TaxTMI 
TaxTMI 
2018 (4) TMI 515
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....own funds or interest free funds. l(c). On the facts and in the circumstances of the case and in law, the Ld, CIT(A) failed to appreciate that the decision of the Hon'ble Bombay High Court in the case of Reliance Utilities & Power Ltd (313 ITR 340) was given in the context of investments made in sister concerns and the presumption of interest free funds being available with the assessee for investment in property would not apply. 2. On the facts and in the circumstances of the case and in law, the Ld. CIT(A) erred in directing to allow deduction of the amount of Rs. 29,42,23,853/- being amount credited to exchange difference gain account on reversal of provision for loss made on 31.03.2009. 3. The appellant prays that the order of the Ld. CIT(A) be set aside and the order of the AO be restored. 3. Brief facts of the case are as under: In this case, the Assessing Officer has noticed that the assessee company has given advance for purchase of business premise in Bharat Diamond Bourse (BDB) and other immovable properties including Amby Valley Project, Gujrat Hira Bourse and Suzlon Energy. Since these advances are for fixed assets and they have not ....
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.... of the learned AR. The AO has disallowed proportionate interest on the advances given for acquisition of certain business assets since they were not put to use during the year. The AO has also argued that since the funds are mixed up, it is difficult to bifurcated the funds which have gone into investment from own funds and borrowed funds. The argument c; the learned AR, on the other hand, is that the borrowed funds were for a specific purpose i.e for packing and post shipment purposes since the appellant company is fully into export business and submitted the loan sanction letters from the banks in support of his claim. After careful examination of the facts of the case I have noticed that a similar issue has come before the Honourable ITAT, Mumbai in the case of Karp Impex Ltd wherein the ITAT has given relief to the appellant. The relevant paras of the order of the ITAT in ITA No.4500/Mum/2010 dt. 21.1.2015 in that case, are reproduced as under- 7. Relying on the decision of the Bombay High Court for the case of IT vs. Reliance Utilities & Powers Ltd.( 313ITR340), wherein it was held that if there were funds available both interest-free and overdraft and/or loans taken....
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.... net effect of this mark to market item was at Rs. 58,96,91,773/-. The assessee submitted that method of accounting is consistently followed in connection with all the foreign currency denominated transactions and contracts. Further assessee has submitted in his letter as under: (a) For the earlier previous year ended on 31.03.2009 corresponding to A Y 2009/2010, mark to market loss on account of revaluation of outstanding forwards contracts amounting to Rs. 29,42,23,853/- was not allowed during the course of assessment proceedings u/s. 143(3). This item of loss is reversed during the year under assessment as per the consistent method of accounting and as such the same is also accounted as income for the year under assessment. (b) No appeal is filed against the above disallowance by the assessee and all the applicable regular taxes have been paid off and the challans filed with your office from time to time. In view thereof, for this year under assessment, the reduction in the taxable income is required to be made to the extent of Rs. 29,42,23,853/- to mitigate double taxation of the same item in two years. Reply of the assessee was considered, but found ....
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....ear i.e. AY 2010-11, the AO has not considered the request of the appellant for similar adjustment from the gains declared for the year since that would lead to assessment of income below the returned income. 10. Thereafter, considering the assessee's submissions, the ld. Commissioner of Income Tax (Appeals) brought on record further following facts: 5.2 I have carefully considered the facts and circumstances of the case and submissions made by the learned AR. I have also consider the decisions relied on by the learned AR. As seen from the facto of the case the total exchange gain offered for taxation during the year by the appellant including the gain from PCs is Rs. 90,68,46,428. Out of this the net gain out of PCs was arrived at by the appellant as under- FC gain(exports) Rs. 61,09,78,777 FC loss(imports) Rs. 2.12,87,004 Net gain Rs. 58,96,91,773 After taking into those exchange gains the appellant has filed its return of income and disposed taxable income as 36,23,15,625. The AO after making disallowance of Rs. 24,84,689 u/s 36(1)(iii) has concluded his assessment under section 143(3) on 20.2. 2014 by determining taxable income at....
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....ill result in assessment below the returned income. Keeping in view the facts of the case in the light of above rulings I, hereby direct the AO to consider the claim of the appellant and give credit to the loss determined for AY 2009-10. The ground is allowed. 12. Against the above order, the Revenue is in appeal before us. 13. We have heard both the counsel and perused the records. Principally, we find ourselves in agreement with the stand of the assessee and view taken by the ld. Commissioner of Income Tax (Appeals). However, we note that the facts of the issue are not clearly emanating out of the records. What is being claimed is that a sum of Rs. 29,42,43,853/- being provision for mark to market loss was disallowed by the Assessing Officer in the preceding assessment year. However, we note that in the assessment order of last year, the disallowance was only Rs. 21,46,28,951/- in the final computation of income. Now the assessee's plea is that the assessee has not filed the appeal against the disallowance. However, in the current assessment year it has passed a reversal entry debiting the provision and crediting the profit and loss account by Rs. 29,42,23,853/-. The assess....