TaxTMI 
TaxTMI 
2021 (8) TMI 607
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....posed off by way of this consolidated order for convenience. 2. First, we take up the appeals and cross objection for assessment year 2012-13. The grounds of appeal of the Revenue in ITA No. 600/Del/2018 for assessment year 2012-13 are reproduced as under: 1. Whether the Ld. CIT(A) has erred on facts and in law in deleting the 50% addition of Rs. 13,78,30,136/- on account of addition made after disallowance of foreign exchange loss, without appreciating the fact that assessee itself has failed to prove that the said loans were not used in investment in equity shares and the loan was used wholly & exclusively for business purpose. If interest on loan is not correlated with business purpose then foreign exchange loss suffered is also not allowable. 2. The appellant craves leave for reserving the right to amend, modify, alter, add or forego any ground(s) of appeal at any time before or during the hearing of this appeal. 2.1 The grounds raised by the assessee in cross objection are reproduced as under: 1. That the Ld. CIT(Appeal) erred in law in upholding the 50% of disallowance made by the Assessing Officer towards foreign exchange loss of Rs. 6,89,15,068/- without applying hi....
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....ing Officer disallowed 'foreign exchange fluctuation loss' of Rs. 13,78,30,136/- on the ground that loan taken by the assessee on which fluctuation loss had been claimed, were not utilized for the purpose of the business and those funds had been used for investment in equity shares. The Ld. CIT(A) however deleted 50% of disallowance and sustained balance 50% of disallowance observing as under: "3.3.1 I have considered the submissions of the appellant as well as the findings of the AO. The AO has disallowed loss of Rs. 13,78,30,136/- incurred on account of foreign exchange fluctuation as he was of the view that the loans were not utilized for business purposes but these funds were essentially utilized in investment in equity shares of M/s. Swama Tollway Pvt. Ltd. (STPL) and, therefore, the expenditure/loss was not covered u/s 37(1) of the Act. 3.3.2 The general principles regarding the treatment of foreign exchange fluctuation are as below: i. A loss arising in the process of conversion of foreign currency which is part of the trading asset of the assessee is a trading loss. ii. A loss suffered by the assessee on account of exchange differences as on the date of balance shee....
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.... seeks deduction for foreign exchange loss in respect of conversion of different expenditure at a uniform rate, though it is not a foreign exchange fluctuation, the same shall be allowed as deduction - [CIT vs. Enron Oil & Gas Limited (2008) 305 ITR 75 (SC)]. 3.3.3 The appellant company has categorically submitted that it supervised the two projects (Jalandhar and Orissa) directly undertaken by its Malaysian AE i.e. M/s Bumi Hiway (M) Sdn. Bhd (BHM) in India while it also supervised one road project (Vijayawada), awarded to it directly by M/s. Swama Tollway Private Limited (STPL). Regarding the projects of Jalandhar and Orissa, the same were originally awarded by the National Highway Authority of India (NHAI) to M/s Bumi Hiway (M) (BHM) but subsequently M/s Bumi Hiway (M) (BHM) sub-contracted them to the appellant company. Moreover, BHI (appellant company) held 16.8% equity shares in STPL, a consortium company specifically incorporated in executing the agreement between the Government of India and the group of companies in Malaysia, to build a certain length of national highway, by way of design, build, operate and transfer and as a shareholder of STPL, the appellant was awarded ....
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....t cannot be said that the sum expended for the entire transactions are wholly or exclusively for the business expediency or business purposes. Therefore, the addition of Rs. 3,29,11,946/- as made by the Ld. A.O. on account of disallowance on foreign exchange loss is hereby restricted to Rs. 1,64,55,973/-. Hence the grounds of appeal is this respect are partly allowed." 3.3.6 Since the facts during the year under appeal are identical to those in the A.Y. 2011-12 discussed above, following the findings of the first appellate authority for the preceding year, the addition of Rs. 13,78,30,136/- as made by the AO on account of disallowance of foreign exchange loss is hereby restricted to Rs. 6,89,15,068/-(50% of the disallowance made by the A.O.). Hence, these grounds of appeal are partly allowed. 3.1 Aggrieved, both the Revenue and the assessee are before us by way of raising respective grounds in their appeals and cross objection. 4. Before us, the parties appeared through Video Conference facility and filed decisions relied upon through email. 5. At the outset, the learned Counsel of the assessee submitted that issue in dispute is covered by the order of the Tribunal in ITA ....
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..... 239 & 240/Del/2016 wherein the matter has been referred to the file of the Assessing Officer for verification of the utilization of the loan for business purpose by taking into account the amount of the loan raised, the quantum of the own capital and the reserves & surplus, utilization of the amount for day-to-day running of the business and utilization off the amount for investment in the equity shares of the subsidiary company or the amount invested for infusion of the capital in any other company." 7.3 Respectfully, following the findings of the Tribunal (supra) above, we restore the appeal of the Revenue; appeal of the assessee; and cross objection filed by the assessee to the file of the Assessing Officer for deciding the issue-in-dispute in the light of the direction given by the Tribunal(supra) in assessment year 2013-14. 7.4 Accordingly, the grounds raised in appeals and cross objection are accordingly allowed for statistical purposes. 8. The grounds raised by the Revenue in ITA No. 601/Del/2018 for assessment year 2013-13 are reproduced as under: 1. Whether the Ld. CIT(A) has erred on facts and in law in deleting the 50% addition of Rs. 6,77,95,765/- on account of a....