TaxTMI 
TaxTMI 
2016 (5) TMI 978
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.... prejudice to the contention raised in Ground No.2 above, the Commissioner of Income-tax (Appeals) failed to appreciate that the Supreme Court decision in the case of Goetz (India) Ltd. was relevant only in relation to the Assessing Officer's power and not in respect of the power of an Appellate authority and thus he erred in applying the said decision in relation to the claim made by the appellant at the Appeal stage." 4. The Assessee is a company. It is engaged in the business of raising of ore and manufacture of ferro alloys. The assessee is also engaged in trading of iron ore and mining ore. For A.Y.2006-07 the assessee filed return of income declaring total income of Rs. 797,24,64,400/-. Assessment was completed by the AO determining the total income of Rs. 821,98,42,178/- by order dated 30.12.2009 passed u/s 143(3) of the Income Tax Act, 1961 (Act). It is not in dispute that in arriving at the total income declared by the assessee in the return of income the assessee had included foreign exchange fluctuation gain of Rs. 10,89,43,668/-. The assessee noticed that the aforesaid foreign exchange fluctuation gain included a sum of Rs. 5,79,10,208/- which pertain to foreign ....
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....e from should be considered as being on capital account and consequently the said sum was required to be reduced from the assessee's total income. The assessee pointed out before CIT(A) that the AO ought to have excluded the same from the total income. The assessee relied on the decision of the Hon'ble Supreme Court in the case of Sutlej Cotton Mills Ltd. Vs. CIT 116 ITR 1 (SC) wherein the Hon'ble Supreme Court held that profit or loss that arises to an assessee 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 circulating capital embarked in the business. But, if on the other hand, the foreign currency is held as capital asset or as fixed capital, such profit or loss would be of capital nature. 7. CIT(A) however did not agree with the aforesaid submissions of the assessee for the reasons that the assessee did not make any claim for exclusion of the aforesaid gain from the total income before the AO by filing a revised return of income. Accor....
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....hat the ground raised was bona fide and the same cwas not raised earlier for good reasons. The ld. Counsel submitted that the ratio laid down in the case of Goetze India Ltd., regarding the power of the Tribunal to entertain a new plea should be construed as applicable to the first appellate authority also in view of the decision in the case of Jute Corporation of India (supra). The ld. DR relied on the order of the AO. 10. We have given a very careful consideration to the rival submissions and are of the view that the stand taken by the ld. Counsel for the assessee deserves to be accepted. As rightly contended by him the facts with regard to the foreign exchange fluctuation gain and the purpose for which the foreign currency loan had been availed viz., to purchase indigenous machineries are not in dispute. The past assessment records also show that the assessee has been consistently excluding similar foreign exchange fluctuation gain from the computation of total income. In the given facts and circumstances of the case we are of the view that the first appellate authority ought to could have entertained the claim of the assessee and examined the same on merits rather than refus....
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....depreciation, being 25% as applicable on the related plant and machinery, in respect of this amount ofRs.1,79,20,653/-. Aggrieved, assessee carried the matter in appeal before the ld. CIT(A) who deleted this disallowance by observing as follows :- "I have carefully considered the submissions made and the decisions cited by the ld. A.R. and the observations of the A.O. in the assessment order. The appellant has availed foreign currency loan from IDBI and Export Import Bank of India for acquisition of indigenous plant and machinery. The appellant has received exchange fluctuation gain of Rs. 1,79,20,653/- during the relevant year. Relying on the decision of S.C. in Sutlej Cotton Mills Ltd. Cited supra, as the gain was in respect of a capital asset it is considered as a capital receipt. As the loan was used for acquisition of capital asset, the said transaction was clearly on capital account. It being a capital receipt it is not taxable. The Assessing officer has not objected to the treatment of the exchange fluctuation gain as a capital receipt, but he has redacted the exchange fluctuation gain from the cost of fixed asset and reduced the depreciation claim applying provisio....
