MAHINDRA & MAHINDRA LTD, MUMBAI V. ADDL CIT RG 2(2), MUMBAI

MA 26/MUM/2021

• Counselvise Citation: [2021] 107 COUNSELVISE.COM (IT) 8685 (ITAT-MUMBAI)
• Duration Of Justice: 5 month(s) 27 day(s)
• Appeal Type: Miscellaneous Application
• Pronouncement Date: 26-07-2021
• Appeal Filed By: Assessee
• Order Result: Dismissed
• Bench Allotted: J
• Assessment Year: 2009-2010
• Appeal Filed On: 29-01-2021
• Result in Favour of: Revenue
• Court: TRIBUNAL
• Department Lawyers: SANJAY J SETHI
• Keywords: Capital asset converted into stock in trade; Capital asset; Depreciation; Rectification of order; Cost of acquisition; Revenue expenditure; Capital expenditure
• Section: 254(2); 13

Judgement Text

THE INCOME TAX APPELLATE TRIBUNAL J BENCH, MUMBAI SHRI SHAMIM YAHYA (AM) & SHRI PAVANKUMAR GADALE ( JM) M.A. NO. 26/MUM/2021 ARISING OUT OF I.T.A. NO. 446/MUM/2019 (ASSESSMENT YEAR 2009-10) MAHINDRA & MAHINDRA LTD. CORPORATION TAXATION R.K. KURNE CHOWK WORLI, MUMBAI-400 018. PAN : AAACM3025E VS. ADDITIONAL CIT RANGE-2(2) AAYAKAR BHAVAN M.K. ROAD MUMBAI- 400 020. (APPELLANT) (RESPONDENT) ASSESSEE BY SHRI AJIT KUMAR JAIN DEPARTMENT BY SHRI SANJAY J. SETHI DATE OF HEARING 09 .0 7 .2021 DATE OF PRONOUNCEMENT 26.07.2021 O R D E R PER SHAMIM YAHYA (AM) :- BY WAY OF THIS MISCELLANEOUS APPLICATION THE ASSES SEE SEEKS RECTIFICATION OF MISTAKE APPARENT FROM RECORD IN THE ORDER OF THI S TRIBUNAL IN ITA NO. 1956/MUM/2014 FOR A.Y. 2009-10 VIDE ORDER DATED 10. 4.2019. 2. THE ASSESSEES PLEA IS AS UNDER :- 1 THE APPLICANT HAD FILED AN APPEAL BEFORE THE HO N'BLE INCOME TAX APPELLATE TRIBUNAL ('ITAT/ TRIBUNAL'), MUMBAI FOR AY 2009-10. 2 THIS APPEAL FILED BY THE APPLICANT WAS HEARD ON JANUARY 1, 2019. THE HON'BLE ITAT DISPOSED-OFF THE AFORESAID APPEAL BY AN ORDER DATED APRIL 4,2019. [COPY OF THE ITA T ORDER IS ATTACHED ('ITA T ORDER') AT PAGE NO. 5 TO 45]. INADVERTENT MISTAKE IN NOT ADJUDICATING THE ISSUE O F ALLOWANCE OF DEPRECIATION 3 IN THE GROUNDS OF APPEAL FILED BEFORE THE HON'BL E ITAT, THE APPLICANT HAD RAISED THE ISSUE OF DISALLOWANCE OF DIFFERENCE IN E XCHANGE LOSS CLAIMED AS REVENUE EXPENDITURE RS.251,63,00,000/-. VIA GROUND N O. 16 OF THE GROUNDS OF APPEAL. [ COPY OF THE FORM NO. 36B ALONG WITH GROUNDS OF APP EAL IS ATTACHED AT PAGE NO. 46 TO 60]. FOR READY REFERENCE GROUND NO. 16 RAISED BEFORE THE HON'BLE ITAT READS AS FOLLOWS: MAHINDRA & MAHINDRA LTD. 2 16. DISALLOWANCE OF DEDUCTION FOR DIFFERENCE IN EXC HANGE OFRS 251.63 CRORES ON THE FACTS AND IN THE CIRCUMSTANCES OF THE CASE AND IN LAW THE LEARNED ADDL C.I.T. ERRED IN PROPOSING AND THE DRP ERRED IN NOT ALLOWING DEDUCTION FOR DIFFERENCE IN EXCHANGE OF RS.251.63 C RORES AS CLAIMED BY THE APPELLANT IN THE COMPUTATION OF INCOME. THE LEA RNED ADDL CIT/DRP OUGHT TO HAVE ACCEPTED THE CONTENTION THAT THERE IS NO REQUIREMENT IN THE LAW TO CAPITALIZE THE DIFFERENCE IN EXCHANGE TO THE CAPITAL ASSETS ACQUIRED BY THE APPELLANT AS ALSO THE LOSS ARISING DUE TO DIFFERENCE IN EXCHANGE WAS NOT CONTINGENT IN NATURE AND THEREFORE WAS ALLOWABLE AS REVENUE DEDUCTION WHILE COMPUTING THE TAXABLE INCOM E OF THE APPELLANT. WITHOUT PREJUDICE TO THE AFORESAID CONTENTION THAT THE DIFFERENCE IN EXCHANGE WAS ALLOWABLE AS REVENUE DEDUCTION, THE LEA RNED ADDL CIT/DRP OUGHT TO HAVE ALLOWED DEPRECIATION ON SUC H DIFFERENCE IN EXCHANGE AS CAPITALIZED IN THE BOOKS OF ACCOUNTS. 