J.K.Paper Ltd.,, Surat v. The ACIT, Circle-1,, Surat

CO 37/AHD/2014 | 2008-2009
Pronouncement Date: 18-10-2016 | Result: Dismissed

Appeal Details

RSA Number 3720523 RSA 2014
Assessee PAN AAACT6305N
Bench Ahmedabad
Appeal Number CO 37/AHD/2014
Duration Of Justice 2 year(s) 8 month(s)
Appellant J.K.Paper Ltd.,, Surat
Respondent The ACIT, Circle-1,, Surat
Appeal Type Cross Objection
Pronouncement Date 18-10-2016
Appeal Filed By Assessee
Order Result Dismissed
Bench Allotted C
Tribunal Order Date 18-10-2016
Date Of Final Hearing 05-10-2016
Next Hearing Date 05-10-2016
Assessment Year 2008-2009
Appeal Filed On 17-02-2014
Judgment Text
IN THE INCOME TAX APPELLATE TRIBUNAL AHMEDABAD C BENCH (BEFORE SHRI N.K. BILLAIYA ACCOUNTANT MEMBER & SHRI MAHAVIR PRASAD JUDICIAL MEMBER) ITA. NO: 2155AHD/2013 & C.O. NO.36/AHD/2014 & ITA NO: 2156/AHD/2013 & C.O. NO. 37/AHD/2014 (ASSESSMENT YEARS: 2006-07 & 2008-09) ASST. COMMISSIONER OF INC OME-TAX CIRCLE-1 SURAT M/S. J.K. PAPER LIMITED P.O. CENTRAL PULP MILLS FORT-SONGADH SURAT V/S V/S M/S. J.K. PAPER LIMITED P.O. CENTRAL PULP MILLS FORT-SONGADH SURAT ASST. COMMISSIONER OF INC OME-TAX CIRCLE-1 SURAT (APPELLANT) (RESPONDENT) PAN: AAACT6305N APPELLANT BY : MRS. VIBHA BHALLA CIT/DR RESPONDENT BY : SHRI S.N.SOPARKAR WITH MS. UKTI S HAH ( )/ ORDER DATE OF HEARING : 05 -10-201 6 DATE OF PRONOUNCEMENT : 18 -10-2016 PER N.K. BILLAIYA ACCOUNTANT MEMBER: ITA NOS. 2155/AHD /13 & C.O. NO. 36/A/14 & ITA NOS. 2156/ AHD/13 & C.O. 37/A/14 . A.YS. 2006-07 & 2008-09 2 1. ITA NO. 2155/AHD/2013 & C.O. NO. 36/AHD/2014 ARE AP PEAL OF THE REVENUE AND CROSS OBJECTION OF THE ASSESSEE DIRECTED AGAINS T THE VERY SAME ORDER OF THE LD. CIT(A)-1 SURAT DATED 10.06.2013 AND ITA NO . 2156/AHD/2013 AND C.O. NO. 37/AHD/2014 ARE APPEAL OF THE REVENUE AND CROSS OBJECTION BY THE ASSESSEE PREFERRED AGAINST THE VERY SAME ORDER OF T HE LD. CIT(A)-1 SURAT DATED 10.06.2013 FOR A.Y. 2006-07 & 2008-09 RESPECT IVELY. 2. APPEALS OF THE REVENUE AND CROSS OBJECTIONS OF THE ASSESSEE WERE HEARD TOGETHER AND DISPOSED OF BY THIS COMMON ORDER FOR T HE SAKE OF CONVENIENCE. ITA NO. 2155/AHD/2013 & C.O. 36/AHD/2014 FOR A. Y. 2006-07 3. THE SUM AND SUBSTANCE OF THE GRIEVANCE OF THE REVEN UE IS THAT THE LD. CIT(A) ERRED IN ANNULLING THE ASSESSMENT ORDER MADE U/S. 1 47 R.W.S. 143(3) OF THE ACT VIDE ORDER DATED 25.10.2012. 4. BRIEFLY STATED THE FACTS OF THE CASE ARE THAT THE O RIGINAL ASSESSMENT WAS MADE U/S. 143(3) OF THE ACT VIDE ORDER DATED 26.12. 