AI OCR 
TaxTMI 
TaxTMI 
TaxTMI 
2018 (2) TMI 1998
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....ealt as under, issue wise: 2.1 Unabsorbed Depreciation u/s. 10B: ITA No: 827, 828, 829 & 830/2017 Ays 2005-06, 2007-08, 2008-09: The assessee claimed deduction u/s 10B before setting off of brought forward unabsorbed depreciation allowances of ay 2001-02 & 2001-03. In the assessments made for ays 2005-06, 2007-08 & 2008-09 , the AO relying on the Karnataka High Court decision in the case of CIT Vs Himatasingike Saide Ltd in 286 ITR, first set off brought forward unabsorbed depreciation of ays 2001-02 & 2001-03 against each of the current year profits from the business before computing the deduction u/s 10B and then proceeded to determine the total income . Aggrieved , the assessee filed appeals before the CIT(A). The CIT(A) though relied on the decision of the Apex Court in the case of CIT vs Yokogawa India Ltd in 2016 TIOL 228-SC-IT but held that the deduction u/s. 10B would be applied only after adjusting the unabsorbed depreciation and thus held in favour of Revenue. Aggrieved, the assessee filed these appeals pleading that the CIT(A) erred in law in upholding the setting off of brought (carried) forward unabsorbed depreciation losses pertaining to the ays 2001-02 & 2001-03 be....
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....ncome of the undertaking only. Further, Id. AR submitted that even though it is a deduction to be given, it is to be deducted while arriving at the profits of business and not from the Gross Total Income as envisaged under Chapter VI-A of the Act. A deduction under Chapter III of the Act is to be granted first while computing the profits and gains of business itself and not from the Gross Total Income. The assessee case involves set off of unabsorbed depreciation and losses from other business or undertakings i. e. Non 10A unit, against the profit of the 10A unit. The Id. AR further submitted that the Intellinet Technologies India case upon is based on the kamataka High Court ruling in the case of Himatasingike Seide Ltd. case (supra). The Himatasingike Seide Ltd. case (supra) is distinguishable on facts since it was on the set off of unabsorbed depreciation of the same EOU unit. However the facts in this case relate to set off of unabsorbed depreciation of non- EOU unit, which was decided by the Ld. CIT (A) in favour of the assessee for assessment year 2005-06. 38. We have heard both the parties and perused the material on record. In our opinion, this issue is squarely covered b....
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....id reasons we answer the appeals and the questions arising therein, as formulated at the outset of this order, by holding that though Section 10A, as amended, is a provision for deduction, the stage of deduction would be while computing the gross total income of the eligible undertaking under Chapter IV of the Act and not at the stage of computation of the total income under chapter VI." In view of the above judgement of Apex Court, we are inclined to allow the ground taken by the assessee. Following the above order, we allow the assessee's appeals. 3. Deduction of gains arising out of foreign exchange fluctuations u/s. 10B: ITA No. 830/2017 for AY 2008-09 While making the assessment for ay 2008-09, the AO excluded Rs. 19,61,35,076 from the business profits holding that the gains on transfer of funds between two accounts ie EEFC & PCFC in India is not on account of export receivables and hence it is to be treated as income from other sources. The AO relied on the decision of the Bombay High Court in CIT vs Shah Originals 327 ITR 19. Aggrieved , the assessee filed an appeal before the CIT(A). The CIT (A) upheld the AO's finding as well as his reliance on the Bombay High Co....
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....ties Pvt. Ltd. (88 CCH 313) held that the Assessing Officer has to consider the foreign exchange derivative in proportion to export turnover as regular business transaction of the assessee. If the derivative transaction undertaken by the assessee is in excess of export turnover then that loss suffered in respect of that portion of excess transaction has to be considered as speculative loss only and that excess derivative transaction has no proximity with export turnover and the Assessing Officer is directed to compute accordingly. Further, the Assessing Officer has to see whether there is any premature cancellation of forward contract of foreign exchange and that transaction should be taken out for the purpose of considering the business loss and only the transactions which are completed to be considered for the purpose of determining the business loss from this foreign exchange forward contract and remitted the matter to Assessing Officer for fresh consideration. 5.3 In view of the above discussion, we are in agree with the proposition that the MTM loss on forward contracts is not contingent loss and it is a business loss to set off against the business income of assessee. Howev....
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.... portion of the order of the CIT(A) is extracted as under: "23. I have carefully perused the facts in issue, submissions of the appellant and material on record. It would serve useful purpose to refer to the decision in the case of CIT vs. Daga Capital Management P Ltd, 117 ITO 169 (2008) the provisions of s.14A are applicable retrospectively since they are procedural in nature. Based on this decision, the Board has released a Circular No.173 dated 4.2.2009 holding that the provisions of s.14A(2) & (3) will be applicable retrospectively w.e.f. 1.4.1962. However, this decision has been reversed by Godrej & Boyce Mfg. Co. Ltd v. DCIT (328 ITR 81) (2010) (Bom.) which has come subsequently in 2010. Even though the provisions of Rule 80 have come into effect from 24.3.2008 as per the decision of Godrej & Boyce which states that application of provisions of 14A are 'Constitutionally valid' and Rule 80 is applicable from AY 08-09, it also stated that provisions of s.14A are still applicable for earlier years and AO is duty bound to determine expenditure by adopting a reasonable basis or method. 24. With regard to the plea that the provisions of s. 14A cannot be invoked when th....
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....d not for investments. However on the facts of this case no such clear segregation has been furnished. The AO is directed to call for the details of the same and exclude the interest portion if found correct. This ground of appeal is allowed for statistical purposes. 28. In the result, the appeal is partly allowed." 5.2 From the above, it is clear that the CIT(A) has applied the ratio in the case of Godrej Boyce Manufacturing Co. Ltd., supra. Further, his direction to the AO to verify whether the interest expenditure is related to the impugned investments being a fact finding exercise for applying the correct law, we do not find any infirmity in his order, supra. Thus, the assessee's appeal grounds are dismissed. So also the grounds of appeal filed by the Revenue. 6. Now let us examine the Revenue's appeals , issue wise & assessment year wise as under: 6.1 Expenditure incurred in foreign currency : deduction u/s. 10B: ITA No: 1071 & 1072/2017 Department's appeal for AYs 2007-08 & 2008-09: In the assessments made for ays 2007-08 & 2008-09, the AO excluded the expenditure incurred for freight / telecom charges in foreign currency from the export turnover and included it i....