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2016 (10) TMI 624 - ITAT MUMBAI

2016 (10) TMI 624 - ITAT MUMBAI - TMI - Treatment to notional loss on account of foreign exchange fluctuation as revenue loss - section 43A applicability - Held that:- The assessee during the year had claimed the loss on account of foreign exchange fluctuation in respect of loan which was used for the purpose of capital asset as revenue loss which claim was consistent with the department’s stand in earlier years. However, surprisingly for the year under consideration, the AO treated the said los .....

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ding the assessee’s appeal for A.Y. 2004-05. - ITA No.630/M/2009, ITA No.631/M/2009, ITA No.2536/M/2013, ITA No.3101/M/2013 - Dated:- 31-8-2016 - SHRI B.R. BASKARAN, ACCOUNTANT MEMBER AND SHRI SANJAY GARG, JUDICIAL MEMBER For The Assessee : Shri Prakash Jotwani, A.R. For The Revenue : Shri A.B. Koli, D.R. ORDER Per Sanjay Garg, Judicial Member: The above captioned three appeals by the assessee and one cross appeal by the Revenue have been preferred against the orders of the Commissioner of Incom .....

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missioner of Income-tax (Appeals) {{CIT(A)}] erred in confirming the disallowance of ₹ 16,91,710/- made by the Assessing Officer under section 36(1)(va) in respect of Employees contributions to Provident Fund and ESIC actually paid by the appellant, though delayed. 2. (a) On the facts and circumstances of the case and in law, the ld. CIT(A) erred in confirming the action of the A.O. of taxing as revenue receipt an amount of ₹ 1,00,07,200/- being notional gain due to fluctuation in fo .....

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ing the A.O. to allow depreciation on fixed assets without reducing the aforesaid foreign exchange fluctuation gain adjusted by the appellant under section 43A of the Act. 3. On the facts and circumstances of the case and in law, the ld. CIT(A) erred in confirming the disallowance of ₹ 1,29,839/- made by the A.O. in respect of expenses incurred and relatable to the previous year ended 31.3.2004 but accounted in subsequent year. Your appellant craves leave to add to alter, amend or delete t .....

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that the contribution to the above stated funds was paid by the assessee after the due date as specified in explanation to section 36(1)(va) of the Act. 5. The Ld. CIT(A) also confirmed the disallowance. 6. Before us, the Ld. A.R. of the assessee has relied upon the decision of the Hon ble Supreme Court in the case of CIT vs. Alom Extrusions Ltd. reported in 185 Taxman 416 (SC) wherein the Hon ble Supreme Court has held that the effect of deletion of second proviso to section 43B of Finance Act .....

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ar and if it is found so, then not to make any disallowance in the light of the decision of the Hon ble Supreme Court. Ground No.2 8. With this ground, the assessee has agitated the action of the Ld. CIT(A) in confirming the action of the AO in taxing the notional gain due to fluctuation in foreign exchange rates in respect of foreign currency loans which were utilized for purchase of capital assets holding the same as revenue receipt as against the claim of the assessee that the same being a ca .....

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hich were installed in the hotel unit and flight kitchen unit. In respect of foreign currency loan, included in above, which was utilized for importing fixed assets, the assessee has been adjusting the loss or gain arising out of foreign exchange rates fluctuation as per the provisions of Section 43A of the I.T. Act. As the above existing loans were high interest bearing loans, the assessee under its capital re-structuring plan, negotiated for an external commercial borrowing in foreign exchange .....

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earlier years. 9. These facts narrated above have not been disputed by the Revenue authority. The AO disallowed the claim of the assessee and taxed the notional gain on account of fluctuation in foreign exchange treating the said gain as revenue receipt on the ground that the new loan taken by the assessee was not utilized for the purchase of an asset but for repayment of earlier loan. 10. The Ld. CIT(A) also confirmed the above finding of the AO. 11. The Ld. A.R. of the assessee, before us, has .....

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regarding which the assessee had already been adjusting the loss or gain arising out of the foreign exchange rates fluctuation as per the provisions of section 43A of the Act were taken over by the Bank of Baroda. The Ld. A.R. has also demonstrated that the assets which were already pledged as primary security with the old banks were accordingly taken over by the new bank. The present loan was not taken for any other purpose but for the repayment of the old loan which was admittedly used for th .....

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ts/adjustments of the corresponding losses and gains as per the provisions of section 43A of the Act. We accordingly allow this issue in favour of the assessee. So far as the alternate contentions of the assessee for directing the AO to allow depreciation on fixed assets without reducing the aforesaid foreign exchange fluctuation gain adjusted by the assessee under section 43A of the Act is concerned, the said issue has become infructuous as we have already decided the main issue of adjustment o .....

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of delayed payment in respect of Employees Contribution to ESIC under section 36(1)(va) of the Act. This issue has already been adjudicated by us while deciding ground No.1 of the assessee s appeal for A.Y. 2004-05. This issue is accordingly restored to the file of the AO for verification as per our directions given above. Ground No.3 15. Ground No.3 is identical to that of ground No.2 taken in assessee s appeal for A.Y. 2004-05 regarding the adjustments of notional gain/loss on foreign exchange .....

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