4 THE APPLICANT SUBMITS, THAT THE APPLICANT ON A WITHO UT PREJUDICE BASIS HAD SPECIFICALLY RAISED THE ISSUE OF ALLOWANCE OF DE PRECIATION ON THE FOREIGN EXCHANGE LOSS IN CASE THE SAID FOREIGN EXCHANGE LOSS WAS TREATED AS CAPITAL IN NATURE BY THE HON'BLE ITAT. 5 THE HON'BLE ITAT DISPOSED OF GROUND OF APPEAL NO. 16 IN THE ITAT ORDER BY HOLDING AS FOLLOWS: '......... ...IF ON THE OTHER HAND, THE FOREIGN CURRENCY IS HE LD AS A CAPITAL ASSET OR AS FIXED CAPITAL, SUCH PROFIT OR LOSS WOUL D BE OF CAPITAL NATURE. IN THIS VIEW OF THE MATTER, IN OUR CONSIDERED OPINI ON THE ACTION OF THE AUTHORITIES BELOW IN HOLDING THAT FOREIGN EXCHANGE GAIN OR LOSS INCURRED ON ACQUISITION OF CAPITAL ASSET HAS TO BE ADJUSTED WITH THE COST OF CAPITAL ASSET IS CORRECT. AS REGARDS THE GAIN OR LOSS OF REVENUE ACCOUNT, THE SAME HAS TO BE DEALT WITH IN THE REVENUE FIELD. THE AO IN THIS REGARD HA S ERRED IN HOLDING THAT THESE ARE CONTINGENT AS THE SAME IS CONTRARY TO THE HON 'BLE APEX COURT DECISION IN THE CASE OF CIT VS. WOODWARD GOVERNOR I NDIA P LTD. HOWEVER, WE NOTE THAT THE ID. DRP HAS ANALYZED THE NATURE OF FOREIGN EXCHANGE LOSS CLAIMED BY THE ASSESSEE AND DECIDED T HE ISSUE PROPERLY. THE CLAIM OF THE ASSESSEE THAT FOREIGN EXCHANGE FLU CTUATION LOSS IRRESPECTIVE OF IT BEING IN THE FIELD OF CAPITAL OR REVENUE BE ALLOWED AS REVENUE EXPENDITURE IS NOT SUSTAINABLE IN THE LIGHT OF THE ABOVE CASE LAW FROM SATLEJ COTTON MILLS (SUPRA) FROM THE HON 'BLE SUPREME COURT........ IN THESE CIRCUMSTANCES, WE FIND THAT THE OBSERVATIONS OF THE DRP IN THIS REGARD ARE IN ACCORDANCE WITH THE ABOVE SAID EXPEDI TIONS. IN THIS VIEW OF THE MATTER, WE DO NOT FIND ANY INFIRMITY IN THE ORDER OF DRP, HENCE, WE ARE UPHOLDING THE SAME. ' 6 THEREFORE, THE APPLICANT SUBMITS THAT THE HON'BLE ITAT U PHELD THE VIEW OF THE LOWER AUTHORITIES THAT FOREIGN EXCHANGE GAIN OR LOS S INCURRED ON ACQUISITION OF CAPITAL ASSET HAS TO BE ADJUSTED WITH T HE COST OF CAPITAL ASSET. MAHINDRA & MAHINDRA LTD. 3 THE HON'BLE ITAT HELD THAT THE FOREIGN EXCHANGE LOSS B E TREATED AS CAPITAL IN NATURE. 7 THEREAFTER, THE APPLICANT FILED A MISCELLANEOUS APPLICATION BEING MA NO. 446/MUM/2019 ('FIRST MA APPLICATION'). [COPY OF THE MISCELLANEOUS APPLICATION IS ATTACHED AT PAGE NO. 61 TO 67]. IN THE SAID MA, THE APPLICANT HAD RAISED THE ISSUE THAT SINCE THE HON'BLE ITAT HAD TREATED THE FOREIGN EXCHANGE GAIN OR LOSS AS CAPITAL IN NATURE, T HE HON'BLE ITAT DID NOT ADJUDICATE THE WITHOUT PREJUDICE ISSUE OF ALLOWANCE O F DEPRECIATION RAISED VIDE GROUND OF APPEAL NO. 16 IN THE GROUNDS OF APPEA L FILED BEFORE THE HON'BLE ITAT. THEREFORE, WE PRAY THAT THERE IS A MISTAKE APPA RENT FROM RECORD IN THE ITAT ORDER WHICH REQUIRED RECTIFICATION. 8 THE HON'BLE ITAT VIDE ITS ORDER ('MA ORDER') DATED FEBRUARY 21, 2020 IN M.A. NO. 446/MUM/2019 [THE MA ORDER IS ATTACHED AT PAGE NO. 68 TO 76] DID NOT ADJUDICATE THE WITHOUT PREJUDICE ISSUE OF ALLOW ANCE OF DEPRECIATION ON THE FOREIGN EXCHANGE LOSS TREATED AS CAPITAL IN NATURE . 