ACIT, CENTRAL CIRCLE-1(1), KOLKATA, KOLKATA vs. M/S RAMKRISHNA FORGINGS LTD., KOLKATA

IN THE INCOME TAX APPELLATE TRIBUNAL KOLKATA ‘A’ BENCH, KOLKATA (Before Sri J. Sudhakar Reddy, Accountant Member & Sri Aby T. Varkey, Judicial Member) ITA No. 113/Kol/2017 Assessment Year: 2009-10

Asstt. Commissioner of Income Tax, Central Circle-1(1), Kolkata…...............…........…....Appellant Vs. M/s. Ramkrishna Forgings Ltd...…………........................................................……………….….Respondent 16, Camac Street L&T Chamber 6th Floor Kolkata – 700 017 [PAN : AABCR 3285 N] IT(SS)A No. 08/Kol/2017 Assessment Year: 2009-10 M/s. Ramkrishna Forgings Ltd...…………........................................................………….....…….….Appellant 16, Camac Street L&T Chamber 6th Floor Kolkata – 700 017 [PAN : AABCR 3285 N] Vs. Asstt. Commissioner of Income Tax, Central Circle-1(1), Kolkata…...............…....…....Respondent

C.O. No. 16/Kol/2017 A/o ITA No. 113/Kol/2017 Assessment Year: 2009-10 M/s. Ramkrishna Forgings Ltd...…………........................................................…………….…….….Appellant 16, Camac Street L&T Chamber 6th Floor Kolkata – 700 017 [PAN : AABCR 3285 N] Vs. Asstt. Commissioner of Income Tax, Central Circle-1(1), Kolkata…...............…...........Respondent

Appearances by: Shri Ram Bilash Meena, CIT, D/R, appearing on behalf of the Revenue. Shri S.M. Surana, Advocate, appeared on behalf of the assessee. Date of concluding the hearing : March 3rd, 2020 Date of pronouncing the order : March 13th, 2020 ORDER Per J. Sudhakar Reddy, AM :-

2 ITA No. 113/Kol/2017 Assessment Year: 2009-10 & C.O. No. 16/Kol/2017 Assessment Year: 2009-10 IT(SS)A No. 08/Kol/2017 Assessment Year: 2009-10 M/s. Ramkrishna Forgings Ltd. These appeals filed by the filed by the revenue are directed against separate but identical separate but identical orders of the Learned Commissioner of Income Tax of the Learned Commissioner of Income Tax (Appeals), Kolkata Kolkata, (hereinafter the “ld.CIT(A)”), passed u/s. 2 passed u/s. 250 of the Income Tax Act, 1961 (the ‘Act’) (the ‘Act’), both for the Assessment Year 2009-10. The assessee has filed a cross-objection being C.O. No. objection being C.O. No. 16/Kol/2017 against the appeal of the revenue in ITA No. 113/Kol/2017, for the against the appeal of the revenue in ITA No. 113/Kol/2017, for the against the appeal of the revenue in ITA No. 113/Kol/2017, for the Assessment Year 2009-10. 2. As the grounds of appeal in both the revenue appeals are identical and for the As the grounds of appeal in both the revenue appeals are identical and for the As the grounds of appeal in both the revenue appeals are identical and for the same Assessment Year and on the very same set of circumstances, they are heard same Assessment Year and on the very same set of circumstances, they are heard same Assessment Year and on the very same set of circumstances, they are heard together and disposed off by way of this common order. gether and disposed off by way of this common order. 3. We first take up the revenue appeals. The Grounds of appeal in ITA No. We first take up the revenue appeals. The Grounds of appeal in ITA No. We first take up the revenue appeals. The Grounds of appeal in ITA No. 113/Kol/2017, are as follows: 113/Kol/2017, are as follows:- “1. That CIT (A) has erred both in facts and in law in deleting the disallowance of That CIT (A) has erred both in facts and in law in deleting the disallowance of That CIT (A) has erred both in facts and in law in deleting the disallowance of 50% additional depreciation in A. Y. 2009 50% additional depreciation in A. Y. 2009-10 ignoring the fact that 50% of additional 10 ignoring the fact that 50% of additional depreciation was claimed and allowed in asst year 2008 depreciation was claimed and allowed in asst year 2008-09 and plant & machinery 09 and plant & machinery which was put to use for less than 180 days in the assessment year 2008 put to use for less than 180 days in the assessment year 2008 put to use for less than 180 days in the assessment year 2008-09 was no longer new and hence was not eligible for additional depreciation in assessment year longer new and hence was not eligible for additional depreciation in assessment year longer new and hence was not eligible for additional depreciation in assessment year 2009-10. 2. Ld. CIT(A) has erred in facts as well as on law in treating the compensation Ld. CIT(A) has erred in facts as well as on law in treating the compensation Ld. CIT(A) has erred in facts as well as on law in treating the compensation received for under performance of machine as capital receipts, ignoring the reasoned for under performance of machine as capital receipts, ignoring the reasoned for under performance of machine as capital receipts, ignoring the reasoned order of the A.O. & relying on the assessee's submission. order of the A.O. & relying on the assessee's submission. 3) Ld. CIT(A) has erred in facts as well as on law in deleting the disallowance Ld. CIT(A) has erred in facts as well as on law in deleting the disallowance Ld. CIT(A) has erred in facts as well as on law in deleting the disallowance made for delay in deposit of employee's made for delay in deposit of employee's contribution towards provident fund and ESI contribution towards provident fund and ESI and allowing relief under section 43B by failing to appreciate the fact that the and allowing relief under section 43B by failing to appreciate the fact that the and allowing relief under section 43B by failing to appreciate the fact that the provisions of employees contribution is governed by the provisions of Sec 36(I)(va) provisions of employees contribution is governed by the provisions of Sec 36(I)(va) provisions of employees contribution is governed by the provisions of Sec 36(I)(va) read with 2(24)(x). 4) The Ld. CIT(A) has er The Ld. CIT(A) has erred in facts as well as on law in deleting the disallowance red in facts as well as on law in deleting the disallowance made u/s 14A read with rule 8D(ii). made u/s 14A read with rule 8D(ii). 5) The Ld. CIT(A) has erred in facts as well as on law in enhancing depreciation The Ld. CIT(A) has erred in facts as well as on law in enhancing depreciation The Ld. CIT(A) has erred in facts as well as on law in enhancing depreciation or block assets which was never claimed in the return. or block assets which was never claimed in the return. 6) The appellant cra The appellant craves the leave to make any addition, alteration and ves the leave to make any addition, alteration and modification etc of ground or grounds on or before the date of hearing of the appeal.” modification etc of ground or grounds on or before the date of hearing of the appeal. modification etc of ground or grounds on or before the date of hearing of the appeal.