2008. THE COMPLETED ASSESSMENT WAS REOPENED BY A NOTICE ISSUED U/S. 148 DATED 23.03.2012. THE DATE OF NOTICE CLEARLY SHOWS THAT THE COMPLETED ASSESSMENT HAS BEEN REOPENED BEYOND THE PERIOD OF 4 YEARS FROM THE END OF THE RELEVANT ASSESSMENT YEAR. ITA NOS. 2155/AHD /13 & C.O. NO. 36/A/14 & ITA NOS. 2156/ AHD/13 & C.O. 37/A/14 . A.YS. 2006-07 & 2008-09 3 5. THE REASONS RECORDED BY THE ASSESSING OFFICER FOR R EOPENING THE ASSESSMENT READS AS UNDER:- ' THE ASSESSEE IS ENGAGED IN THE BUSINESS OF MANUFA CTURING AND TRADING OF PAPER. THE ASSESSEE FILED ITS REVISED RETURN OF INCOME ON 22. 09. 2007 DECLARING NIL INCOME AFTER SET OFF OF UNABSORBED DEPRECIATION OF RS 16 52 47 1307- AND PAID TAX U/S 115 JB . THE CASE WAS FINALIZED U/S 143 (3) OF THE I T ACT DECIDING TOTAL ASSESSED INCOME OF RS NIL AFTER MAKING ADDITION OF RS 9 16 87 6207- AND ENHANCING BOOK PROFIT BY RS 4 75 46 243/-FORTHE PUR POSE OF MAT. AS PER EXPLANATION BELOW SECTION 115JB OF THE ACT FOR THE PURPOSE OF THIS SECTION ' BOOK PROFIT MEANS THE NET PROFIT AS SHOWN IN THE PROFIT AND LOSS ACCOUNT FOR THE RELEVANT PREVIOUS YEAR PREPARED UNDER SUB - SECTION (2) AS INCREASED BY [G] AMOUNT OF INCOME TAX AND PROVISION THEREOF [H] AMOUNT OF CARRIED TO ANY RESERVES [I] AMOUNT OF SET ASIDE BY WAY OF PROVISIONS MAD E FOR MEETING LIABILITY [J] AMOUNT BY WAY OF PROVISIONS FOR LOSSES [K] AMOUNT OF DIVIDEND PAID OR PROPOSED [I] AMOUNT OF EXPENDITURE RELATABLE TO ANY INCOM E TO WHICH SECTION 10 SECTION 10A OR SECTION 10B OR SECTION 11 OR 12 APPLY. IF ANY OF SUCH ITEM DEBITED TO P &L A/C AND AS REDU CED BY [C] AMOUNT WITHDRAWN FROM ANY RESERVE OR PROVISION [D] THE AMOUNT OF INCOME TO WHICH SECTION 10 OR 10A OR 10B OR 11 OR 12 APPLY AND FURTHER MORE (C- G). SCRUTINY OF THE ASSESSMENT RECORDS REVEALED THAT WH ILE COMPUTING BOOK PROFIT FOR THE PURPOSE OF 115JB DID NOT ADD BACK PROVISION OF FBT OF RS 1 05 74 900/- AND EXPENDITURE OF RS 58 60 628/- INCURRED ON SOCIAL FO RESTRY TO EARN EXEMPTED INCOME ( AS PER ASSESSMENT ORDER DATED 26.12.2008 ( CLAUSE 2) AS PER EXPLANATION ITA NOS. 2155/AHD /13 & C.O. NO. 36/A/14 & ITA NOS. 2156/ AHD/13 & C.O. 37/A/14 . A.YS. 2006-07 & 2008-09 4 GIVEN BELOW THE SAID PROVISION. OMISSION TO DO SO HAS RESULTED IN UNDER ASSESSMENT OF BOOK PROFIT OF RS 1 64 35 528/- '. 6. HAVING HEARD THE RIVAL CONTENTIONS WE HAVE CAREFUL LY PERUSED THE ORDERS OF THE AUTHORITIES BELOW. UNDISPUTEDLY THE NOTICE WAS ISSUED AFTER 4 YEARS FROM THE END OF THE RELEVANT ASSESSMENT YEAR THERE FORE PROVISO TO SECTION 147 SQUARELY APPLY ON THE FACTS OF THE CASE. 7. A PERUSAL OF THE REASONS MENTIONED HEREINABOVE SHOW S THAT THE A.O. REOPENED THE ASSESSMENT FOR MAKING THE ADDITION OF THE PROVISION OF FBT OF RS. 1 05 74 900/- AND THE EXPENDITURE OF RS. 58 60 629/- INCURRED ON SOCIAL FORESTRY FOR EARNING EXEMPT INCOME. 