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TMI Blog2019 (7) TMI 747X X X X Extracts X X X X X X X X Extracts X X X X ..... 5D - expenses were incurred during the assessment year 2008-09 - alleged that assessee was not an industrial undertaking but Civil Contractor - HELD THAT:- Though the assessee has incurred the expenditure during the AY 2008-09 wherein the assessee was not entitled for the claim of deduction U/s. 35D as the assessee was not an industrial undertaking , however the Act was amended and the word industrial was omitted by the Finance Act, 2008 w.e.f 1/04/2009. The expenditure incurred by the assessee was subsequent to the 31st Day of March, 1970. In this situation, the assessee has fulfilled all the conditions stipulated under the Act for the residual period viz., AY 2010-11, 2011-12 and 2012-13. Therefore, there is no reason why the benefit of s ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... r reducing the cost of capital asset acquired and shall not be adjusted to the taxable income. Notional gain on capital items (Forex) is notional gain on capital items due to change in foreign currency rates thus gain is not actual gain and moreover it is notional gain on capital items and hence the same is not taxable under, Income Tax Act, 1961 . CIT without verifying the submissions of the assessee hastily passed orders for the both AYs 2010-11 and 2011-12 which is not appropriate. Therefore, we do not find any merit in the action of the Ld. CIT for invoking his powers U/s. 263 of the Act on this issue also. Since all the reasons cited by the Ld. CIT for invoking his powers U/s. 263 of the Act are found to be devoid of merits we hereby q ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ing that the notional gain on capital items (Forex) was wrongly excluded by the assessee. 3. Brief facts of the case are that the assessee is a Public Limited Company engaged in the business of Civil Construction filed its e-return of income for the AY: 2010-11 on 30/09/2010 and for the AY: 2011-12 the e-return was filed on 29/09/2011 declaring loss of ₹ 218,58,33,251/- and ₹ 124,62,42,466/- respectively. Thereafter, both the cases were taken up for scrutiny and assessment was completed U/s. 143(3) of the Act on 3/1/2014 and 21/2/2014 respectively. Subsequently, the Ld. CIT on verification of the assessment records held that the Ld. AO had framed the assessment in the case of the assessee for both the AYs mechanically and witho ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e AY 2008-09 the assessee is entitled for the benefit of section 35D of the Act for the residual period viz., AY 2010- 11, 2011-12 and 2012-13 as the period of five years covers from AY 2008-09 to AY 2012-13 wherein for the AY 2008-09 and 2009-10 the assessee is not entitled to claim the benefit of section 35D of the Act since it was allowable only for "Industrial Undertaking" as the Act stood during that period while as subsequently the Act had omitted the word "industrial" in the Finance Act 2008 w.e.f. 01/04/2009. It was therefore argued that the Ld. AO had judicially granted deduction u/s 35D of the Act for the AY 2010-11 and 2011-12 and there is no error in the order of the Ld. AO which is prejudicial to the interest of the Revenue. Th ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... or both the relevant AYs. 7. Ground No: 3 share of profits from the Joint Ventures: 8. The Ld. CIT observed that the assessee had reduced the share of profits earned from JV projects while computing it's loss declared in the return of income. On query the assessee had submitted that all the JV Projects were separately assessed and therefore it was excluded while computing the income of the assessee. It was further submitted that the income tax returns were furnished before the Ld. AO based on which the Ld. AO has passed the assessment Order. However, the Ld. CIT opined that the Ld. AO had blindly accepted the version of the assessee without primarily examining the issue whether the profits had been separately assessed or not. We do not fi ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... to the change in rate of currency - Section 43A of Income Tax Act, 1961. "Actual gain on capital items (Forex)" of ₹ 11,01,21,858/- is actual loss on capital items due to change in foreign currency -rates. The amount was reported in profit and loss account under "Schedule 22 - Administrative and selling expenses". The amount was included in line item loss on exchange fluctuation (net) under schedule 22. The breakup of the same is given for your ready reference. As per section 43A any gain or loss on account of changes in rate of exchange of currency shall go in enhancing or reducing the cost of capital asset acquired and shall not be adjusted to the taxable income. Since "Actual gain on capital items (F ..... X X X X Extracts X X X X X X X X Extracts X X X X
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