AI Drafter 
TaxTMI 
TaxTMI 
TaxTMI 
2017 (8) TMI 640
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....ating to foreign exchange gains. 3. The assessee is engaged in the business of towage, salvage and related marine services, i.e., in shipping business. The assessee owned qualifying ships (as per tonnage tax scheme) and non-qualifying ships. Accordingly it offered its income under tonnage scheme for qualifying ships and under Regular Provisions of the Act for non-qualifying ships. The assessing officer, inter alia, added a sum of Rs. 14.26 lakhs us. 14A of the Act and also added foreign exchange gains of Rs. 921.33 lakhs to the total income of the assessee. The learned CIT(A) partly confirmed both the additions referred above. Still aggrieved, the assessee has filed this appeal before us. 4. First issue relates to addition made u/s. 1....
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....e with the assessee is in far excess of the amount of investments and hence no disallowance out of interest expenditure is called for as per decision rendered by Hon'ble Jurisdictional High Court in the case of HDFC Bank Ltd. Vs. DCIT (366 ITR 505). We noticed that the assessee has held investments in three schemes of mutual funds and all of them have been liquidated during the year. Accordingly, we are of the view that there is merit in the contentions of the assessee that the provisions of Rule 8D(2)(iii) of the I.T. Rules should not be applied in the facts and circumstances of the case. Since the assessee has received dividend income and since there were activities relating to liquidation of mutual funds, we are of the view that some....
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....and hence the above said income would be covered under tonnage tax scheme. 9. The learned CIT(A) agreed with the contentions of the assessee that net foreign exchange gain of Rs. 7.68 crores only should be considered for the purpose of addition. The learned CIT(A) noticed that foreign exchange gain has arisen to the assessee out of loan transactions, whereas in the case of Tag Offshore Ltd. (supra), foreign exchange gain arose on revenue account, i.e., out of debtors and creditors balances. Accordingly, he held that entire amount of net foreign exchange gain is taxable in the hands of the assessee under normal provisions of the Act. Before, the learned CIT(A), the assessee submitted that proportionate gain of Rs. 14.74 lakhs relating to ....
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....ons and perused the materials available on record. The facts stated hereinabove are undisputed. There is no dispute that the provisions of section 43A of the Act would become applicable for recognizing the exchange fluctuation if the loan was obtained for acquisition of fixed assets only at the time of making payment and accordingly the exchange gain, if any, would go to reduce the cost of the fixed asset. Since in the instant case, the exchange gain is derived only on a notional basis and is unrealized, by applying the provisions of section 43A of the Act, the said gain needs to be reduced from the taxable income. We also find that the Learned Assessing Officer having accepted to the facts of the case and the relevant provision of the Inco....
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....chase assets, would be governed by the provisions of section 43A of the Act and further the differences are required to be adjusted against the cost of asset at the time of making actual payment. In the instant case, assessee has accounted for the foreign exchange differences arising on ECB loan as per the Accounting Principles and hence the same is required to be ignored for the purpose of computing total income as per the provisions of section 43A of the Act as held in the case of Vodafone East Ltd (supra). 13. In respect of foreign exchange gain difference arising on other items, we noticed that the assessee has allocated the gain between the qualifying ships and non-qualifying ships. Income from qualifying ships is computed under ton....