DCIT Vs FMI Automotive Components Pvt. Ltd. (ITAT Delhi)
Adhoc Disallowances Without Defects Unsustainable – Delhi Tribunal Grants Full Relief; Revenue’s Case Collapses: ITAT Delhi Deletes Additions on Forex, Repairs & Insurance Claim
Revenue filed appeal against the order of CIT(A), NFAC, Delhi dated 30.05.2024 deleting various disallowances made by AO in the assessment of FMI Automotive Components Pvt. Ltd., a joint venture of Futaba Industrial Co. Ltd. & Maruti Suzuki India Ltd.
AO had disallowed foreign exchange fluctuation loss of Rs.5.90 crore on foreign currency loan utilized for purchase of plant & machinery, treating it as debited to P&L instead of capitalization. He also disallowed Rs.49,930 u/s 41 treating static balance of capital creditors as cessation of liability, Rs.11.35 lakh treating certain repair/ replacement expenses as capital in nature, Rs.40.26 lakh being 10% of service fee & job work for want of full bills, Rs.2.94 crore being 10% of disproportionately increased expenditure as compared to previous year, & Rs.4.04 lakh treating insurance claim as revenue receipt.
CIT(A) deleted all additions. He held that foreign exchange loss was duly capitalized u/s 43A & not debited to P&L, hence no disallowance could be made. The static balance of creditors was already offered to tax in A.Y. 2019-20, therefore no addition could be sustained in present year. The expenses of Rs.1.95 lakh for machinery part replacement & Rs.9.39 lakh for polycarbonate sheet were only maintenance & repair, not capital in nature. The adhoc disallowances of 10% on service fee, job work & other expenses were held unsustainable in absence of specific defects, as accounts were audited & no adverse remarks were given. As regards insurance claim, it was received for damage to servo motor forming part of plant & machinery, hence a capital receipt falling u/s 45(1A), not taxable as revenue.
