9911796707
TMI Blog2012 (6) TMI 574X X X X Extracts X X X X X X X X Extracts X X X X ..... hether the Tribunal was correct in reversing the findings of the Assessing Officer that a sum of Rs. 4,91,22,842/-, loss on reinstatement of Foreign Currency Liability as on the last date of the accounting year is an allowable deduction, despite the same having not accrued for payment, nor was payment made? 4. Whether the Tribunal was correct in reversing the findings of the Assessing Officer that in respect of the expenditure incurred over the office premises for renovation and paying compensation to the lessor which was taken on lease by the assessee. Section 32 Explanation 1 of the Act cannot be invoked and the claim of revenue expenditure should be allowed ?". 3. The assessee is represented by M/s. S. Parthasa ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... s deductible the following have to be taken into account (i) whether the system of accounting followed by the assessee is mercantile system, which brings into debit the expenditure amount for which a legal liability has been incurred before it is actually disbursed and brings into credit what is due, immediately it becomes due and before it is actually received; (ii) Whether the same system is followed by the assessee from the very beginning and if there was a change in the system, whether the change was bona fide: (iii) whether the assessee has given the same treatment to losses claimed to have accrued and to the gains that may accrued to it; (iv) whether the assessee has been consistent and definite in making entries in the account books ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... the Assessing Officer is incorrect, that the Assessing Officer having not exhibited his awareness as to whether the denial of the claim of the assessee towards foreign exchange loss on account of fluctuation in the exchange rate particularly in respect of outstanding payments required to be made by the assessee in favour, of foreign suppliers of goods and services, located in a foreign country and payment to be made in foreign currency and having regard to the value of the rupee having varied and the assessee required to incur more expenditure in terms of rupees, the amount had been claimed as a loss and therefore, the Tribunal is fully justified in allowing the loss as claimed. The judgment of the Supreme Court supports the same and theref ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 2010] 189 Taxman 292. The view now taken is that fluctuation in exchange rate can result in loss or profit namely on the last day of the accounting year the day on which the accounts are normally made up and should be factored into determination of loss or profit etc. 11. However, it is also true that the Supreme Court has made the claim for foreign exchange loss to be allowed subject to verification and scrutiny by the Assessing Officer, in the light of the guidelines referred to in para 21 of the judgment in Woodward Governor India (P.) Ltd.'s case (supra) has extracted in the earlier part of the judgment. 12. When the Assessing Officer passed the assessment order, this judgment was not available and therefore, it could not be noticed b ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ofar as the second question is concerned, we find that the Tribunal proceeded on the premise that the entire expenditure is a revenue expenditure and therefore, the stand that Explanation 1 to Section 32 is not attracted to the assessee. 16. We find this view of the Tribunal is not at all tenable either on the language of the Explanation 1 to Section 32 reading as under "32. Explanation 1. Where the business or profession of the assessee is carried on in a building not owned by him but in respect of which the assessee holds a lease or other right of occupancy and any capital expenditure is incurred by the assessee for the purpose of the business or profession on the construction of any structure or doing of any wo ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ere indicating that a sum of Rs. 6,73,119/- should he taken as a revenue expenditure incurred by the assessee qualifying for deduction, whereas the sum of Rs. 22,19,000/- cannot be considered as a revenue expenditure incurred by the assessee and not even as a capital expenditure as the assessee has not constructed the building part but the amount is paid to the lessor.
19. In the result, we answer the first question partly in favour of the revenue, the second question partly in favour of both the revenue and the assessee.
20. Therefore, the order of the Tribunal is set aside to this extent and on these two aspects, the matter is remanded to the Assessing Authority.
21. The appeal is allowed in part. X X X X Extracts X X X X X X X X Extracts X X X X
|
