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2018 (5) TMI 1587 - AT - Income TaxRevision u/s 263 - Foreign Exchnage(FE) loss disallowance - Held that - The loss on account of a FE fluctuation was not a contingent loss as held by the CIT. The loss was not arising out of any speculative business. The FE loss was due to purchase of capital asset and same was not claimed by the assessee while computing the income under the normal provisions of the Act. We are of the opinion that order of the AO is neither erroneous not prejudicial to the interest of the revenue. We further hold that the loss is not of contingent nature and the direction of the CIT is contrary to the decision of the Hon ble Supreme Court delivered in the case of in Woodward Governor India private Ltd. (2009 (4) TMI 4 - SUPREME COURT ). Accordingly we allow second ground of appeal. MAT - Disallowance of production u/s. 80 IC in respect of voluntary transfer pricing adjustment undertaken by the assessee invoking the provisions of section 92C(4) - Held that - After considering the computation of total income under the normal provisions and the MAT provisions we find that the order of the AO was not prejudicial to the interest of the Revenue as disallowance of deduction u/s. 80 IC to the extent of 9 86 657/-did not affect the tax calculation. Therefore we decide this ground of appeal in favour of the assessee.
Issues:
1. Challenge to the order passed by the Commissioner of Income Tax under section 263 of the Income-tax Act. 2. Treatment of Foreign Exchange (FE) loss in computing income under the Act. 3. Disallowance of production under section 80 IC due to voluntary transfer pricing adjustment. Issue 1: Challenge to the order passed by the Commissioner of Income Tax under section 263 of the Income-tax Act: The assessee challenged the order passed by the Commissioner of Income Tax (LTU) under section 263 of the Act. The Assessing Officer had completed the assessment determining the income of the assessee at Rs. NIL under the normal provisions and calculated book profit at &8377; 96.45 crores under section 115 JB of the Act. The Commissioner found the AO's order erroneous and prejudicial to the revenue's interest, leading to the initiation of revisionary proceedings. The CIT dropped the revisionary proceedings on one of the grounds. Issue 2: Treatment of Foreign Exchange (FE) loss in computing income under the Act: The first ground of appeal focused on the treatment of Foreign Exchange (FE) loss. The CIT directed the AO to recompute the income by disallowing the notional loss resulting from outstanding liabilities/receivables. The AR argued that the loss was actual and not contingent, citing relevant cases. The Tribunal found that the FE loss was not contingent and was due to the purchase of a capital asset, thus not arising from speculative business. The Tribunal referred to previous cases and held in favor of the assessee, stating that the CIT's direction was contrary to the decision in Woodward Governor India Private Ltd. Issue 3: Disallowance of production under section 80 IC due to voluntary transfer pricing adjustment: The third ground of appeal involved the disallowance of production under section 80 IC due to a voluntary transfer pricing adjustment. The CIT held that when an assessee suffers an adjustment proposed by the TPO higher than its voluntary adjustment offer, the provisions of section 92C(4) would trigger. The AR argued that there was no loss to revenue even with the disallowance and that the deduction under section 80 IC was not claimed for the telecom division where the adjustment was made. The Tribunal found that the AO's order was not prejudicial to the revenue, as the disallowance did not affect the tax calculation, thus deciding in favor of the assessee. In conclusion, the Appellate Tribunal ITAT Mumbai addressed various issues in the judgment, including challenging the CIT's order under section 263, the treatment of Foreign Exchange loss in income computation, and the disallowance under section 80 IC due to a voluntary transfer pricing adjustment. The Tribunal ruled in favor of the assessee on the grounds related to the treatment of FE loss and the disallowance under section 80 IC, finding the AO's orders not erroneous or prejudicial to the revenue's interest.
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