2021 (1) TMI 1071 - AT - Income Tax

Depreciation on exchange fluctuation - assets acquired in India from the funds raised through Foreign Currency Convertible Bonds (FCCBs) in terms of section 43 (1) of the Act read with explanation 8 thereto and section 43A of the Act and section 36 (1)(iii) - HELD THAT - Depreciation on exchange fluctuation on the assets acquired in India from the funds raised through Foreign Currency Convertible Bonds (FCCBs) in terms of section 43 (1) of the Act, in assessee s own case for the assessment years 2009-10 and 2012-13 2020 (12) TMI 1190 - ITAT DELHI and batch of appeals clearly shows that this aspect was considered in the assessment year 2009-10 and such a view was followed in the subsequent assessment years. The view taken by the Tribunal is followed in assessee s case for the assessment year 2012-13. It is, therefore, clear that the consistent view taken by the Tribunal in assessee s own case for the assessment years 2009-10 and 2012-13 goes in favour of the assessee and in the absence of any change is in the facts are in law, we find it difficult to deviate from the same or to take a different view, more particularly in view of the decision of Radhasoami Satsang 1991 (11) TMI 2 - SUPREME COURT and Excel industries Ltd 2013 (10) TMI 324 - SUPREME COURT in respect of taking consistent view on the same set of facts in the case of the same assessee. We hold grounds in favour of the assessee and direct the authorities to delete the addition. Adjustment to the book profits on section 115 JB on Addition made u/s 14A of the Act read with Rule 8D of the Rules - HELD THAT - Assessee is placing reliance on the decision of the special Bench of the Tribunal in the case of ACIT vs. Vireet investments private Ltd 2017 (6) TMI 1124 - ITAT DELHI which in fact was relied upon by the Tribunal in assessee s own case for the earlier assessment years to hold that the computation under clause (f) of explanation 1 to section 115 JB (2) of the Act has to be made without resorting to the computation as contemplated under section 14A of the Act read with Rule 8D of the Rules. In view of this settled legal position, as has been followed by the Tribunal in assessee s own case for the earlier assessment years, we are of the considered opinion that the adjustment to the book profits under section 115 JB of the Act is not sustainable and the same has to be deleted. Decided in favour of the assessee.

Summary

Issues:
1. Capitalization of exchange-rate fluctuation in respect of missionary bot in India from foreign funds.
2. Disallowance of excess depreciation.
3. Exempt dividend treatment under section 10(34) in computation of tax liability under section 115JB.
4. Adjustment of addition under section 14 of the Act in the computation of book profits under section 115JB.

Issue 1: Capitalization of Exchange-Rate Fluctuation:
The appellant, a company engaged in manufacturing, capitalized exchange-rate fluctuation on assets acquired in India from foreign funds raised through FCCBs. The Assessing Officer disallowed excess depreciation, adding a sum by disallowing the excess depreciation, following a similar order for the previous year. The appellant contended that the reasoning for the addition was not accepted in previous appeals. The Tribunal held that the consistent view taken in previous years favored the appellant, following principles of consistency and legal precedents. The Tribunal directed the authorities to delete the addition, ruling in favor of the appellant.

Issue 2: Disallowance of Excess Depreciation:
The Assessing Officer disallowed excess depreciation claimed by the appellant due to capitalization of exchange-rate fluctuation on assets acquired in India from foreign funds. The Tribunal, based on previous decisions and legal principles, found in favor of the appellant. The Tribunal directed the authorities to delete the addition, holding grounds related to excess depreciation in favor of the appellant.

Issue 3: Exempt Dividend Treatment:
The Assessing Officer observed that the appellant earned an exempt dividend, which was not considered in the computation of tax liability under section 115JB. The appellant argued for the same treatment in the computation of tax liability under section 115JB. The Tribunal, considering settled legal positions and precedents, ruled that the adjustment of the exempt dividend to the book profits under section 115JB was not sustainable. The Tribunal directed the deletion of the adjustment, holding grounds related to exempt dividend treatment in favor of the appellant.

Issue 4: Adjustment under Section 14 of the Act:
An addition was made under section 14A of the Act read with Rule 8D of the Rules, leading to an adjustment to the book profits under section 115JB. The appellant relied on a Tribunal decision in a previous case to argue against this adjustment. The Tribunal, following the settled legal position from previous cases, held that the adjustment was not sustainable. The Tribunal directed the deletion of the adjustment, ruling in favor of the appellant.

In conclusion, the Tribunal allowed the appeal of the appellant, directing the authorities to delete the additions related to the capitalization of exchange-rate fluctuation, excess depreciation, exempt dividend treatment, and adjustment under section 14 of the Act. The Tribunal's decision was based on principles of consistency, legal precedents, and settled legal positions from previous cases.