2010 (11) TMI 520 - AT - Income Tax

Tribunal directs reassessment of forex loss, expenses disallowance, excludes certain income

The Tribunal directed the Assessing Officer to reconsider the disallowance of foreign exchange fluctuation loss in closing stock and expenses related to ... Disallowance - Whether foreign exchange loss is a part of the cost of material - Tribunal has decided the issue in favour of the assessee and he has no objection, if the issue is restored to the file of the Assessing Officer for considering the issue in the light of the decision of the Tribunal Regarding disallowance u/s 14A - assessee company has claimed dividend income amounting to Rs.37,13,803/- as exempt u/s 10(33) of the Act - It is the submission of the ld counsel for the assessee that the calculation made by the Assessing Officer, is erroneous since he has included the manufacturing expenses for calculating proportionate disallowance u/s 14A although in the assessment order, he has mentioned that proportionate disallowance has to be claimed on the basis of administrative and other expenses other than manufacturing expenses incurred during the year - Appeal is allowed for statistical purpose Regarding deduction u/s 80HHC - in assessee' s own case and in absence of any contrary material brought to our notice - Held that: not to exclude the lease rentals and sale of scrap from profit of the business while computing relief u/s 80HHC - Appeal is allowed for statistical purpose Issues:1. Disallowance of foreign exchange fluctuation loss in closing stock.2. Disallowance of expenses related to dividend income under sec. 14A of the IT Act.3. Exclusion of income from sale of scrap and lease rentals for deduction u/s 80HHC of the Act.Issue 1: Disallowance of foreign exchange fluctuation loss in closing stock:The Assessing Officer disallowed Rs. 51,96,795 of foreign exchange fluctuation loss attributable to the closing stock. The CIT(A) upheld this decision based on the Assessing Officer's action for the previous assessment year. The Tribunal decided to restore the issue to the Assessing Officer for reconsideration in light of the Tribunal's previous decisions in favor of the assessee. The Tribunal directed the Assessing Officer to make necessary adjustments and pass an appropriate order after giving the assessee a hearing.Issue 2: Disallowance of expenses related to dividend income under sec. 14A of the IT Act:The Assessing Officer disallowed Rs. 4,82,284 as expenses attributable to earning dividend income claimed exempt u/s 10(33) of the Act. The CIT(A) upheld this disallowance. The Tribunal found the calculation by the Assessing Officer erroneous as manufacturing expenses were included. The Tribunal directed the Assessing Officer to re-adjudicate the issue in light of the jurisdictional High Court's decision, providing the assessee with a hearing opportunity.Issue 3: Exclusion of income from sale of scrap and lease rentals for deduction u/s 80HHC of the Act:The Assessing Officer excluded income from sale of scrap and lease rentals for calculating deduction u/s 80HHC, which the CIT(A) upheld. However, the Tribunal referred to its previous decisions in the assessee's case for other assessment years where similar issues were decided in favor of the assessee. Following these precedents, the Tribunal directed the Assessing Officer not to exclude lease rentals and sale of scrap from profit of the business while computing relief u/s 80HHC. The appeal was partly allowed for statistical purposes.In conclusion, the Tribunal provided detailed analysis and directions for each issue, ensuring a fair reconsideration by the Assessing Officer in accordance with the law and previous decisions. The judgments were based on legal provisions, precedents, and the specific circumstances of the case.