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TMI Blog2021 (8) TMI 22X X X X Extracts X X X X X X X X Extracts X X X X ..... ;ble ITAT, the applicant had raised the issue of disallowance of difference in exchange loss claimed as revenue expenditure Rs. 251,63,00,000/-. via Ground no. 16 of the Grounds of appeal. [ Copy of the Form No. 36B along with grounds of appeal is attached at Page No. 46 to 60]. For ready reference Ground No. 16 raised before the Hon'ble ITAT reads as follows: 16. Disallowance of deduction for Difference in Exchange of Rs. 251.63 crores On the facts and in the circumstances of the case and in law the learned Addl C.I.T. erred in proposing and the DRP erred in not allowing deduction for difference in exchange of Rs. 251.63 crores as claimed by the Appellant in the computation of income. The Learned Addl CIT/DRP ought to have accepted the contention that there is no requirement in the Law to capitalize the difference in exchange to the capital assets acquired by the Appellant as also the loss arising due to difference in exchange was not contingent in nature and therefore was allowable as revenue deduction while computing the taxable income of the Appellant. Without prejudice to the aforesaid contention that the difference in exchange was allowable as revenue deduction, the L ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... icant had raised the issue that since the Hon'ble ITAT had treated the foreign exchange gain or loss as capital in nature, the Hon'ble ITAT did not adjudicate the without prejudice issue of allowance of depreciation raised vide ground of appeal no. 16 in the grounds of appeal filed before the Hon'ble ITAT. Therefore, we pray that there is a mistake apparent from record in the ITAT order which required rectification. 8 The Hon'ble ITAT vide its order ('MA order') dated February 21, 2020 in M.A. No. 446/Mum/2019 [the MA order is attached at Page No. 68 to 76] did not adjudicate the without prejudice issue of allowance of depreciation on the foreign exchange loss treated as capital in nature. 9 The Applicant submits that the issue of allowance of depreciation on foreign exchange loss was raised in the ground of appeals filed before the Hon'ble ITAT vide ground no. 16. The Hon'ble ITAT in the IT AT order did not adjudicate the issue of allowance of depreciation in the ITAT order. Further, the applicant pointed out the said mistake by filing miscellanous application. In the MA order the Hon'ble ITAT again did not to adjudicate the without prejud ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ugust 31, 2020. However, on March 31, 2020 the president promulgated the Taxation and Other Laws (Relaxation of Certain Provisions) Ordinance, 2020. (the ordinance is attached at Page No. 77 to 82). As per section 3(1) of the Ordinance due dates under the Act falling during the period of March 20 to June 29, 2020 were extended to June 30, 2020. On June 24,2020 the Central Board of Direct Taxes ('CBDT') issued a notification and a press release to further extend the due dates (the notification and press release is attached at Page No. 83 to 89). The time limit for due dates under the Act falling between March 20 to December 31, 2020 is extended to March 31, 2021. Therefore, this application is within the time limit." 3. We have heard both the parties and perused the record. We find that the assessee has already filed a Miscellaneous Application on this issue which was dealt with by the ITAT vide order in M.A.No. 446/Mum/2019 vide order dated 21.2.2020. "4. Another issue raised in the miscellaneous application relates to the following ground :- "On the facts and in the circumstances of the case and in law the learned Addl C.I.T. erred in proposing and the DRP erred in no ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... s charged the same to the fixed Currency Monetary item Translation Difference Account' to be written-off to the profit & loss account in later years. The assessee submitted that the foreign exchange expense fluctuation liability has been capitalized in the books but for income tax purposes it is considered as revenue expense. Accordingly the cost of assets for computation of depreciation allowable under section 32, such foreign expense has not been considered as cost of capital asset. The deduction has been claimed in the computation of total income filed. 37. The AO has disallowed this expenditure stating that the same is a contingent liability. Also, for the loans taken for fixed assets, the same was required to be capitalized and hence the AO has disallowed this expenditure. 38. The DRP upon assessee's appeal has dealt with the issue as under:- 21.4. We have considered the assessment order, the facts of the case as well as the submissions of the assessee. Admittedly foreign exchange loss of Rs. 214 crores is on capital account and the assessee vide submission dated 18th December 2013 has submitted that depreciation on this amount may be allowed considering that the a ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... . 21.8. Another foreign exchange loss of Rs. 14.55 crores is stated to be incurred in relation to working capital loan from Union Bank of India; the copy of loan document regarding such loan has been produced. This is an undated document signed by the assessee purporting to be a Packing Credit Agreement with Union bank of India, Industrial finance Branch, Nariman Point for packing credit loan of Rs. 100 crore. This loan is in Indian currency. Therefore this is not foreign currency loan and hence any foreign currency loss cannot be incurred in relation to this loan. 21.9. The Assessee has also credited Foreign exchange gain of Rs. 9.82 crore under the Revenue account being Foreign Exchange Loss accrued on Inter Corporate deposits given in Foreign currency. This gain has been treated by the Assessee on the Revenue account and accordingly gross foreign exchange loss on revenue account Rs. 47.46 Crores has been reduced by this amount and deduction of only the balance Rs. 37.64 crores has been claimed. The foreign exchange losses on various accounts have already been discussed and directions as appropriate have been issued. The AO is directed to treat this foreign exchange gain on ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... assessee on revenue account or as a trading asset or as part of circulating capital embarked in the business. But, if on the other hand, the foreign currency is held as a capital asset or as fixed capital, such profit or loss would be of capital nature. In this view of the matter, in our considered opinion the action of the authorities below in holding that foreign exchange gain or loss incurred on acquisition of capital asset has to be adjusted with the cost of capital asset is correct. 42. As regards the gain or loss of revenue account, the same has to be dealt with in the revenue field. The AO in this regard has erred in holding that these are contingent as the same is contrary to the Hon'ble Apex Court decision in the case of CIT vs. Woodward Governor India P Ltd. However, we note that the ld. DRP has analyzed the nature of foreign exchange loss claimed by the assessee and decided the issue properly. The claim of the assessee that foreign exchange fluctuation loss irrespective of it being in the field of capital or revenue be allowed as revenue expenditure is not sustainable in the light of the above case law from Satlej Cotton Mills (supra) from the Hon'ble Supreme Court. T ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... learned departmental representative pleaded that the order of the honourable Supreme Court takes precedence over decision of inferior courts and Tribunals. Furthermore learned departmental representative submitted that by claiming that there was no need to furnish details for claim of allowance of depreciation the assessee is itself making out a case for review. As regards the other issues mentioned in the submission learned departmental representative submitted that these are not arising out of the grounds of appeal or the order of the ITAT. He claimed that the assessee is pleading for some further issues to the adjudicated as "related" which is not permissible in the garb of rectification of mistake apparent from record. 8. Upon careful consideration we find that ITAT has elaborately discussed the issue. It had found that the decision of honourable Supreme Court in Sutlej Cotton Mills (supra) is directly applicable on the facts of the case. Furthermore as detailed in the submission of the learned departmental representative above the other aspects raised in the miscellaneous application call for a review of the order of the ITAT in the garb of rectification of mistake appar ..... X X X X Extracts X X X X X X X X Extracts X X X X
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