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2020 (1) TMI 288 - AT - Income TaxRevision u/s 263 - disallowances made towards expenditure related to issue of NCD, disallowances of foreign exchange loss, while computing book profit u/s 115JB deduction for provision for leave encashment and disallowances of expenditure related to foreign currency convertible notes - HELD THAT:- CIT(LTU) has adopted another view and review the assessment order passed by the Ld. AO by holding that any expenditure for raising the loan to finance the expansion of the business and such expenditure is allowable only by way of amortization in terms of section 35D. Similarly, in respect of disallowances of foreign exchange loss, while computing book profit u/s 115JB, although, the Ld. AO has accepted explanation furnished by the assessee but, the Ld. CIT(LTU) has adopted different view by holding that the exchange loss is to be treated as diminish in the value of investments attributable to foreign exchange and that the foreign exchange is contingent in the nature . Fact remains that the issue of foreign exchange loss has been elaborately discussed by the Hon’ble Supreme Court, in the case of Woodward Governor vs. CIT [2009 (4) TMI 4 - SUPREME COURT] , where it was held that loss suffered by the assessee, in respect of revenue liability on account of exchange difference as on the date of the balance sheet is an item of expenditure allowable u/s 37(1) of the Act, in the year of accrual. The assessee has explained the above facts and also support its arguments with the help of the decisions of Hon’ble Supreme Court in the above case. AO after considering relevant facts has accepted the claim of the assessee. But, the Ld. CIT(LTU) was of the view that the Ld. AO has not carried out required enquiries to be carried out in accordance with law, without bringing on record how enquiries carried out by the Ld.AO is insufficient or inadequate. Deduction for provision for leave encashment - assessee has claimed deduction for said provision on the basis of decision of Hon’ble Kolkata High Court, in the case of Exide Industries Limited Vs CIT [2007 (6) TMI 175 - CALCUTTA HIGH COURT] and this fact has been brought to the notice of the Ld.AO. Pursuant to the above, Ld. AO has allowed the deduction for the same, after considering one of the possible views. Subsequently, the Ld.CIT(LTU) adopted another view in 263 proceedings on the basis of Hon’ble Supreme court decision in its first interim order, dated 08/09/2008, in case of Exide Industries Limited. However, it is pertinent to note that the stay given by the Hon’ble Supreme Court was interim stay till further order and thereafter, the Hon’ble Supreme court has passed a subsequent interim order, dated 08/09/2008, wherein it has laid down condition for claiming deduction for provision for leave encashment and thereby stay initial granted by Hon’ble Supreme Court, vide first interim order get vacated. The Hon’ble Supreme Court, further held that the assesee can claim deduction by paying tax as if, section 43B(f) is on statue book. But, at the same time, it would not be entitled to make a claim in its return of income. The assesee on the basis of said findings of the courts has made a claim and same has been accepted by the Ld. AO. Therefore, we are of the considered view that the ld.CIT(LTU) was incorrect in coming to the conclusion that the Ld. AO has erroneously allowed deduction for provision for leave encashment. Disallowances of expenditure related to foreign currency convertible notes, the assessee has made all the disclosure in the statutory documents, including in the return of income and notes thereto given in statement of total income. Further, the assesee has specifically drawn attention of the Ld.AO to the aforesaid claim of the expenditure by way of notes to computation of income, wherein it has been explained that said expenditure was incurred on discharge of loan liability and it was written off against securities premium account in the books of accounts in accordance with the provision of section 78 and 79 of the Companies Act, 1956 and for the purpose of income tax, these expenses incurred in connection with discharge of loan liability have been claimed as deduction. All these facts were brought to the notice of the Ld.AO. Pursuant to, the Ld. AO has allowed deduction for the same by accepting the claim of the assesee. CIT(LTU) has made the disallowances by holding that said expenses is incurred to discharge loan liability and accordingly, capital in nature, but, the Ld. AO was not examined these aspects before allowing the claim, without bring on record, how the view taken by the Ld. AO is incorrect. Therefore, we are of the considered view that on this count also, the assumption of jurisdiction by the Ld.CIT(LTU) is incorrect. Assessment order passed by the Ld. AO is neither erroneous, nor prejudicial to the interest of the revenue. Therefore, we set aside order passed by the Ld. CIT(LTU) u/s 263 of the I.T.Act, 1961 and restored assessment order passed by the Ld. AO u/s 143(3) r.w.s. 144C(13) - Decided in favour of assessee.
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