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2022 (7) TMI 386 - AT - Income TaxAddition on account of unrealized loss arising from foreign exchange fluctuations - rejection of claim of Forex Loss holding that the loss represented the marked to market loss which is notional and contingent in nature and not eligible for setting off against the taxable income - HELD THAT - As in assessee s own case in AY 2009-10, 2010-11 2018 (7) TMI 2266 - ITAT KOLKATA 2011-12 2019 (8) TMI 1826 - ITAT KOLKATA we find that the issue is squarely covered in favour of the assessee wherein the Co-ordinate Bench has held that loss incurred on account of marked to market basis in respect of forward contracts which were outstanding at the year end on the basis of foreign exchange rate at the end of the year is not a notional loss and also not contingent in nature but a loss which the assessee is entitled to set off against the its income. In view of these facts and circumstances and the decisions of the coordinate bench supra, we are inclined to uphold the order of Ld. CIT(A) by dismissing the ground no. 1 in the revenue s appeal. Disallowance of depreciation on energy saving devices comprising transformer of different KVA, switchyard and chimney etc. - CIT-A directing the AO to allow the depreciation @ 80% as against the depreciation of 15% allowed by the AO - HELD THAT - As undisputed facts in all preceding and succeeding years these items of equipments have been treated as part of the energy saving devices and the assessee has been allowed depreciation @ 80%. As decided in M/S MAHARAJA SHREE UMAID MILLS LTD 2020 (5) TMI 118 - ITAT JAIPUR , RAKESH GUPTA 2013 (6) TMI 691 - ITAT CHANDIGARH , MEHRU ELECTRICALS MECHANICAL ENGINEERS PVT. LTD., ALWAR 2016 (7) TMI 708 - RAJASTHAN HIGH COURT held that transformer, switchyard and chimney are integral part of co-generation system and they are in the nature of energy saving devices. The Ld. CIT(A) has also given a very comprehensive items on the cogeneration system and how the transformer, switchyard, chimney are integral part are energy power generation system not analyzing each item. Under these circumstances, we do not find any reason to interfere in the order passed by the Ld. CIT(A). Besides the issue has been accepted by the Department in all the preceding and succeeding assessment years. Therefore the revenue cannot be allowed to demand a different stand in the current assessment year in this year as there is no change of facts and circumstances during the year vis a vis preceding and succeeding years. The case of assessee also finds support from the decision of Radhasoami Satsang 1991 (11) TMI 2 - SUPREME COURT , CIT vs. Excel Industries Ltd. ( 2013 (10) TMI 324 - SUPREME COURT and Maharao Bhim Singh of Kota vs. CIT ( 2016 (12) TMI 418 - SUPREME COURT on this issue that where there is change in the facts and circumstances vis a vis the earlier years and the revenue has accepted the position with regard to particular issue , then in the subsequent the revenue can not be allowed to take a different stand. In view of these facts and circumstances and considering the various decisions of the various judicial forums as referred to above, we are inclined to uphold the order of Ld. CIT(A) by dismissing the ground no. 2 of revenue s appeal. Additional depreciation claimed by the assessee @ 10% - HELD THAT - As relying on case Rittal India (P) Ltd. 2016 (1) TMI 81 - KARNATAKA HIGH COURT , National Engineering Industrial Ltd. 2021 (12) TMI 1130 - ITAT KOLKATA , Century Enka Ltd. 2015 (5) TMI 647 - ITAT KOLKATA ,and Universal Cables Ltd. 2015 (5) TMI 650 - ITAT KOLKATA the assessee is entitled to remaining 50% of the depreciation in the subsequent year which was not claimed in the year of addition because of the reasons that the asset was put to use for less than 180 days. The assessee has claimed 50% of the depreciation in consonance with second proviso to section 32(1)(ii) of Act. Accordingly we are inclined to uphold the order of Ld. CIT(A) by dismissing the ground no. 3 of revenue. Addition on account of TP adjustment - upholding the internal CUP method to bench mark the transactions of sale of power by directing the AO/TPO to allow the deduction u/s 80IA(8) of the Act - HELD THAT - The power supplied by the CPP to non eligible unit was business to consumer (commonly known As B2C) meaning thereby the rate at which the ultimate consumers can purchase the power for their consumption is relevant. In the instant case before us, the B2C market comprises the sale of power by SEB and IEX etc to different categories of consumers. Thus the power sold by the CPP to unrelated parties namely Noida Power Co Ltd, Global Energy , RPG Power Trading Co, and IEX etc was in altogether different market conditions which is business to business commonly known as B2B model and the said rate represented the rate at which the distribution companies purchased power from generation companies. Further no consumer can buy the power in the open market at a rate generation companies sell power to distribution companies. No force in the contentions of the ld DR that rate at which the power was sold to unrelated parties by the CPP is the ALP. We also note that decision of the Calcuta High court in the case of CIT Vs ITC 2015 (7) TMI 450 - CALCUTTA HIGH COURT which was relied by the TPO/AO and the functional dissimilarity between CPP and SEB have been considered