ITAT dismisses rectification plea, upholding original order under Income Tax Act

The ITAT dismissed the applicant's miscellaneous application seeking rectification of a mistake apparent from the record in the original order. The ITAT held that the issues raised were either already adjudicated or not part of the original grounds of appeal. Emphasizing that there is no provision for reviewing an order under section 254(2) of the Income Tax Act, the ITAT upheld its original order and subsequent miscellaneous application order, stating that repeated filings on the same issue do not alter statutory provisions. The judgment was pronounced on July 26, 2021.

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Issues Involved:
1. Rectification of mistake apparent from the record.
2. Allowance of depreciation on foreign exchange loss.
3. Capitalization of foreign exchange loss.
4. Adjudication of related issues not initially addressed.

Detailed Analysis:

1. Rectification of Mistake Apparent from the Record:
The assessee sought rectification of a mistake in the ITAT order dated April 10, 2019, concerning the assessment year 2009-10. The issue was that the ITAT did not adjudicate the allowance of depreciation on foreign exchange loss, which was treated as capital in nature. The applicant argued that the non-adjudication of this issue constituted a mistake apparent from the record, which is rectifiable under section 254(2) of the Income Tax Act, 1961.

2. Allowance of Depreciation on Foreign Exchange Loss:
The applicant contended that the ITAT, in its order, did not address the specific issue of allowing depreciation on the foreign exchange loss treated as capital in nature. The applicant had raised this issue in the grounds of appeal and reiterated it in a subsequent miscellaneous application. The ITAT, however, upheld the view that foreign exchange gain or loss incurred on the acquisition of a capital asset should be adjusted with the cost of the capital asset, and thus, the foreign exchange loss should be treated as capital in nature.

3. Capitalization of Foreign Exchange Loss:
The ITAT, in its original order, referenced the Supreme Court decision in the case of Sutlej Cotton Mills Ltd., which stated that foreign exchange gain or loss on capital assets should be adjusted with the cost of the capital asset. The ITAT found that the assessee had not provided sufficient details to attribute the foreign exchange loss to specific capital assets, which was necessary for allowing depreciation. The Dispute Resolution Panel (DRP) had similarly held that in the absence of detailed information, it was not possible to attribute the foreign exchange loss to any item of capital asset for the purpose of allowing depreciation.

4. Adjudication of Related Issues Not Initially Addressed:
The applicant argued that several related issues were not adjudicated, including the allowance of depreciation without needing to furnish details of individual assets, the treatment of foreign exchange loss transferred to FCMITDA, the foreign exchange gain of Rs. 9.82 crores on ICDs, and the classification of a loan from Union Bank as a foreign currency loan. The ITAT found that these issues were not part of the original grounds of appeal and could not be addressed in the garb of rectification of a mistake apparent from the record.

Conclusion:
The ITAT concluded that the issues raised in the miscellaneous application were either already adjudicated or not part of the original grounds of appeal. The ITAT emphasized that there is no provision in the Income Tax Act for reviewing an order under section 254(2). The application for rectification was dismissed, except for the acknowledgment that the issue had been previously addressed in another miscellaneous application. The ITAT reiterated that repeated filings on the same issue do not change the prescription of the Act.

Final Judgment:
The miscellaneous application was dismissed, and the ITAT's original order, as well as the subsequent miscellaneous application order, were upheld. The ITAT pronounced this judgment in the open court on July 26, 2021.

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