8. WE FIND THAT THE PROVISION OF FBT WAS MENTIONED IN THE PROFIT AND LOSS ACCOUNT WHICH WAS BEFORE THE ASSESSING OFFICER AT T HE TIME OF ORIGINAL ASSESSMENT PROCEEDINGS. THEREFORE IT CANNOT BE SAI D THAT THERE WAS A FAILURE ON THE PART OF THE ASSESSEE TO DISCLOSE TRU LY AND FULLY ALL THE MATERIAL FACTS BEFORE THE ASSESSING OFFICER. 9. SO FAR AS THE EXPENDITURE OF RS. 58 60 628/- IS CON CERNED WE FIND THAT THIS AMOUNT WAS ADDED BY THE A.O. IN THE COMPUTATION OF INCOME AS PER THE NORMAL PROVISIONS OF THE ACT. THEREFORE IT CANNOT BE SAID FULL FACTS RELATED TO THIS ISSUE WERE NOT DISCLOSED BEFORE THE A.O. AT THE TIME OF ORIGINAL ASSESSMENT. ITA NOS. 2155/AHD /13 & C.O. NO. 36/A/14 & ITA NOS. 2156/ AHD/13 & C.O. 37/A/14 . A.YS. 2006-07 & 2008-09 5 10. CONSIDERING THE ABOVE FACTS AND TOTALITY WE FIND T HAT THERE WAS NO FAILURE ON THE PART OF THE ASSESSEE TO DISCLOSE TRULY AND F ULLY ALL THE MATERIAL FACTS BEFORE THE ASSESSING OFFICER AT THE TIME OF ORIGINA L ASSESSMENT PROCEEDINGS. 11. IN THE LIGHT OF THE PROVISO TO SECTION 147 OF THE A CT WE DO NOT FIND ANY ERROR OR INFIRMITY IN THE FINDINGS OF THE LD. CIT(A ). APPEAL FILED BY THE REVENUE IS ACCORDINGLY DISMISSED. 12. THE LEARNED SENIOR COUNSEL DID NOT PRESS THE CROSS OBJECTION OF THE ASSESSEE; THEREFORE THE SAME IS DISMISSED AS NOT PR ESSED. ITA NO. 2156/AHD/2013 & C.O. NO. 37/AHD/2014 FOR A.Y. 2008-09. 13. THE SUBSTANTIVE GRIEVANCE OF THE REVENUE READS AS U NDER:- 1. ON THE FACTS AND CIRCUMSTANCES OF THE CASE WHETHER THE LD CIT(A) IS JUSTIFIED IN DELETING THE ADDITION OF RS.6 13 84 689/- MADE ON A CCOUNT OF ADJUSTMENT OF MAT CREDIT ENTITLEMENT WHILE COMPUTING BOOK PROFIT U/S. 115JB? 2. ON THE FACTS AND CIRCUMSTANCES OF THE CASE WHETHER THE LD CIT(A) IS JUSTIFIED IN DELETING THE ADDITION OF RS.1 83 67 000/- OUT OF TO TAL ADDITION OF RS.2 88 96 000/- MADE ON ACCOUNT OF EXCHANGE FLUCTUATION AS THE REPA YMENT OF LOAN BY THE ASSESSEE WAS CAPITAL IN NATURE ? 14. THE FIRST GRIEVANCE RELATES TO THE DELETION OF THE ADDITION OF RS. 6 13 84 689/- TOWARDS ADJUSTMENT OF MAT CREDIT ENTI TLEMENT FOR COMPUTING BOOK PROFIT U/S. 115JB. ITA NOS. 2155/AHD /13 & C.O. NO. 36/A/14 & ITA NOS. 2156/ AHD/13 & C.O. 37/A/14 . A.YS. 2006-07 & 2008-09 6 15. DURING THE COURSE OF THE SCRUTINY ASSESSMENT PROCEE DINGS AND ON VERIFICATION OF THE ASSESSMENT RECORDS THE A.O. NO TICED THAT THE ASSESSEE HAS