9 THE APPLICANT SUBMITS THAT THE ISSUE OF ALLOWANCE OF DEPRECIATION ON FOREIGN EXCHANGE LOSS WAS RAISED IN THE GROUND OF AP PEALS FILED BEFORE THE HON'BLE ITAT VIDE GROUND NO. 16. THE HON'BLE ITAT I N THE IT AT ORDER DID NOT ADJUDICATE THE ISSUE OF ALLOWANCE OF DEPRECIATION IN THE ITAT ORDER. FURTHER, THE APPLICANT POINTED OUT THE SAID MISTAKE BY FILING MIS CELLANOUS APPLICATION. IN THE MA ORDER THE HON'BLE ITAT AGAIN DID NOT TO ADJU DICATE THE WITHOUT PREJUDICE ISSUE OF ALLOWANCE OF DEPRECIATION. 10 THEREFORE, THE APPLICANT PRAYS AND SUBMITS THAT NON ADJUDICATION OF A GROUND OF APPEAL IS A MISTAKE APPARENT FROM RECORD AN D NON - ADJUDICATION OF A MISTAKE APPARENT FROM RECORD IS ALSO A MISTAKE APPAR ENT FROM RECORD RECTIFIABLE U/S 254(2) OF THE INCOME TAX ACT, 1961. THEREFORE, THE APPLICANT SUBMITS THAT THE HON'BLE ITAT MAY KINDLY RECTIFY THE AF ORESAID MISTAKE CREPT IN BOTH THE ITAT ORDER AND AS WELL AS IN THE MA ORDER. 11 THE APPLICANT SUBMITS THAT THE DISPUTE RESOLUTION PA NEL ('DRP') WITH RESPECT TO ALLOWANCE OF DEPRECIATION HELD AS FOLLOWS IN PARA 21.6 OF THE DRP DIRECTIONS: '21.6 THE ADDITION TO THE ASSETS HAVE BEEN MADE UND ER VARIOUS HEADS INCLUDING LAND, BUILDING, PLANT AND MACHINERY, FURN ITURE FITTINGS AND VEHICLES, DEVELOPMENT AND SOFTWARE EXPENDITURE. THE ASSESSEE HAS NOT FURNISHED DETAILS OF FOREIGN EXCHANGE LOSS ATTRIBUT ABLE TO VARIOUS ITEMS OF CAPITAL ASSETS AND WORK IN PROGRESS. IN ABSENCE OF FOREIGN EXCHANGE LOANS TO DIFFERENT ITEMS OF CAPITAL ASSETS IT IS NOT POSSIBLE TO ATTRIBUTE SUCH LOSS TO ANY ITEM OF CAP ITAL ASSET AS COST OF ACQUISITION OF SUCH ASSET AND ALLOW DEPRECI ATION.' 12 THE APPLICANT PRAYS AND SUBMITS THAT THE VIEW OF THE DRP THAT IN ABSENCE OF DETAILS OF FOREIGN EXCHANGE LOSSES TO DIFFERENT IT EM OF CAPITAL ASSETS IT IS NOT POSSIBLE TO ATTRIBUTE SUCH LOSS TO ANY ITEM OF CAPITAL A SSET AS COST OF ACQUISITION OF SUCH ASSET AND ALLOW DEPRECIATION IS N OT APPROPRIATE AS DEPRECIATION COULD HAVE BEEN ALLOWED ON PRO-RATA BAS IS OR ANY SUCH OTHER SUITABLE BASIS. MAHINDRA & MAHINDRA LTD. 4 13 THEREFORE, IN LIGHT OF THE ABOVE THE APPLICANT HUMBL Y PRAYS AND SUBMITS THAT THE NON ADJUDICATION AS OUTLINED ABOVE IS MISTAKE A PPARENT FROM RECORD IN THE MA ORDER AND THE ITAT ORDER AND HAS CAUSED P REJUDICE TO THE APPLICANT AND THE APPLICANT REQUEST THE HON'BLE ITAT TO KINDLY: A. RECALL THE ORDER DATED APRIL 10, 2019 IN ITA NO. 1956/M/2014 READ WITH ORDER DATED FEBRUARY 21, 2020 IN MA NO. 4 46/M/2019 AND B. RECTIFY THE AFORESAID MISTAKE APPARENT FROM RECOR D IN THE MA ORDER AND ITAT ORDER FOR AY 2009-10. 14 AS PER SECTION 254(2) OF THE ACT, THE ITAT CAN AMEND ANY ORDER PASSED BY IT WITHIN SIX MONTHS FROM THE END OF THE MONTH IN W HICH THE ORDER REQUIRING RECTIFICATION WAS PASSED. THE MA ORDER WA S PASSED ON FEBRUARY 21, 2020. THEREFORE, AS PER SECTION 254(2) OF THE ACT, THE LAST DATE TO AMEND THE ORDER WAS AUGUST 31, 2020. HOWEVER, ON MARCH 31, 202 0 THE PRESIDENT PROMULGATED THE TAXATION AND OTHER LAWS (RELAXATION O F CERTAIN PROVISIONS) ORDINANCE, 2020. (THE ORDINANCE IS ATTACHED AT PAGE NO. 77 TO 82). AS PER SECTION 3(1) OF THE ORDINANCE DUE DATES UNDER THE AC T FALLING DURING THE PERIOD OF MARCH 20 TO JUNE 29, 2020 WERE EXTENDED TO JUNE 30, 2020. ON JUNE 24,2020 THE CENTRAL BOARD OF DIRECT TAXES ('CBDT') ISSUED A NOTIFICATION AND A PRESS RELEASE TO FURTHER EXTEND THE DUE DATES (THE NOTIFICATION AND PRESS RELEASE IS ATTACHED AT PAGE NO. 83 TO 89). THE TIME LIMIT FOR DUE DATES UNDER THE ACT FALLING BETWEEN MARCH 20 TO DECEM BER 31, 2020 IS EXTENDED TO MARCH 31, 2021. THEREFORE, THIS APPLICATI ON IS WITHIN THE TIME LIMIT. 