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2015 (6) TMI 719 - ITAT DELHI

2015 (6) TMI 719 - ITAT DELHI - TMI - Addition of prior period expenses - CIT(A) deleted the addition - Held that:-In the facts of the present case there is no reference to any evidence having been considered by the CIT(A) to hold that the expenses stated to be incurred in June 2014 to August 2005 actually pertained to setting up some new business, reference there to is completely missing in the pleadings and the finding. Similarly what is the evidence to show that the specific venture was aband .....

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with law after giving the assessee a reasonable opportunity of being heard. - Decided in favour of revenue for statistical purposes.

Additional liability due to foreign exchange fluctuations towards the capital cost of metallizer - CIT(A) upholding the illegal addition - Held that:- On a consideration thereof in the face of the arguments of the assessee that on facts, the CIT(A) has not appreciated the issue as it was never the case of the assessee that it is a revenue expenditure. Th .....

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sonable opportunity of being heard. The arguments of the Ld. AR that issue should be decided on the principle that irrespective of the year the tax rate is the same cannot be accepted as relevant facts need to be addressed. - Decided in favour of assessee for statistical purposes. - I.T.A .No.-523/Del/2013,I.T.A .No.-6493/Del/2012 - Dated:- 16-6-2015 - Smt Diva Singh and Sh. T.S.Kapoor , JJ. For the Petitioner: Smt. Parwinder Kaur, Sr. DR For the Respondent : Sh.R.Santhanam, Adv. ORDER PER DIVA .....

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al raised above at the time of hearing. It is prayed that the order of the Ld. CIT(A)-XIII, being contrary to the facts on record and the settled position of law, be set aside and that of the Assessing officer be restored. I.T.A .No.-6493/Del/2012 On the facts and in the circumstances of the case, the CIT(A) has erred in upholding the illegal addition of ₹ 11,83,407/- in respect of additional liability due to foreign exchange fluctuations towards the capital cost of metallizer by treating .....

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return was subjected to scrutiny assessment. The AO considering the expenses of ₹ 76,34,951/- under the head debit balance written required the assessee to explain the nature and basis of the claim. The expenditure was stated to be a normal business transaction, the details of which were as under:- S.No. Date Particular Amount(Rs.) 1. 30.06.2004 Foreign travel A/c 4,47,186/- 2. 30.06.2004 Foreign travel A/c 3,05,846/- 3. 30.06.2004 Legal and Professional A/c 7,99,320/- 4. 30.06.2004 Foreig .....

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n Travel A/c 34,755/- 16. 31.03.2005 Consultancy Fee 3,00,000/- 17. 16.08.2005 Legal Fee 1,30,626/- Total 42,20625/- 2.1. It was claimed that the expenses were incurred in 2005-06 assessment year for exploring some business opportunities in the overseas market which ultimately was not established accordingly the expenditure incurred deserves to be allowed in the year under consideration. However since the details of the overseas locations where the expenditure was incurred were not submitted and .....

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id method of accounting was no longer acceptable since the amendment in section 145 w.e.f 01.04.1997 thus the said system having been given up in 1997-98 assessment year, it was concluded that the expenses could only have been claimed in 2005-06 assessment year and not in the year under consideration. In view thereof addition by way of a disallowance of the expenses was made. 3. Aggrieved by this, the assessee came in appeal before the First Appellate Authority. Where it was submitted that the f .....

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. All these items it was submitted were disallowed on the ground that the expenditure pertained to prior period and should have been claimed in the previous years. Accordingly it was contended that had the business fructified which was sought to be set up abroad, the expenses would have been clubbed and capitalized but however since the efforts did not result in enlarging the business in those countries, the assessee was left with no alternative but to write off the expenses so incurred in the y .....

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(2011) 332 ITR 594; DCIT vs Assam Asbestors Ltd. (2003) 263 ITR 357; Maharaj Shri Umaid Mills Ltd. No.2 vs CIT (1989) 175 ITR 73; CIT vs Tamil Nadu Chemical Products Ltd. (2003) 259 ITR 582; EID Parry India Ltd. vs CIT (2002) 257 ITR 253; CIT vs Modi Industries Ltd. No.3 (1993) 200 ITR 341 (Del.) were also relied upon. Considering these submissions, the CIT(A) came to the following conclusions on facts:- 5.3 Decision I have considered the submission of the appellant, observation of the Assessing .....

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were relate to DEPB benefit, advance for repairing, prepaid insurance written off, advance to purchase goods/inputs in normal course of business. The expenses on foreign travelling, legal & professional expenses and consultancy charges were incurred for getting more customers and markets for the products of the company in foreign markets and for exploring additional markets through dealers and distributors. This initiative was started in F.Y. 2004-05 and 2005-06 for expanding the company bu .....

