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Income Tax Appellate Tribunal, DELHI BENCH “E” DELHI
Before: SHRI KUL BHARAT & SHRI PRADIP KUMAR KEDIA
PER PRADIP KUMAR KEDIA, A.M.: The captioned appeal has been filed at the instance of the assessee against the order of the Commissioner of Income Tax (Appeals)-I, New Delhi [‘CIT(A)’ in short], dated 12.06.2015 arising in the assessment order dated 28.03.2013 passed by the Assessing Officer (AO) under Section 143(3) of the Income Tax Act, 1961 (the Act) concerning AY 2010-11.
As per grounds of appeal, the assessee has challenged the addition of Rs.24,42,523/- on account of notional exchange gain due to fluctuation in prices of foreign currency on PCFC loans at closing date.
3. Briefly stated, the Assessing Officer in the course of assessment proceedings u/s.143(2) of the Act inter alia observed that the assessee has earned exchange gain due to fluctuation in prices of foreign currency on PCFC loans amounting to Rs.24,42,523/- during the Financial Year 2009-10 relevant to Assessment Year 2010-11 in question. The Assessing Officer did not find merit in the contentions of the assessee that the gain arising in the books was not ultimately realized or actually received as a benefit. Thus no real income was accrued to the assessee. The Assessing Officer made reference to the Accounting Standard-11 issued by the ICAI and also relied upon the decision of the Hon’ble Supreme Court in CIT vs. Woodward Governor India P. Ltd., 179 Taxman 326 (SC) and made the additions on account of exchange gains due to fluctuations in the price of foreign currency on PCFC loans to the tune of Rs.24,42,523/- and assessed the income accordingly.
4. Aggrieved, the assessee preferred appeal before the CIT(A). However, no relief was made available to the assessee by the First Appellate Authority either.
5. Further aggrieved, the assessee preferred appeal before the Tribunal.
When the matter was called for hearing, the ld. counsel for the assessee at the outset submitted that sans of arguments to be advanced by the assessee, the aforesaid amount was offered to tax in the subsequent assessment year(s) on actual realization basis, and therefore, taxing the same account on accrual basis in the Assessment Year 2010-11 in question separately would tantamount to double taxation which is not justified. It was contended that the whole exercise is revenue neutral. Ld. counsel in the same vain submitted that the issue may be remitted back to the file of the Assessing Officer for verification on the aspects of declaration of impugned income in the subsequent assessment year(s), if so considered expedient.
Ld. Department Representative for the Revenue, on the other hand, relied upon the action of the lower authorities and submitted that no interference thereon is called for.
We have carefully considered the rival submissions and perused the orders of the authorities below. We find merit in the contention of the assessee that when it does not make a difference to the Department it should not contest whether a particular income is taxable in one year or in the next. It is the contention of the assessee that the entire exercise is tax neutral and thus no addition is called for in the light of the decision of the Hon’ble Supreme Court in the case of CIT vs. Bilahari Investment, (2008) 299 ITR 1 (SC); CIT vs. Excel Industries 358 ITR 295 (SC).
In the light of the judgments rendered by the Hon’ble Supreme Court, the impugned addition is not warranted where the income has already been offered in the subsequent assessment year(s). However, whether the income arising from fluctuation of currency has been offered in the subsequent assessment year or not is a question of fact and would require some verification at the end of the Assessing Officer. Accordingly, the impugned order of the CIT(A) is set aside and the matter is remitted back to the file of the Assessing Officer for verification of the factual aspect as noted above. Where the Assessing Officer finds to his satisfaction that income has been duly offered and included in the chargeable income in the subsequent assessment year, the impugned addition in the year under consideration would not survive. The Assessing Officer shall give due and effective opportunity to the assessee to justify its claim on fact and law.
In the result, the appeal of the assessee is allowed for statistical purposes.
Order pronounced in the open Court on 02/02/2022.