by the coordinate bench of the tribunal in the case of Star Paper Mills Ltd 2021 (11) TMI 1 - ITAT KOLKATA Therefore , we are inclined to uphold the order of Ld. CIT(A) by holding that the ALC at which the power is procured by noneligible unit from SEB is the most appropriate ALP to bench mark the specified domestic transaction and accordingly the order passed by Ld. CIT(A) is upheld by dismissing the ground no. 4 of the revenue s appeal. Disallowance u/s 14A r.w.r. 8D - HELD THAT - CIT(A) allowed the appeal of the assessee so far as the disallowance under Rule 8D(2)(ii) is concerned by holding that the assessee has sufficient own interest free funds available and therefore came to the conclusion that the investment in share and securities were made out of own interest free by relying the decision of Reliance Utilities Power Ltd. 2009 (1) TMI 4 - BOMBAY HIGH COURT , CIT vs. HDFC Bank Ltd. 2016 (3) TMI 755 - BOMBAY HIGH COURT , CIT vs. UTI Bank Ltd. 2013 (6) TMI 223 - GUJARAT HIGH COURT and CIT vs. Max India Ltd. 2016 (11) TMI 1012 - PUNJAB AND HARYANA HIGH COURT and assessee s own case for AYs. 2009-10 2010-11. Disallowance under rule 8D(2)(iii) was concerned, the Ld. CIT(A) allowed the appeal of the assessee by holding that only those investments are required to be considered which yielded exempt income during the year by following the ratio laid down by co-ordinate Bench in assessee s own case 2018 (7) TMI 2266 - ITAT KOLKATA and came to the conclusion that the disallowance under rule 8D(2)(iii) worked out to Rs. 9635/- only. Since the assessee has suo-moto made disallowance which is higher than the disallowance coming under Rule 8D(2)(iii), therefore no need for any disallowance and directed the AO to restrict the disallowance to the suo-moto disallowance. Appeal of revenue dismissed.
Issues Involved:
1. Unrealized loss from foreign exchange fluctuations. 2. Depreciation on energy-saving devices. 3. Additional depreciation claimed. 4. Transfer pricing adjustment for captive power consumption. 5. Disallowance under Section 14A read with Rule 8D. Issue-wise Detailed Analysis: 1. Unrealized Loss from Foreign Exchange Fluctuations: The revenue contested the deletion of an addition of Rs. 2,28,42,000/- for unrealized loss from foreign exchange fluctuations by the CIT(A). The CIT(A) had considered the loss as marked to market and thus not notional or contingent. The Tribunal upheld the CIT(A)'s decision, referencing earlier decisions favoring the assessee, including those from the Hon'ble Apex Court and Co-ordinate Bench decisions for previous assessment years. It was concluded that the loss is not notional but a legitimate one eligible for set-off against taxable income. 2. Depreciation on Energy-Saving Devices: The revenue challenged the CIT(A)'s decision to allow 80% depreciation on energy-saving devices, including transformers, switchyards, and chimneys, which the AO had allowed only 15%. The CIT(A) considered these items as integral parts of the co-generation power system essential for its functioning. The Tribunal supported this view, noting that similar depreciation rates were accepted in preceding and succeeding years and upheld by judicial forums. The Tribunal emphasized that the revenue cannot change its stance without a change in facts or circumstances. 3. Additional Depreciation Claimed: The revenue disputed the CIT(A)'s allowance of additional depreciation of Rs. 92,82,415/- claimed by the assessee for assets used for less than 180 days in the previous year. The CIT(A) ruled that the remaining depreciation could be claimed in the subsequent year, as there is no restrictive condition in Section 32(1)(iia) of the Act. The Tribunal upheld this decision, citing various judicial precedents supporting the allowance of remaining depreciation in subsequent years. 4. Transfer Pricing Adjustment for Captive Power Consumption: The revenue contested the CIT(A)'s deletion of a transfer pricing adjustment of Rs. 6,37,37,035/- for captive power consumption. The CIT(A) accepted the internal CUP method used by the assessee, which benchmarked the power transfer price at Rs. 6.71 per unit, the rate at which the non-eligible unit procured power from SEB. The Tribunal upheld the CIT(A)'s decision, noting that the power sold to third parties at Rs. 3.65 per unit was under different market conditions and not representative of the fair market value. The Tribunal referenced various judicial decisions supporting the use of the SEB rate as the most appropriate ALP. 5. Disallowance under Section 14A read with Rule 8D: The revenue challenged the CIT(A)'s decision to delete disallowances under Rule 8D(2)(ii) and Rule 8D(2)(iii). The CIT(A) found that the assessee had sufficient interest-free funds to cover investments and thus no disallowance under Rule 8D(2)(ii) was warranted. For Rule 8D(2)(iii), the CIT(A) held that only investments yielding exempt income should be considered, resulting in a lower disallowance than the suo-moto disallowance made by the assessee. The Tribunal upheld the CIT(A)'s decision, finding no infirmity in the order. Conclusion: The Tribunal dismissed the revenue's appeal on all grounds, upholding the CIT(A)'s decisions on unrealized forex loss, depreciation on energy-saving devices, additional depreciation, transfer pricing adjustment, and disallowance under Section 14A read with Rule 8D.
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