AI Drafter 
TaxTMI 
TaxTMI 
TaxTMI 
2016 (7) TMI 999
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....n the facts and in the circumstances of the case and in law, the Ld. CIT (A) erred in deleting the addition of Rs. 77,90,000/- claimed as expenditure for provision of liability regarding exchange rate fluctuation arising in respect of sums payable to suppliers of raw material purchased by the assessee company. 1.1 On the facts and in the circumstances of the case and in law the learned C1T(A) failed to appreciate that this was a contingent liability and had not been ascertained and therefore, erred in allowing a relief of Rs. 77,90.000/- on this account." 2. "On the facts and in the circumstances of the case and in law the learned CIT(A) erred in deleting the addition of Rs. 8,25,000/- on account of advance written off without appreciating the fact that this was on account of amount fraudulently withdrawn by someone and the ratio of the case decision of M/s Badri Das Daga Vs. CIT (supra) squarely applicable to facts of the case." 3. ''On the facts and in the circumstances of the case the Ld. CIT(A) was not justified in taking OP/sales of Artfiled Group Ltd. for the period ending on 31.03.2004 at -6.92% of 1.41% as taken by the TPO." 3.1 "On the facts and in circ....
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.... • CIT VS Paper Product Ltd. 271 ITR 472 (Del) • CIT Vs Oil India Co. Ltd. 137 ITR 156 (Cal) • CIT Vs International Combustion (I) Pvt. Ltd. 137 ITR (Cal) • CIT Vs ES Dempo & Co. Ltd. 206 ITR 293 (Bom) • State Bank of Travancore Vs CIT, Kerala 158 ITR 102 (SC) • Telemachanique & Control India Ltd. Vs CIT 60 ITD 483 (ITAT, Del) 6. The AO, however, did not find merit in the submissions of the assessee and made the addition of Rs. 77,90,000/- by observing that the liability arose only at the time of payment and that the provision made did not qualify for deduction because it must have actually arisen and incurred not merely anticipated as certain to occur in future. The reliance was placed on the following case laws: • Tuticorin Alkalies Chemical and Fertilizer Vs CIT 227 ITR 172 (SC) • Indian Overseas Bank Vs CIT 151 ITR 446 (Mad) 7. Being aggrieved the assessee carried the matter to the ld. CIT(A) and submitted that the allowability of foreign exchange fluctuation loss was no more res-integra and the issue was covered by the judgment of the Hon'ble Apex Court in the case of CIT....
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....t is noticed that an identical issue has been decided by the Hon'ble Apex Court in the case of CIT Vs Woodward Governor India P. Ltd. (supra) wherein it has been held as under: "Loss" suffered by the assessee on account of fluctuation in the rate of foreign exchange as on the date of the balance-sheet is an item of expenditure under section 37(1) of the Income-tax Act, 1961." 12. It is also noticed that an identical issue having similar facts was a subject matter of the departmental appeal in assessee's own case for the assessment year 1998-99 in ITA No. 3561/Del/2003 wherein vide order dated 09.12.2005 the relevant findings have been given as under: 14. The ground No. 4 of the department is related to the loss of Rs. 16,25,000/- due to exchange rates fluctuations. Assessing Officer observed that the said amount was debited to profit and loss account on account of fluctuation and made the addition. But CIT(A) has deleted the said amount after examining the bank certificate as well as the statement of loss of foreign exchange." 15. During the course of argument Ld. DR supported the order of the Assessing Officer. On the other hand, Ld. AR relied on the ratio laid down by....
