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Income Tax Appellate Tribunal, DELHI BENCH: ‘D’ NEW DELHI
PERK.NARASIMHACHARY, JM: Aggrieved by the order dated 5/12/2016 in appeal number del/CIT (A)-5/0351/2015-16, passed by the learned Commissioner of Income Tax (Appeals)-5, Delhi (Ld. CIT(A)) in the case of M/s KEI industries (P) Ltd (the assessee), for the assessment year 2013-14, assessee preferred this appeal.
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Brief facts of the case are that the assessee is a company engaged in the business of manufacturing of cables, wires, stainless steel wires and turnkey projects. For the assessment year 2013-14, they havehas filed the return of income on 25/9/2013 which was revised on 25/3/2014 and again on 18/7/2014 declaring nil income after setting of brought forward unabsorbed loss and unabsorbed depreciation and income as per section 115 JB of the Income Tax Act, 1961 (for short “the Act”) at Rs. 43, 25, 68, 392/-.
During the course of assessment proceedings, from the assessment order for the assessment year 2012-13, learned Assessing Officer found that the assessee is captilising exchange-rate fluctuation in respect of the missionary bot in India from the foreign funds raised through FCCBs ECB’s/BUYER’S credit,repayment of these loans was not made in that year but the assessee has raised an extra liability on account of prevailing exchange rate as on 31/3/2012 and during the financial year 2012-13 the assessee allocated foreign exchange fluctuation loss to fix it assets accordingly and claimed extra depreciation of Rs. 3, 48, 40, 771/-on account of this capitalisation. On this account, while following the earlier order for the assessment year 2012-13 which was sustained by the Ld. CIT(A), learned Assessing Officer added a sum of Rs. 3, 48, 40, 771/-by disallowing the excess depreciation.
Learned Assessing Officer further found that during the year the assessee earned dividend of Rs. 2, 91, 352/-which was exempt under section 10 (34) of the Act. Learned Assessing Officer made an
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observation that since the assessee made a disallowance so Moto under normal provisions, the same treatment was required to be done in computation of tax liability under section 115 JB of the Act.
Aggrieved by such additions assessee preferred appeal before the Ld. CIT(A) who, by way of impugned order dismissed the same, again following the decision for the assessment year 2012-13. Assessee, therefore, being aggrieved by such an order is before us in this appeal contending that the very basis for making the addition, i.e., the reasoning given by the learned Assessing Officer for the assessment year 2012-13 was not accepted by the Tribunal in assessee’s appeal against the orders of the Ld. CIT(A) for such assessment years and therefore, the additions have no legs to stand.Copy of the order dated 3/12/2020 in ITA No. 1433/del/2014 and batch of appeals in assessee’s own case for the assessment year 2009-10, 2011-12 and 2012-13 is filed and forms part of the record.
Ld. DR referred to the relevant paragraphs in the orders of the authorities below in justification of the additions and sustaining the same, but there is no dispute as to the proceedings in ITA No. 1433/del/2014 and batch of appeals or that the subject matter involved in such appeals and the subject matter involved in this appeal being the one and the same.
We have gone through the record in the light of the submissions made on either side. The issues involved in this appeal, namely, the depreciation on exchange fluctuation on the assets acquired in India from the funds raised through Foreign Currency Convertible Bonds
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(FCCBs) in terms of section 43 (1) of the Act read with explanation 8 thereto and section 43A of the Act and section 36 (1)(iii) of the Act and also the adjustment of addition under section 14 of the Act in the computation of book profits under section 115JB of the Act, are recurring ones and as a matter of fact it was decided right from 2009-10 by the Ld. CIT(A) as well as the Tribunal. Assessment order, and for that matter the order of the first appellate authority also, reads that the authorities followed the view taken on this aspect for the assessment year 2012-13.