3. WE HAVE HEARD BOTH THE PARTIES AND PERUSED THE R ECORD. WE FIND THAT THE ASSESSEE HAS ALREADY FILED A MISCELLANEOUS APPLICAT ION ON THIS ISSUE WHICH WAS DEALT WITH BY THE ITAT VIDE ORDER IN M.A.NO. 446/MU M/2019 VIDE ORDER DATED 21.2.2020. 4. ANOTHER ISSUE RAISED IN THE MISCELLANEOUS APPLICA TION RELATES TO THE FOLLOWING GROUND :- 'ON THE FACTS AND IN THE CIRCUMSTANCES OF THE CASE AND IN LAW THE LEARNED ADDL C.I.T. ERRED IN PROPOSING AND THE DRP ERRED IN NOT ALLOWING DEDUCTION FOR DIFFERENCE IN EXCHANGE OF RS. 251.63 CRORES AS CLAIMED BY THE APPELLANT IN THE COMPUTATION OF INCOME. THE LEARNED ADDL CIT/DRP OUGHT TO HAVE ACCEPTED THE CO NTENTION THAT THERE IS NO REQUIREMENT IN THE LAW TO CAPITALIZE THE DIFFER ENCE IN EXCHANGE TO THE CAPITAL ASSETS ACQUIRED BY THE APPELLANT AS ALSO THE L OSS ARISING DUE TO DIFFERENCE IN EXCHANGE WAS NOT CONTINGENT IN NATURE A ND THEREFORE WAS ALLOWABLE AS REVENUE DEDUCTION WHILE COMPUTING THE TAX ABLE INCOME OF THE APPELLANT. MAHINDRA & MAHINDRA LTD. 5 WITHOUT PREJUDICE TO THE AFORESAID CONTENTION THAT THE D IFFERENCE IN EXCHANGE WAS ALLOWABLE AS REVENUE DEDUCTION, THE LEARNED ADDL CIT/DRP OUGHT TO HAVE ALLOWED DEPRECIATION ON SUCH DIFFERENCE IN EXCH ANGE AS CAPITALIZED IN THE BOOKS OF ACCOUNTS.' 5. WE FIND THAT THE ITAT HAS ADJUDICATED THIS ISSUE IN ITS ORDER AS UNDER :- GROUND NO.16: DISALLOWANCE OF DIFFERENCE IN EXCHAN GE LOSS CLAIMED AS REVENUE EXPENDITURE RS. 251,63,00,000/-. 35. BRIEF FACTS OF THE CASE ARE THAT DURING THE YEAR, THE ASSESSEE CLAIMED A DEDUCTION OF RS. 251.63 CRORES OUT OF COMPUTATION OF IN COME ON ACCOUNT OF DIFFERENCE IN EXCHANGE ARISING OUT OF REPAYMENT OF FO REIGN CURRENCY LOANS/ REVALUATION OF FOREIGN CURRENCY. THE LOANS HAVE NOT BEEN REPAID DURING THE YEAR. THE LOANS ARE SAID TO HAVE BEEN UTILIZED TOWARDS PURCHASE OF FIXED ASSETS AS WELL AS FOR CERTAIN CURRENT ASSETS. THE ASS ESSEE HAS GIVEN DETAILS OF FOREIGN EXCHANGE FLUCTUATION EXPENSES AND APPLICATION OF THE FOREIGN EXCHANGE LOANS AS UNDER:- PARTICULAR PROFIT AND LOSS FY 2009 RS. IN LAKHS CAPITAL EXPENDITURE IN LAKHS FOREX RESERVE RS. IN LAKHS UNUTILISATION OF FOREX RESERVE ZERO COUPON FOREIGN CURRENCY CONVERTIBLE BONDS LOAN 19507 16496 3011 INVESTMENT IN MAHINDRA GEARS INTERNATIONAL LTD. MAURITIUS AND MAHINDRA OVERSEAS INVESTMENT COMPANY (MAURITIUS) LTD. HSBC LOAN 5181 4904 277 INVESTMENT IN MAHINDRA GEARS INTERNATIONAL LIMITED, MAURITIUS AND MAHINDRA OVERSEAS INVESTMENT COMPANY (MAURITIUS) LTD. UNION BANK OF INDIA 145T 1455 GENERAL WORKING CAPITAL PURPOSE CITI BANK & DBS 3 3 GENERAL WORKING CAPITAL PURPOSE ICS S GIVEN 0982 - 982 TOTAL 25164 21400 3764 36. IT WAS SUBMITTED THAT THE ASSESSEE HAS NOT DEBITED THI S AMOUNT IN THE PROFIT AND LOSS ACCOUNT AND HAS ACCOUNTED THE SAME IN COMPLIANCE WITH ACCOUNTING STANDARD 11. THE ASSESSEE HAS CHARGED THE SAME TO THE FIXED CURRENCY MONETARY ITEM TRANSLATION DIFFERENCE ACCOUNT ' TO BE WRITTEN-OFF TO THE PROFIT & LOSS ACCOUNT IN LATER YEARS. THE ASSESSE E SUBMITTED THAT THE FOREIGN EXCHANGE EXPENSE FLUCTUATION LIABILITY HAS B EEN CAPITALIZED IN THE BOOKS BUT FOR INCOME TAX PURPOSES IT IS CONSIDERED AS REVENUE EXPENSE. ACCORDINGLY THE COST OF ASSETS FOR COMPUTATION OF DEPR ECIATION ALLOWABLE UNDER SECTION 32, SUCH FOREIGN EXPENSE HAS NOT BEEN C ONSIDERED AS COST OF MAHINDRA & MAHINDRA LTD. 6 CAPITAL ASSET. THE DEDUCTION HAS BEEN CLAIMED IN THE COMPUTATION OF TOTAL INCOME FILED. 