ACIT, CHENNAI vs. NARMADA INFRASTRUCTURE CONSTRUCTION ENTERPRISES LIMITED, CHENNAI

आदेश / O R D E R

PER ABRAHAM P. GEORGE, ACCOUNTANT MEMBER

ITA No. 1559 & 1560/2016. :- 2 -:

Facts apropos are that assessee has availed loan aggregating 3. to �46,42,85,714.34 from IDFC for construction and maintenance of the bridge, which was constructed and run under BOT scheme. As per ld. Assessing Officer loan availed by the assessee and exchange loss on account of interest payment, all were related to creation of a capital asset. According to him, Sec. 43A of the Act was attracted. A disallowance of �2,16,70,381/- was made for the foreign exchange loss on account of interest payment.

Argument of the assessee, in its appeal before ld. CIT(A) is 4. that key condition of Sec. 43A of the Act was that loan taken should have been for acquiring a foreign asset. As per assessee it had not imported any asset. Contention of the assessee was that Sec. 43A of the Act had no application. Ld. Commissioner of Income Tax (Appeals) appreciated this contention and deleted the addition.

Now before us, ld. Departmental Representative strongly 5. assailing the orders of the lower authorities submitted that foreign

ITA No. 1559 & 1560/2016. :- 3 -: exchange loss on loan raised was for cancellation/roll forward of forward contracts and this was not appreciated by the ld. Commissioner of Income Tax (Appeals).

We have considered the ld. Departmental Representative 7. contention and perused the orders of the authorities below. Sec. 43A of the Act is reproduced here under:-

‘’Notwithstanding anything contained in any other provision of this Act, where an assessee has acquired any asset in any previous year from a country outside India for the purposes of his business or profession and, in consequence of a change in the rate of exchange during any previous year after the acquisition of such asset, there is an increase or reduction in the liability of the assessee as expressed in Indian currency (as compared to the liability existing at the time of acquisition of the asset) at the time of making payment (a) towards the whole or a part of the cost of the asset ; or (b) towards repayment of the whole or a part of the moneys borrowed by him from any person, directly or indirectly, in any foreign currency specifically for the purpose of acquiring the asset along with interest, if any, the amount by which the liability as aforesaid is so increased or reduced during such previous year and which is taken into account at the time of making the payment, irrespective of the method of accounting adopted by the assessee, shall be added to, or, as the case may be, deducted from ITA No. 1559 & 1560/2016. :- 4 -:

(i) the actual cost of the asset as defined in clause (1) of section 43 ; or (ii) the amount of expenditure of a capital nature referred to in clause (iv) of sub-section (1) of section 35 ; or (iii) the amount of expenditure of a capital nature referred to in section 35A ; or (iv) the amount of expenditure of a capital nature referred to in clause (ix) of sub-section (1) of section 36 ; or (v) the cost of acquisition of a capital asset (not being a capital asset referred to in section 50) for the purposes of section 48, and the amount arrived at after such addition or deduction shall be taken to be the actual cost of the asset or the amount of expenditure of a capital nature or, as the case may be, the cost of acquisition of the capital asset as aforesaid’’: As noted by the ld. Commissioner of Income Tax (Appeals), the Section can be invoked only when there is an acquisition of asset from a country outside India. Fixed asset schedule of the assessee consisted of the following items:-

Sl.No Fixed Assets Written Down value (closing) (in �)

1 Building 99,58,85,138 2 Plant and Machinery 1,85,54,005 3 Furniture & Fixtures and 10,32,217 office equipment 4 Vehicles 4,74,862 Revenue could not show any of the assets to have been acquired from a country outside India. In our opinion there could have been no ITA No. 1559 & 1560/2016. :- 5 -: application of Sec. 43A of the Act. We do not find any reason to interfere with the order of the ld. CIT(A).

In the result both appeals of the Revenue are dismissed. 9.

Order pronounced on Friday, the 25th day of November, 2016, at Chennai.