India Safari And Tours Ltd Vs DCIT (ITAT Delhi)
Apropos issue relating to disallowance of gross income on foreign exchange. On this issue, AO noted that assessee was found to have claimed certain loss on account of foreign exchange fluctuation on revaluation of advances received. He noted that loss was in respect of advances and not in respect of any revenue or expenditure, hence not allowable. The assessee informed that this was on account of revaluation under the head advance from customer. AO held that the amount of fluctuation on account of revaluation of advances is not revenue expenditure. Ld. CIT (A) confirmed the same.
It has been submitted that assessee is a company bound to follow Accounting Standards issued by the ICAI. It has been submitted that as per the Accounting Standard 11 issued by the ICAI, exchange differences arising on foreign currency transactions have to be recognized as income or as expense in the period in which they arise. Assessee has further placed reliance on the judgment of Hon’ble Apex Court in the case of CIT vs. Woodward Governor India Pvt. Ltd. 312 ITR 254. Further it has been submitted that the assessee has been consistently following this practice.
Upon careful consideration, ITAT find that the claim of the assessee has to be examined on the touchstone of Hon’ble Supreme Court decision in Woodward Governor India Pvt. Ltd. (supra). Hon’ble Apex Court has affirmed the allowability as revenue expenditure of the foreign exchange fluctuation determined on the basis of Accounting Standard-11 consistently on mercantile basis. Here, no case has been made out that the claim of assessee is not in consonance of this exposition. Hence, respectfully following the precedent, the assessee’s ground is allowed.
FULL TEXT OF THE ORDER OF ITAT DELHI
This appeal by the assessee is directed against the order of the ld. CIT (Appeals)-22, New Delhi dated 27.04.20 18 pertaining to assessment year 2013-14.
2. The grounds of appeal raised by the assessee read as under :-
“1. That the Learned Commissioner of Income Tax (Appeals)-22, New Delhi, has erred in law as well as on facts and in circumstances of the case in upholding action of the Assessing Officer in disallowing of claim of depreciation of the appellant amounting to Rs. 15,46,939/- without appreciating the fact that the furniture used by the Appellant for a limited period due to expiry of lease of the premises.
2. That the Learned Commissioner of Income Tax (Appeals)-22, New Delhi, has erred in law as well as on facts and in circumstances of the case in confirming disallowance of depreciation claim amounting to Rs. 2,60,403/- of the appellant without appreciating the fact that the Appellant company engage in the business of tour and travel and vehicles have actually been used for carrying the travelers.
3. That the Learned Commissioner of Income Tax (Appeals)-22, New Delhi, has erred in law as well as on facts while confirming disallowance of loss incurred on foreign exchange amounting to Rs. 14,404/- by disregarding verdict of Hon’ble Supreme Court in CIT Vs Woodward Governor India Pvt Ltd. [312 ITR 254].
4. That the Learned Commissioner of Income Tax (Appeals)-22, New Delhi has erred in law as well as on facts and in circumstances of the case in confirming action of the AO in treating legal & professional expenses as capital nature and allowing only depreciation for the part of the year.”
3. Apropos ground no.1 : Brief facts of the case are that the assessee company was engaged in the business of inbound tours and provides tour and travel services to foreigners coming to India. The Assessing Officer (AO) observed that during examination of the case, it was noticed from the schedule of fixed assets as filed with the revised return that there was an addition of Rs. 16,28,357/- shown under the head of Temporary Structure and depreciation @ 100% was claimed thereon. AO sought response from the assessee. Not satisfied with the reply, the AO hypothesized that the additions were probably additions in furniture & fixtures. He has held as under :-
“The facts of the case in this regard and submissions made as well as documents filed by the assessee have been duly considered. From the perusal of the same, certain observations made are as under :-
i) Period of construction of such alleged temporary structure is spread over more than 5 months (from 14.05.2012 to 31.10.2012).
ii) Details and nature of some of the bills are as following :-
