Gajaananda Jewellery Maart (P) Ltd., Tiruppur V. DCIT, Coimbatore

MA 35/CHNY/2015

• Counselvise Citation: [2015] 124 COUNSELVISE.COM (IT) 3175 (ITAT-CHENNAI)
• Duration Of Justice: 3 month(s) 2 day(s)
• Appeal Type: Miscellaneous Application
• Pronouncement Date: 25-06-2015
• Appeal Filed By: Assessee
• Bench Allotted: C
• Next Hearing Date: 19-06-2015
• Assessment Year: 2009-2010
• Appeal Filed On: 23-03-2015
• Court: TRIBUNAL
• Department Lawyers: A V SREEKANTHJCIT
• Assessee Lawyers: T BANUSEKARC A
• Keywords: Capital asset; Revenue expenditure; Capital expenditure

Judgement Text

, , IN THE INCOME TAX APPELLATE TRIBUNAL C BENCH, CHENNAI . , . !' , # $ BEFORE SHRI A.MOHAN ALANKAMONY, ACCOUNTANT MEMBER AND SHRI V. DURGA RAO, JUDICIAL MEMBER M.P.NO.35/MDS./2015 ./ I.T.A.NO.1646/MDS./2013 ASSESSMENT YEAR:2009-10) M/S.GAJAANANDA JEWELLERY MAART PVT LTD. (IN WHICH M/S.TCS TEXTILES (P) LTD. HAS MERGED), SREE KUMARAN THANGAMALIGAI BUILDING, 133, NEW MARKET STREET, TIRUPUR 641 604. VS. DEPUTY COMMISSIONER OF INCOME TAX, CENTRAL CIRCLE III (I/C), COIMBATORE. PAN AABCT 7921 K ( 34 / APPELLANT ) ( 5634 / RESPONDENT ) / APPELLANT BY : MR.T.BANUSEKAR,C.A / RESPONDENT BY : MR.A.V.SREEKANTH,JCIT D.R / DATE OF HEARING : 19.06.2015 /DATE OF PRONOUNCEMENT : 25.06.2015 7 / O R D E R PER A.MOHAN ALANKAMONY , ACCOUNTANT MEMBER: THIS MISCELLANEOUS PETITION IS FILED BY THE ASSES SEE, PRAYING FOR RECTIFICATION OF THE ORDER OF THE TRIBUNAL IN ITA N O.1646/MDS./2013 DATED 27.02.2015 MP NO. 35/MDS/15 2 2. LD. A.R. SUBMITTED BEFORE US THAT IN THE AFORES AID ORDER IN PARA-12.4, PAGE-37, THE HONBLE TRIBUNAL HAS NOT GI VEN ANY DIRECTION WITH REGARD TO THE ISSUE OF CAPITALIZATION OF FOREI GN CURRENCY FLUCTUATION LOSS ON LOAN TAKEN FOR PURCHASE OF FIXE D ASSETS. LD. A.R. FURTHER STATED IN HIS WRITTEN SUBMISSION THAT THE T RIBUNAL HAS NOT DISCUSSED THE FOLLOWING POINTS WHICH WERE ADDRESSED DURING THE COURSE OF HEARING HELD ON 12.01.2015. 1. IT WAS POINTED OUT BEFORE THE BENCH THAT THE PRO VISIONS OF THE SECTION 43A WOULD BE ATTRACTED ONLY IF FOREIGN CURRENCY LOA N WAS TAKEN FOR PURCHASE OF FIXED ASSET FROM A COUNTRY OUTSIDE OF I NDIA AND THAT IN THE PETITIONERS CASE THE LOAN WAS TAKEN IN FOREIGN CUR RENCY BUT THE ASSET BEING WIND MILL WAS PURCHASED ONLY INDIA. 