TURBOMACH INDIA P. LTD, MUMBAI V. ADDL CIT 8(3), MUMBAI

ITA 8123/MUM/2010

• Counselvise Citation: [2013] 140 COUNSELVISE.COM (IT) 71654 (ITAT-MUMBAI)
• Duration Of Justice: 2 year(s) 11 month(s) 27 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 21-11-2013
• Appeal Filed By: Assessee
• Order Result: Dismissed
• Bench Allotted: E
• Next Hearing Date: 21-11-2013
• Assessment Year: 2007-2008
• Appeal Filed On: 24-11-2010
• Result in Favour of: Revenue
• Court: TRIBUNAL
• Department Lawyers: M L PER UMAE
• Assessee Lawyers: P R V RAGHVAN
• Keywords: Capital asset; Depreciation
• Section: 2

Judgement Text

, IN THE INCOME TAX APPELLATE TRIBUNAL E , BENCH MUMBAI , BEFORE SHRI D.KARUNAKARA RAO , A M & SHRI SANJAY GARG , J M IT A NO. 8123 /MUM/201 0 ( ASSESSMENT YEAR :200 7 - 200 8 ) M/S TURBOMACH (INDIA) PRIVATE LIMITED, 5 & 6, PAPA INDUSTRIAL ESTATE, SUREN ROAD, ANDHERI (EAST), MUMBAI - 93 VS. THE AD.CIT - 8(3), MUMBAI - 20 PAN/GIR NO. : A A BCT 7422 R ( APPELLANT ) .. ( RESPONDENT ) /ASSESSEE BY : MR. P.R.V.RAGHVAN /REVENUE BY : MR . M.L.PER UMAE DATE OF HEARING : 2 1 ST NOVEMBER , 201 3 DATE OF PRONOUNCEMENT : 2 1 ST NOVEMBER,2013 O R D E R PER D.KARUNAKARA RAO ( A .M.) : TH IS APPEAL BY THE ASSESSEE HAS BEEN PREFERRED AGAINST THE ORDER DATED 16 - 9 - 2010 , PASSED BY THE LEARNED CIT(A) - 18 , MUMBAI FOR THE ASSESSMENT YEAR 200 7 - 200 8 . 2 . THE ONLY EFFECTIVE ISSUE THAT ARISES FROM THE GROUNDS IS IN REGARD TO ALLOWABILITY OF FOREX FLUCTUATION LOSS, WHICH UNDISPUTEDLY RELATED TO THE ECB LOANS SPENT FOR THE PURPOSE OF ACQUIRING THE CAPITAL ASSETS. ITA NO.8123/2010 2 3 . THE RELEVANT FACTS ARE THAT THE ASSESSEE TOOK ECB LOANS FROM SWITZERLAND FOR PURCHASE OF FIXED ASSET AND INCURRED FOREIGN EXCHANGE LOSS OF RS. 8,41,482/ - . PARA 3 OF THE ASSESSMENT ORDER CONTAINS THE RELEVANT FACTS ON THE LEGAL PROPOSITION AND THE REASONING FOR THE AO TO MAKE DISALLOWANCE ON THIS ACCOUNT. IT IS THE CONCLUSION OF THE AO THAT THE SAID LOSS CONSTITUTES A CAPITAL IN NATURE AND NOT ALLOWED AS REVENUE IN COMPARISON OF INCOME. 4 . IN APPEAL, THE CIT(A) CONFIRMED THE SAME RELYING ON VARIOUS BINDING DECISIONS ON THE ISSUE. 5 . IT IS THE SU BMISSION OF THE LEARNED COUNSEL FOR THE ASSESSEE BEFORE US THAT AS PER THE SECTION 43A OF THE ACT , ACQUIRING PURCHASE OF ASSET INSIDE INDIA , SHOULD NOT BE COVERED BY THE PROVISIONS OF SECTION 43A OF THE ACT, WHICH APPLIES ONLY TO THE ASSETS PURCHASED FROM OUTSIDE INDIA. 6 . ON PERUSAL OF THE IMPUGNED ORDERS IN GENERAL AND IN PARA 4 OF THE ORDER OF THE CIT(A) IN PARTICULAR, WE FIND THAT THE CIT(A) HAS EXPLAINED THE PROVISIONS OF SECTION 43A OF THE ACT RELYING ON THE JUDGMENT OF THE HON BLE SUPREME COURT IN THE CASE OF CIT VS. WOODWARD GOVERNOR INDIA PVT. LTD., REPORTED IN (2009) 312 ITR 254 (SC) AND HAS HELD THAT THE LOSS OF THIS KIND IS TO BE TREATED AS CAPITAL IN NATURE. THE CONTENTS OF PARA S 4.3.2 & 4.3.3 ARE RELEVANT AND THE SAME ARE REPRODUCED AS UNDER : - ITA NO.8123/2010 3 4.3.2 THE IMPORTANT POINTS PERTAINING TO THIS SECTION ARE, (A) THE SECTION DEALS WITH HOW TO DETERMINE THE COST OF ASSET WHEN THE SAME WAS ACQUIRED IN FOREIGN CURRENCY . (B) THE SECTION CAN BE INVOKED WHERE THE ASSET WAS ACQUIRED ABROAD OR WHERE T HE MONEY WAS BORROWED IN FOREIGN CURRENCY TO ACQUIRE THE ASSET. (C) THE GAIN OR LOSS ON ACCOUNT OF FLUCTUATION OF FOREIGN EXCHANGE IS ON CAPITAL ACCOUNT. 4.3.3 IN VIEW OF THE ABOVE DISCUSSION, THE FOREIGN LOSS SUFFERED BY THE APPELLANT ON THE BORROWINGS TAKEN FOR THE PURPOSE OF ACQUIRING THE CAPITAL ASSET SHOULD BE ADJUSTED IN DETERMINING THE CAPITAL COST OF THE ASSET AND ACCORDINGLY THE AO IS DIRECTED TO ALLOW THE DEPRECIATION AS PER THE RULES. 7. CONSIDERING THE ABOVE, WE ARE OF THE OPINION THAT THE DECISION OF THE CIT(A) IS JUST AND FAIR, WHICH DOES NOT REQUIRE ANY INTERFERENCE OR AMENDMENT. 8 . IN THE RESULT, APPEAL OF THE AS S ESSEE IS DISMISSED . ORDER PRONOUNCED IN THE OPEN COURT ON THIS 2 1 ST OF NOV. 201 3 . 2 1 ST 201 3 SD/ - SD/ - ( ) ( SANJAY GARG ) ( ) ( D.KARUNAKARA RAO ) / JUDICIALMEMBER / ACCOUNTANT MEMBER MUMBAI ; DATED : 2 1 /11/ 2013 /PKM , PS COPY OF THE ORDER FORWARDED TO : / BY ORDER, ( ASSTT. REGISTRAR) / ITAT, MUMBAI 1. / THE APPELLANT 2. / THE RESPONDENT. 3. / THE CIT(A) - X, MUMBAI. 4. / CIT 5. / DR, ITAT, MUMBAI 6. GUARD FILE. //TRUE COPY//