37. THE AO HAS DISALLOWED THIS EXPENDITURE STATING TH AT THE SAME IS A CONTINGENT LIABILITY. ALSO, FOR THE LOANS TAKEN FOR F IXED ASSETS, THE SAME WAS REQUIRED TO BE CAPITALIZED AND HENCE THE AO HAS DISAL LOWED THIS EXPENDITURE. 38. THE DRP UPON ASSESSEES APPEAL HAS DEALT WITH THE ISSUE AS UNDER:- 21.4. WE HAVE CONSIDERED THE ASSESSMENT ORDER, THE FAC TS OF THE CASE AS WELL AS THE SUBMISSIONS OF THE ASSESSEE. ADMITTEDL Y FOREIGN EXCHANGE LOSS OF RS. 214 CRORES IS ON CAPITAL ACCOUN T AND THE ASSESSEE VIDE SUBMISSION DATED 18TH DECEMBER 2013 HAS SUBMIT TED THAT DEPRECIATION ON THIS AMOUNT MAY BE ALLOWED CONSIDERIN G THAT THE ASSETS HAVE BEEN PUT TO USE FOR PERIOD LESS THAN 182 D AYS DURING THE YEAR. HOWEVER, THE ASSESSEE HAS NOT BEEN ABLE TO FURNI SH THE DETAILS OF SPECIFIC FOREIGN EXCHANGE LOANS TAKEN FOR CAPITAL PUR POSES AND IDENTIFIED AND CORRELATED THE RESPECTIVE CAPITAL ASSET S AND WHEN SUCH ASSETS HAVE BEEN PUT TO USE. IT HAS SUBMITTED THAT FOREI GN EXHANGE LOSS ON ZERO COUPON FCCB RS. 195.07 CRORE, AND ON H SBC LOAN 51.81 CRORES ARE OF BOTH CAPITAL AND REVENUE PURPOSES. TH E CAPITAL PURPOSE LOSS ON FCCB LOAN IS 164.96 CRORES LOAN IS 49.04 CR ORES AND ON HSBC LOAN IS 49.04 CRORES. 21.5. FROM THE BALANCE SHEET OF THE ASSESSEE IT IS SEEN THAT THE ASSESSEE HAS SECURED FOREIGN CURRENCY L OAN FROM BANKS RS. 378 CRORES (302 CRORES IN PRECEDING YEAR) AND U NSECURED FOREIGN CURRENCY LOANS ON FCCB AND BANK IS RS 1587 CRORES ( 1293 CRORES IN PRECEDING YEAR). THE SECURED LOAN INCLUDES RS. 253 CRORE SHORT TERM LOANS. FROM THE SCHEDULE OF FIXED ASSETS IN THE BALAN CE SHEET IT IS SEEN THAT THE ASSESSEE HAS ADDED FIXED ASSETS RS. 1291 CROR E DURING THE YEAR. THE CAPITAL WIP ON 31ST MARCH IS 646.73 CRORES WHEREAS IN THE PRECEDING YEAR IT WAS 546.45 CRORES. 21.6. THE ADDIT ION TO THE ASSETS HAVE BEEN MADE UNDER VARIOUS HEADS INCLUDING LAND, BUILDING, PLANT AND MACHINERY, FURNITURE FITTINGS AND VEHICLES, DEVEL OPMENT AND SOFTWARE EXPENDITURE. THE ASSESSEE PAS NOT FURNISHED DETAILS OF FOREIGN EXCHANGE LOSS ATTRIBUTABLE TO VARIOUS ITEMS OF CAPITAL ASSETS AND WIP. IN ABSENCE OF DETAILS OF APPLICATION OF FOREIGN EXCH ANGE LOANS TO DIFFERENT ITEMS OF CAPITAL ASSETS IT IS NOT POSSIBLE TO ATTRIBUTE SUCH LOSS TO ANY ITEM OF CAPITAL ASSET AS COST OF ACQUISITION OF SUCH ASSET AND ALLOW DEPRECIATION. FROM APPLICATION OF LOAN AS GIVE N IN THE TABLE, IT IS EVIDENT THAT LOAN HAS BEEN APPLIED ALSO FOR INVESTMENT IN EQUITY OF FOREIGN SUBSIDIARIES. THEREFORE THE ORDER OF THE AO R EGARDING DISALLOWANCE OF FOREIGN EXCHANGE LOSS TO THE TUNE OF RS. 214 CRORES IS UPHELD. 21.7. REGARDING THE BALANCE FOREIGN EXCHANGE LOSS OF RS 37.64 CRORES CLAIMED AS REVENUE EXPENDITURE, AS PER INFORMATION S UBMITTED, THE LOSS OF RS. 32.88 CRORES HAS BEEN INCURRED IN RELATI ON TO INVESTMENT IN THE EQUITY OF MAHINDRA GEARS INTERNATIONAL LIMITED MA URITIUS AND MAHINDRA OVERSEAS INVESTMENT COMPANY MAURITIUS LIMITE D. MAHINDRA & MAHINDRA LTD. 7 THEREFORE THE FOREX LOSS OF RS 32.88 CRORES IS ON CA PITAL ACCOUNT AND THE DISALLOWANCE IN THIS REGARD DOES NOT NEED ANY INTE RVENTION. 