As a relief to Vodafone Idea ltd, the Mumbai Bench of the Income Tax Appellate Tribunal ( ITAT ) has held that Foreign Exchange Gain on the acquisition of fixed assets is allowable as deduction as per Section 43A of the Income Tax Act,1961.
The assessee challenged the action of the Commissioner of Income Tax (A) upholding the addition made on account of foreign exchange gain of Rs.51,96,46,461/- to the total income on the ground that the cost of assets was not reduced with the aforesaid gain and thereby assessee had claimed excess depreciation.
The AO observed that in the computation of income, the assessee has reduced an amount of Rs.51,96,46,461/- on account of the gain of foreign exchange fluctuation relating to fixed assets. In the notes attached with the computation of income, it was mentioned that Foreign Exchange Fluctuation Gains included in the profit and loss account by AS-11 include an amount of Rs.51,96,46,461/- relating to foreign exchange fluctuation gains which need to be adjusted in the cost of assets by the provisions of Section 43A of the Income Tax Act, 1961 and the same has been reduced from total taxable income.
CIT(A), the assessee sought to produce a certificate dated 10/04/2013 which is enclosed on page 513 of the paper book filed before us, wherein the tax auditor had duly clarified that a sum of Rs.51,96,46,461/- had been reduced from the cost of fixed assets, being the foreign exchange gain on loans taken in foreign currency utilised for the acquisition of fixed assets by Section 43A of the Income Tax Act.
The CIT(A) ignores this certificate without even mentioning the fact of filing the said certificate and upheld the action of the AO. It was argued by the department that the assessee had not proved that the foreign exchange gain of Rs.51.96 Crores had been reduced from the cost of fixed assets.
The ITAT bench consisting of Shri Vikas Awasthy, judicial member & Shri M Balaganesh, accountant member observed that Rs.519.65 million representing foreign exchange gain relatable to the acquisition of fixed assets seem to have been adjusted with the cost of fixed assets as per Section 43A of the Act.
To avoid doubt, the bench remanded the issue to the file of the AO for the limited purpose of verification of the fact as to whether this foreign exchange gain of Rs.519.65 million had been reduced from the cost of fixed assets or not. If it is found to be reduced, then the addition made by the AO needs to be deleted. The appeal on this ground was allowed for statistical purposes.
Subscribe Taxscan Premium to view the JudgmentSupport our journalism by subscribing to Taxscan premium. Follow us on Telegram for quick updates