3.1. The Grounds of appeal in The Grounds of appeal in IT(SS)A No. 08/Kol/2017, are as follows: /Kol/2017, are as follows:- “1. Ld. CIT (A) has erred both in facts and CIT (A) has erred both in facts and in law in deleting the disallowance of in law in deleting the disallowance of 50% additional depreciation in A. Y. 2009 50% additional depreciation in A. Y. 2009-10 ignoring the fact that 50% of additional 10 ignoring the fact that 50% of additional

3 ITA No. 113/Kol/2017 Assessment Year: 2009-10 & C.O. No. 16/Kol/2017 Assessment Year: 2009-10 IT(SS)A No. 08/Kol/2017 Assessment Year: 2009-10 M/s. Ramkrishna Forgings Ltd. depreciation was claimed and allowed in asst year 2008 depreciation was claimed and allowed in asst year 2008-09 and plant & machinery 09 and plant & machinery which was put to use for less than 180 days in the which was put to use for less than 180 days in the assessment year 2008 assessment year 2008-09 was no longer new and hence was not eligible for additional depreciation in assessment year longer new and hence was not eligible for additional depreciation in assessment year longer new and hence was not eligible for additional depreciation in assessment year 2009-10. 2. Ld. CIT(A) has erred in facts as well as on law in treating the compensation Ld. CIT(A) has erred in facts as well as on law in treating the compensation Ld. CIT(A) has erred in facts as well as on law in treating the compensation received for under performance of machine as capital receipts, ignoring the reasoned received for under performance of machine as capital receipts, ignoring the reasoned received for under performance of machine as capital receipts, ignoring the reasoned order of the A.O. & relying on the assessee's submission. order of the A.O. & relying on the assessee's submission. 3) Ld. CIT(A) has erred in facts Ld. CIT(A) has erred in facts as well as on law in deleting the disallowance as well as on law in deleting the disallowance made for delay in deposit of employee's contribution towards provident fund and ESI made for delay in deposit of employee's contribution towards provident fund and ESI made for delay in deposit of employee's contribution towards provident fund and ESI and allowing relief under section 43B by failing to appreciate the fact that the and allowing relief under section 43B by failing to appreciate the fact that the and allowing relief under section 43B by failing to appreciate the fact that the provisions of employees contribution is gove provisions of employees contribution is governed by the provisions of Sec 36(I)(va) rned by the provisions of Sec 36(I)(va) read with 2(24)(x). 4) The Ld. CIT(A) has erred in facts as well as on law in deleting the disallowance The Ld. CIT(A) has erred in facts as well as on law in deleting the disallowance The Ld. CIT(A) has erred in facts as well as on law in deleting the disallowance made u/s 14A read with rule 8D(ii). made u/s 14A read with rule 8D(ii). 5) Ld. CIT(A) has erred in law as well as facts in allowing the claim of Ld. CIT(A) has erred in law as well as facts in allowing the claim of Ld. CIT(A) has erred in law as well as facts in allowing the claim of depreciation on the block value without reduction of the compensation treated as depreciation on the block value without reduction of the compensation treated as depreciation on the block value without reduction of the compensation treated as capital receipts which the assessee had actually claimed in the return. Actually, the capital receipts which the assessee had actually claimed in the return. Actually, the capital receipts which the assessee had actually claimed in the return. Actually, the CIT() has allowed the enhanced depreciation on block of assets without reducing the CIT() has allowed the enhanced depreciation on block of assets without reducing the CIT() has allowed the enhanced depreciation on block of assets without reducing the value of compensation, which was never claimed in the return. e of compensation, which was never claimed in the return. 6) The appellant craves the leave to make any addition, alteration and The appellant craves the leave to make any addition, alteration and The appellant craves the leave to make any addition, alteration and modification etc of ground or grounds on or before the date of hearing of the appeal.” modification etc of ground or grounds on or before the date of hearing of the appeal. modification etc of ground or grounds on or before the date of hearing of the appeal.

4 ITA No. 113/Kol/2017 Assessment Year: 2009-10 & C.O. No. 16/Kol/2017 Assessment Year: 2009-10 IT(SS)A No. 08/Kol/2017 Assessment Year: 2009-10 M/s. Ramkrishna Forgings Ltd.  Birla Corporation Ltd. vs. DCIT (ITA No. 683/Kol/2011) Birla Corporation Ltd. vs. DCIT (ITA No. 683/Kol/2011)  Century Enka Ltd. vs. DCIT (ITA No. 560/Kol/2010) Century Enka Ltd. vs. DCIT (ITA No. 560/Kol/2010) 6. As the ld. CIT(A) has followed the propositions of law laid down by different As the ld. CIT(A) has followed the propositions of law laid down by different As the ld. CIT(A) has followed the propositions of law laid down by different benches of the ITAT on this issue on this issue, which are cited above, we find no infirmity in ind no infirmity in his order and hence this ground of the revenue this ground of the revenue in both the appeals. 7. Ground No. 2, is on the issue as to whether compensation received for under Ground No. 2, is on the issue as to whether compensation received for under Ground No. 2, is on the issue as to whether compensation received for under performance of SMS EMU CO machine installed in the financial year 2007 performance of SMS EMU CO machine installed in the financial year 2007 performance of SMS EMU CO machine installed in the financial year 2007-08. 7.1. The compensation for under performance was split into two i.e., technical loss nsation for under performance was split into two i.e., technical loss nsation for under performance was split into two i.e., technical loss amounting to Rs.5,16,27,109/ amounting to Rs.5,16,27,109/- and financial loss of Rs.3,09,76,266/ and financial loss of Rs.3,09,76,266/-. The issues was whether the compensation received on account of technical loss is a capital receipt or a whether the compensation received on account of technical loss is a capital receipt or a whether the compensation received on account of technical loss is a capital receipt or a revenue receipt. The Assessing Officer relied on the decision of ipt. The Assessing Officer relied on the decision of CIT v. Manna Ramji & Co., CIT v. Manna Ramji & Co., [1972] 86 ITR 29 (SC), and was of the view that this receipt is taxable as income. and was of the view that this receipt is taxable as income. and was of the view that this receipt is taxable as income. Before the ld. First Appellate Authority, th Before the ld. First Appellate Authority, the assessee relied on the following case e assessee relied on the following case- law and claimed that the compensation received for technical loss for was on capital laimed that the compensation received for technical loss for was on capital laimed that the compensation received for technical loss for was on capital account:-  CIT vs. Suarashtra Cement [2012] 325 ITR 422 (SC) CIT vs. Suarashtra Cement [2012] 325 ITR 422 (SC) CIT vs. Suarashtra Cement [2012] 325 ITR 422 (SC)  Xpro India Ltd. [ITA No. 214/Kol/2011, order dt. 23/03/2016] pro India Ltd. [ITA No. 214/Kol/2011, order dt. 23/03/2016] pro India Ltd. [ITA No. 214/Kol/2011, order dt. 23/03/2016]  Deputy Commissioner of Income Deputy Commissioner of Income-tax, Circle -4, Kolkata vs. 4, Kolkata vs. Tongani Tea Co. Ltd. Tea Co. Ltd. [63 taxmann.com 149 Kolkata ITAT]

