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Income Tax Appellate Tribunal, DELHI BENCH “A” NEW DELHI
IN THE INCOME TAX APPELLATE TRIBUNAL DELHI BENCH “A” NEW DELHI BEFORE SHRI S.V. MEHROTRA : ACCOUNTANT MEMBER AND SHRI SUDHANSHU SRIVASTAVA: JUDICIAL MEMBER Asstt. Yr: 2009-10 ACIT Circle 1(1), Vs. M/s Ajanta Offset and Packaging Ltd., New Delhi. 95-B, Wazirpur Industrial Area, New Delhi-110052. PAN: AAACA 0245 Q ( Appellant ) (Respondent) Appellant by : Shri Vidur Puri CA Assessee by : Shri S.L. Anuragi DR Date of hearing : 15/02/2016. Date of order : 17/02/2016. O R D E R PER S.V. MEHROTRA, A.M:
The captioned appeal, preferred by the revenue, is directed against CIT(A)-IV, New Delhi’s order dated 28.1.2013 relating to AY 2009-10.
Brief facts of the case are that in the relevant assessment year the assessee was engaged in the business of offset printing of books, calendars, diaries, stationeries and publicity materials. It had filed its return of income declaring Nil income. AO had computed the total income at Rs. 43,34,942/-, inter alia, making disallowance of foreign exchange fluctuation of Rs. 1,69,11,584/- and disallowance of bank changes aggregating to Rs. 31,30,850/-.
Ld. CIT(A) deleted both the additions. Being aggrieved the department is in appeal before us and has taken following grounds of appeal: “1. Whether the Ld. CIT (A) has erred in law and on facts in deleting the addition of Rs. 142,80,450/- made on account of exchange fluctuation loss on loans taken for fixed assets ignoring the fact that the forex loss was on account of loan taken for purchase of plant and machinery which should have been capitalized instead of claiming as revenue expenditure.
2. Whether the Ld. (IT (A) has erred in law and on facts in deleting the disallowance of Rs. 31,03,850/- made on account of bank charges ignoring the fact that the bank charges were incurred for loan raised to acquire plant and machinery and should have been capitalized instead of claiming as revenue expenditure.
3. The Appellant craves leave for reserving the right to amend, modify, alter, add or forego any ground(s) of appeal at any time before or during the hearing of this appeal.
Brief facts apropos ground no. 1 are that in course of assessment proceedings the assessee was required to provide details of foreign exchange loss debited in the P&L a/c during AY 2009-10. The AO noticed that a portion of forex fluctuation loss pertained to loans taken by the assessee for purchase of plant and machinery and advancing loan to one of its subsidiary in United Kingdom for acquiring business of another company in that country.
After considering the assessee’s reply in detail the AO concluded that loss on account of foreign exchange fluctuation of Rs. 1,42,80,450/- in respect of loan from LBBW and Exim Bank was for purchase of plant and machinery and loss of Rs. 56,15,531/- on loan to subsidiary company was towards acquiring assets abroad aggregating to Rs. 1,98,95,981/- and thus in capital field. He, therefore, disallowed the assessee’s claim and allowed only depreciation @ 15% on loss of Rs. 1,98,95,981/-. Thus, he made addition of Rs. 1,69,11,584/-. 6. In appeal, the ld. CIT(A) in para 4.3 observed as under:
4.3 I have carefully considered the submissions of the Id. AR and perused the order passed by the AO and remand report of the AO. As admitted by the AO in the remand report, the appellant itself has not claimed the exchange fluctuation loss of RS.1 ,42,80,450/- as the same pertains to the loans taken for fixed assets, the AO was not justified in allowing the depreciation @ 15% and making the addition for the balance amount. The addition made by the AO cannot be sustained and hence the same is directed to be deleted. However, the depreciation allowed by AO will also not be allowed. This ground of the appeal is allowed.
At the outset we may point out that there is no dispute as regards the disallowance of Rs. 56,15,531/-. As regards the forex loss of Rs. 1,42,80,450/-, since AO himself had admitted in the remand report that assessee had not claimed the exchange fluctuation loss of Rs. 1,42,80,450/-, therefore, the addition made by AO was rightly deleted by ld. CIT(A) on the basis of remand report. We do not find any reason to interfere with the order of ld. CIT(A) on this count. Ground is dismissed.
Apropos ground no. 2 the AO in para 7 has observed as under: “7. During the assessment proceedings, it is seen that the assessee has paid bank charges which includes documentation fees of Rs. 35000/-, processing fees of Rs. 15006/- and service fees of Rs. 4,25,000/-, totaling Rs. 4,75,000/-on the Term loan from Exim Bank. Further, the assessee has paid documentation fees of Rs. 70,000(1000 Euros) and management fees of Rs. 2558850/-(1% on total loan amount) totaling Rs. 26,28,850/-. Since these expenses have been incurred on capital a/c for acquiring plant and machinery, hence the amount is capitalized. The said expenses paid by the assessee cannot be claimed as revenue expenditure. Therefore a sum of Rs. 3103850/- is being disallowed and is added to the total income of the assessee.”
Before ld. CIT(A) it was, inter alia, pointed out that assessee had paid Rs. 29,05,543/- which were incurred and charged/ capitalized in the books of a/c for AY 2005-06. It was submitted that the amount of Rs. 2,90,55,433/- was not claimed by the assessee during the year and, therefore, there was no justification for making the disallowance. As regards the sum of Rs. 4,75,000/- it was pointed out that the same was incurred for working capital loan and not for acquisition of plant & machinery. The assessee had given entire details in regard to the sum of Rs. 1,45,23,822.56, which have been reproduced at pages 14 & 15 of CIT(A)’s order and after considering the same ld. CIT(A), in para 8.2, has observed as under:
“8.2. I have carefully considered the submissions of the Id. AR and perused the order passed by the AO. I find force in the submissions of the Id. AR that the appellant company has not taken any loan during the year for acquisition of plant and machinery as is clear from page no. 23 and 25 of the Paper Book. Therefore, the disallowance of Rs.29,05,543/- which was not claimed by the appellant during the year cannot be disallowed. I further find that the amount of Rs.4,75,000/- was incurred for working capital loan from Exim Bank and not for acquisition of plant and machinery. Therefore, the addition made by the AO cannot be sustained and hence the same is deleted. The ground of appeal is allowed.
10. These findings of ld. CIT(A) have not at all been controverted by the department and, therefore, the disallowance of Rs. 29,05,543/- which was not claimed by the assessee during the year, could not be disallowed. There is no dispute that the sum of Rs. 4,75,000/- was incurred for working capital loan from Exim Bank and not for acquisition of plant and machinery. Therefore, there was no reason for making any disallowance on this count. Accordingly, order of ld. CIT(A), deleting the addition in question is upheld.
In the result, revenue’s appeal is dismissed. Order pronouncement in open court on 17/02/2016.