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....49 (SC) 17. It was stated before the ld. CIT(A) that the amount had been fraudulently withdrawn by anonymous person, the assessee thought prudent to write off the loss though suit had been filed for recovery of the same and that the loss was suffered by the assessee of Rs. 8,25,000/- in regular course of business be allowed as a deduction u/s 37(1) of the Act and in the alternative, it was to be allowed as business loss u/s 28(i) of the Act. The reliance was placed on the following case laws: • Ramachandar Shivnarayan Vs CIT 111 ITR 268 (SC) • Badridas Daga Vs CIT 34 ITR 10 (SC) • Commonwealth Trust (India) Ltd. Vs CIT 242 ITR 593 (Ker) • Shitla Prasad Shyam Lal Vs CIT 96 CTR 150 (All) • Kamla Cotton Company Vs CIT 226 ITR 605 (All) • A. W. Figgis and Co. Pvt. Ltd. Vs CIT 254 ITR 63 (Cal) 18. The ld. CIT(A) after considering the submissions of the assessee observed that the amount was fraudulently withdrawn from the accounts of the assessee who made out efforts to money back by filing the suit against the bank and that the account from which the money was withdrawn fraudulently was a Current Account....
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....he Government of India had announced excise benefits for the state of Himachal Pradesh and the assessee wanted to open up a plant in Himachal Pradesh to avail of a much needed advantage in the Indian market. During the Financial Year 2003-04, the assessee had engaged in the following international transactions: S.No. Particulars Amount (in INR) 1 Purchase of raw material, consumables and other suppliers 26,422,068 2 Sale of components 1,796,932 3 Purchase of finished watches 24,175,721 4 Sale of finished watches 2,953,091 5 Royalty 964,196 6 Service Income 7,333,655 Total 63,645,663 24. The assessee had used Transactional Net Margin Method (TNMM) as the most appropriate method and OP/Sales was chosen as Profit Level Indicator (PLI). The assessee clubbed the international transaction except for the service income and benchmarked together. The assessee had carved out the manufacturing segment from the audited accounts, this segment was further divided into three segment, namely, Segment AE, Segment non-AE, Segment other than non-AE. It was stated that during the year under consideration ....
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....nder uti lization Rs.1,81,53,977 Less: Extra depr eciation on account of under utilization Rs.55,79,736 Net Loss under the AE segment (Rs.2,60,70,572) Total Income under the AE segment Rs.13,92,33,342 NCP Margin (-) 18.72% Computation of Arm's length price of international transaction Total Income Rs. 13,92,33,342 NCP Margin (-) 18.72% Arm's length NCP 3.61% Net Profit at Arm's length margin Rs. 50,26,323 Adjustment at Arm's length margin [50,26,323-(-2,60,70,572)] (50,26,323 + 2,60,70,572) Rs. 3,10,96,895 Accordingly, an upward adjustment of Rs. 3,10,96,895/- is required to be made to the total income of the assessee. Accordingly, the arm's length price of international transaction shall get adjusted upward/downward as the case may be from the book value of the transaction to extent of Rs. 3,10,96,895/-. 25. The TPO accepted the segmental accounts and also accepted three comparables selected by the assessee. However, objected to the calculation made by the assessee who had taken out unabsorbed overheads and extra depreciation on account of un....
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....ing 31 March 2004 was taken into consideration and hence, a margin of (6.42%) was computed and submitted as a part of the above mentioned Submission. Further, the TPO has neither discussed with the appellant on this point nor he asked for the back-up of the calculation, leading to a presumption in the mind of the appellant that the said re-computation has been accepted by the TPO. In order to support the re-computation done for the Artfield Group, please find attached as Annexure 22 (pages 229- 232), the back-up computation and a copy of the financial data as available in the OneSource.com database." 28. The ld. CIT(A) after considering the submissions of the assessee observed that the TPO had no objection in accepting the comparable Artfield Group. Therefore, it was only reasonable to take the full financial year data of the accepted comparables for benchmarking purpose. The ld. CIT(A), therefore, held that 12 months data year ending 31.03.2004 should have been taken for calculating the PLI. Accordingly, the mean margin of the comparables was worked out as under: Name of Company OP/Sales FY 2003-04 Artfield Group Ltd. -6.42% Egganagoldpfeil Holdings 3.33% ....
