TMI Blog2022 (11) TMI 848X X X X Extracts X X X X X X X X Extracts X X X X ..... ssment year. AO has therefore rightly considered the exchange loss arising for the impugned assessment year and has allowed the same while passing order u/s 154 of the Act. Exchange loss for the F.Y.2012-13 cannot be claimed in the F.Y.2013-14, relevant to the A.Y.2014-15 u/s 37 of the Act, since it is considered as prior period expenses. We are therefore of the considered view that the Ld.AO has rightly allowed the exchange loss pertaining to the relevant assessment year and has disallowed the same pertaining to the previous assessment year. We, therefore, do not wish to interfere in the order of the Ld.AO on this ground and dismiss the ground raised by the assessee. - I.T.A.No.364/Viz/2019 - - - Dated:- 16-11-2022 - Shri Duvvuru Rl Reddy, Hon ble Judicial Member And Shri S Balakrishnan, Hon ble Accountant Member For the Appellant : Shri GVN Hari, AR For the Respondent : Shri MN Murthy Naik, CIT(DR) ORDER PER SHRI DUVVURU RL REDDY, JUDICIAL MEMBER : This appeal is filed by the assessee against the order of the Principal Commissioner of Income Tax [in short, Pr,CIT ], Visakhapatnam in F.No.Pr.CIT-1/VSP/263/3/2018-19 dated 31.03.2019 for the Assessm ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... o with the purchaser, submitted that article 5.2 and 5.3 are independent to each other, which has no application on one another and further submitted that the Ld.Pr.CIT ignored the article 6.1 which supports the objective of understanding as agreed in article 5.3. For the sake of clarity and convenience article 5.1, 5.2 5.3 and 6.1 of the marketing agreement entered into with the purchaser are extracted as under: 5.1. The prices of the products captured by the vessels of BALAJI SEA FOODS LTD., during a particular fishing trip and purchased by TOP FORTUNE INTERNATIONAL LTD. in terms of this agreement shall be negotiated before each shipment mutually and the same shall be best international prices in effect, at the time of sale as determined by the price being paid to Tuna Long liners landing their catches at the intended port of destination. 5.2. BALAJI SEA FOODS LTD. will deliver their catches to TOP FORTUNE INTERNATIONAL LTD. and consequently TOP FORTUNE INTERNATIONAL LTD. shall pay and be responsible for all expenses and charges which may include storage, insurance, freight loading, handling and transportation upto the port of destination and final sale. 5.3. TOP F ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... f the revenue and the twin conditions as contemplated in sec.263 are satisfied in the present case. 3. Aggrieved by the order of the Ld.Pr.CIT, the assessee preferred an appeal before the Tribunal and raised the following grounds of appeal : 1. That the order of the learned Principal Commissioner of Income Tax-1, Visakhapatnam ( hereinafter referred to as Ld.PCIT ) dated 31.03.2019 passed u/s 263 is without jurisdiction and is opposed to the principles of law, weight of evidence, probabilities, equity, natural justice, fair play and the facts and circumstances of the case of the appellant and the materials available on record. 2. That the Ld.PCIT erred in initiating revisionary proceedings u/s 263 though the order of assessment u/s 143(3) dated 30.12.2016 passed by the Assessing Officer was after making detailed inquiries, proper verification and due application of mind and thereby erred in forming an opinion that the assessment order is erroneous in law and prejudicial to the interest of the revenue. 3. That the Ld.PCIT ought to have appreciated that the claim of expenditure to the extent of Rs.5,13,41,403/- made by the appellant is valid and hence allowable. ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... greement could not be accepted. Clause 5.3 and Clause 6.1 of the agreement are extracted below: 5.3. TOP FORTUNE INTERNATIONAL LTD. will pay for the invoices raised for the Mid Sea bunkers, foreign crew salary, stores provisions and frozen bait received by the fishing vessels and the balance will be transferred to BALAJI SEA FOODS Ltd. In the instant case, the above expenses claimed by the assessee are covered either by clause 5.3 or 6.1 of the agreement and therefore, the Ld.Pr.CIT has directed the Ld.AO to disallow the same. We are therefore of the considered view that the Ld.Pr.CIT has rightly directed the Ld.AO and find no infirmity in the order of the Ld.Pr.CIT and dismiss the ground raised by the assessee. 8. Ground No.4 is related to disallowance of loss on foreign exchange rate fluctuation to the extent of Rs.2,38,77,814/- claimed by the assessee. The Ld.Pr.CIT observed from the summary of accounts filed during the assessment proceedings that on 14.05.2012, the assessee had received an amount of Rs.14,80,65,876/- ($28,83,464 x Rs.51.35) from the Taiwanese Company M/s Top Fortune International Limited for supply of different species of fish caught in the high se ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... itted that the above treatment in the books of account was made following the principles of Accounting Standard(AS)-11 on the effect of changes in foreign exchange rates prescribed by the Institute of Chartered Accountants of India (ICAI). According to which, the profit or loss arising on account of foreign exchange fluctuation as on the reporting date is required to be recognized as income or expenses during the period. Hence, the foreign exchange fluctuation losses bear the character of revenue expenditure and allowable under section 37(1) of the Act and fluctuation profit bears the character of revenue profit and chargeable to tax. The Ld.AR submitted that restricting the loss on foreign exchange fluctuation to the extent of invoices raised was neither prescribed by the Accounting Standards issued by the Institute of Chartered Accountants of India nor prescribed by the provisions of the Act. The Ld.AR relied on the judgement of Hon ble Supreme Court of India in the case of CIT Vs. Woodward Governor India (P) Ltd. [2009], where in Hon ble Apex court held that the losses suffered by the assessee on account of foreign exchange difference as on date of balance sheet is an item of ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ge of the 10 fishing vessels with the vessel registration authority in India for the advance amount paid against each vessel till such time the assessee clears and settles the advance payment against acquisition of the 10 fishing vessels. From the said Article, it is clear that the advance received by the assessee company is towards acquisition of fishing vessels and not towards proposed supply of fish by the assessee. Thus, any change or fluctuation in foreign exchange rate at the year end cannot be termed as revenue expenditure. In fact, such adjustment on account of acquisition of an asset using foreign exchange is governed by the special provisions of section 43A as per which the expenditure is allowable only on payment basis and not on accrual basis. Hence, the contention of the assessee that the notional loss arising out of foreign exchange fluctuations is allowable u/s 37(1) of the Act is not correct. The AO has totally overlooked this aspect while making assessment for the year. Consequently, the Ld.Pr.CIT set aside the assessment order passed by the AO with a direction to examine the correctness and admissibility of loss on account of foreign exchange fluctuations by verif ..... X X X X Extracts X X X X X X X X Extracts X X X X
|