CREDITED AN AMOUNT OF RS. 6 13 84 689/- AS MAT CREDIT ENTITLEMENT WHICH WAS NOT REDUCED FROM THE NET PROFIT FOR COMPU TING BOOK PROFIT. DRAWING SUPPORT FROM EXPLANATION 1 TO SECTION 115JB OF THE ACT THE A.O. WAS OF THE OPINION THAT THERE IS NO PROVISION FOR A NY ADJUSTMENT IN RESPECT OF MAT CREDIT ENTITLEMENT CREDITED TO THE PROFIT AN D LOSS ACCOUNT. THE ASSESSEE WAS ASKED TO JUSTIFY ITS CLAIM. 16. THE ASSESSEE FILED A DETAILED REPLY VIDE LETTER DAT ED 07.09.2012 THE MAIN CONTENTIONS OF THE ASSESSEE READS AS UNDER:- 1. THE ABOVE ADJUSTMENT IS IN ACCORDANCE WITH EXPLANAT ION (1) BELOW THE SECTION (2) OF SECTION 115JB OF THE ACT WHEREIN IT IS SPEC IFIED THAT ' BOOK PROFIT ' MEANS THE NET PROFIT AS SHOWN IN THE PROFIT IN THE PROFIT AND LOSS ACCOUNT FOR THE RELEVANT PREVIOUS YEAR PREPARED UNDER SUB- SECT ION (2) AS REDUCED BY ' THE AMOUNT OF DEFERRED TAX IF ANY SUCH AMOUNT IS CREDI TED TO THE PROFIT AND LOSS ACCOUNT ' SINCE MAT CREDIT ENTITLEMENT OF RS 613.85 LAC CRED ITED TO PROFIT & LOSS ACCOUNT IS RECOVERABLE TAX AS PRESCRIBED IN SECTION 115JAA OF THE ACT THE SAME THEREFORE IS DEFERRED TAX. THEREFORE CREDIT OF MAT CREDIT ENTITLEMENT OF RS 6 13. 95LAC WAS CORRECTLY DEDUCTED BY THE ASSESSEE WHILE COMPUTING 'BOOK PROF IT. 1. WITHOUT PREJUDICE ON THE ABOVE CONTENTION WE SUBMI T THAT MAT CREDIT ENTITLEMENT IS ALSO TAX AS DEFINED IN SECTION 115JA A OF THE ACT WHICH IS ADJUSTABLE IN FUTURE YEARS SUBJECT TO CERTAIN CONDI TION AS PRESCRIBED IN THE SECTION 115JAAOFTHE ACT. EXPLANATION (1) BELOW THE SUB - SECTION (2) OF SECT ION 115JB OF THE ACT PRESCRIBES THAT FOR THE PURPOSE OF THIS SECTION ' BOOK PROFIT ' MANS THAT NET PROFIT AS SHOWN IN ITA NOS. 2155/AHD /13 & C.O. NO. 36/A/14 & ITA NOS. 2156/ AHD/13 & C.O. 37/A/14 . A.YS. 2006-07 & 2008-09 7 THE PROFIT AND LOSS ACCOUNT FOR THE RELEVANT PREVIO US YEAR PREPARED UNDER SECTION (2) AS INCREASED BY :- A) THE AMOUNT OF INCOME TAX PAID OR PAYABLE AND THE P ROVISION THEREFORE ...... SINCE THE MAT CREDIT IS OF SAME NATURE AS ON INCOME TAX THE ADJUSTMENT OF THE SAME IS ALSO REQUIRED WHILE COMPUTING BOOK PROFIT U /S 115 JB. 2. FURTHER WITHOUT PREJUDICE TO ABOVE CONTENTIONS WE SUBMIT THAT THE SPIRIT OF SECTION 115 JB OF THE ACT IS TO BRING ALL THE ADJUS TMENTS UNDER TAX NET WHICH ARE IN THE NATURE OF APPROPRIATION OF PROFIT AS PER SCHEDULE-VI. IN THIS REGARD WE REFER CIRCULAR NO. 1/2009 DATED 27. 03.2009 ISSUED BY CBDT WHEREIN IT GIVES EXPLANATORY NOTE TO THE PROVISIONS OF FINANCE ACT 2008 IN PARAGRAPH NO.22 TO 22. 