2. IN THIS CONNECTION IT WAS ALSO POINTED OUT THAT THE WHOLE OF THE FOREIGN CURRENCY FLUCTUATION LOSS OF RS.7.7. CRORES I.E. RS .1.33 CRORES + RS.6.37 CRORES ON THE LOAN TAKEN FOR PURCHASE OF FIXED ASSE T IS ALLOWABLE AS REVENUE EXPENDITURE AS PER AS-11 AND FOR THIS PROPO SITION THE AUTHORISED REPRESENTATIVE OF THE PETITIONER RELIED ON THE FOLLOWING DECISIONS I) CIT VS. WOODWARD GOVERNOR INDIA (P) LTD. (200() 312 ITR 254(SC) II) RELIANCE INDUSTRIES LTD. VS. CIT (2013) 40 TAXM ANN.COM 431 (MUM TRIB) III) CIT VS. CLIMAE SYSTEM P LTD. (2014) (8) TMI 90 1 DEL HC. MP NO. 35/MDS/15 3 3. WITHOUT PREJUDICE TO THE ABOVE SUBMISSION THAT THE WHOLE OF THE FOREIGN CURRENCY FLUCTUATION LOSS OF RS.7.7. CRORES I.E. RS .1.33 CRORES + RS.6.37 CRORES IS ALLOWABLE AS REVENUE XPN IT WAS SUBMITTED THAT THE LOSS OF 1.33 CRORES REPRESENTS ACTUAL LOSS INCURRED AND RS.6.37 CRORES IS THE PROVISION MADE AT THE YEAR END WHICH IS IN ACCORDAN CE WITH AS AND CONSEQUENTIALLY IN ACCORDANCE WITH MERCANTILE SYSTE M OF ACCOUNTING. HENCE THE LOSS OF RS.6.37 CRORES SHOULD NOT BE TREA TED AS NOTIONAL BUT HAS TO BE TREATED AS CAPITAL EXPENDITURE AND DEPREC IATION BE ALLOWED ON THE SAME AS HAS BEEN DONE IN THE CASE OF ACTUAL LOS S OF RS.1.33 CRORES. 4. WITHOUT PREJUDICE TO THE ABOVE, IT WAS SUBMITTE D THAT A DIRECTION BE GIVEN TO THE AO TO ELIMINATE THE GAIN ON ACCOUNT OF FOREI GN CURRENCY FLUCTUATION ON THE LOAN TAKEN FOR PURCHASE OF FIXED ASSET IN THE SUBSEQUENT YEARS WHICH HAVE BEEN OFFERED AS INCOME IN THE RELEVANT YEARS. UNDER THESE CIRCUMSTANCES SINCE THE ABOVE POINTS WH ICH HAVE BEEN ADDRESSED TO THE BENCH WERE NOT DISCUSSED IN THE ORDER BY THE HONBLE TRIBUNAL, THE PETITIONER MOST HUMBLY PRAYS THAT THESE POINTS BE C ONSIDERED AND DECIDED BY THE HONBLE BENCH IN ITS ORDER. THE PETITIONER ALSO PRA YS FOR A CONDONATION OF ANY DELAY THAT MAY HAVE OCCURRED IN THE FILING OF THIS PETITION. THE PETITIONER UNDERTAKES TO PRODUCE ALL THE NECESS ARY MATERIAL BEFORE THE HONBLE TRIBUNAL FOR IT TO DECIDE THE MATTER ON MER ITS, IF THIS PETITION IS ALLOWED. MP NO. 35/MDS/15 4 3. ON PERUSING THE ORDER OF THE TRIBUNAL, WE FIND THAT IN PARA 12.4 AS CITED BY THE LD. A.R INADVERTENTLY IT WAS MENTIO NED THAT THE ASSESSEE HAD ACQUIRED AN ASSET FROM A COUNTRY OUTSI DE INDIA FOR THE PURPOSE OF ITS BUSINESS OR PROFESSION BASED ON WHICH THE BENCH HAD COME TO THE CONCLUSION THAT SECTION-43A OF THE ACT WOULD BE ATTRACTED. EVEN THOUGH IT IS A MISTAKE APPARENT ON RECORD BECAUSE AS CONTENDED BY THE LD. A.R AND CONCEDED BY THE LD. D. R THAT THE ASSET IS NOT ACQUIRED FROM OUTSIDE