| The Tax Publishers2020 TaxPub(DT) 1993 (Mum-Trib) INCOME TAX ACT, 1961
Section 154
Where a debatable issue like whether foreign exchange gain on capital account would be chargeable to tax or not, could not be said to be a mistake apparent from record, the AO was not justified in passing order under section 154 by adding such foreign exchange gain to the total income of the assessee.
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Rectification - Debatable issue - Treatment of foreign exchange gain on capital account - No mistake apparent from record
AO passed an assessment order under section 143(3) read with section 263 in case of assessee-company. Subsequently, the AO passed an order under section 154 to rectify the said assessment order. He noticed that the assessee excluded gain on exchange fluctuation amounting from taxable income and credited to profit and loss account. Accordingly, the AO passed order under section 154 and added the said amount to the total income of the assessee rejecting the contention of the assessee that foreign exchange fluctuation was on capital account and hence excluded from computation of income. Further, CIT (A) set aside the order passed by the AO. Aggrieved, Revenue was in appeal. Held: It is settled law that foreign exchange gain on capital account transaction is not chargeable to tax. In instant case, assessee had been consistently following the same treatment in respect of gain on exchange fluctuation for all the subsequent years. Further, during the course of original assessment proceedings, the assessee specifically stated that foreign currency convertible bonds were used for capital account purposes and Revenue did not rebut the fact that the assessee followed the same treatment in earlier years. Further, it as per the settled position that only mistake apparent from record can be rectified under section 154 and thus, a debatable issue like whether foreign exchange gain on capital account would be chargeable to tax or not, could not be said to be a mistake apparent from record. Therefore, the findings of CIT (A) were based on the settled principles of law and hence, the order passed by the CIT (A) was upheld.
REFERRED : Sutlej Cotton Mills Ltd. v. CIT (1979) 116 ITR 1 (SC) : 1979 TaxPub(DT) 0782 (SC) TS Balaram, ITO v. Volkart Brothers & Ors. (1971) 82 ITR 50 (SC) : 1971 TaxPub(DT) 0355 (SC) CIT v. Tata Locomotive and Engineering Company Ltd. (1966) 60 ITR 405 (SC) : 1966 TaxPub(DT) 0318 (SC) Satyanarayan Laxminarayan Hegde v. Millikarjun Bhavanappa Tirumale (1960) 1 SCR 890 CIT v. M/s. PVP Ventures Ltd. (2012) 23 taxmann.com 286 (Madras) : 2014 TaxPub(DT) 1924 (Mad-HC) CIT v. Jagatjit Industries Ltd. (2010) 191 Taxman 54 (Delhi) : 2010 TaxPub(DT) 0837 (Del-HC) EID Parry Ltd. v. CIT (1988) 174 ITR 11 (Mad) : 1988 TaxPub(DT) 1072 (Mad-HC) Sidhramappa Andannappa Manvi v. CIT (1952) 21 ITR 333 (Bom) : 1952 TaxPub(DT) 0028 (Bom-HC)
FAVOUR : In assessee's favour
A.Y. :
IN THE ITAT, MUMBAI BENCH
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