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TMI Blog2024 (10) TMI 242X X X X Extracts X X X X X X X X Extracts X X X X ..... after referred to as 'ld. AO'). 2. Identical issues are involved in these appeals and hence they are taken up together and disposed of by this common order for the sake of convenience. ITA No. 3437/Del/2014 - Asst Year 2005-06 - Revenue Appeal 3. The first issue to be decided in this appeal is as to whether the ld. CIT(A) was justified in deleting the addition on account of translation gain in the facts and circumstances of the case. 3.1. We have heard the rival submissions and perused the materials available on record. The assessee is in the business of manufacture of pipes used in supply of oil / gas and water pipelines, having plants at various locations ie. Kosi, Mundra, Nashik apart from a stainless steel cold rolling plant. It has got an Export Oriented Unit (EOU) at Mundra since 25.11.2000 and an overseas branch in United States of America (USA) whose financial results were merged into the accounts of the assessee. The translation income / loss arrived at while converting the balance sheet and profit and loss account of the US Branch from USD to INR , being notional in nature, was not given effect to while computing the taxable income by the assessee company. This conver ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... NR with the balance sheet of the assessee as per AS 11 issued by ICAI. We find from the financials of the assessee, the translation gain arising out of revenue transactions had been duly offered to tax by the assessee in the return of income. Further the ld. CIT(A) held that the disallowance is to be deleted even on the principles of consistency as the revenue cannot be allowed to take a divergent stand for translation loss and translation gain. We find that this issue is no longer res integra in view of the CBDT Circular No. 10 of 2017 dated 23.3.2017 wherein it was held that the losses / gains arising by valuation of monetary assets and liabilities of the foreign operations as at the end of the year cannot be treated as real income of the assessee. This Circular has been heavily relied upon by the Hon'ble Jurisdictional High Court in the case of Chamber of Tax Consultants vs Union of India reported in 400 ITR 178 (Del). We do not find any infirmity in the said action of the ld. CIT(A) granting relief to the assessee. Accordingly, the Ground No.1 raised by the revenue is dismissed. 4. The next issue to be decided in the appeal of the revenue is as to whether the ld. CIT(A) was ju ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... the said new units have been established during the period prescribed in the said Notifications. These certificates are enclosed in Pages 85 and 86 of the Paper Book. 4.3. The assessee during the year under consideration, received excise duty refund of Rs 163,15,661/- which was offered to tax as revenue receipt in the return of income and assessed as such by the ld. AO. Before the ld. CIT(A), the assessee raised an additional ground claiming the said receipt to be capital receipt not chargeable to tax. The ld. CIT(A) after calling for a remand report from the ld. AO admitted the said additional ground, being legal in nature and by applying the 'purpose test' of the Incentive Scheme 2001 held that the excise duty refund received by the assessee is not liable to tax as it is in the nature of capital receipt. 4.4. We find that the appellate authorities are duly entitled to admit the additional ground if it is legal in nature and goes to the root of the matter and not requiring verification of fresh facts. All the facts relevant for adjudication of the said additional ground was already available on record before the ld. CIT(A). Since the same being legal ground, there was nothing w ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ubsequent notifications issued in the year 2008 substantially diluting excise incentives granted by the original notification issued in the year 2001 in the form of excise duty refund. Hence the Hon'ble Gujarat High Court was required to examine whether the subsequent notifications issued by the Government in the year 2008 were legally valid or not. The Hon'ble Gujarat High Court after going through the incentive scheme 2001 observed that exemption from excise duty was granted by the original notification in the year 2001 in order to incentivize setting up of industries in the Kutch region of Gujarat in the wake of massive earthquake. The intention behind the exemption scheme was to attract fresh investment so as to generate employment and for industrial development of the region. The subsequent notifications issued in the year 2008 substantially diluted the benefit granted by the original notification on the ground that there was substantial revenue loss to the Government. The Hon'ble High Court held that the notifications issued in the year 2008 to be invalid to the extent they were sought to be applied to the new unit set up in the Kutch District of Gujarat in compliance of the ..... X X X X Extracts X X X X X X X X Extracts X X X X
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