TMI Blog2011 (5) TMI 505X X X X Extracts X X X X X X X X Extracts X X X X ..... nce, the issue on merit is decided in faovur of the assessee. - ITA No. 2336/Mum/2010 - - - Dated:- 13-5-2011 - J. Sudhakar Reddy, Vijay Pal Rao, JJ. F.V. Irani for the Appellant R.S. Srivastav for the Respondent ORDER Vijay Pal Rao:- 1. This appeal filed by the assessee is directed against the order dated 2.2.2010 of the CIT(A) arising from the order relating to AY 2004-05. 2. The assessee has raised the following effective grounds in its appeal:- "i) The ld CIT(A) has erred in confirming the reopening of the assessment proceedings u/s 147 of the act, as valid through there was additional material which was not disclosed in the original scrutiny proceedings for the year under consideration. ii) The ld CIT(A) has erred in confirming the reopening of the assessment proceedings through the original order made u/s 143(3) of the Act contained the detailed note of the allowance of the said fluctuation. iii) The ld CIT(A) has erred in confirming the additions of Rs. 99,78,719/- towards foreign exchange gain which is nothing but the notional gain accounted for in terms of Accounting Standard 11 issued by the Institute of Chartered Accounta ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... n of foreign exchange fluctuation, the assessment cannot be reopened on the same issue. He has relied upon the decision of the Hon'ble Supreme Court in the case of CIT vs Kelvinator India Ltd reported in 321 ITR 561 as well as the decision of the jurisdictional High Court in the case of Aventis Pharma Ltd vs ACIT reported in 323 ITR 570. 4.1 The ld DR, on the other hand, while supporting the orders of the lower authorities has submitted that in the original assessment, the Assessing Officer examined only the issue of loss on foreign exchange fluctuation and not the issue of gain on exchange fluctuation rate. He has submitted that the assessee has reduced this amount of Rs. 1,00,38,101/- in the computation of the total income with note that the item separately treated whereas this amount has not been added back separately. Thus, this issue was not at all examined and decided by the AO in the original issue. The ld DR, thus contended that when no view was taken by the Assessing Officer in the original assessment, then there is no question of change of opinion at the time of reopening of the assessment on that issue. 5. We have considered the rival submissions made by both the ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... come to the tune of Rs. 1,00,38,101/-." 5.2 The issue of foreign exchange fluctuation gain though was not specifically addressed in the original assessment, however, the said issue was connected with the exchange loss claimed by the assessee and finally the assessee worked out the net notional gain as per Annexure L to the reply. The details of exchange rate fluctuation has been given by the assessee as per 31-A of the paper book being Annexure L as under:- Detail of Exchange Rate fluctuation for the year 2003-04 (Assessment Year 2004-05):- i) Notional Gain on Exchange Rate fluctuation ICICI Term Loan:- a. Balance as on 31.3.2004 USD 90,99,922.80 x Rs. 1.165 10601410 Original rate 45,385 Ate as on 31.3.2004 44,220 Difference 1,165 Less:- Actual loss on working Capital FCNRB loss from SBI, Fort 563309 Net notional gain 10038101 5.3 Thus, it is clear that the issue of loss on foreign exchange fluctuation with respect to the working capital loan is part and parcel of the entire exchange rate fluctuation working wherein the ass ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... order of assessment, the assessee had filed an appeal before the CIT(A). The grounds in the appeal specifically include a challenge to the order of assessment on the ground that the AO, erred in disallowing depreciation of Rs. 64.62 lakhs by holding that the same represented depreciation on obsolete assets which are not used in business and included in the WDV of the block of assets. Similarly, another point in the appeal is that the AO erred in determining long-term capital gains arising on the sale of Phase III land at Mulund to the extent of Rs. 10.66 crores. The contention is that in view of the proviso to s. 147, the AO is precluded from reopening the assessment on an issue which is the subject-matter of a pending appeal. The second submission was based on s. 120 of the Act and it was urged that since the original order of assessment was passed by the Addl. CIT, Range 8(1), Mumbai, it was not within the jurisdiction of the Asstt. CIT, who is a subordinate authority, to reopen the assessment. 16. For the reasons already indicated, on the question as to whether the AO had reason to believe that income had escaped assessment within the meaning of s. 147, we have come to the ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 3A were "for making payment" and not "on payment" which is now brought in by amendment to s. 43A vide Finance Act, 2002. 34. Lastly, we are of the view that amendment of s. 43A by the Finance Act, 2002 w.e.f. 1st April, 2003 is amendatory and not clarificatory. The amendment is in complete substitution of the section as it existed prior thereto. Under the unamended s. 43A adjustment to the actual cost took place on the happening of change in the rate of exchange whereas under the amended s. 43A the adjustment in the actual cost is made on cash basis. This is indicated by the words "at the time of making payment". In other words, under the unamended s. 43A, "actual payment" was not a condition precedent for making necessary adjustment in the carrying cost of the fixed asset acquired in foreign currency, however, under amended s. 43A w.e.f. 1st April, 2003 such actual payment of the decreased/enhanced liability is made a condition precedent for making adjustment in the carrying amount of the fixed asset. This indicates a complete structural change brought about in s. 43A vide Finance Act, 2002. Therefore, the amended section is amendatory and not clarificatory in nature. Acco ..... X X X X Extracts X X X X X X X X Extracts X X X X
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