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2023 (1) TMI 39
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....time and filed the requisite details. The AO completed the assessment u/s. 143(3) on 29.12.2017 wherein he made the following additions A. Rs.9,12,184 on account of delayed payment of PF& ESIC. B. Rs.42,810/- on account of underreporting of income of Rs.37,692/- and Rs.5,118/- respectively being less receipt of interest and underreporting of interest from M/s. Infra Master Private Limited. C. Rs.14,32,814/- being loss on account of foreign exchange loss. 3. In appeal, the ld.CIT(A) confirmed the disallowance of Rs.9,12,184/- on account of delayed payment of PF & ESIC and directed the AO to verify the tax credit and give appropriate credit. So far as the addition of foreign exchange loss is concerned, the ld.CIT(A) held that such foreign exchange loss is to be treated as capital in nature and to be added back to the value of building and proportionate depreciation to be allowed. 4. Aggrieved with such order of the ld.CIT(A), the assessee is in appeal before the Tribunal by raising the following grounds 1.The Ld.CIT (A) erred both on facts and in law and the order passed by the Ld. CIT(A) in upholding the order of the AO passed u/ s 143(3) of the Act is prejudicial to the i....
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....) of the Act is invalid. 12. The AO erred in considering the total taxes paid at Rs.3,19,78,883/ - instead of Rs. 3,29,39,073/ - while computing the tax payable of Rs. 30,40,050/ -. 13. The AO ought to have appreciated the fact that assessee has paid total taxes of Rs. 3,29,39,073/ - in year under consideration which includes payment of TDS at Rs. 15,04,813/ -, advance taxes of Rs. 3,10,00,000/ - and self assessment tax of Rs. 4,34,260/-. 14. The Assessee may add, alter or modify any other points to the grounds of appeal at any time before or at the time of the hearing. 5. The assessee has also raised the following additional grounds of appeal. 11. The ld.CIT(A) erred in not appreciating the fact that sec 43A of the Act is applicable only at the time of when the assets are acquired from a country outside India and does not apply to the acquisition of indigenous assets. 12. The ld.CIT(A) ought to have considered that AO has erred in making the addition of Rs.42,810/- as per 26AS on account of shortfall of income offered without appreciating the fact that the assessee is following Mercantile system of Accounting. 6. Referring to the decision of Hon'ble Supreme Court in th....
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.... deleting the addition of Rs.42810/- made by the AO without appreciating the fact that assessee is following mercantile system of accounting. 10. Facts of the case, in brief, are that during the course of assessment proceedings the AO asked the assessee to reconcile the gross receipts with 26AS statement. From the details furnished by the assessee, he noted that there is excess receipts to the tune of Rs.5,118/- over the income reported in P&L account on interest received from M/s. Infra Master Pvt.Ltd. Similarly, there is an underreporting of income to the tune of Rs.37,692/- on professional receipts/contract receipts from M/s. CES Information Systems Pvt.Ltd. and M/s. Magnitude Software India Pvt.Ltd. He, therefore, made addition of Rs.42,810/- being the income underreported and treated the same as income of the assessee for AY 2014-15. The assessee did not challenge the addition before the ld.CIT(A). However, it has raised the ground in the shape of additional ground. 11. After hearing both the sides, we find it is the argument of the ld.counsel for the assessee that the assessee is following mercantile system of accounting and has duly filed the reconciliation statement. It i....
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....lding at Chennai from M/s. Shriram Venture Limited. The said loan was outstanding for the year under consideration and at the year ending there was an exchange loss of Rs.14,32,814/- towards restatement of the above loan. The above building being purchased in India, provisions of Sec 43A is not applicable. Referring to page No.155 of the paper book, he drew the attention of the Bench to the terms and conditions of the repayment of the loan of Rs.600 lakhs over a period of 36 equal monthly installments of Rs.16.67 lakhs towards principal plus interest as and when debited. 16. The ld.Counsel for the assessee referring to a series of decision submitted that foreign fluctuation currency loss arising out of acquiring fixed asset cannot be capitalized and it should be allowed as revenue expenditure. Referring to the decision of Hon'ble Supreme Court in the case of CIT vs. Woodward Governor India Ltd. reported in 312 ITR 254, he submitted that the Hon'ble Supreme Court in the said decision has held that loss suffered by assessee on account of foreign exchange difference as on date of balance sheet is an item of expenditure u/s.37(1) of the I.T.Act. Referring to the Cochin Bench of the Tr....