INDIA BUT ONLY LOAN IS RECEIVED FROM OUTSIDE INDIA FOR THE PURPOSE OF ACQUIRING THE ASSE T IN INDIA, THE SCOPE OF THE DECISION CANNOT BE ALTERED BECAUSE THE SAME ANALOGY IN OUR VIEW IS APPROPRIATE CONSIDERING THE PROVISIONS OF T HE ACT EVEN WHEN THE ASSET IS PURCHASED WITHIN INDIA FOR WHICH THE L OAN IS OBTAINED FROM ABROAD. ACCORDINGLY THE REVENUE IS RIGHT IN ITS RE ALM FOR CAPITALIZING THE ACTUAL LOSS ON REPAYMENT OF LOAN IN FOREIGN CUR RENCY OF ` 1,36,00,000/- BECAUSE THE LOAN IS UTILIZED FOR THE ACQUISITION OF THE ASSET AND THE FOREIGN EXCHANGE FLUCTUATION HAS A DI RECT BEARING ON THE COST OF THE ASSET. FURTHER, THE REVENUE HAS DI SALLOWED THE FOREIGN CURRENCY FLUCTUATION NOTIONAL LOSS OF ` 6,37,00,000/- BECAUSE THE SAME HAS NOT CRYSTALLIZED TO THE ASSESSEE. IN OUR ORDER WE WERE MP NO. 35/MDS/15 5 ALSO IN AGREEMENT TO THIS VIEW OF THE REVENUE, HOWE VER, THE LD. A.R. HAD MADE A PRAYER THAT A DIRECTION MAY BE GIVEN TO THE LD. ASSESSING OFFICER TO ELIMINATE THE GAIN ON ACCOUNT OF FOREIGN CURRENCY FLUCTUATION ON THE LOAN TAKEN FOR THE PURCHASE OF THE ASSET IN THE SUBSEQUENT YEARS WHICH HAVE BEEN OFFERED AS INCOME IN THAT REL EVANT YEARS. SINCE WE HAVE HELD THAT THE NOTIONAL LOSS HAS TO BE DISREGARDED WHILE COMPUTING THE INCOME OF THE ASSESSEE THE SAME ANALO GY ALSO APPLIES WITH RESPECT TO THE GAINS ARISING OUT OF FOREIGN CU RRENCY FLUCTUATION WHILE COMPUTING THE INCOME OF THE ASSESSEE. THEREFO RE IN THE INTEREST OF JUSTICE AND TO MAKE OUR DECISION CLEAR WE HEREBY DIRECT THE LD. ASSESSING OFFICER TO RE-COMPUTE THE INCOME OF THE A SSESSEE BY APPLYING THE ABOVE RATIO IN ALL THE RELEVANT ASSESS MENT YEARS AND RECTIFY THE ORDERS HOWEVER COMPLYING WITH THE PROVI SIONS OF SECTION 150 OF THE ACT. WE FURTHER MAKE IT CLEAR THAT THE D ECISIONS CITED BY THE LD.A.R (SUPRA) ARE NOT APPLICABLE TO THE FACTS OF T HE CASE BEFORE US. FURTHER IN PARA NO.12.2 OF THE ORDER AT PAGE 36 IN THE FIRST LINE PURCHASE OF CAPITAL LOSS STAND CORRECTED AS PURCHASE OF CAPITAL ASSET . MP NO. 35/MDS/15 6 4. IN THE RESULT, THE MISCELLANEOUS PETITION FILED BY THE ASSESSEE IS PARTLY ALLOWED. ORDER PRONOUNCED ON 25 TH JUNE, 2015 AT CHENNAI. SD/- SD/- ( . !' ) ( V.DURGA RAO ) ( . ) (A.MOHAN ALANKAMONY) JUDICIAL MEMBER ACCOUNTANT MEMBER CHENNAI, DATED THE 25 TH JUNE, 2015. K S SUNDARAM. !!'#$!%$ /COPY TO: ! 1. /APPELLANT 2. /RESPONDENT 3. ! &!' /CIT(A) 4. ! & /CIT 5. $( )!''*+ /DR 6. ) ,-!. /GF MP NO. 35/MDS/15 7