4 OF AFORESAID CIRCULAR THE CBDT HAS CLARIFIED THE INTENTION OF THE LAW RELATING TO ADJUSTMENTS U/S 11 15 JB AS UNDER :- CLARIFICATION ON ADD BACK OF ' DEFERRED TAX ' DIVID END DISTRIBUTION TAX ETC FOR CALCULATING BOOK PROFIT UNDER SECTION 115JB. SECTION 115JB OF THE INCOME - TAX ACT PROVIDES FOR LEVY OF MINIMUM ALTERNATE TAX (MAT) ON THE BASIS OF BOOK PROFITS OF A COMPANY. AS PER THE EXPLANATION AFTER SUB - SECTION(2) THE EXPRESSION ' BOOK PROFIT ' MEANS NET PROFIT AS SHOWN IN THE PROFIT AND LOSS ACCOUNT PREPARED IN ACCORDANCE WITH THE PR OVISIONS OF PART II AND III OF SCHEDULE VI TO THE COMPANIES ACT 1956 AS INCREASE D OR REDUCED BY CERTAIN ADJUSTMENTS AS SPECIFIED IN THAT SECTION. CLAUSE ( A) OF THE AFORESAID EXPLANATION INTER - ALIA PROVIDES FOR INCREASING THE BOOK PROFI TS BY INCOME - TAX PAID OR PAYABLE AND THE PROVISION THEREFORE; IF DEBITED TO PROFIT AND LOSS ACCOUNT. THE INTENTION BEHIND THESE ADD BACK IS THAT THE ITEMS W HICH MAINLY APPEAR BELOW THE LINE ' IN THE PROFIT AND LOSS ACCOUNT SHOULD BE ADD ED BACK TO ARRIVE AT THE ' BOOK PROFIT' IF THEY APPEAR 'ABOVE THE LINE ' IN THE PRO FIT AND LOSS ACCOUNT. SECTION 115JB HAS NOT SPECIFICALLY PROVIDED FOR ADD BACK OF SOME SUCH ' BELOW ' THE LINE ' ITEMS LIKE DEFERRED TAX DIVIDEND DISTRIBUTION TAX ETC AS THEY WERE THOUGHT TO BE INCLUDED IN THE TERM ' INCOME - TAX ' HOWEVER THER E HAS BEEN SOME AMBIGUITY REGARDING ADD BACK OF THESE ITEMS IF DEBITED TO PRO FIT AND LOSS ACCOUNT. ITA NOS. 2155/AHD /13 & C.O. NO. 36/A/14 & ITA NOS. 2156/ AHD/13 & C.O. 37/A/14 . A.YS. 2006-07 & 2008-09 8 WITH A VIEW TO CLARIFYING THE INTENTION A NEW CLAU SE HAS BEEN (INSERTED AFTER CLAUSE (G) OF THE EXPLANATION 1 AS SO NUMBERED SO AS TO PROVIDE THAT THE BOOK PROFIT SHALL BE INCREASED BY THE AMOUNT OF DEFERRED TAX AND THE PROVISION THEREOF IF DEBITED TO PROFIT AND LOSS ACCOUNT. HENCE IN VI EW OF THE ABOVE THE ADJUSTMENT FOR MAT CREDIT ENTITLEMENT OF RS 613.85 LACS MADE I N RETURN AND ACCEPTED IN SECTION 143 (3) ORDER IS IN ACCORDANCE WITH PROVISI ONS OF THE ACT. 17. THE DETAILED SUBMISSIONS OF THE ASSESSEE DID NOT FI ND ANY FAVOUR WITH THE A.O. WHO WAS OF THE FIRM BELIEF THAT THERE IS NO PR OVISION FOR ANY ADJUSTMENT IN RESPECT OF MAT CREDIT ENTITLEMENT CRE DITED TO THE PROFIT AND LOSS ACCOUNT AND THE SAME WAS REQUIRED TO BE REDUCE D FROM THE NET PROFIT FOR COMPUTING BOOK PROFIT. THE A.O. ACCORDINGLY ADD ED RS. 6 13 84 689/- FOR COMPUTING THE BOOK PROFIT. 18. ASSESSEE CARRIED THE MATTER BEFORE THE LD. CIT(A) A ND REITERATED WHAT HAS BEEN STATED BEFORE THE ASSESSING OFFICER. 