7.2. The ld. CIT(A) at para 2.4. page 7 of his order, held as follows: The ld. CIT(A) at para 2.4. page 7 of his order, held as follows:- “2.4. As pointed out by the AR the relevant facts in the case of Manna Ramji are As pointed out by the AR the relevant facts in the case of Manna Ramji are As pointed out by the AR the relevant facts in the case of Manna Ramji are different in so far as the compensation was for different in so far as the compensation was for rent for the user of godown. The rent for the user of godown. The Assessing Officer has not challenged the appellant’s claim that the said amount of Assessing Officer has not challenged the appellant’s claim that the said amount of Assessing Officer has not challenged the appellant’s claim that the said amount of compensation was for impairment of the assets and was not to compensate for the compensation was for impairment of the assets and was not to compensate for the compensation was for impairment of the assets and was not to compensate for the profit. The AO has observed that the compensation was to co profit. The AO has observed that the compensation was to compensate the revenue mpensate the revenue loss of earning but has not established his case that underperformance of the loss of earning but has not established his case that underperformance of the loss of earning but has not established his case that underperformance of the equipment was liable to be treated as revenue loss. On the contrary the appellant’s equipment was liable to be treated as revenue loss. On the contrary the appellant’s equipment was liable to be treated as revenue loss. On the contrary the appellant’s submission has relied on some judicial decisions as noted above which dem submission has relied on some judicial decisions as noted above which dem submission has relied on some judicial decisions as noted above which demonstrate that underperformance of the assets in the present case is equivalent to capital loss that underperformance of the assets in the present case is equivalent to capital loss that underperformance of the assets in the present case is equivalent to capital loss as the impact is for the entire life of the assets involved. It appears that the machine as the impact is for the entire life of the assets involved. It appears that the machine as the impact is for the entire life of the assets involved. It appears that the machine procured did not meet the specifications promised by the vendor/manufact procured did not meet the specifications promised by the vendor/manufact procured did not meet the specifications promised by the vendor/manufacturer and as a result the supplier agreed to return a part of the sums received from the as a result the supplier agreed to return a part of the sums received from the as a result the supplier agreed to return a part of the sums received from the

5 ITA No. 113/Kol/2017 Assessment Year: 2009-10 & C.O. No. 16/Kol/2017 Assessment Year: 2009-10 IT(SS)A No. 08/Kol/2017 Assessment Year: 2009-10 M/s. Ramkrishna Forgings Ltd. appellant and termed the sum so received as compensation for technical loss. appellant and termed the sum so received as compensation for technical loss. appellant and termed the sum so received as compensation for technical loss. Compensation termed as financial loss [Rs. 3,09,76,266/ Compensation termed as financial loss [Rs. 3,09,76,266/-] was offered by the ] was offered by the appellant as revenue receipt/income and so it is not in dispute. The former evenue receipt/income and so it is not in dispute. The former evenue receipt/income and so it is not in dispute. The former compensation is for the permanent impairment of the asset whose performance compensation is for the permanent impairment of the asset whose performance compensation is for the permanent impairment of the asset whose performance turned out to be below the specifications agreed during the purchase. The issue turned out to be below the specifications agreed during the purchase. The issue turned out to be below the specifications agreed during the purchase. The issue appears to be covered by the judicial appears to be covered by the judicial decisions relied upon in the submission and decisions relied upon in the submission and listed above. Following the said decisions t listed above. Following the said decisions the Ground No. 2 is allowed and the e Ground No. 2 is allowed and the compensation towards the technical loss computed at Rs.5,16,27,109/ compensation towards the technical loss computed at Rs.5,16,27,109/- - is termed as capital receipt.”

6 ITA No. 113/Kol/2017 Assessment Year: 2009-10 & C.O. No. 16/Kol/2017 Assessment Year: 2009-10 IT(SS)A No. 08/Kol/2017 Assessment Year: 2009-10 M/s. Ramkrishna Forgings Ltd. inclined not to reduce the actual cost of the plant and machinery by the amount of inclined not to reduce the actual cost of the plant and machinery by the amount of inclined not to reduce the actual cost of the plant and machinery by the amount of compensation. Accordingly w compensation. Accordingly we have no hesitation in approving the order of the ld. e have no hesitation in approving the order of the ld. CIT(A). Hence this ground of Revenue's appeal is dismissed. CIT(A). Hence this ground of Revenue's appeal is dismissed.