21.8. ANOTHER FOREIGN EXCHANGE LOSS OF RS. 14.55 CRO RES IS STATED TO BE INCURRED IN RELATION TO WORKING CAPITAL LOAN FROM UNI ON BANK OF INDIA; THE COPY OF LOAN DOCUMENT REGARDING SUCH LOAN HAS BEE N PRODUCED. THIS IS AN UNDATED DOCUMENT SIGNED BY THE ASSESSEE PU RPORTING TO BE A PACKING CREDIT AGREEMENT WITH UNION BANK OF INDIA, I NDUSTRIAL FINANCE BRANCH, NARIMAN POINT FOR PACKING CREDIT LOAN OF RS. 100 CRORE. THIS LOAN IS IN INDIAN CURRENCY. THEREFORE TH IS IS NOT FOREIGN CURRENCY LOAN AND HENCE ANY FOREIGN CURRENCY LOSS C ANNOT BE INCURRED IN RELATION TO THIS LOAN. 21.9. THE ASSESSEE HAS ALSO CREDITED FOREIGN EXCHAN GE GAIN OF RS.9.82 CRORE UNDER THE REVENUE ACCOUNT BEING FOREIGN EXCHANG E LOSS ACCRUED ON INTER CORPORATE DEPOSITS GIVEN IN FOREIGN CURRENCY. THIS GAIN HAS BEEN TREATED BY THE ASSESSEE ON THE REVENU E ACCOUNT AND ACCORDINGLY GROSS FOREIGN EXCHANGE LOSS ON REVENUE ACCOUNT RS. 47.46 CRORES HAS BEEN REDUCED BY THIS AMOUNT AND DEDUCTION OF ONLY THE BALANCE RS.37.64 CRORES HAS BEEN CLAIMED. THE FOREI GN EXCHANGE LOSSES ON VARIOUS ACCOUNTS HAVE ALREADY BEEN DISCUS SED AND DIRECTIONS AS APPROPRIATE HAVE BEEN ISSUED. THE AO I S DIRECTED TO TREAT THIS FOREIGN EXCHANGE GAIN ON ICDS ON REVENUE ACCOUN T AS SHOWN BY THE ASSESSEE IN THE RETURN AND BRING IT TO TAX. 21.10. IN THE RESULT THE DISALLOWANCE OF FOREIGN EXCH ANGE LOSS RS. 251.64 CRORES MADE BY THE AO IS UPHELD AND THE AO IS FURTHER DIRECTED TO TAX THE FOREIGN EXCHANGE GAIN OF RS.9.82 CRORE ON ICD. 39. AGAINST THIS ORDER, ASSESSEE HAS FILED AN APPEAL BEFORE US. 40. THE SUBMISSION OF THE LD. COUNSEL OF THE ASSESSEE ON THIS ISSUE ARE SUMMARISED AS UNDER:- THERE IS NO PROVISION IN THE INCOME TAX ACT, OTHER THA N S. 43A, WHICH DEALS WITH TAX TREATMENT OF FOREIGN EXCHANGE FLUCTUATI ONS. IN THIS SITUATION, THE ACCOUNTING PRINCIPLES LAID DOWN IN ACCOUNTING STANDARDS NOTIFIED BY THE ICAI WOULD GOVERN. IN WOODWARD GOVERNOR INDIA P LTD THE SC HAS HELD (P ARA 17) THAT ACCOUNTING STANDARD 11 IS MANDATORY. THE AS DEALT WITH BY THE COURT WAS THE ONE ' REVISED IN 1994 PARA 10 OF WHICH PROV IDED FOR ADJUSTMENT OF CARRYING AMOUNT OF FIXED ASSETS FOR EXCH ANGE DIFFERENCES; ON THE OTHER HAND, PARA 13 OF IF AS 11 REVISED IN 20 03 PROVIDES THAT EXCHANGE DIFFERENCES ARISING ON SETTLEMENT OR REVALUA TION OF MONETARY ITEMS SHOULD BE TREATED AS INCOME OR EXPENSE OF THE R ELEVANT PERIOD. MAHINDRA & MAHINDRA LTD. 8 SIMILARLY, INCOME COMPUTATION AND DISCLOSURE STANDARDS NOTIFIED UNDER S 145(2) WE-F AY 2017-18 PROVIDE IN PARA 5(1) THAT EXPENSES DIFFERENCES SHOULD BE RECOGNIZED AS INCOME OR EXPEN SE IN THE RELEVANT YEAR. IN HIS SUBMISSIONS BEFORE THE DELHI HIGH COURT IN TH E CASE OF CHAMBER OF TAX CONSULTANTS WHEREIN THE CONSTITUTIONAL V ALIDITY OF ICDS WAS CHALLENGED THE ADDITIONAL SOLICITOR GENERAL . APPEARING ON BEHALF OF THE UNION OF INDIA SUBMITTED THAT THE CHANGE S BROUGHT ABOUT (BY ICDS) ARE ONLY AIMED AT BRINGING UNIFORMITY AND CLARITY IN THE COMPUTATION OF INCOME. THEREFORE IN TERMS OF AS 11 (REVISED 2003) AND ICDS VI, ALL EXCHANGE DIFFERENCES RELATING TO MONETARY ITEMS (REVISION OF LIA BILITY DESIGNATED IN FOREIGN CURRENCY) WOULD HAVE TO BE RECOGNIZED AS INCOME OR EXPENSE. 