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....ransaction only to this proportion." 31. Now the department is in appeal. The ld. DR reiterated the observations made by the TPO and the AO and strongly supported the assessment order passed by the AO. 32. In his rival submissions the ld. Counsel for the assessee reiterated the submission made before the authorities below and strongly supported the impugned order passed by the ld. CIT(A). It was further submitted that the issue under consideration is squarely covered by the judgment of the Hon'ble Jurisdictional High Court in the case of CIT Vs Keihin Panalfa Ltd. in ITA 11/2015 vide order dated 09.09.2015 (copy of the said order was furnished which is placed on the record). The reliance was also placed on the following decisions of various benches of the ITAT: • M/s Genisys Integrating Systems (India) Pvt. Ltd. Vs DCIT in ITA No. 1231/Bang./2010 order dated 05.08.2011 (ITAT Bangalore) • IL Jin Electronics (I) (P) Ltd. Vs ACIT in ITA No. 438/Del/2008 order dated 06.11.2009 (ITAT Delhi) 33. We have considered the submissions of both the parties and carefully gone through the material available on the record. In the present case, it is an admitted f....
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....gards to CO No. 323/Del/2012, the ld. Counsel for the assessee submitted that he has the instruction not to press the Cross Objection and gave in writing as under: "Not pressed" 37. The ld. DR did not object if the Cross Objection is dismissed as not pressed. Accordingly, the Cross Objection of the assessee is dismissed as not pressed. 38. In ITA No. 258/Del/2013 for the assessment year 2005- 06, the grounds raised by the department read as under: "1. "On the facts and in the circumstances of the case and in law the learned CIT(A) erred in deleting the addition of Rs. 3,16,43,179/- made by the AO on account of Arms Length Price." 2. "On the facts and in the circumstances of the case and in law the learned CIT(A) erred in deleting the addition of Rs. 5,66,270/- made by the AO on account of advances written off." 3. "On the facts and in the circumstances of the case and in law the learned CIT(A) erred in deleting the addition of Rs. 5,65,648/- made by the AO on account of excess claim of depreciation on computer peripherals." 4. "On the facts and in the circumstances of the case and in law the learned CIT(A) erred in deleting the addition of Rs. 1,22,952/- made b....
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.... (Addition of Rs. 5,65,648) 43. Being aggrieved the assessee carried the matter to the ld. CIT(A) and submitted as under: "In the instant case, the depreciation has been claimed on computer, printers, scanners and UPS as would be evident from the details placed in the Paper Book. It is thus submitted that, in light of the above evidences, it be held that the assessee is entitled to depreciation of 60% of the computer peripherals and the disallowance claimed of depreciation of Rs. 5,65,648/- may kindly be deleted." 44. It was further submitted that the issue was covered by the judgment of the Hon'ble Jurisdictional High Court in the case of CIT Vs BSES Yamuna Powers Ltd. in ITA No. 1267/Del/2010 vide order dated 31.08.2010. The reliance was also placed on the following case laws: • DCIT v Datacraft India Ltd. (Mumbai Special Bench ITAT in ITA no. 7462 and 754) • ACIT Vs Container Corporation of India Limited (2009-TIOL-195-ITAT-DEL) -Delhi ITAT • Expeditors International India (P) Ltd. vs. Addl. CIT (118 TTJ 652) (Delhi Tribunal) • ACIT, Circle 3(1), New Delhi vs. Cincom System India Pvt. Ltd. (Delhi Tribunal in ITA No. ....
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....erefore, disallowed remaining amount of Rs. 1,22,952/-. 52. Being aggrieved the assessee carried the matter to the ld. CIT(A) and submitted as under: "It is next submitted that appellant has been following this method consistently in as much as provisions are firstly made in the year in which liability has accrued and, thereafter the same is reversed in the succeeding year and, difference of provision reversed and, actual expenditure is debited/credited by the appellant company since the liability is in respect of difference crystallized in the instant year. It is also submitted that, this method has been accepted by the revenue consistently. It is thus submitted that, applying the rules of consistency too no disallowance is warranted." 53. The ld. CIT(A) after considering the submissions of the assessee deleted the addition by observing in para 7.2 of the impugned order as under: "7.2 The appellant is consistently following the accounting policy of creating the provision for such expenses and on receipt of the bill actual payment is made and the provision account is reversed in the beginning of the year. The event of receipt of bill was subsequent to finalization of th....