8.1. The Hon’ble Supreme Court in the case of The Hon’ble Supreme Court in the case of Saurashtra Cement Ltd. (supra) Saurashtra Cement Ltd. (supra), was considering a compensation received from the suppliers by considering a compensation received from the suppliers by way of liquidated damages. way of liquidated damages. It held as follows:- “10. Thus, the short question for determination is whether the liquidated damages Thus, the short question for determination is whether the liquidated damages Thus, the short question for determination is whether the liquidated damages received by the assessee from the supplier of the plant and machinery on account of received by the assessee from the supplier of the plant and machinery on account of received by the assessee from the supplier of the plant and machinery on account of delay in the supply of plant is delay in the supply of plant is a capital or a revenue receipt? 11. The question whether a particular receipt is capital or revenue has frequently The question whether a particular receipt is capital or revenue has frequently The question whether a particular receipt is capital or revenue has frequently engaged the attention of the Courts but it has not been possible to lay down any single engaged the attention of the Courts but it has not been possible to lay down any single engaged the attention of the Courts but it has not been possible to lay down any single criterion as decisive in the determination of the question. Time and again, it has been criterion as decisive in the determination of the question. Time and again, it has been criterion as decisive in the determination of the question. Time and again, it has been reiterated that answer to the question must ultimately depend on the facts of a reiterated that answer to the question must ultimately depend on the facts of a reiterated that answer to the question must ultimately depend on the facts of a particular case, and the authorities bearing on the question are valuable only as particular case, and the authorities bearing on the question are valuable only as particular case, and the authorities bearing on the question are valuable only as indicating the matters that have to be taken into account in reaching a conclusion. In indicating the matters that have to be taken into account in reaching a conclusion. In indicating the matters that have to be taken into account in reaching a conclusion. In Rai Bahadur Jairam Valji's case (supra), it was observed thus : adur Jairam Valji's case (supra), it was observed thus : "The question whether a receipt is capital or income has frequently come up for "The question whether a receipt is capital or income has frequently come up for "The question whether a receipt is capital or income has frequently come up for determination before the courts. Various rules have been enunciated as furnishing determination before the courts. Various rules have been enunciated as furnishing determination before the courts. Various rules have been enunciated as furnishing a key to the solution of the question a key to the solution of the question, but as often observed by the highest , but as often observed by the highest authorities, it is not possible to lay down any single test as infallible or any single authorities, it is not possible to lay down any single test as infallible or any single authorities, it is not possible to lay down any single test as infallible or any single criterion as decisive in the determination of the question, which must ultimately criterion as decisive in the determination of the question, which must ultimately criterion as decisive in the determination of the question, which must ultimately depend on the facts of the particular case, and depend on the facts of the particular case, and the authorities bearing on the the authorities bearing on the question are valuable only as indicating the matters that have to be taken into question are valuable only as indicating the matters that have to be taken into question are valuable only as indicating the matters that have to be taken into account in reaching a decision. Vide Van Den Berghs Ltd. v. Clark [1935] 3 account in reaching a decision. Vide Van Den Berghs Ltd. v. Clark [1935] 3 account in reaching a decision. Vide Van Den Berghs Ltd. v. Clark [1935] 3 ITR (Eng. Cas.) 17. That, however, is not to say that the question is (Eng. Cas.) 17. That, however, is not to say that the question is one of fact, for, as one of fact, for, as observed in Davies (H.M. Inspector of Taxes) v. Shell Company of China Ltd. observed in Davies (H.M. Inspector of Taxes) v. Shell Company of China Ltd. observed in Davies (H.M. Inspector of Taxes) v. Shell Company of China Ltd. [1952] 22 ITR (Suppl.) 1, "these questions between capital and income, t , "these questions between capital and income, t , "these questions between capital and income, trading profit or no trading profit, are questions which, though they may depend no doubt to a no trading profit, are questions which, though they may depend no doubt to a no trading profit, are questions which, though they may depend no doubt to a very great extent on the particular facts of each case, do involve a conclusion of very great extent on the particular facts of each case, do involve a conclusion of very great extent on the particular facts of each case, do involve a conclusion of law to be drawn from those facts." law to be drawn from those facts." 12. In Kettlewell Bullen & Co. Ltd.'s case ( In Kettlewell Bullen & Co. Ltd.'s case (supra), dealing with the question whether supra), dealing with the question whether compensation received by an agent for premature determination of the contract of compensation received by an agent for premature determination of the contract of compensation received by an agent for premature determination of the contract of agency is a capital or a revenue receipt, echoing the views expressed in Rai Bahadur agency is a capital or a revenue receipt, echoing the views expressed in Rai Bahadur agency is a capital or a revenue receipt, echoing the views expressed in Rai Bahadur Jairam Valji's case (supra) and analysing numero Jairam Valji's case (supra) and analysing numerous judgments on the point, this Court us judgments on the point, this Court laid down the following broad principle, which may be taken into account in reaching laid down the following broad principle, which may be taken into account in reaching laid down the following broad principle, which may be taken into account in reaching a decision on the issue :

7 ITA No. 113/Kol/2017 Assessment Year: 2009-10 & C.O. No. 16/Kol/2017 Assessment Year: 2009-10 IT(SS)A No. 08/Kol/2017 Assessment Year: 2009-10 M/s. Ramkrishna Forgings Ltd. "Where on a consideration of the circumstances, payment is made to compensate "Where on a consideration of the circumstances, payment is made to compensate "Where on a consideration of the circumstances, payment is made to compensate a person for cancellation of a person for cancellation of a contract which does not affect the trading structure a contract which does not affect the trading structure of his business, nor deprive him of what in substance is his source of income, of his business, nor deprive him of what in substance is his source of income, of his business, nor deprive him of what in substance is his source of income, termination of the contract being a normal incident of the business, and such termination of the contract being a normal incident of the business, and such termination of the contract being a normal incident of the business, and such cancellation leaves him free to carry on his cancellation leaves him free to carry on his trade (freed from the contract trade (freed from the contract terminated) the receipt is revenue : Where by the cancellation of an agency the terminated) the receipt is revenue : Where by the cancellation of an agency the terminated) the receipt is revenue : Where by the cancellation of an agency the trading structure of the assessee is impaired, or such cancellation results in loss of trading structure of the assessee is impaired, or such cancellation results in loss of trading structure of the assessee is impaired, or such cancellation results in loss of what may be regarded as the source of the assessee's inco what may be regarded as the source of the assessee's income, the payment made me, the payment made to compensate for cancellation of the agency agreement is normally a capital to compensate for cancellation of the agency agreement is normally a capital to compensate for cancellation of the agency agreement is normally a capital receipt." 13. We have considered the matter in the light of the afore We have considered the matter in the light of the afore-noted broad principle. It is noted broad principle. It is clear from clause No. 6 of the agreement dated 1 clear from clause No. 6 of the agreement dated 1-9-1967, extracted above, that the tracted above, that the liquidated damages were to be calculated at 0.5 per cent of the price of the respective liquidated damages were to be calculated at 0.5 per cent of the price of the respective liquidated damages were to be calculated at 0.5 per cent of the price of the respective machinery and equipment to which the items were delivered late, for each month of machinery and equipment to which the items were delivered late, for each month of machinery and equipment to which the items were delivered late, for each month of delay in delivery completion, without proof of the actual dama delay in delivery completion, without proof of the actual damages the assessee would ges the assessee would have suffered on account of the delay. The delay in supply could be of the whole plant have suffered on account of the delay. The delay in supply could be of the whole plant have suffered on account of the delay. The delay in supply could be of the whole plant or a part thereof but the determination of damages was not based upon the or a part thereof but the determination of damages was not based upon the or a part thereof but the determination of damages was not based upon the calculation made in respect of loss of profit on account of supply of a calculation made in respect of loss of profit on account of supply of a particular part of particular part of the plant. It is evident that the damages to the assessee was directly and intimately the plant. It is evident that the damages to the assessee was directly and intimately the plant. It is evident that the damages to the assessee was directly and intimately linked with the procurement of a capital asset, i.e., the cement plant, which would linked with the procurement of a capital asset, i.e., the cement plant, which would linked with the procurement of a capital asset, i.e., the cement plant, which would obviously lead to delay in coming into existence of the profit obviously lead to delay in coming into existence of the profit-making apparatus, rather ng apparatus, rather than a receipt in the course of profit than a receipt in the course of profit-earning process. Compensation paid for the delay earning process. Compensation paid for the delay in procurement of capital asset amounted to sterilization of the capital asset of the in procurement of capital asset amounted to sterilization of the capital asset of the in procurement of capital asset amounted to sterilization of the capital asset of the assessee as supplier had failed to supply the plant within ti assessee as supplier had failed to supply the plant within time as stipulated in the me as stipulated in the agreement and clause No. 6 thereof came into play. The afore agreement and clause No. 6 thereof came into play. The afore-stated amount received stated amount received by the assessee towards compensation for sterilization of the profit by the assessee towards compensation for sterilization of the profit-earning source, not earning source, not in the ordinary course of their business, in our opinion, w in the ordinary course of their business, in our opinion, was a capital receipt in the as a capital receipt in the hands of the assessee. We are, therefore, in agreement with the opinion recorded by hands of the assessee. We are, therefore, in agreement with the opinion recorded by hands of the assessee. We are, therefore, in agreement with the opinion recorded by the High Court on question Nos. (i) and (ii) extracted in Para 1 (supra) and hold that the High Court on question Nos. (i) and (ii) extracted in Para 1 (supra) and hold that the High Court on question Nos. (i) and (ii) extracted in Para 1 (supra) and hold that the amount of Rs. 8,50,000 received by the assessee from the amount of Rs. 8,50,000 received by the assessee from the suppliers of the plant was the suppliers of the plant was in the nature of a capital receipt.” in the nature of a capital receipt.” 9. As the ld. CIT(A) has applied the proposition of law laid down by the Hon’ble As the ld. CIT(A) has applied the proposition of law laid down by the Hon’ble As the ld. CIT(A) has applied the proposition of law laid down by the Hon’ble Supreme Court, on similar facts, on similar facts, we have to uphold the same and dismiss Ground No. 2 we have to uphold the same and dismiss Ground No. 2 of the revenue in both the appeals. h the appeals. 10. Ground No. 3 is on the issue of disallowance made for delay in deposit of Ground No. 3 is on the issue of disallowance made for delay in deposit of Ground No. 3 is on the issue of disallowance made for delay in deposit of employees contribution towards ESI. employees contribution towards ESI.