41. UPON HEARING BOTH THE COUNSEL AND PERUSING THE R ECORDS, WE FIND THAT HONBLE APEX COURT IN THE CASE OF SATLEJ COTTON MILLS LTD., VS. VIR 116 ITR 1 HAD EXPOUNDED THAT WHERE PROFIT OR LOSS ARISES TO AN A SSESSEE 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 TRADING PROFIT OR LOSS IF THE FOREIGN CURRENCY IS HELD BY THE ASSESSEE ON REVENUE ACCOUNT OR AS A TRADING ASSET OR AS PART OF CIR CULATING 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 PROF IT OR LOSS WOULD BE OF CAPITAL NATURE. IN THIS VIEW OF THE MATTER, IN OUR CONS IDERED OPINION THE ACTION OF THE AUTHORITIES BELOW IN HOLDING THAT FOREIGN EXCHANGE GAIN OR LOSS INCURRED ON ACQUISITION OF CAPITAL ASSET HAS TO BE AD JUSTED WITH THE COST OF CAPITAL ASSET IS CORRECT. 42. AS REGARDS THE GAIN OR LOSS OF REVENUE ACCOUNT, THE SAME HAS TO BE DEALT WITH IN THE REVENUE FIELD. THE AO IN THIS REGARD HAS ERRED IN HOLDING THAT THESE ARE CONTINGENT AS THE SAME IS CONTRARY TO THE HON BLE APEX COURT DECISION IN THE CASE OF CIT VS. WOODWARD GOVERNOR IN DIA P LTD. HOWEVER, WE NOTE THAT THE LD. DRP HAS ANALYZED THE NATURE OF FOREIGN EXCHANGE LOSS CLAIMED BY THE ASSESSEE AND DECIDED THE ISSUE PROPERL Y. THE CLAIM OF THE ASSESSEE THAT FOREIGN EXCHANGE FLUCTUATION LOSS IRRES PECTIVE OF IT BEING IN THE FIELD OF CAPITAL OR REVENUE BE ALLOWED AS REVENUE EX PENDITURE IS NOT SUSTAINABLE IN THE LIGHT OF THE ABOVE CASE LAW FROM SATL EJ COTTON MILLS (SUPRA) FROM THE HONBLE SUPREME COURT. THE REFERENCE OF THE A SSESSEE REGARDING THE INCOME COMPUTATION AND DISCLOSURE STANDARDS (ICDS) NOT IFIED U/S.145(2) W.E.F. AY 2017-18 DOES NOT HELP THE CASE OF THE ASSES SEE. FROM THE PERUSAL OF CBDT CIRCULAR 10/2017 DATED 23/03/2017, IT IS OBSER VED THAT ICDS SHALL BE APPLICABLE WITH THE TRANSACTION YEARS HELD THEREIN IN RELATION TO A.Y.2017-18 AND SUBSEQUENT ASSESSMENT YEAR. ADMITTEDLY, IN THE PR ESENT ASSESSMENT YEAR THE SAID ICDS IS NOT APPLICABLE, HENCE, THE EXPO SITION OF HONBLE APEX COURT DECISION IN THE CASE OF SUTLEJ COTTON MILLS (SUPRA ) AS ABOVE DULY HOLDS THE FIELD. IN THESE CIRCUMSTANCES, WE FIND THAT THE OBSE RVATIONS OF THE DRP IN THIS REGARDS ARE IN ACCORDANCE WITH THE ABOVE SAID E XPEDITIONS. IN THIS VIEW OF MAHINDRA & MAHINDRA LTD. 9 THE MATTER, WE DO NOT FIND ANY INFIRMITY IN THE ORDER O F DRP, HENCE, WE ARE UPHOLDING THE SAME. 6. NOW BY WAY OF MISCELLANEOUS APPLICATION IN THIS RE GARD THE ASSESSEE STATES AS UNDER :- 10. THE MISTAKE THAT IS APPARENT FROM RECORD IS THAT THE HONORABLE TRIBUNAL HAS NOT CONSIDERED THE DECISION OF CHENNAI T RIBUNAL IN THE CASE OF HYUNDAI MOTOR INDIA LTD (SUPRA), WHICH IN TURN FOLL OWED THE DECISION OF THE PUNE BENCH IN THE CASE OF COOPER CORPN. (P.) LTD . V. DY. CIT [2016] 69 TAXMANN.COM 244/159 ITD 165 (PUNE - TRIB.) WHERE IN SUPREME COURT DECISION IN SUTLEJ COTTON MILLS WAS CONSIDERED A ND DISTINGUISHED. 11. FURTHER, THE HONORABLE TRIBUNAL HAS NOT ADJUDICAT ED THE FOLLOWING RELATED ISSUES :- ALLOWABILITY OF DEPRECIATION IN RESPECT OF FOREIG N EXCHANGE LOSS RELATED TO ACQUISITION OF CAPITAL ASSETS WITHOUT THERE BEING ANY N EED TO FURNISH DETAILS OF PUT TO USE OF INDIVIDUAL ASSETS, FOREIGN EXCHANGE LOSS TRANSFERRED TO FCMITDA (FOR MING PART OF TOTAL DISALLOWANCE CONTESTED BEFORE HONORABLE TRIBUNAL); FOREIGN EXCHANGE GAIN OF RS. 9.82 CRORES IN RE SPECT OF ICDS (FORMING PART OF TOTAL DISALLOWANCE CONTESTED BEFORE HONORABLE TRIB UNAL) AND LOAN FORM UNION BANK (WHICH HAS BEEN UPHELD TO B E LOAN IN LOCAL CURRENCY BY LD. DRP) IS ALSO LOAN IN FOREIGN CURRENCY. 