2014 (4) TMI 626 - AT - Income Tax

Tribunal rulings on tax issues: loss treatment, PF contributions, interest-free loans, FBT taxability

Intergold (India) Pvt. Ltd. Versus DCIT 8(2), Mumbai

The tribunal addressed various tax issues, including the treatment of loss on cancellation of Forward Exchange Contracts, disallowance of employees' ... Nature of loss – Speculation Loss or not – Forward exchange contracts – Held that:- The decision in CIT vs. Badridas Gauridu (P) Ltd vs. CIT [2003 (1) TMI 61 - BOMBAY High Court] followed – In order to hedge against losses, the assessee had booked foreign exchange in the forward market with the bank - the matter is remitted back to the AO for fresh consideration while following the above mentioned judgement – Decided in favour of Assessee. Deletion on account of diversion of interest bearing funds – Interest free loans provided to subsidy companies – Held that:- As decided in assessee’s own case and in the decision in S. A. Builders Ltd. Vs Commissioner of Income-tax (Appeals) [2006 (12) TMI 82 - SUPREME COURT] followed - CIT (A) has deleted the addition after giving a finding that interest free advances to subsidiary companies have been given on commercial expediency and no disallowance could therefore be made - the order of the CIT (A) is fair and reasonable and it does not call for any interference – Decided against Revenue. Liability of advertisement expenses as FBT u/s 115WD of the Act – Held that:- Assessee contended that there is couple of issues raised in the ground and the first issue relates to taxability of development expenditure as FB and the second one being the bus hire charges incurred for the purpose of transporting the employees to the premises of the assessee – thus,the matter is remitted back to the AO to examine the applicability of the said CBDT Circular and for fresh adjudication – Decided in favour of Assessee. Inclusion of bus hire expenses under FBT – Held that:- The expenses incurred by the company on the employees for transporting them between residence and the premises of the company do not attract FBT – thus, the matter is remitted back to the AO for examination of the facts of the transportation and the places covered by the bus employed – Decided in favour of Assesseee. Issues:- Tax treatment of loss on cancellation of Forward Exchange Contracts- Disallowance of Employees' contributions to PF and ESIC- Addition of interest-free loans to subsidiary companies- Taxability of advertisement expenses and bus hire charges under Fringe Benefit TaxAnalysis:Issue 1: Tax treatment of loss on cancellation of Forward Exchange Contracts- The assessee contested the treatment of loss on cancellation of Forward Exchange Contracts as 'Speculation Loss.'- The counsel referred to relevant tribunal and high court judgments supporting the assessee's position.- The tribunal remanded the issue to the AO for fresh adjudication based on the cited judgments and directed a reasonable opportunity for the assessee.Issue 2: Disallowance of Employees' contributions to PF and ESIC- The CIT(A) had allowed these grounds during proceedings under section 154, rendering them infructuous.- The AO failed to implement the amended order of the CIT(A), prompting the tribunal to direct the AO to comply within two months.- Grounds 2 and 3 were dismissed as infructuous, and the appeal was partly allowed for statistical purposes.Issue 3: Addition of interest-free loans to subsidiary companies- The Revenue appealed the deletion of an addition related to diversion of interest-bearing funds for interest-free loans to subsidiary companies.- The tribunal upheld the CIT(A)'s decision based on precedents and found no reason to interfere with the order, dismissing the Revenue's appeal.Issue 4: Taxability of advertisement expenses and bus hire charges under Fringe Benefit Tax- The assessee challenged the taxability of advertisement expenses and bus hire charges under Fringe Benefit Tax.- The tribunal remanded the issues to the AO for fresh examination in light of relevant CBDT Circulars, granting a reasonable opportunity for the assessee to present their case.- The tribunal allowed the grounds related to both issues for statistical purposes, directing the AO to reevaluate the applicability of FBT.In conclusion, the tribunal addressed various tax issues related to different assessment years, remanding some matters for fresh consideration based on legal precedents and directing the AO to comply with previous orders. The judgments were based on a thorough analysis of the facts and legal provisions, ensuring a fair and reasoned decision in each case.