8 ITA No. 113/Kol/2017 Assessment Year: 2009-10 & C.O. No. 16/Kol/2017 Assessment Year: 2009-10 IT(SS)A No. 08/Kol/2017 Assessment Year: 2009-10 M/s. Ramkrishna Forgings Ltd. 11. The ld. CIT(A) on facts held that the ESI payments in question were made in The ld. CIT(A) on facts held that the ESI payments in question were made in The ld. CIT(A) on facts held that the ESI payments in question were made in September, 2008 and hence made before the September, 2008 and hence made before the prescribed due date of filing of the return filing of the return u/s 139 of the Act and hence allowable. This factual position could not be disputed by u/s 139 of the Act and hence allowable. This factual position could not be disputed by u/s 139 of the Act and hence allowable. This factual position could not be disputed by the ld. D/R. Hence, we uphold the order of the ld. CIT(A) and dismiss Ground No. 3 of the ld. D/R. Hence, we uphold the order of the ld. CIT(A) and dismiss Ground No. 3 of the ld. D/R. Hence, we uphold the order of the ld. CIT(A) and dismiss Ground No. 3 of the revenue in both these appeals. the revenue in both these appeals. 12. Ground No. 4 is on the disallowance u/s 14A of the Act. Ground No. 4 is on the disallowance u/s 14A of the Act. 13. The ld. CIT(A) deleted the disallowance made of proportionate interest of The ld. CIT(A) deleted the disallowance made of proportionate interest of The ld. CIT(A) deleted the disallowance made of proportionate interest of Rs.80,800/- for the reason that the assessee had interest free own funds in excess of for the reason that the assessee had interest free own funds in excess of for the reason that the assessee had interest free own funds in excess of investments, on the presumption that on the presumption that interest free funds were utilized for investment. interest free funds were utilized for investment. This presumption is in accordance with the propositions of the law laid down by the This presumption is in accordance with the propositions of the law laid down by the This presumption is in accordance with the propositions of the law laid down by the Hon’ble Bombay High Court in the case of Hon’ble Bombay High Court in the case of Commissioner of Income Tax vs. HDFC Bank Commissioner of Income Tax vs. HDFC Bank Ltd. reported in [2014] 366 ITR 505 (Bo [2014] 366 ITR 505 (Bombay). Thus, we uphold the order of the ld. . Thus, we uphold the order of the ld. CIT(A) and delete this disallowance. CIT(A) and delete this disallowance. Hence, Ground No. 4 of the revenue in both the Hence, Ground No. 4 of the revenue in both the appeals are dismissed. 14. Ground No. 5, is against the enhancing the depreciation on block assets. The ld. Ground No. 5, is against the enhancing the depreciation on block assets. The ld. Ground No. 5, is against the enhancing the depreciation on block assets. The ld. D/R submits that this was not claimed by the assessee. On a query from the Bench he s was not claimed by the assessee. On a query from the Bench he s was not claimed by the assessee. On a query from the Bench he submits that the depreciation in question has to be allowed as per law, though not submits that the depreciation in question has to be allowed as per law, though not submits that the depreciation in question has to be allowed as per law, though not claimed by the assessee. Thus, we dismiss this ground of the revenue in both the claimed by the assessee. Thus, we dismiss this ground of the revenue in both the claimed by the assessee. Thus, we dismiss this ground of the revenue in both the appeals. 15. Ground No. 6 is general in nature in both the appeals. general in nature in both the appeals. 16. In the result, both the appeals of the revenue are dismissed. In the result, both the appeals of the revenue are dismissed. In the result, both the appeals of the revenue are dismissed. 17. Coming to the cross Coming to the cross-objection filed by the assessee, the grounds of cross objection filed by the assessee, the grounds of cross- objections, read as follows:- “1. For that in the facts and circumstanc For that in the facts and circumstances of the case, the Ld. CIT(A) was not justified es of the case, the Ld. CIT(A) was not justified in treating the loss of Rs.99,07,016/ in treating the loss of Rs.99,07,016/-, being Rs.90,78,000/- towards ‘Forex Derivative’ loss, towards ‘Forex Derivative’ loss, Rs.6,25,200/- towards the loss on ‘forward booking of yen’ and Rs.2,03,816/ towards the loss on ‘forward booking of yen’ and Rs.2,03,816/ towards the loss on ‘forward booking of yen’ and Rs.2,03,816/- towards loss on account of ‘Revaluat on account of ‘Revaluation of Packing Credit loan’, as speculative loss as against the ion of Packing Credit loan’, as speculative loss as against the normal business loss as claimed by the assessee. normal business loss as claimed by the assessee. 2. For that in the facts and in the circumstances of the case, the Ld. CIT(A) was not For that in the facts and in the circumstances of the case, the Ld. CIT(A) was not For that in the facts and in the circumstances of the case, the Ld. CIT(A) was not justified in confirming the addition Rs.1,04,526/ justified in confirming the addition Rs.1,04,526/- made u/s 14A r.w. Rule 8D of the Act.” /s 14A r.w. Rule 8D of the Act.”