19. AFTER CONSIDERING THE FACTS AND THE SUBMISSIONS TH E LD.CIT(A) HELD AS UNDER:- 10.3 THE CONTENTIONS OF THE ASSESSING OFFICER AS WE LL AS THE APPELLANT HAVE BEEN EXAMINED. IT IS APPARENT THAT THE MAT CREDIT IS A D EFERRED TAX AND IN VIEW OF EXPLANATION TO SECTION 115JB THE 'BOOK PROFIT' IS TO BE INCREASED IF TAX IS DEBITED AND REDUCED IF THE DEFERRED TAX IS CREDITED IN ACCO RDANCE WITH CLAUSE H AND CLAUSE VIII OF EXPLANATION -1. CONSEQUENTLY THE GR OUND NO. 4 IS ALLOWED IN FAVOUR OF THE APPELLANT. ITA NOS. 2155/AHD /13 & C.O. NO. 36/A/14 & ITA NOS. 2156/ AHD/13 & C.O. 37/A/14 . A.YS. 2006-07 & 2008-09 9 20. AGGRIEVED BY THIS THE REVENUE IS BEFORE US. THE LD . D.R. PLACED STRONG RELIANCE ON THE ASSESSMENT ORDER. IT IS THE SAY OF THE LD D.R. THAT MAT IS NOT PART OF DEFERRED TAX. PER CONTRA THE LEARNED SENIO R COUNSEL REITERATED WHAT HAS BEEN STATED BEFORE THE LOWER AUTHORITIES. 21. WE HAVE GIVEN A THOUGHTFUL CONSIDERATION TO THE ORD ERS OF THE AUTHORITIES BELOW. LET US FIRST EXAMINE HOW THE ASSESSEE HAS SH OWN PROFIT BEFORE TAX IN ITS PROFIT AND LOSS ACCOUNT FOR THE YEAR ENDED 31.0 3.2008 THE SAME READS AS UNDER:- PROFIT BEFORE DEPRECIATION & TAX 10 578.03 12 250.44 DEPRECIATION 18 5 883.56 4 961.29 PROFIT BEFORE TAX 4 694.47 7 289.15 PROVISION FOR CURRENT TAX 741.02 550.80 PROVISION FOR FRINGE BENEFIT TAX 135.55 105.00 MAT CREDIT ENTITLEMENT (613.85) (550.80) PROFIT BEFORE DEFERRED TAX 4 431.75 7 184.15 PROVISION FOR DEFERRED TAX 254.71 2 378.38 PROFIT AFTER TAX 4 177.04 4 805 .77 DEBENTURE REDEMPTION RESERVE WRITTEN BACK 209. 54 484.58 SURPLUS BROUGHT FORWARD 9 358.02 5 165.79 13 744.60 10 456.14 22. THE BOOK PROFIT FOR MAT/TAX LIABILITY HAS BEEN COMP UTED AS UNDER:- PARTICULARS ASSESSMENT YEAR 2007-08 2008-09 RETURN FILED ON 30.0 3.10 A. NET PROFIT AS PER P & L A/C 480574564 417709631 B. ADD: STATUTORY ADDITIONS PROVISION FOR CURRENT TAX PROVISION FOR DEFERRED TAX PROVISION FOR FBT 55079728 237838836 10500000 -- 74101907 25470312 13554724 45200000 ITA NOS. 2155/AHD /13 & C.O. NO. 36/A/14 & ITA NOS. 2156/ AHD/13 & C.O. 37/A/14 . A.YS. 2006-07 & 2008-09 10 DIMUNITION IN VALUE OF INVESTMENT TOTAL (B) 303418564 158326943 C. TOTAL (A+B) 783993128 5760365574 D. LESS: PERMISSIBLE DEDUCTIONS TRANSFER FROM GENERAL RESERVE MAT CREDIT ENTITLEMENT PROVISION FOR FBT DIVIDEND INCOME EXEMPT U/S. 10(33) -- 55079728 10500000 -- 69250000 61384689 13554724 216000 TOTAL (D) 65579728 144405413 E. BOOK PROFIT (C-D) 718413400 431631161 F. MAT LIABILITY @ 11.33% ON E 80605983 48903811 23. IT CAN BE SEEN THAT PROVISION FOR CURRENT TAX IS SH OWN AT RS. 7 41 01 