENUES APPEAL ON ACCOUNT OF LOW TAX EFFECT IS NOT PERMISSIBLE IN THE GIVEN CASE. THEREFORE WE DISMISS THE ASSESSEES GROUND NO.2 OF THE ASSESSEES CROSS OBJECTION. 13. IN THE RESULT THE CROSS OBJECTION OF THE ASSESS EE IS DISMISSED. 14. IN THE RESULT THE APPEAL OF THE REVENUE AS WELL AS THE CROSS OBJECTION OF THE ASSESSEE STANDS DISMISSED. THE ORDER PRONOUNCED IN THE OPEN COURT ON 20.06.20 19 SD/- SD/- (KUL BHARAT) (MANISH BORAD) JUDICIAL MEMBER ACCOUNTANT MEMBER / DATED : 20 JUNE, 2019 /DEV CUMMINS TURBO TECHNOLOGIES LTD ITA NO.74/IND/2018 & C.O.NO.24/IND/18 8 COPY TO: THE APPELLANT/RESPONDENT/CIT CONCERNED/CIT (A) CONCERNED/ DR, ITAT, INDORE/GUARD FILE. BY ORDER, ASSTT.REGISTRAR, I.T. A.T., INDORE