9 ITA No. 113/Kol/2017 Assessment Year: 2009-10 & C.O. No. 16/Kol/2017 Assessment Year: 2009-10 IT(SS)A No. 08/Kol/2017 Assessment Year: 2009-10 M/s. Ramkrishna Forgings Ltd. 18. Ground No. 2 is dismissed as not pressed. Ground No. 2 is dismissed as not pressed. 19. After hearing rival contentions, we find that the loss of Rs.90,78,000/ After hearing rival contentions, we find that the loss of Rs.90,78,000/ After hearing rival contentions, we find that the loss of Rs.90,78,000/- is forex derivatives loss and forex loss of forex loss of Rs.2,03,816/- was on account of revaluation of packing was on account of revaluation of packing credit loan. The Kolkata ‘C’ Bench of the Tribunal in the case of credit loan. The Kolkata ‘C’ Bench of the Tribunal in the case of DCIT vs. DCIT vs. M/s. Gujarat NRE Coke Ltd. in ITA No. 167/Kol/2018, order dt. 18/12/2019, NRE Coke Ltd. in ITA No. 167/Kol/2018, order dt. 18/12/2019, held as follows: held as follows:- “4. Lastly comes the third issue of disallowance of foreign exchange loss amounting to “4. Lastly comes the third issue of disallowance of foreign exchange loss amounting to “4. Lastly comes the third issue of disallowance of foreign exchange loss amounting to ₹74,39,71,483/-. The CIT(A)'s detailed discussion qua this last issue reads as under: . The CIT(A)'s detailed discussion qua this last issue reads as under: . The CIT(A)'s detailed discussion qua this last issue reads as under:- "4. I have carefully considered the action of the Ld.AO as well as the various "4. I have carefully considered the action of the Ld.AO as well as the various "4. I have carefully considered the action of the Ld.AO as well as the various submissions and arguments made by the appellant company. I have also carefully submissions and arguments made by the appellant company. I have also carefully submissions and arguments made by the appellant company. I have also carefully examined the Paper Book bearing reference to the various issues placed for attention he Paper Book bearing reference to the various issues placed for attention he Paper Book bearing reference to the various issues placed for attention by the Ld. A.R for the appellant in his submissions. From the factual matrix, it by the Ld. A.R for the appellant in his submissions. From the factual matrix, it by the Ld. A.R for the appellant in his submissions. From the factual matrix, it emerges that the Ld. A.O. observed that the assessee emerges that the Ld. A.O. observed that the assessee-company had booked foreign company had booked foreign exchange loss of Rs. exchange loss of Rs.14,26,54,748/- on repayment of foreign currency loans and on repayment of foreign currency loans and Rs.60,13,16,734/- - under the head exception items, aggregating to Rs.74,39,71,483/ under the head exception items, aggregating to Rs.74,39,71,483/-. When required to explain during the scrutiny proceedings, it was submitted by the When required to explain during the scrutiny proceedings, it was submitted by the When required to explain during the scrutiny proceedings, it was submitted by the appellant that the exceptional i appellant that the exceptional items were pertaining to unusual diminution in the tems were pertaining to unusual diminution in the value of rupee as against the US Dollar during the year, that the closing value of value of rupee as against the US Dollar during the year, that the closing value of value of rupee as against the US Dollar during the year, that the closing value of Packing Credit Facility (PCFC) and External Commercial Borrowings (ECB) had been Packing Credit Facility (PCFC) and External Commercial Borrowings (ECB) had been Packing Credit Facility (PCFC) and External Commercial Borrowings (ECB) had been restated at the rate prevailing as on the restated at the rate prevailing as on the last of the A.Y. as per AS-11 and sec.43A does 11 and sec.43A does not permit the capitalization of this loss and that the net loss of Rs.51,77,406/ not permit the capitalization of this loss and that the net loss of Rs.51,77,406/ not permit the capitalization of this loss and that the net loss of Rs.51,77,406/- was on revenue account. Reliance was placed in the case of on revenue account. Reliance was placed in the case of CIT vs. Woodward CIT vs. Woodward Governor India Pvt. Ltd. [312 ITR 254 (SC)]. The appellant has also submitted that further, on . [312 ITR 254 (SC)]. The appellant has also submitted that further, on . [312 ITR 254 (SC)]. The appellant has also submitted that further, on receipt of the draft order u/s.144C(1)/ 143(3) dated 31.03.2016, the assessee filed a receipt of the draft order u/s.144C(1)/ 143(3) dated 31.03.2016, the assessee filed a receipt of the draft order u/s.144C(1)/ 143(3) dated 31.03.2016, the assessee filed a petition u/s. 154 of the, Act dated. 08.04.2016 pointing out that notional petition u/s. 154 of the, Act dated. 08.04.2016 pointing out that notional petition u/s. 154 of the, Act dated. 08.04.2016 pointing out that notional capital loss of Rs.74,39,71,483/ of Rs.74,39,71,483/- on account of revaluation of outstanding foreign currency loans on account of revaluation of outstanding foreign currency loans has been erroneously disallowed, inasmuch as loss on repayment/revaluation of has been erroneously disallowed, inasmuch as loss on repayment/revaluation of has been erroneously disallowed, inasmuch as loss on repayment/revaluation of foreign currency loans was to the tune of Rs.14,26,54,748, comprising of realiz foreign currency loans was to the tune of Rs.14,26,54,748, comprising of realiz foreign currency loans was to the tune of Rs.14,26,54,748, comprising of realized loss on repayment of foreign currency loans of Rs. 11,34,84,999/ on repayment of foreign currency loans of Rs. 11,34,84,999/- and unrealized loss on and unrealized loss on revaluation of outstanding foreign currency loans as on 31.03.2012 of revaluation of outstanding foreign currency loans as on 31.03.2012 of revaluation of outstanding foreign currency loans as on 31.03.2012 of Rs.2,91,69,750/-, it was contended by the appellant that an erroneous figure by an , it was contended by the appellant that an erroneous figure by an , it was contended by the appellant that an erroneous figure by an excess of Rs.71,48,01,733/ s.71,48,01,733/- [Rs.74,39,71,483 - Rs.2,91,69,750] has been considered in Rs.2,91,69,750] has been considered in the draft order. However, as has been submitted by the appellant, while passing the the draft order. However, as has been submitted by the appellant, while passing the 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 final assessment order, the Ld. AO did not consider the said 154 petition, and alleged 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 ssessee could not substantiate the business expediency for loss of ssessee could not substantiate the business expediency for loss of Rs.51,77,406/- on premature cancellation of Forward Exchange Contracts. The on premature cancellation of Forward Exchange Contracts. The on premature cancellation of Forward Exchange Contracts. The Learned. AO also did not accept the assessee's explanation with respect to notional Learned. AO also did not accept the assessee's explanation with respect to notional Learned. AO also did not accept the assessee's explanation with respect to notional loss on closing value of PCFC loss on closing value of PCFC & ECB. The Ld. AO has held that the foreign exchange & ECB. The Ld. AO has held that the foreign exchange fluctuation loss being a notional loss not incurred in the normal course of business fluctuation loss being a notional loss not incurred in the normal course of business fluctuation loss being a notional loss not incurred in the normal course of business was not on revenue account and hence not allowable u/s 37(1) of the Act. was not on revenue account and hence not allowable u/s 37(1) of the Act. was not on revenue account and hence not allowable u/s 37(1) of the Act. The Ld. AO thus disallowed foreign exchange The Ld. AO thus disallowed foreign exchange fluctuation loss amounting to Rs.74,39,71,483/ fluctuation loss amounting to Rs.74,39,71,483/- u/s. 37(1) of the Act and added back the same to the assessee's total income. On examination u/s. 37(1) of the Act and added back the same to the assessee's total income. On examination u/s. 37(1) of the Act and added back the same to the assessee's total income. On examination of the contentions made by the Ld. AR for the appellant, I find myself in agreement with the of the contentions made by the Ld. AR for the appellant, I find myself in agreement with the of the contentions made by the Ld. AR for the appellant, I find myself in agreement with the contentions of the appellant that the Learned. AO has made a mistake in considering the ellant that the Learned. AO has made a mistake in considering the ellant that the Learned. AO has made a mistake in considering the figure of PCFC and ECB revaluation loss to be Rs.74,39,71,483/ figure of PCFC and ECB revaluation loss to be Rs.74,39,71,483/- rather than Rs.29169.750/ rather than Rs.29169.750/- as is obvious from the list of breakup of foreign loss as submitted by the appellant. It is also as is obvious from the list of breakup of foreign loss as submitted by the appellant. It is also as is obvious from the list of breakup of foreign loss as submitted by the appellant. It is also quite obvious that the Ld. AO has not said anything in the matter of foreix losses incurred by ite obvious that the Ld. AO has not said anything in the matter of foreix losses incurred by ite obvious that the Ld. AO has not said anything in the matter of foreix losses incurred by

