TaxTMI 
TaxTMI 
2015 (6) TMI 719
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.....No.-6493/Del/2012 "On the facts and in the circumstances of the case, the CIT(A) has erred in upholding the illegal addition of Rs. 11,83,407/- in respect of additional liability due to foreign exchange fluctuations towards the capital cost of metallizer by treating the same as income liable to tax and the illegal addition is liable to be deleted and held as unsustainable, both on facts and in law." 2. The relevant facts of the case are that the assessee company engaged in manufacturing and selling of polyster chips, polyster film and engineering plastics manufactured in its unit at Khatima in the state of Uttrakhand filed a NIL return as per normal provision and as per taxable book profit u/s 115JB, the income was computed at Rs. 4773.68 lacs. The said return was subjected to scrutiny assessment. The AO considering the expenses of Rs. 76,34,951/- under the head debit balance written required the assessee to explain the nature and basis of the claim. The expenditure was stated to be a normal business transaction, the details of which were as under:- S.No. Date Particular Amount(Rs.) 1. 30.06.2004 Foreign travel A/c 4,47,186/- ....
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.... Appellate Authority. Where it was submitted that the foreign travel and legal professional expenses amounting to Rs. 42,20,625/- for the period June 2004 to August 2005 was incurred to explore more avenues abroad for buyers and dealers; and the remaining amount of Rs. 14,20,887/- was incurred for foreign travel expenses and consultancy charges. The remaining of Rs. 19,93,438/- it was submitted related to DEPB benefit, advance for repairing, prepaid insurance written off, advances to purchase goods/inputs in the normal course of business. All these items it was submitted were disallowed on the ground that the expenditure pertained to prior period and should have been claimed in the previous years. Accordingly it was contended that had the business fructified which was sought to be set up abroad, the expenses would have been clubbed and capitalized but however since the efforts did not result in enlarging the business in those countries, the assessee was left with no alternative but to write off the expenses so incurred in the year in which the project was considered as aborted. Accordingly the deduction u/s 37(1) r.w.s 28, it was submitted cannot be denied on technical grounds. Rel....
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.... but the project could not take off, therefore, such expenses have been claimed during the year as revenue expenditure as the project for expansion of business was abandoned during the year. It is claimed by the appellant that these expenses were incurred wholly and exclusively for the business purposes of the appellant business and deduction to be allowed in the year in which the amount is claimed and written off in the books of accounts in view of the abandonment of the project during the year.........." 3.1. The view taken was fortified by relying upon various decisions referred to in the finding under challenge by the Revenue. 4. Addressing the grievance posed in the grounds, the Ld. Sr. DR referring to the proceedings during the assessment and the appellate stage vehemently argued that the order of the CIT(A) is silent on vital facts, if any. Inviting attention to the assessment order and the impugned order it was submitted that admittedly the expenses pertained to 2004-2005 Financial year and the occasion to allow the same in the year under consideration by the CIT(A) has been on the plea of the assessee that the business was not finally set up where are the facts suppo....
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....on facts has been made let alone considered by the CIT(A) who has merely accepted the pleadings of the assessee who also has not cared to refer to any facts or evidences. It is seen that this specific short-coming was pointed out by the AO in his order where he observed that "..............As per the claim, the assessee was discovering some business opportunities in overseas market, but ultimately failed to establish the business in so called overseas locations. The details of locations are not submitted." 5.1. We also find that even before us no detail of any location has been mentioned either by way of evidence or in the narrations given to the CIT(A) in regard to by what acts it can be said that the alleged efforts were made and by what evidence on fact it is being submitted that the project was abandoned. IN the absence of any discussion in the order on relevant facts where it is difficult to say what evidence if any was placed before the CIT(A) on the basis of which assessee's claim has been allowed. We deem it appropriate to set aside the impugned order. While so holding, we note that the decisions relied upon by the CIT(A) at pages 8-10 are based on the fact that....
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....he preceding years, the assessee had imported some metalizer (fixed asset) and due to weak rupee in comparison to dollar the assessee had to pay in excess resulting in foreign exchange fluctuation loss which is claimed as expenditure. In preceding year, the assessee had disallowed certain part of loss as it was not admissible in those years on the ground that same related to import of fixed asset which is not an allowable expenditure in revenue nature. As per assessee's claim while working out the quantum of disallowance in preceding years excess disallowance of Rs. 11,83,407/- was made which is being rectified during the year under consideration." 8. Relying upon section 43A of the Act, as modified by the Finance Act, 2002, he was of the view that the amendments provided for increase/decrease only for currency fluctuation at the time of payment. For unpaid currency liability, as the value of the assessee of the same had to be increased/decreased in the books of accounts it was held this would not be eligible for depreciation under the Income Tax Computation. 9. Aggrieved by this, the assessee went in appeal before the First Appellate Authority. Considering the submission....