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....ipt as it was utilised for purchase of asset and further it cannot be reduced from the cost of fixed assets for computation of depreciation as the provisions of section 43A are not applicable as the assets have been purchased from India and not abroad. Accordingly the A.O. is directed not to reduce the cost of fixed assets for depreciation purpose. This ground is thus allowed." 13. We have heard the rival contentions, perused the material on record and duly considered facts of the case in the light of the applicable legal position. 14. As learned CIT(A) has rightly held, the provisions of section 43A of the Act come into play only when the asset in question is acquired from outside India whereas, as is the undisputed position on the facts of this case, the related plant and machinery was "indigenous". There is a categorical finding to that effect by the Assessing Officer himself. As such, the provisions of section 43A of the Act do not come into play at all. Learned Departmental Representative could not point out any other statutory provision under which impugned adjustment could have been made. In view of these discussions, we see no reasons to disturb the relief....
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.... Mercantile basis and thus he erred in not admitting the Additional Ground of Appeal raised by the appellant." 15. At the time of hearing of the appeal it was noticed that the claim as contained in ground no.4 was not made by the assessee before the AO. This claim was made by him in the form of additional grounds of appeal before CIT(A). The same was not admitted by the CIT(A) for adjudication for the reason that the aforesaid claim was not the subject matter of the assessment order against which the assessee has filed its appeal. 16. The ld. Counsel for the assessee submitted that the facts which were necessary for adjudicating the issue raised in ground No.4 are not available on record either before AO or CIT(A) and in these circumstances the principle laid down by the Hon'ble Supreme Court in the case of Jute Corporation of India as well as NTPC (supra) cannot be applied and the claim of the assessee cannot be entertained by the first appellate authority. Taking into consideration the above submissions of the ld. Counsel for the assessee, we dismiss ground nos. 4 and 5 raised by the assessee. 17. In the result the appeal of the assessee is partly allowed. ITA No.589/....
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....ivities and the land in respect of which the payment was made, was owned by the Forest Department. By making the payment of NVP, no tangible asset came into existence. The Assessee also submitted that the payment of NPV was not a voluntary payment and it was a payment on the basis of the direction given by the Divisional Forest Officer, Keonjhor working under the Ministry of Environment and Forest, Government of India. It was further submitted by the Assessee that whenever an undertaking was under an obligation to make certain payments as per the directions of the government, the concerned undertaking would be compulsorily required to make such payment in its own business interest and, accordingly, the Assessee had to follow the same. The Assessee further clarified that the payment of NPV being a statutory requirement which had to be complied with by the Assessee wholly and exclusively for the purpose of carrying on of its business, the incurring of such expenditure should be considered as having direct nexus with the business activities of the Assessee. The Assessee thus submitted that before the AO that the payment of NPV should be considered as an allowable revenue expenditure. ....
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....l as on facts in concluding(vide his order, page-14) that the assessee did not get any fresh right to mining by making payment of Rs. 1,45,00,000/-. 2. That on the facts and circumstances of the case, ld. CIT(A) has erred in law as well as on facts in not considering the order of the Ministry of Environment & Forests (F.C. Division), dated 10.12.2005, circulated vide F.No.8-41/2003-FC, by virtue of which the assessee got right of mining over an additional 25 hector of broken up forest area., 3. That on the facts and circumstances of the case, ld. CIT(A) has erred in law as well as on facts in not considering the fact that the assessee paid Rs. 1,45,00,000/- for getting the right of mining over an additional 25 hector of broken up forest area, which is evident from the letter of the DFO, Rairangpur Division vide Memo No.5114 dated 28.11.2005 and addressed to the Ch. Conservator of Forest, Bhubaneswar, Orissa. 4. That on the facts and circumstances of the case, ld. CIT(A) has erred in law as well as on facts in not considering the fact that expenses made to acquire any right of business is a capital expenditure and hence, not allowable. 5. That on ....