10 ITA No. 113/Kol/2017 Assessment Year: 2009-10 & C.O. No. 16/Kol/2017 Assessment Year: 2009-10 IT(SS)A No. 08/Kol/2017 Assessment Year: 2009-10 M/s. Ramkrishna Forgings Ltd. the assessee-appellant on account of import of cooking coal and export of metcoke, major appellant on account of import of cooking coal and export of metcoke, major appellant on account of import of cooking coal and export of metcoke, major components contributing to Forex loss / gain. As has been brought to notic components contributing to Forex loss / gain. As has been brought to notice in the succeeding e in the succeeding year AY 2013-14, the Ld AO has allowed foreign exchange loss of Rs.45,11,62,855/ 14, the Ld AO has allowed foreign exchange loss of Rs.45,11,62,855/ 14, the Ld AO has allowed foreign exchange loss of Rs.45,11,62,855/- being the actual foreign exchange loss incurred on account of import of cooking coal and export of actual foreign exchange loss incurred on account of import of cooking coal and export of actual foreign exchange loss incurred on account of import of cooking coal and export of metcoke to be allowable u/s. 37(1) of the Income Tax ac metcoke to be allowable u/s. 37(1) of the Income Tax act, 1961. In the matter of the t, 1961. In the matter of the Revaluation / cancellation of contracts after examination of the details submitted by the Revaluation / cancellation of contracts after examination of the details submitted by the Revaluation / cancellation of contracts after examination of the details submitted by the appellant, I find that the Ld AO has disallowed the loss on specious grounds that there was no appellant, I find that the Ld AO has disallowed the loss on specious grounds that there was no appellant, I find that the Ld AO has disallowed the loss on specious grounds that there was no binding urgency on the assessee to cancel binding urgency on the assessee to cancel the contracts prematurely. The Ld. AO has said that the contracts prematurely. The Ld. AO has said that the business expediency was not emanating from such cancellation. However, I find that the the business expediency was not emanating from such cancellation. However, I find that the the business expediency was not emanating from such cancellation. However, I find that the matter has been explained by the appellant that it has entered into a number of forward matter has been explained by the appellant that it has entered into a number of forward matter has been explained by the appellant that it has entered into a number of forward contracts in foreign currency in the normal course of its business of import and export of rency in the normal course of its business of import and export of rency in the normal course of its business of import and export of goods to hedge against fluctuation in exchange rates, and that however, due to insufficient goods to hedge against fluctuation in exchange rates, and that however, due to insufficient goods to hedge against fluctuation in exchange rates, and that however, due to insufficient funds to pay to the Bank for import of goods as on the date of maturity of the contact, it had funds to pay to the Bank for import of goods as on the date of maturity of the contact, it had funds to pay to the Bank for import of goods as on the date of maturity of the contact, it had to cancel ta few contracts during the year. It was explained that due to cancellation of these cancel ta few contracts during the year. It was explained that due to cancellation of these cancel ta few contracts during the year. It was explained that due to cancellation of these contracts, the Bank debited/credited the account of the assessee with the exchange contracts, the Bank debited/credited the account of the assessee with the exchange contracts, the Bank debited/credited the account of the assessee with the exchange (loss)/gains. Therefore, I find myself in agreement with the appellant that the (loss)/gains. Therefore, I find myself in agreement with the appellant that the (loss)/gains. Therefore, I find myself in agreement with the appellant that the exchange loss on cancellation of foreign exchange contracts was actual loss suffered by the assessee. The on cancellation of foreign exchange contracts was actual loss suffered by the assessee. The on cancellation of foreign exchange 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 matter has also been elucidated and substantiated by the as in the sample copy of the Bank 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 supportin Advice for cancellation of the contract and other supporting documents at page 1 g documents at page 1-3 of the paper book. I am inclined to accept the contention that these were real losses on account of paper book. I am inclined to accept the contention that these were real losses on account of 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 cancellation of the contracts was debited to the account of the assessee, as such the same was cancellation of the contracts was debited to the account of the assessee, as such the same was a actual loss suffer by the assessee. a actual loss suffer by the assessee. The assessee is able to establish a proximate nexus of the 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 losses with the business and the matte, in my considered view is covered by the view 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 Hon'ble Supreme Court in the case of S.A. Builders Ltd. Vs. CIT (2007) 288 ITR 1 (SC). 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 n my considered view to be examined from the point of view of the assessee, as it is n 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 seen that these are regular losses / gains coming to the assessee year on year as it ins in the 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 coo business of import and export of items, and it is a regular importer of coo 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 exporter of metcoke. Further courts have held that such losses are business losses when there 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 is failure of an assessee to execute certain export contracts for which it has to incur losses, as is failure of an assessee to execute certain export contracts for which it has to incur losses, as it is quite a normal practice to hedge against lo it is quite a normal practice to hedge against losses by booking foreign exchange in the sses by booking foreign exchange in the forward market with banks. I also find that the claim of the assessee that the loss of forward market with banks. I also find that the claim of the assessee that the loss of forward market with banks. I also find that the claim of the assessee that the loss of Rs.1,37,89,339/- on account of revaluation of forward contracts as at the end of the reporting on account of revaluation of forward contracts as at the end of the reporting on account of revaluation of forward contracts as at the end of the reporting period would be covered by the cas period would be covered by the case of the Hon'ble Apex Court in CIT vs. Woodward Governor CIT vs. Woodward Governor India (P) Ltd. (2009) 312 ITR 0254 (SC) wherein it was held that loss due to foreign exchange . (2009) 312 ITR 0254 (SC) wherein it was held that loss due to foreign exchange . (2009) 312 ITR 0254 (SC) wherein it was held that loss due to foreign exchange fluctuation in foreign currency transactions has to be fluctuation in foreign currency transactions has to be considered on the last date of considered on the last date of accounting year and it is deductible u/s 37(1) of the Act. The Hon'ble Court has clarified that accounting year and it is deductible u/s 37(1) of the Act. The Hon'ble Court has clarified that accounting year and it is deductible u/s 37(1) of the Act. The Hon'ble Court has clarified that the important point to be noted is that AS the important point to be noted is that AS-11 stipulates effect of changes in exchange rate vis 11 stipulates effect of changes in exchange rate vis- a-vis monetary items denominated vis monetary items denominated in a foreign currency to be taken into account for giving in a foreign currency to be taken into account for giving accounting treatment on the balance sheet date. Therefore, an enterprise has to report the accounting treatment on the balance sheet date. Therefore, an enterprise has to report the accounting treatment on the balance sheet date. Therefore, an enterprise has to report the outstanding liability relating to import of raw materials using closing rate of exchange. "Any outstanding liability relating to import of raw materials using closing rate of exchange. "Any outstanding liability relating to import of raw materials using closing rate of exchange. "Any difference. loss or gain, arising on conversion of the said liability at the closing rate, should be loss or gain, arising on conversion of the said liability at the closing rate, should be loss or gain, arising on conversion of the said liability at the closing rate, should be recognized in the P&L account for the reporting period". recognized in the P&L account for the reporting period". 5. It is also observed that as has been brought top notice and relied upon by the appellant 5. It is also observed that as has been brought top notice and relied upon by the appellant 5. It is also observed that as has been brought top notice and relied upon by the appellant - company, the said matter is also covered in favor of the assessee by the order of the Hon'ble id matter is also covered in favor of the assessee by the order of the Hon'ble id matter is also covered in favor of the assessee by the order of the Hon'ble Jurisdictional ITAT-"C" - Bench in ITA No. 2133/Kol/2010 in the case of Neptune exports Ltd. Bench in ITA No. 2133/Kol/2010 in the case of Neptune exports Ltd. Bench in ITA No. 2133/Kol/2010 in the case of Neptune exports Ltd. In their order dated 29.03.2011, the Hon'ble ITAT, relying on the decision of the Ho In their order dated 29.03.2011, the Hon'ble ITAT, relying on the decision of the Ho In their order dated 29.03.2011, the Hon'ble ITAT, relying on the decision of the Hon'ble Apex court in CIT Vs Woodward Governor India Ltd. have observed as follows: court in CIT Vs Woodward Governor India Ltd. have observed as follows: "As regarding disallowance on account of foreign exchange fluctuation loss as well as "As regarding disallowance on account of foreign exchange fluctuation loss as well as "As regarding disallowance on account of foreign exchange fluctuation loss as well as profit on conversion of foreign currency keeping in view of the fact that the Hon'ble profit on conversion of foreign currency keeping in view of the fact that the Hon'ble profit on conversion of foreign currency keeping in view of the fact that the Hon'ble Apex Court cited supra has held that "loss suffered by the assessee in respect of the pex Court cited supra has held that "loss suffered by the assessee in respect of the pex Court cited supra has held that "loss suffered by the assessee in respect of the