In respect of the issue relating to the depreciation on exchange fluctuation on the assets acquired in India from the funds raised through Foreign Currency Convertible Bonds (FCCBs) in terms of section 43 (1) of the Act, order dated 3/12/2020 in assessee’s own case for the assessment years 2009-10 and 2012-13 in ITA numbers 1433/del/2014 and batch of appeals clearly shows that this aspect was considered in the assessment year 2009-10 and such a view was followed in the subsequent assessment years. Relevant observation of the Tribunal for the assessment year 2009-10 reads thus,- 10. We have considered the rival submissions. The assessee explained before the authorities below that in assessment year under appeal, the assessee had capitalized a sum of Rs.27,37,25,941/- on account of exchange rate fluctuation in respect of machineries bought in India from the foreign funds raised through FCCBs. No repayment of loan by way of FCCBs was made during the year under appeal. However, increase in any liability on account of prevailing exchange rate was shown in the balance-sheet under the Head "Unsecured Loans" the fluctuations to the extent of acquisition of fixed assets in India by utilising FCCBs was added to the actual cost and depreciation charged
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thereon. Thus, the assessee purchased the machinery in India from the foreign funds through FCCBs which fact is not disputed by the authorities below. It is, therefore, clear that though Section 43A apply to the assets acquired from Abroad, still the A.O. without justification applied Section 43A for making the disallowance of depreciation against the assessee. Section 43A thus could not apply in the case of the assessee which is also held by various Benches of the Tribunal in the decisions quoted above. Accounting Standard-11 would also apply in the case of the assessee. The assessee has also explained that Companies Amendment Rules also apply to the facts of the case because option is given to assessee and it provided "Where long term foreign currency monetary items relates to acquisition of depreciable capital asset, the same shall be added/deducted from the cost of the asset and shall be depreciated accordingly over the balance life of the asset.". It is not in dispute that assessee followed AS-11 regularly. In A.Y. 2010-2011 the Ld. CIT(A) allowed similar claim of the assessee, but, the Department did not file any appeal against the same Order. In A.Y. 2011-2012 though the Department filed appeal before the Tribunal on this issue on allowing depreciation, but, the same has been dismissed vide Order Dated 21.10.2019 (supra). Thus, the Ld. CIT(A) was bound to follow rule of consistency and should not have taken a contrary view in A.Y. 2012- 2013. We rely upon the Judgments of the Hon'ble Supreme Court in the case of RadhasoamiSatsung 193 ITR 321 (SC) and Excel Industries Ltd., 358 ITR 295 (SC). The assessee has also followed Companies Rules, 2009 because it has given option to the assessee to do so. The decision of Mumbai Bench in the case of DDIT v. Staubil A.G. India Branch Office (supra), relied upon by the Ld. CIT(A) is on identical facts. Therefore, there is no infirmity in the Order of the Ld. CIT(A) in following the same. It may also be noted here that wherever there was an exchange gain to the assessee, the same was reduced from the WDV and claim was made accordingly, therefore, assessee is following the AS-11 consistently and as such the same should not have been disputed by the authorities below.
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The view taken by the Tribunal is followed in assessee’s case for the assessment year 2012-13. It is, therefore, clear that the consistent view taken by the Tribunal in assessee’s own case for the assessment years 2009-10 and 2012-13 goes in favour of the assessee and in the absence of any change is in the facts are in law, we find it difficult to deviate from the same or to take a different view, more particularly in view of the decision of the Hon’ble Apex Court in the case of Radhasoami Satsang 193 ITR 321 (SC) and Excel industries Ltd 358 ITR 295 (SC) in respect of taking consistent view on the same set of facts in the case of the same assessee. With this view of the matter we hold grounds No. 2 to 2.3 in favour of the assessee and direct the authorities to delete the addition.
Now coming to the addition of Rs. 25, 54, 207/-made under section 14A of the Act read with Rule 8D of the Rules and consequent adjustment to the book profits on section 115 JB of the Act, assessee is placing reliance on the decision of the special Bench of the Tribunal in the case of ACIT vs. Vireet investments private Ltd (2017) 82 taxmann.com 415, which in fact was relied upon by the Tribunal in assessee’s own case for the earlier assessment years to hold that the computation under clause (f) of explanation 1 to section 115 JB (2) of the Act has to be made without resorting to the computation as contemplated under section 14A of the Act read with Rule 8D of the Rules. In view of this settled legal position, as has been followed by the Tribunal in assessee’s own case for the earlier assessment years, we are of the considered opinion that the adjustment of Rs. 25, 54, 207/-to the book profits under section 115 JB of the Act is not sustainable and the
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same has to be deleted. Grounds No. 3 and 3.1 are also held in favour of the assessee.
In the result, appeal of the assessee is allowed. Order pronounced in the open court on this the 25th day of January, 2021 immediately after the hearing over watchable more is complete
. Sd/- Sd/- (O.P. KANT) (K.N. CHARY) ACCOUNTANT MEMBER JUDICIAL MEMBER Dated: 25thJanuary, 2021. RK/- Copy forwarded to: 1. Appellant 2. Respondent 3. CIT 4. CIT(A) 5. DR Asst. Registrar, ITAT, New Delhi