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.... of wood and other forest produce saving devices and other allied activities. In the context, Hon'ble Apex Court observed that NPV will not fall under Article 110 or 199 or 195 of the Constitution. It was observed that such payments were levied for rendering service which the state considers beneficial in public interest. It is a fee which falls in entries 47 of List-III of 7th Schedule of the Constitution. The fund set up is a part of economic and social planning which comes within Entry 23 of List III and the charge which is levied for that purpose would come under Entry 47 of List III. In that context, it was held by Their Lordships that levy of NPV is a fee that means every mining agency using and converting forest land to non-forest purpose has to pay a fee for continuing carrying on of the business. We agree with ld. AR that nonpayment of this NPV could lead to consequences, inter alia, to the stoppage of the business. The Hon'ble Apex Court ha held in the case of Bikaner Gypsums Ltd.-vs.- CIT (supra) at page 49 as under:- 'Where the assessee has an existing right to carry on a business, any expenditure made by it during course of business for the purpose of removal ....
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....to facilitate to continue its mining business. Therefore, the above decision of Hon'ble Apex Court in the case of Bikaner Gypsums Limited (supra) squarely applies to the case of assessee and it could not be capital in nature. 14.1 A similar issue also came before Hon'ble Karnataka Bench of ITAT in the case of National Aluminium Co. Ltd.-vs.-DCIT [101 TTJ (CTK) 949]. In the said case, assessee-company debited an amount of Rs. 6.20 crores towards contribution to Minerals Exploration Fund set up by Government of India. The said payment was required on the direction of State Pollution Control Board and Ministry of Environment and Forests as a condition to renew assessee's clearance certificate. The Fund was set up for peripheral development works. It was held that the said payment is not a voluntary one and it is a payment on the basis of the direction given by the Government of India, Ministry of Mines, under which the assessee-company comes. When a payment is made as per specific direction of Government of India, it cannot but be in the business interest of the assessee-company to abide by such directions of the Government of India. Accordingly, this payment is a statutory r....
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....allowable as business expenditure under section 37(1) of the Act. Therefore, we uphold the order of ld. CIT(Appeals) by rejecting Ground No.1 of the appeal taken by the Department. Hence, Ground No.1 is rejected." Similarly, this issue is also covered by the Co-ordinate Bench decision in the case of ACIT v. Freegrade & Co. Ltd. in ITA No. 934/Kol/2009 dated 05-08- 2011. 5. On the other hand, Ld. SR-DR has not denied that the Co-ordinate Bench decision is not applicable to the present facts of the case but he relied on the decision of Hon'ble Supreme Court in the case of T.N. Godavarman Thirumulpad v. Union of India and Others (2006) 1 SCC dated 26-09-2005.According to Ld. SR-DR the NPV is considered as fee. We find that this issue has been considered by this Co-ordinate Bench decision of NPV paid by assessee is held to be revenue expenditure, this liable u/s 37(1) of the Act. Once, this the position issue is squarely covered in favour of assessee and we find no reason to interfere with the order of CIT(A), hence, both the appeals of Revenue are dismissed." 24.2. The aforesaid ruling was followed in Assessee's own case in ITA No. 56/Kol/2010 for AY 2006-07 order....
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.... that the surplus funds of the assessee on which it is not required to pay interest are deployed in the investments from which exempt income is earned. Since borrowed funds prima-facie do not appear to be invested in the investments therefore no disallowance can be made u/s.14A out of the interest expenses. As regards the administrative and other expenses which can be ascribed to the exempt income it is seen that in recent judgment Hon'be ITAT, Kolkata has decided that one percent of the exempt income can be taken as related to administrative expenses. The assessee has already disallowed one percent of the dividend income amounting to Rs. 3,99,203/- in its computation of income. Therefore, no further disallowance is required to be made u/s 14A. Hence I delete the disallowance of Rs. 5,94,14,773/- made by the A.O. on this ground. " Aggrieved by the order of CIT(A) revenue has preferred ground no.2 before the Tribunal. 28. We have heard the submissions of the ld. Counsel for the assessee and ld. DR. The ld. DR relied on the order of AO while the ld. Counsel submitted that ITAT, Kolkata Bench has been taking a consistent view that 1% of the exempt income would be appropriate....