7. WE HAVE HEARD BOTH THE COUNSEL AND PERUSED THE RE CORDS IN THIS REGARD. THE LEARNED COUNSEL OF THE ASSESSEE HAS REITERATED THE SUBMISSIONS AS ABOVE. PER CONTRA LEARNED DEPARTMENTAL REPRESENTATIVE SUBMITTED THAT ITAT IN ITS ORDER HAS FOUND THAT THE DECISION OF HONOURABLE SUPREME COUR T IN THE CASE OF SUTLEJ COTTON MILLS (SUPRA) IS DIRECTLY APPLICABLE ON THE FA CTS OF THE CASE. HENCE LEARNED DEPARTMENTAL REPRESENTATIVE PLEADED THAT THE ORDER OF TH E HONOURABLE SUPREME COURT TAKES PRECEDENCE OVER DECISION OF INFERIOR COUR TS AND TRIBUNALS. FURTHERMORE LEARNED DEPARTMENTAL REPRESENTATIVE SUBMITTE D THAT BY CLAIMING THAT THERE WAS NO NEED TO FURNISH DETAILS FOR CLAIM OF ALLOWANCE OF DEPRECIATION THE ASSESSEE IS ITSELF MAKING OUT A CASE FOR REVIEW. A S REGARDS THE OTHER ISSUES MENTIONED IN THE SUBMISSION LEARNED DEPARTMENTAL REPR ESENTATIVE SUBMITTED THAT THESE ARE NOT ARISING OUT OF THE GROUNDS OF APPEA L OR THE ORDER OF THE ITAT. HE CLAIMED THAT THE ASSESSEE IS PLEADING FOR SOME FU RTHER ISSUES TO THE ADJUDICATED AS RELATED WHICH IS NOT PERMISSIBLE IN THE GARB OF RECTIFICATION OF MISTAKE APPARENT FROM RECORD. 8. UPON CAREFUL CONSIDERATION WE FIND THAT ITAT HAS EL ABORATELY DISCUSSED THE ISSUE. IT HAD FOUND THAT THE DECISION OF HONOURABLE SUPREME COURT IN SUTLEJ COTTON MILLS (SUPRA) IS DIRECTLY APPLICABLE ON THE FAC TS OF THE CASE. FURTHERMORE AS DETAILED IN THE SUBMISSION OF THE LEARNED DEPARTME NTAL REPRESENTATIVE ABOVE THE OTHER ASPECTS RAISED IN THE MISCELLANEOUS APPLICATI ON CALL FOR A REVIEW OF THE MAHINDRA & MAHINDRA LTD. 10 ORDER OF THE ITAT IN THE GARB OF RECTIFICATION OF MI STAKE APPARENT FROM RECORD UNDER SECTION 254(2) OF THE IT ACT. THE SUBMISSION IN THE MISCELLANEOUS APPLICATION THAT SOME RELATED ISSUES HAVE REMAINED TO BE ADJUDICATED ARE IN FACT AIMED AT GETTING THE REVIEW OF THE ORDER. THIS IS N OT PERMISSIBLE. THESE ISSUES ARE NOT ARISING OUT OF THE GROUNDS OF APPEAL BEFORE THE TRIBUNAL. ACCORDINGLY THE MISCELLANEOUS APPLICATION FOR THIS IS SUE STANDS DISMISSED. 9. IN THE RESULT THE MISCELLANEOUS APPLICATION STAN DS PARTLY ALLOWED. 4. FROM THE ABOVE IT IS EVIDENT THAT THE ISSUE RAIS ED IN THIS MISCELLANEOUS APPLICATION WAS ALREADY RAISED IN AN EARLIER MISCEL LANEOUS APPLICATION WHICH HAS BEEN DULY DEALT WITH AND DISPOSED BY THE ITAT. THERE IS NO PROVISION IN THE ACT FOR REVIEW OF THE ORDER UNDER SECTION 254(2). B Y REPEATEDLY FILING MISCELLANEOUS APPLICATIONS ON THE SAME ISSUE THE PR ESCRIPTION OF THE ACT CANNOT BE CHANGED. 5. IN THIS VIEW OF THE MATTER SINCE ITAT HAS ALREAD Y DISPOSED OFF THE MISCELLANEOUS APPLICATION ON THE SAME ISSUE THIS MI SCELLANEOUS APPLICATION IS LIABLE TO BE DISMISSED. THE SAME IS DISMISSED AS SU CH. PRONOUNCED IN THE OPEN COURT ON 26.7.2021. SD/- SD/- (PAVANKUMAR GADALE) (SHAM IM YAHYA) JUDICIAL MEMBER ACC OUNTANT MEMBER MUMBAI; DATED : 26/07/2021 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. BY ORDER, //TRUE COPY// ( ASSISTANT REGISTRAR) PS ITAT, MUMBAI