11 ITA No. 113/Kol/2017 Assessment Year: 2009-10 & C.O. No. 16/Kol/2017 Assessment Year: 2009-10 IT(SS)A No. 08/Kol/2017 Assessment Year: 2009-10 M/s. Ramkrishna Forgings Ltd. revenue liability on account of exchange difference as on the date of the balance revenue liability on account of exchange difference as on the date of the balance revenue liability on account 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." sheet is an item of expenditure allowable u/s 37(1) in the year of accrual." 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 iew taken by the Id. CIT(A) is in conformity with the decision of the Hon'ble Apex iew 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 Id. CIT(A) and we confirm the same and dismiss Court we find no infirmity in the orders of the Id. CIT(A) and we confirm the same and dismiss Court we find no infirmity in the orders of the Id. CIT(A) and we confirm the same and dismiss the appeal of the Revenue." the appeal of the Revenue." In view of these rulings, I hold that the Ld AO w In view of these rulings, I hold that the Ld AO was not justified in making the addition of as not justified in making the addition of Rs.51,77,406/- on account of cancellation and / or revaluation of contracts, and I find that on account of cancellation and / or revaluation of contracts, and I find that on account of cancellation and / or revaluation of contracts, and I find that the amount would be deductible u/s 37(1) of the the amount would be deductible u/s 37(1) of the Income Tax Act.” 20. Respectfully following the same, we allow the Respectfully following the same, we allow the claim of the assessee by holding claim of the assessee by holding that forex loss of Rs.90,78,000/ that forex loss of Rs.90,78,000/- and forex loss of Rs.2,03,816/- is in the revenue field is in the revenue field and has to be allowed as expenditure u/s 37 of the Act. and has to be allowed as expenditure u/s 37 of the Act. 21. On the issue of forex loss On the issue of forex loss of Rs.6,25,200/-, we find that it is on capital account , we find that it is on capital account as it was incurred on forward booking of yen, in respect of it was incurred on forward booking of yen, in respect of a capital asset. Thus, the capital asset. Thus, the disallowance to this extent is upheld. extent is upheld. 22. In the result, both the appeals of the revenue are dismissed and the In the result, both the appeals of the revenue are dismissed and the In the result, both the appeals of the revenue are dismissed and the cross- objection of the assessee is allowed in part. objection of the assessee is allowed in part. Kolkata, the Kolkata, the 13th day of March, 2020. Sd/- Sd/- [Aby T. Varkey] [J. Sudhakar Reddy J. Sudhakar Reddy] Judicial Member Accountant Member Accountant Member Dated : 13.03.2020 {SC SPS}

12 ITA No. 113/Kol/2017 Assessment Year: 2009-10 & C.O. No. 16/Kol/2017 Assessment Year: 2009-10 IT(SS)A No. 08/Kol/2017 Assessment Year: 2009-10 M/s. Ramkrishna Forgings Ltd. Copy of the order forwarded to: 1. M/s. Ramkrishna Forgings Ltd M/s. Ramkrishna Forgings Ltd 16, Camac Street L&T Chamber 6th Floor Kolkata – 700 017