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TMI Blog2011 (12) TMI 585X X X X Extracts X X X X X X X X Extracts X X X X ..... URT ] that loss incurred on revenue side on account of foreign exchange fluctuation is allowable. Since the disallowance of loss amounting to 47,01,720/- is admittedly on revenue side, therefore, we set aside the order of ld. CIT(A) and direct the AO to allow this loss. Exemption u/s.10B - Held that:- We find that as far as the issue regarding premium on transfer of import licences, insurance claim, sundry credit balance written back and staff agreement deposit forfeiture is concerned, the same has been decided against the assessee by the order of Tribunal for earlier year, particularly in asstt. year 1998-99 Compensation for amount received on surplus of assets can also be not related to the business of export and, therefore, the same is also decided against the assessee. Refund of sales-tax - We agree with the contention of the ld. Sr. Advocate, Shri Y.P. Trivedi, that when sales-tax is initially paid, that will go on to increase the purchases which means profit is reduced and when sales-tax is refunded the profit would increase and therefore payment and reimbursement would nullify each other. Therefore, we hold that refund of sales-tax cannot be reduced from profits. Ddisallowin ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... tice u/s.148 was served on the assessee. Objections were raised before the AO regarding re-opening of the assessment. The AO upheld the re-opening on the basis that income has escaped assessment, particularly in respect of issues like loss on account of exchange fluctuation, income of units u/s.10B, interest on loans taken for new projects capitalized in the books but claimed as revenue, commission payment, provision for debts etc. are not allowable. 4. Before the ld. CIT(A), it was mainly submitted that sufficient time was not given to file the return as provided u/s. 148(1). The re-opening was without jurisdiction because the conditions laid down in sec. 147 were not satisfied because the AO had no material at all to form a reasonable belief. The ld. CIT(A) adjudicated this issue vide para 3.2 of his order, which is as under : "3.2 Finding: The Appellant had made similar submission during assessment proceedings. The Assessing Officer has considered and rejected the same for the following reasons : "I do not agree with the assessee's contention that income has not escaped assessment. It is seen that loss on account of exchange rate fluctuation, income of units u/s.10B, in ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... rn has been only processed u/s. 143(1), then re-opening is justified. In fact, the held column of the said decision reads as under : "Taxing income escaping assessment in the case of an intimation under section 143(1) is covered by the main provision of section 147 as substituted with effect from April 1, 1989, and initiating reassessment proceedings in the case of intimation would be covered by the main provision of section 147 and not the proviso thereto. Only one condition has to be satisfied. Failure to take steps under section 143(3) will not render the Assessing Officer powerless to initiate reassessment proceedings when intimation under section 143(1) has been issued." In view of the above position, we are of the opinion that assessment has been validly re-opened. 8. Issue No. 2 reads as under : Sr.No. Grounds of Appeal Amounts Rs. Amounts Rs 2 The ld. C.I.T.(A) has erred in confirming the action of the A.O. in disallowing the loss due to Exchange rate fluctuation of ₹ 47,01,720/- to the extent of loan which was not paid during the year. 47,01,720/- 9. After hearing both the parties, we find that during assessment proceedings the AO noticed that the assesse ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... year under consideration was a notional loss, hence it is not allowable as deduction. Reliance is placed on the decision of Rajasthan High Court in Dhadda & Co. vs. CIT (2003) 22 SITC 366. However, in view of the Supreme Court decision in the case of Sutlej Cotton Mills Ltd. vs. CIT (116 ITR 1) the actual loss of ₹ 3,75,63,754 only incurred during the year on repayment of loan obtained for working capital requirement of the company is allowable deduction u/s. 37(1) of the Act, which the Assessing Officer has already allowed in assessment order for Assessment Year 2000-2001. Therefore, the Assessing Officer has allowed the deduction correctly and no interference is called for. Consequently, Ground No.2 is dismissed." 10. Before us, the ld. Sr. Advocate of the assessee submitted that the issue is covered in favour of the assessee by the decision of Hon'ble Supreme Court in the case of CIT vs. Woodward Governer (I) Pvt. Ltd. (312 ITR 254) (SC) and Special Bench of the Tribunal in the case of ONGC Ltd. vs. CIT (83 ITD 151) and also by the order of Tribunal in ITA No.3507/Mum/2005 for assessment year 1999-2000 vide paras 17 & 18. 11. On the other hand, the ld. D.R. strongly rel ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... nt received on surplus of assets can also be not related to the business of export and, therefore, the same is also decided against the assessee. 14.2 As far as the issue regarding CST reimbursement is concerned, the ld. counsel of the assessee pointed out that similar issue has been decided in favour of the assessee vide para 11.1 in ITA No.9329/Mum/2004. 15. On the other hand, the ld. D.R. submitted that this issue has been decided by the Hon'ble Bombay High Court in the case of CIT vs. Dresser Rand India Pvt. Ltd. (2010) 323 ITR 429 (Bom). 16. In the rejoinder, the ld. counsel of the assessee submitted that the issue involved in the present appeal is little different. It is not a case of sales-tax refund which was before the Hon'ble Bombay High Court in the case of Dresser Rand India P.Ltd. where the assessee pays sales-tax which is refunded later on if the goods manufactured are exported and that is why the decision of Hon'ble Bombay High Court is not applicable. 17. After considering the submissions, we agree with the contention of the ld. Sr. Advocate, Shri Y.P. Trivedi, that when sales-tax is initially paid, that will go on to increase the purchases which means profit is ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ions, the Tribunal decided the issue against the assessee, which is also an admitted position in the chart. Therefore, following the earlier year order, we decide this issue against the assessee. 24. Issue No. 7 reads as under : 7 The ld. C.I.T.(A) has erred in confirming the action of the A.O. in disallowing the project expenses ₹ 57,477/- of Century Cement Division and ₹ 1,47,000/- of Century Pulp Division. Total ₹ 2,04,477/-. 2,04,477/- 25. After hearing both the parties, we find that the assessee had claimed project expenses in respect of Century Cement Division and Century Pulp & Paper Division amounting to ₹ 2,04,477/-, which was disallowed by the AO. The disallowance was confirmed by the ld. CIT(A) on the basis that the expenses have been incurred for setting up of the new projects which were under construction stage at the material time. In this regard, he followed the decision of CIT vs. J.K. Chemicals Ltd. (207 ITR 985) (Bom), Ciba of India Ltd. vs. CIT ( 202 ITR 1) (Bom) and CIT vs. Tata Mills Ltd. (118 ITR 496) (Bom). 26. Before us, the ld. counsel of the assessee submitted that the issue is covered in favour of the assessee by the order of ..... X X X X Extracts X X X X X X X X Extracts X X X X
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