Commissioner of Income-tax, Central, Kanpur v. M/s Jai Prakash Industries Pvt. Ltd
[Citation -2017-LL-0330-10]

Citation 2017-LL-0330-10
Appellant Name Commissioner of Income-tax, Central, Kanpur
Respondent Name M/s Jai Prakash Industries Pvt. Ltd.
Court HIGH COURT OF ALLAHABAD AT LUCKNOW
Relevant Act Income-tax
Date of Order 30/03/2017
Assessment Year 2003-04
Judgment View Judgment
Keyword Tags disallowance of interest • interest free advance • foreign currency • retention money • head office
Bot Summary: Whether on the facts and in the circumstances of the Income 2 Tax Appellate Tribunal was right in dismissing the departmental appeal in respect of disallowance of interest on borrowing amounting to Rs. 3,09,16,000. Whether on the facts and in the circumstances of the Income Tax Appellate Tribunal was right in dismissing the appeal of the department in respect of disallowance of Rs. 25,27,000/ on account of share issue expenses debited in P L account, contrary to the decision of Hon'ble Supreme Court in the case of PIDC Ltd. Vs. CIT reported in 225 ITR 972. So far as question is concerned, we find that there is a finding of fact recorded by Tribunal after noticing that Assessing Officer computed the foreign currency translation difference as income as per accounting principle and only on notional basis. As could be seen from the computation reproduced by the AO in assessment order, this difference had arisen on the translation of the overseas account in the Head Office account at the end of the year on exchange rate prevalent on the last day of the accounting year. The AO in assessment year 1993 94, had observed that this difference arose as it was in different accounts appearing in the books at the exchange rate prevailing on the first day of the accounting year were translated in Indian Rupees at the closing date. The amount of this 3 difference was notional debit/credit and did not represent any loss or income for the purpose of computing the taxable income under the Income Tax Act. For the reasons stated in our judgment dated 24.1.2017 passed in Income Tax Appeal No. 87 of 2008 Question is also answered against Revenue.


Court No. 3 Case : INCOME TAX APPEAL No. 111 of 2008 Appellant : Commissioner Of Income Tax Central Kanpur Respondent : M/S Jai Prakash Industries Pvt. Ltd. Counsel for Appellant : D.D.Chopra, Alok Mathur Counsel for Respondent : Namit Sharma Hon'ble Sudhir Agarwal, J. Hon'ble Ravindra Nath Mishra II, J. 1. Heard Sri Alok Mathur, for appellant and Sri Namit Sharma, Advocate, for respondents. 2. This appeal under Section 260 of Income Tax Act, 1961 (hereinafter referred to as "Act, 1961") has been filed challenging judgment and order dated 31.12.2007 passed by Income Tax Appellate Tribunal, Lucknow Bench 'A', Lucknow (hereinafter referred to as "Tribunal") in Income Tax Appeal No. 416/Luc/2004, relating to Assessment Year 2003 04. 3. Following substantial questions of law are formulated in this appeal: "(i) Whether on fact and in circumstances of Income Tax Appellate Tribunal was right in dismissing departmental appeal in respect of addition of Rs. 3,43,864.00 made on account of deprecations on Iraqi assets without appreciating material brought on records and facts of case. (ii) Whether on facts and in circumstances of Income Tax Appellate Tribunal was right in dismissing appeal of department in respect of addition of Rs. 6,05,81,891.00 on account of deprecation of depreciation on temporary erections by holding that durable structures made of cement, bricks and steels and designed to last 10 to 15 years qualified as purely temporary structures eligible for depreciation @ 100% under Income Tax Rules, 1962. (iii) Whether on facts and in circumstances of Income 2 Tax Appellate Tribunal was right in dismissing departmental appeal in respect of disallowance of interest on borrowing amounting to Rs. 3,09,16,000.00 on account of disallowance of interest on borrowing even though assessee had given interest free advance to sister concerns and other for non business purposes. (iv) Whether on facts and in circumstances of Income Tax Appellate Tribunal was right in dismissing departmental appeal in respect of addition of Rs. 79,58,63,603.00 lacs made on account of retention money without appreciating facts of case and material brought on records. (v) Whether on facts and in circumstances of Income Tax Appellate Tribunal was right in dismissing appeal of department in respect of disallowance of Rs. 25,27,000/ on account of share issue expenses debited in P & L account, contrary to decision of Hon'ble Supreme Court in case of PIDC Ltd. Vs. CIT reported in 225 ITR 972." 4. So far as question (i) is concerned, we find that there is finding of fact recorded by Tribunal after noticing that Assessing Officer computed foreign currency translation difference as income as per accounting principle and only on notional basis. In this regard, Tribunal has recorded its finding which reads as under: "8. As could be seen from computation reproduced by AO in assessment order, this difference had arisen on translation of overseas account in Head Office account at end of year on exchange rate prevalent on last day of accounting year. AO in assessment year 1993 94, had observed that this difference arose as it was in different accounts appearing in books at exchange rate prevailing on first day of accounting year were translated in Indian Rupees at closing date. difference was adjusted in accounts of foreign currency translation difference. amount of this 3 difference was notional debit/credit and did not represent any loss or income for purpose of computing taxable income under Income Tax Act. entries on this account were made only for balancing books. Therefore, this exercise was merely done on account of incorporating trial balance appearing in Iraqi branch in Head Officer books in Indian currency. Since no actual gain accrued to assessee, there was no question of taxing this amount. We, accordingly, confirm order of ld. CIT(A) following precedent and in view of aforementioned discussion." 5. aforesaid finding having not been shown to be incorrect or contrary to record, we answer Question (i) against Revenue. 6. So far as Questions (ii) and (iv)are concerned, it is purely question of fact and do not give rise to any substantial question of law, hence need not be answered. 7. So far as Question (iii) is concerned, counsel for parties states that it is squarely covered by judgment of this Court dated 24.01.2017 passed in Income Tax Appeal No. 87 of 2008 (Commissioner of Income Tax Vs. M/S Jai Prakash Industries Pvt. Ltd.) wherein similar question was answered against Revenue and in favour of Assessee. 8. For reasons stated in our judgment dated 24.1.2017 passed in Income Tax Appeal No. 87 of 2008 (supra) Question (iii) is also answered against Revenue. 9. In respect of Question (v), Tribunal has clearly recorded finding that issues of expenses is covered under Section 35D of Act, 1961 and, therefore, Assessee is entitled for disallowance and we do not find anything wrong in order of Tribunal. Question (v), therefore, is also answered against Revenue. 10. In result, appeal fails and is dismissed accordingly. Dt. 30.03.2017 AK CommissionerofIncome-tax,Central,Kanpur v. M/sJaiPrakashIndustriesPvt.Ltd
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