TMI Blog2015 (6) TMI 719X X X X Extracts X X X X X X X X Extracts X X X X ..... tistical 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. The case of the assessee has always been that this is a loss on account of a capital asset and should be adjusted against the capital account. In the above mentioned factual background, we are of the view that in these peculiar facts and circumstances, it would be appropriate to set aside the impugned order and restore the issue back to the file of the AO to address the issues on facts afresh. The AO is hereby directed to pass a speaking order in accordance with law after giving the assessee a reasonable 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.-6 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 3. 30.06.2004 Legal and Professional A/c 7,99,320/- 4. 30.06.2004 Foreign travel A/c 75,780/- 5. 30.09.2004 Foreign travel A/c 1,60,586/- 6. 30.09.2004 Legal and Professional A/c 5,11,892/- 7. 30.09.2004 Rent expenses A./c 1,44,362/- 8. 30.09.2004 Foreign travel A/c 1,85,049/- 9. 31.12.2004 Legal and Professional A/c 6,97,838/- 10. 31.12.2004 Foreign travel A/c 1,16,276/- 11. 31.12.2004 Foreign Travel A/c 1,11,874/- 12. 31.12.2004 Foreign Travel A/c 39,540/- 13. 31.03.2005 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... repaid insurance written off, advances to purchase goods/inputs in the normal course of business. 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 year in which the project was considered as aborted. Accordingly the deduction u/s 37(1) r.w.s 28, it was submitted cannot be denied on technical grounds. Reliance was placed upon the judgement of the Hon ble Delhi High Court in the case of CIT vs. Shriram Piston Rings Ltd. (2008) 8 DTR (Del.) 209 and the judgement of the Hon ble Bombay High Court in the case of CIT vs Nagri Mills Co. Ltd. (1958) 33 ITR 681. Apart from that various other decisions namely CIT vs Priya Village Roadshows Ltd. (2011) 332 ITR 594; DCIT vs Assam Asbestors Ltd. (2003) 263 ITR 357; Maharaj Shri Umaid Mills Ltd. No.2 vs C ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... nts in view of the abandonment of the project during the year . 3.1. The view taken was fortified by relying upon various decisions referred to in the finding under challenge by the Revenue. 4. Addressing the grievance posed in the grounds, the Ld. Sr. DR referring to the proceedings during the assessment and the appellate stage vehemently argued that the order of the CIT(A) is silent on vital facts, if any. Inviting attention to the assessment order and the impugned 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 his order that as per assessee s claim in the Audit Report, the system of accounting was mercantile and after the specific date of 01.04.1997, the hybrid method of accounting does not have any statutory recognition and th ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 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 project was abandoned. IN the absence of any discussion in the order on relevant facts where it is difficult to say what evidence if any was placed before the CIT(A) on the basis of which assessee s claim has been allowed. We deem it appropriate to set aside the impugned order. While so holding, we note that the decisions relied upon by the CIT(A) at pages 8-10 are based on the fact that where the expenses were incurred for creating new assets which ultimately had to be abandoned and this event of abandoning 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 ev ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... re. As per assessee's claim while working out the quantum of disallowance in preceding years excess disallowance of ₹ 11,83,407/- was made which is being rectified during the year under consideration. 8. Relying upon section 43A of the Act, as modified by the Finance 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) concurred with the finding arrived at by the AO holding as under:- 6.3 Decision I have considered the submission of the appellant and observation of the Assessing Officer. It is seen that Assessing Officer has disallowed ₹ 11,83,407/-in respect of excess disallowance of foreign exchange loss in earlier years in the computation of income. The appellant had imported metallizer machines for which the exchan ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... and, relying upon the consistent findings of the tax authorities on facts submitted that the claim of the assessee under the statute cannot be allowed and reliance was placed upon the finding of the CIT(A). 12. We have heard the rival submissions and perused the material available on record. 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. The case of the assessee has always been that this is a loss on account of a capital asset and should be adjusted against the capital account. In the above mentioned factual background, we are of the view that in these peculiar facts and circumstances, it would be appropriate to set aside the impugned order and restore the issue back to the file of the AO to address the issues on facts afresh. THE AO is hereby directed to pass a speaking order in accordance with law after giving the assessee a reasonable 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 fac ..... X X X X Extracts X X X X X X X X Extracts X X X X
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