907/- AND MAT CREDIT ENTITLEMENT HAS BEEN SEPARATELY SHOW N AT RS. 6 13 84 689/- IT CAN BE FURTHER SEEN THAT THE PROVISION FOR CURRE NT TAX IS SHOWN AT GROSS AMOUNT. THE NET AMOUNT COMES TO RS. 1 27 17 218/- IF THE MAT CREDIT ENTITLEMENT IS REDUCED FROM PROVISION FOR CURRENT T AX. IF THE ASSESSEE HAD SHOWN THE NET AMOUNT OF RS. 1 27 17 218/- AND ADDED BACK THE SAME FOR THE COMPUTATION OF BOOK PROFIT THE REVENUE WOULD H AVE ACCEPTED THIS COMPUTATION. BUT FOR THE ACCOUNTING PRINCIPLES AND SET GUIDELINES BOTH THE AMOUNTS WERE SHOWN SEPARATELY. CONSIDERING THESE FA CTS IN TOTALITY WE DO NOT FIND ANY LOGIC IN MAKING THE ADDITION OF RS. 6 13 84 689/- FOR COMPUTING THE BOOK PROFIT; THE SAME HAS TO BE DELETED. GROUND NO. 1 IS ACCORDINGLY DISMISSED. 24. THE NEXT GROUND RELATES TO THE DELETION OF THE ADDI TION OF RS. 1 83 67 000/-. ITA NOS. 2155/AHD /13 & C.O. NO. 36/A/14 & ITA NOS. 2156/ AHD/13 & C.O. 37/A/14 . A.YS. 2006-07 & 2008-09 11 25. WHILE SCRUTINIZING THE RETURN OF INCOME THE A.O. N OTICED THAT THE ASSESSEE HAS CHARGED THE PROFIT AND LOSS ACCOUNT WITH AN AMO UNT OF RS. 2 88 96 000/- ON ACCOUNT OF EXCHANGE FLUCTUATION ON REPAYMENT OF FOREIGN CURRENCY TERM LOAN. THE A.O. WAS OF THE OPINION THA T SINCE THE REPAYMENT OF LOAN WAS CAPITAL IN NATURE; THEREFORE EXPENDITU RE ON ACCOUNT OF EXCHANGE FLUCTUATION ON REPAYMENT OF SUCH LOAN WAS ALSO CAPITAL IN NATURE. THE ASSESSEE WAS ASKED TO JUSTIFY THE ALLOWABILITY OF THE SAME. IN ITS REPLY VIDE LETTER DATED 07.09.2012 THE ASSESSEE PLACED S TRONG RELIANCE ON THE JUDGMENT OF THE HONBLE SUPREME COURT IN THE CASE O F WOODWARD GOVERNOR INDIA PVT. LTD. 312 ITR 254. 26. THE CONTENTION OF THE ASSESSEE DID NOT FIND ANY FAV OUR WITH THE A.O. WHO WAS OF THE STRONG BELIEF THAT THE JUDGMENT OF THE H ONBLE SUPREME COURT (SUPRA) IS CLEARLY DISTINGUISHABLE ON FACTS. THE A. O. OBSERVED THAT THE HONBLE SUPREME COURT HAS HELD THAT REPAYMENT OF FO REIGN EXCHANGE FLUCTUATION IS ALLOWABLE ONLY IF IT IS NOT CAPITAL IN NATURE. BUT IN THE INSTANT CASE THE REPAYMENT OF LOAN IS CAPITAL IN NATURE AN D HENCE NOT ALLOWABLE. THE A.O. ACCORDINGLY MADE AN ADDITION OF RS. 2 88 9 6 000/-. 27. ASSESSEE CARRIED THE MATTER BEFORE THE LD. CIT(A) A ND REITERATED ITS CLAIM AS MADE DURING THE COURSE OF THE ASSESSMENT PROCEEDING S. AFTER CONSIDERING THE FACTS THE LD. CIT(A) WAS CONVINCED THAT OUT OF RS. 288.96 LACS RS. 183.67 LACS IS ON ACCOUNT OF REVENUE AND THEREFORE DIREC TED THE A.O. TO DELETE THE ADDITION TO THE EXTENT OF RS. 183.67 LACS. ITA NOS. 2155/AHD /13 & C.O. NO. 36/A/14 & ITA NOS. 2156/ AHD/13 & C.O. 37/A/14 . A.YS. 2006-07 & 2008-09 12 28. AGGRIEVED BY THIS THE REVENUE IS BEFORE US. 29. THE LD. D.R. STRONGLY STATED THAT THE BIFURCATION O F THE FOREIGN CURRENCY LOSS GIVEN BY THE ASSESSEE AND CONSIDERED BY THE LD. CIT (A) WAS NOT BEFORE THE A.O. THEREFORE THE SAME NEEDS TO BE VERIFIED BY TH E A.O. THE LD. SENIOR COUNSEL FAIRLY CONCEDED TO THIS SUBMISSION OF THE L D. D.R. 30. WE FIND THAT THE FOLLOWING BIFURCATION WAS GIVEN TO THE LD. CIT(A) AND CONSIDERED BY HIM:- DETAILS OF FOREIGN CURRENCY LOSS OF RS. 288.96 LACS DEBITED TO P & L ACCOUNT LOAN REQUIRED FOR THE PURPOSE OF (ON WHICH SUCH LOSS WAS INCURRED) LOAN AMOUNT LOAN REPAID DURING THE F.Y. 2007- 08 LOAN OUTSTANDING AS ON 31.03.2008 FOREIGN EXCHANGE LOSS ATTRIBUTABLE TO LOAN REPAID DURING THE YEAR FOREIGN EXCHANGE LOSS ATTRIBUTABLE TO LOAN O/S & RECAST AS ON 31.03.2008 TOTAL FOREIGN EXCHANGE LOSS 1 2 3 4 5 6 7(5+6) LACS LACS/RS LACS/RS LACS /RS LACS/RS LACS/RS FOR ACQUIRING CAPITAL ASSETS $ 100 & EUR 23.51 & INR 3000 798.85 9271.64 11.90 93.39 105.29 WORKING CAPITAL REQUIREMENT INR 5000 & $ 50 & OTHERS BUYER CREDIT ETC 710.82 7353.04 14.22 169.45 183.67 TOTAL 3107.37 16624.68 26.12 262.84 288.96 ITA NOS. 2155/AHD /13 & C.O. NO. 36/A/14 & ITA NOS. 2156/ AHD/13 & C.O. 37/A/14 . A.YS. 2006-07 & 2008-09 13 31. A PERUSAL OF THE AFOREMENTIONED CHART SHOWS THAT TH E FOREIGN EXCHANGE FLUCTUATION LOSS ON ACCOUNT OF WORKING CAPITAL IS A T RS. 183.67 LACS. SINCE THIS LOSS IS ATTRIBUTABLE TO THE WORKING CAPITAL RE QUIREMENT THEREFORE IT HAS BEEN CONSIDERED AS A REVENUE LOSS. THIS NEEDS TO BE VERIFIED BY THE A.O. IN THE INTEREST OF JUSTICE AND FAIR PLAY WE RESTORE T HIS ISSUE TO THE FILES OF THE A.O. THE A.O. IS DIRECTED TO EXAMINE THE AFOREMENTI ONED CHART BY CALLING FOR NECESSARY DETAILS FROM THE ASSESSEE. THE ASSESS EE IS DIRECTED TO PROVIDE NECESSARY DETAILS FOR EXAMINATION. NEEDLESS TO MENT ION THE A.O. SHALL GIVE A REASONABLE OPPORTUNITY OF BEING HEARD TO THE ASSE SSEE BEFORE DECIDING THIS ISSUE AFRESH. IN THE RESULT GROUND NO. 2 IS T REATED AS ALLOWED FOR STATISTICAL PURPOSE. 32. APPEAL OF THE REVENUE IS ALLOWED IN PART FOR STATIS TICAL PURPOSE. 33. THE LD. SENIOR COUNSEL DID NOT PRESS CROSS OBJECTIO N OF THE ASSESSEE THEREFORE THE SAME IS DISMISSED AS NOT PRESSED. ORDER PRONOUNCED IN OPEN COURT ON 18 - 10- 20 16. SD/- SD/- (MAHAVIR PRASAD) (N. K. BILLAIYA) JUDICIAL MEMBER ACCOUNTANT MEMBER AHMEDABAD: TRUE COPY RAJESH COPY OF THE ORDER FORWARDED TO: - 1. THE APPELLANT. 2. THE RESPONDENT. 3. THE CIT (APPEALS) 4. THE CIT CONCERNED.