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....AO has treated the same as capital in nature, however, the ld.CIT(A) has already granted depreciation on the same and therefore, the order of the ld.CIT(A) should be upheld and the ground raised by the assessee on this issue should be dismissed. So far as the decision of Hon'ble Supreme Court in the case of Wipro Finance Ltd.(supra) is concerned, he submitted that the said decision is not applicable to the facts of the present case. He submitted that in that case the assessee has obtained loan for its lease cum hire purchase business and therefore, it is on the trading account and not for purchase of any capital asset for which the fluctuation loss has been allowed as revenue in nature. He accordingly submitted that the order of the ld.CIT(A) on this issue be upheld and the grounds raised by the assessee should be dismissed. 21. We have considered rival arguments made by both the sides, perused the orders of the AO and ld.CIT(A) and the paper book filed on behalf of the assessee. We have also considered the various decisions cited before us. We find the AO in the instant case disallowed an amount of Rs.14,32,814/- being foreign exchange loss on account of restatement of loan taken....
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....ssessee-company from the fluctuations in the rate of foreign exchange for the Assessment Year 1961-62, the appropriate part of each of the said two amounts (i.e. after excluding that portion of it which is attributable to the element of interest) was loss on capital account which went to increase the 'actual cost' of the depreciable assets for computing depreciation for the Assessment Year 1961-62?" The High Court has followed its earlier decisions in the case of CIT v. Tata Hydro Electric Power Supply Co. Ltd., (1986) 159 ITR 28 (Bom HC) A point has been taken on behalf of the respondents that the Department not having come up in appeal against that decision, must be taken to have accepted the law stated in that decision as correct. Therefore, it should not be allowed to agitate these questions in this Court. Mr. Murthy, learned Senior Counsel appearing on behalf of the Department, has pointed out that we are concerned in this case with assessment for the Assessment Years 1960-61 and 1961-62. The relevant assessment years in the judgment relied upon by the High Court were 1970-71 and 1971-72. The High Court in those cases relied on the provisions of Section 43-A of the I....
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....eciding an identical issue at para 9 of the order has observed as under:- 9. In our opinion, foreign exchange loss arising out of foreign currency fluctuations in respect of loan in foreign currency used for acquiring fixed assets should be allowed as revenue expenditure by charging the same into the Profit and Loss account and not as capital expenditure by deducting the same from the cost of the respective fixed assets. Hence, in our opinion, there is no potential escapement of income on the issue relating to allowability of foreign exchange loan taken for the construction of new building and additional equipment. Accordingly, this ground of appeal of the assessee is allowed. 26. We find the Pune Bench of the Tribunal in the case of Cooper Corporation Pvt.Ltd. (supra) has observed as under:- 10.5 Before We delineate on the allowability of loss based on generally accepted accountancy principles, it may be pertinent to examine whether the increased liability due to fluctuation loss can be added to the carrying costs of corresponding capital assets with reference to S. 43(1) of the Act. Section 43(1) defines the expression 'actual cost'. As per S. 43(1), actual cost means actual....
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....ut what the assessee has paid for it, is the price of the asset. That price cannot change by any event subsequent to the acquisition of the asset. In our judgment, the manner or mode of repayment of the loan has nothing to do with the cost of an asset acquired by the assessee for the purpose of his business. We hold that the questions were rightly answered by the High Court. The appeals are dismissed. There will be no order as to costs." Thus, it is evident the variation in the loan amount has no bearing on the cost of the asset as the loan is a distinct and independent transaction as in comparison with acquisition of assets out of said loan amount borrowed. Actual cost of the corresponding fixed asset acquired earlier by utilizing the aforesaid loan will not undergo any change owing to such fluctuation. 10.7 The issue is also tested in the light of provision of S. 36(l)(iii) governing deduction of interest costs on borrowals. As stated earlier, manner of utilization of loan amount has nothing to do with allowability of any expenditure in connection with loan repayment. Both are independent and distinct transactions in nature. Similar analogy can be drawn from S. 36(l)(iii) of ....
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....ccount and the Balance Sheet. A conjoint reading of section 145 of the Act and section 211 of the Companies Act leaves no room for doubt that' the Assessee is obliged to follow the accounting standards prescribed to determine business income under the head "business or profession". We notice that the Hon'ble Supreme Court in the case of Woodward Governor India (P) Ltd. (supra) has observed that AS-I I is mandatory in nature. In the light of observations made in Woodward Governor India (P) Ltd. (supra), we arc of the view that loss arising on foreign exchange fluctuation loss has been rightly accounted for as a revenue expense in the Profit & Loss account in accordance with accounting fiat of AS-11. 10.9 We find that the decision in the case of Sutlej Cotton Mills Ltd. (supra) relied upon by the Ld. Departmental Representative is of no assistance to the Revenue. The Hon'ble Supreme Court therein stated the principle of law that where any profit or loss arises to an assessee on account of depreciation in foreign currency held by him on conversion from another currency, such profit and loss would ordinary be trading loss if the foreign currency held by the assessee on revenue accoun....