Gmr Vemagiri Power Generation Ltd ( ... vs Assessee

GMR Vemagiri Power बनाम/ Dy Commissioner of Income Tax , Generation Limited, Circle 3(3), Vs. 25/1, Skip House, Mumbai Museum Road, Bangalore-560025 (अपीलाथ /Appellant) .. ( यथ / Respondent)

आयकर अपील सं./I.T.A. No.3081/Mum/2013 ( नधा रण वष / Assessment Years : 2008-09)

GMR Vemagiri Power बनाम/ Dy. Commissioner of Income Tax , Generation Limited, Circle 3(3), Vs. (Foprmerly known as Mumbai Vemagiri Power Generation Ltd) 25/1, Skip House, Museum Road, Bangalore-560025 (अपीलाथ /Appellant) .. ( यथ / Respondent)

आयकर अपील सं./I.T.A. No.3083/Mum/2013 ( नधा रण वष / Assessment Year : 2009-10)

GMR Vemagiri Power बनाम/ Dy. Commissioner of Income Tax , Generation Limited, Circle 3(3), Vs. (Foprmerly known as Mumbai Vemagiri Power Generation Ltd) 25/1, Skip House, Museum Road, Bangalore-560025 (अपीलाथ /Appellant) .. ( यथ / Respondent)

थायी ले ख ा सं . /जीआइआर सं . /PAN/GIR No. :AABCV1684R ITA No.3081, 3082 and 3983/M/13 2

अपीलाथ ओर से / Assessee by: Shri Manish V Shah

यथ क! ओर से/Revenue by : Shri Ajit K Srivastava

सन ु वाई क! तार%ख / Date of Hearing : 6.1.2015 घोषणा क! तार%ख /Date of Pronouncement : 13.2.2015

आदे श / O R D E R

Per B.R.BASKARAN, Accountant Member:

The assessee has filed these three appeals challenging the orders

passed by Ld CIT(A) and they relate to the assessment years 2007-08 to

2009-10. All these three appeals were heard together and hence they are

being disposed of by this common order, for the sake of convenience.

2. We heard the parties and perused the record. The assessee is

engaged in the business of generation and supply of power. The assessee

commenced its operation during the year relevant to the assessment year

2007-08. After filing the return of income of that year, the assessee

noticed certain mistakes, which resulted in erroneous statement of "Cost of

assets" relevant for computing the depreciation under the Income tax Act.

The major portion of error related to non-deduction of unrealized Forex

gain in terms of sec. 43A of the Act. Hence, the assessee filed a revised

computation of depreciation along with a letter explaining the mistakes.

However, the AO refused to accept the said claim by placing reliance on

the decision of Hon'ble Supreme Court rendered in the case of Goetze

India Ltd (284 ITR 323), wherein it was stated that the additional claims ITA No.3081, 3082 and 3983/M/13 3

could only be made by filing revised return of income. On merits also, the

AO held that the assessee is not entitled to eliminate the effect of

unrealized the Forex gains, since the same has been adjusted in terms of

the mercantile system of accounting followed by the assessee. In

assessment year 2008-09 and 2009-10 also, the AO rejected the claim for

elimination of unrealized forex gains/losses on the WDV of the assets. The

Ld CIT(A) confirmed the assessment order on these issues and hence, the

assessee has filed these appeals before us.

3. We have heard the parties and perused the record. It is seen that

the assessee has prepared its financial statements in accordance with the

accounting principles by duly complying with the Accounting Standards. In

terms of requirements of mercantile system of accounting the assessee

has restated the foreign exchange loans outstanding on the date of

Balance Sheet and the corresponding adjustment has been made on the

cost of assets. In AY 2007-08, the assessee has claimed the depreciation

on the cost of assets as stated in the books of account.

4. However, the total income is required to be computed in accordance

with the provisions of the Income tax Act. Hence, it is well settled principle

that the accounting treatment given in the books of account is not relevant

for the purposes of computing income under the Income tax Act, i.e,

when the accounting system contradicts with the Act, then the Act shall

prevail over the books of accounts. It is pertinent to note that the ITA No.3081, 3082 and 3983/M/13 4

provisions of sec.43A of the Act specifically provides for the manner of

adjustment to be made when there is a change in the rate of exchange of

currency. A careful reading of the provisions of sec. 43A of the Act would

show that the adjustment is required to be made only for the difference in

the liability of foreign currency only at the time of making payment, if such

difference is taken into account at the time of making payment. We notice

that the assessee has claimed depreciation on the cost of assets by

eliminating the unrealized forex gains/losses in terms of sec. 43A of the

Act. However, we notice that the tax authorities have not considered the

express provisions of sec. 43A of the Act. Accordingly, we are of the view

that this issue requires fresh examination at the end of the assessing

officer. Accordingly, we set aside the orders passed by the Ld CIT(A) on

the issue of foreign exchange adjustment in all the three years and restore

the same to the file of the assessing officer with the direction to examine

the same afresh by duly considering the provisions of sec. 43A of the Act

and also by considering the information and explanations that may be

furnished by the assessee in this regard.

5. In assessment year 2007-08, the assessing officer has refused to

accept the additional claims made by the assessee only for the reason that

they are required to be made through revised return only. However, in

the case of Goetz India Ltd (supra), the Hon'ble Supreme Court has held

that the said decision shall not impinge upon the powers of the Tribunal.

ITA No.3081, 3082 and 3983/M/13 5

Since the AO is required to compute the correct total of income, we direct

the AO to consider the additional claims put forth by the assessee and

accordingly determine the amount of depreciation and compute the total

income accordingly. The order of Ld CIT(A) on this issue stands set aside.

6. In the result, all the appeals filed by the assessee are treated as

allowed for statistical purposes.

The above order was pronounced in the open court on 13th Feb, 2015.

घोषणा खल ु े यायालय म) *दनांकः 13th Feb, 2015 को क! गई ।

sd sd

( वजय पाल राव/VIJAY PAL RAO) (बी.आर. बा करन,/ B.R. BASKARAN)

या यक सद य / Judicial Member लेखा सद य/Accountant Member

मुंबई Mumbai: 13th Feb,2015.

व. न.स./ SRL , Sr. PS

आदे श क !त#ल$प अ%े$षत/Copy of the Order forwarded to :

1. अपीलाथ / The Appellant

2. यथ / The Respondent.

3. आयकर आयु0त(अपील) / The CIT(A)- concerned

4. आयकर आयु0त / CIT concerned

5. वभागीय त न2ध, आयकर अपील%य अ2धकरण, मुंबई / DR, ITAT, Mumbai concerned

6.

गाड फाईल / Guard file.

आदे शानस ु ार/ BY ORDER,

true copy सहायक पंजीकार (Asstt. Registrar) आयकर अपील%य अ2धकरण, मुंबई /ITAT, Mumbai