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itially the appellant wanted to treat these expenses in capital nature but the project could not take off, therefore, such expenses have been claimed during the year as revenue expenditure as the project for expansion of business was abandoned during the year. It is claimed by the appellant that these expenses were incurred wholly and exclusively for the business purposes of the appellant business and deduction to be allowed in the year in which the amount is claimed and written off in the books .....

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ned order it was submitted that admittedly the expenses pertained to 2004-2005 Financial year and the occasion to allow the same in the year under consideration by the CIT(A) has been on the plea of the assessee that the business was not finally set up where are the facts supporting these arguments it was questioned by her. Referring to the change in the position of law with the amendment in section 145 of the Act w.e.f 01.04.1997, it was her submission that the AO has adequately brought out in .....

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judicial precedent sited therein submitted that in the case of the assessee who is a public limited company subjected to the same rate of tax and thus where as per judicial precedent it is settled whether the particular expenses are allowed in this year or some other year as rate of tax remains the same it was his submission that the claim of the assessee has rightly been allowed. Relying upon the well-settled legal precedent addressed by the Hon ble Delhi High Court in the case of Shri Ram Pis .....

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ions extracted in the impugned order has argued that the expenses were incurred for setting up a new line of business or activities involving joint venture in foreign projects and also in the course of the arguments before us, the Ld. AR has canvassed that in order to over-come the anti dumping policy of the United States, the assessee had explored the possibility of opening branch office in some other countries where the said embargo did not apply however, since nothing came out of those effort .....

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claim, the assessee was discovering some business opportunities in overseas market, but ultimately failed to establish the business in so called overseas locations. The details of locations are not submitted. 5.1. We also find that even before us no detail of any location has been mentioned either by way of evidence or in the narrations given to the CIT(A) in regard to by what acts it can be said that the alleged efforts were made and by what evidence on fact it is being submitted that the proje .....

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andoning crystallized in the year under consideration the same were held to be allowable as considered in CIT vs PVR Ltd. 332 ITR 594 (Delhi). Similarly in CIT vs Modipan Ltd.(No.1) 334 ITR 102 (Del) where the expenses were booked in the year when the payment was settled. In the facts of the present case there is no reference to any evidence having been considered by the CIT(A) to hold that the expenses stated to be incurred in June 2014 to August 2005 actually pertained to setting up some new b .....

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etailed reasoning the impugned order is set aside and the issue is restored back to the file of the AO with the directions to decide the same afresh in accordance with law after giving the assessee a reasonable opportunity of being heard. 6. In the result the appeal of the Revenue is allowed for statistical purposes. 7. The facts relatable to the only issue agitated by the assessee are found addressed at page 6-8 of the assessment order at para 1.6. A perusal of the same shows that the assessee .....

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r, the assessee had to pay excess resulting in foreign expenditure fluctuation loss which is claimed as an expenditure. The same was rejected by the AO holding as under:- I have considered the submission of the assessee and gone through the details filed. In fact during the preceding years, the assessee had imported some metalizer (fixed asset) and due to weak rupee in comparison to dollar the assessee had to pay in excess resulting in foreign exchange fluctuation loss which is claimed as expend .....

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ce Act, 2002, he was of the view that the amendments provided for increase/decrease only for currency fluctuation at the time of payment. For unpaid currency liability, as the value of the assessee of the same had to be increased/decreased in the books of accounts it was held this would not be eligible for depreciation under the Income Tax Computation. 9. Aggrieved by this, the assessee went in appeal before the First Appellate Authority. Considering the submissions advanced, the CIT(A) concurre .....

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mputation of income. The payment for this metallizer machine was made during the year and the actual fluctuation loss comes to ₹ 74,74,627/-which was charged to the metallizer machine. However, the excess disallowance made in earlier years of ₹ 11,83,407/-was charged to the profit and loss account and claimed as revenue expenditure. This loss cannot be allowed as revenue expenditure as same pertains to purchase of fixed assets and same has to be credited to the fixed assets account. .....

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y appreciated. It was his submission that in the year under consideration as a result of fluctuation in the foreign exchange, the actual cost of the metaliser machine to the assessee was ₹ 74,74,627/- however at the time of settling accounts in the earlier years, the exchange fluctuation loss was higher i.e ₹ 86,58,034/-. As a result of this, the difference of ₹ 11,83,407/- has occurred. It was his submission that in terms of section 43A of the Act, it was the claim of the asse .....

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