TMI Blog2019 (12) TMI 974X X X X Extracts X X X X X X X X Extracts X X X X ..... d disallowance does not apply in absence of any exempt income. The same takes care of both the foregoing limbs of the impugned disallowance since the latter aspect of MAT computation has no legs to stand. This tribunal s decision in VIREET INVESTMENT (P.) LTD. [ 2017 (6) TMI 1124 - ITAT DELHI] has also settled the law that sec. 115JB MAT does not apply in case of sec. 14A disallowance. The Revenue fails in its second substantive grievance as well. Disallowance of foreign exchange loss - HELD THAT:- there is no dispute on facts so far as all the corresponding items of the impugned foreign exchange loss are concerned. The Revenue s twin arguments, inter alia, are that Assessing Officer had rightly declined the impugned foreign exchange loss on the ground that neither there was any business exigency involved in cancellation of the assessee s forward contracts involving net loss of ₹51,77,406/- nor the sum of ₹74,39,71,483/- on account of revaluation; PCFC and ECB i.e. pre-shipment in foreign currency and external commercial borrowings; respectively could be taken as revenue items u/s 37(1) being notional capital loss(es). We see no reason to accept either of Revenue ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 44(C) of the Income Tax Act, 1961; in short the Act . Heard both the parties. Case file perused. 2. The Revenue s first and foremost substantive ground pleads that the CIT(A) has erred in law and on facts in deleting arm s length price (ALP) adjustment of ₹49,99,58,855/- in respect of assessee s corporate guarantee provided to its overseas associate enterprise (AE). Suffice to say, and without going much deeper in factual matrix of first issue, we find that CIT(A) has followed his detailed discussion in assessment years 2007-08, 2009-10 and 2010-11 in assessee s case itself deleting identical ALP adjustment on the ground that a corporate guarantee does not amount to an international transaction in view of various judicial precedents i.e. Bharti Airtel Ltd. Vs. Addl. CIT (2014) 39 CCH 0445 (ITAT Delhi) M/s Videocon Industries Ltd. vs. ACIT (2015) 55 taxmann.com 263 (Mum), DCIT vs. Manalesia Ltd. ITA No.980/Kol/2017 and (2016) 157 ITD 132 (Ahd) Micro Ink Ltd. vs. Add. CIT have also taken note of corresponding amendment in sec. 92B by way of explanation vide Finance Act, 2012 w.r.e.f 01.04.2002. We thus affirm the CIT(A) s findings goin ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ted 31.03.2016, the assessee filed a petition u/s. 154 of the, Act dated. 08.04.2016 pointing out that notional capital loss of ₹ 74,39,71,483/- on account of revaluation of outstanding foreign currency loans has been erroneously disallowed, inasmuch as loss on repayment/revaluation of foreign currency loans was to the tune of ₹ 14,26,54,748, comprising of realized loss on repayment of foreign currency loans of ₹ 11,34,84,999/- and unrealized loss on revaluation of outstanding foreign currency loans as on 31.03.2012 of ₹ 2,91,69,750/-, it was contended by the appellant that an erroneous figure by an excess of ₹ 71,48,01,733/- [ ₹ 74,39,71,483 ₹ 2,91,69,750 ] has been considered in the draft order. However, as has been submitted by the appellant, while passing the final assessment order, the Ld. AO did not consider the said 154 petition, and alleged that the assessee could not substantiate the business expediency for loss of ₹ 51,77,406/- on premature cancellation of Forward Exchange Contracts. The Learned. AO also did not accept the assessee s explanation with respect to notional loss on closing value of PCFC ECB. ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ge contracts was actual loss suffered by the assessee. The matter has also been elucidated and substantiated by the as in the sample copy of the Bank Advice for cancellation of the contract and other supporting documents at page 1-3 of the paper book. I am inclined to accept the contention that these were real losses on account of cancellation of the contracts was debited to the account of the assessee, as such the same was a actual loss suffer by the assessee. The assessee is able to establish a proximate nexus of the losses with the business and the matte, in my considered view is covered by the view of the Hon'ble Supreme Court in the case of S.A. Builders Ltd. Vs. CIT (2007) 288 ITR 1 (SC). The losses are, in my considered view to be examined from the point of view of the assessee, as it is seen that these are regular losses / gains coming to the assessee year on year as it ins in the business of import and export of items, and it is a regular importer of cooking coal and exporter of metcoke. Further courts have held that such losses are business losses when there is failure of an assessee to execute certain export contracts for which it has to incur losses, as it is quite ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... stified in making the addition of ₹ 51,77,406/- on account of cancellation and / or revaluation of contracts, and I find that the amount would be deductible u/s 37(1) of the Income Tax Act . 6. In the matter of the Repayment / revaluation of the foreign currency, PCFC loan, I find that the appellant has arrived at the impugned loss of ₹ 2,91,69,750/- on the loan amounts outstanding in two banks, namely Standard Chartered Bank PCFC Account and Yes Bank PCFC Account. In appeal, it was submitted by the appellant-company that the Pre-shipment loan in foreign currency was taken by the assessee exclusively for his import/export business. To substantiate the issue, the appellant drew attention to the letter issued by the company to Yes Bank Limited at page 4, [ of the Paper Book ] wherein the assessee company has requested the Bank to grant PCFC loan against sale and purchase of low ash metallurgical coke. The assessee also enclosed sample advice copies of the payments credited to the account of the assessee issued by Standard Chartered Bank of India and Yes Bank Limited at page 5-9. of the PB. It was contended that said loss of ₹ 2,91,69,750/- was co ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... t of exchange difference as on the date of the balance sheet is an item of expenditure allowable u/s 37(1) in the year of accrual, Since the view taken by the Id, CIT(A) is in conformity with the decision of the Hon'ble Apex Court we find no infirmity in the orders of the ld. CIT(A) and we confirm the same and dismiss the appeal of the Revenue. Having carefully examined the matter, I also find myself in agreement with the contention of the Ld. A.R for the appellant that, the Accounting Standard-II prescribed by ICAI also stipulates that in situation like this when the transaction in foreign currency has not been settled/squared during the accounting period, the effect of exchange rate difference on the un-expired foreign currency contracts as at the end of accounting period is to be accounted for in the books of accounts prepared for the afore-stated accounting period, Therefore, there is adequate merit in the argument that the ratio of the above discussed decisions are applicable to the facts emergent in the case of the appellant-company and it appears that the loss booked as at the end of the year is allowable loss u/s 37(1), of the Act. It is seen that t ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... at in the previous years whenever the dollar rate stood reduced, the Department had taxed the gains which accrued to the assessee on the basis of accrual and it is only in the year in question when the dollar rate stood increased, resulting in loss that the Department has disallowed the deduction/debit. This fact is important. It indicates the double standards adopted by the Department. 7. Overall, in summary, from the factual and legal matrix that emerges, I hold that the Ld AO was incorrect in finding that the loss claimed by the assessee was notional loss or a capital loss. The action of the Ld.AO being, in disallowing the foreign exchange losses, in my considered observation unjustified, I find that the appellant-company is deserving of relief. The Ld. AO is directed accordingly, and these grounds of appeal 7 to 9 stands allowed . 5. We have heard rival contentions. We find no merit in Revenue s instant last grievance as well. We make it clear that there is no dispute on facts so far as all the corresponding items of the impugned foreign exchange loss are concerned. The Revenue s twin arguments, inter alia , are that Assessing Officer ha ..... X X X X Extracts X X X X X X X X Extracts X X X X
|
