AI OCR 
TaxTMI 
TaxTMI 
TaxTMI 
2014 (3) TMI 1171
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.... assessee in ITA No.43/Mds./10:- (i) The Ld. CIT (A) had erred in confirming the order of the Ld. ACIT disallowing the claim of Rs. 3,74,00,160/- being the additional depreciation not allowed in the preceding year on the asset put to use by the assessee for less than 180 days. (ii) The Ld. CIT (A) had erred in directing the Ld. ACIT to apply Rule 8D for the purpose of disallowance U/s. 14A of the Act, even when the said Rule has been introduced in the statute only w.e.f 24.03.2008 and hence not applicable to the relevant assessment year. Additional Grounds: (iii) The Revenue had erred by treating the remission of sales tax liability as income of the assessee U/s. 41(1) of the Act. 2.2. Concised lone ground of the assessee in ITA No.06/Mds./10:- (i) The Ld. CIT (A) had erred in disallowing expenses of Rs. 7,24,785/- related to earnings from dividend income by applying Rule 8D of the Act. 2.3. Concised lone ground of the Revenue in ITA No.251/Mds./10:- (i) The Ld. CIT (A) had erred in holding that loss on account of exchange fluctuation should be allowed to the assessee as claimed by it. 3. The brief facts of ....
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....sed the view of the Ld. Assessing Officer by observing as under:- "4.2. I have carefully considered the facts of the case and the various submissions made by the AR. I find that the provisions of the Act are very clear. The second proviso to section 32(1), which restricts the depreciation to 50% of the percentage prescribed in respect of assets used for less than 180 days is applicable for additional depreciation also. There is no provision in the act to carry forward and allow the balance depreciation in the next year. Further the additional depreciation is allowable only in respect of new machinery or plant that has been acquired, when the balance 50% of the additional depreciation is proposed to be claimed, the assets are not new machinery or plant eligible for additional depreciation. These assets form part of the opening written down value of the assets. Therefore, these are not entitled for the said additional depreciation. I am therefore of the considered opinion that the claim of the appellant on this ground cannot be allowed. This ground of appeal is therefore dismissed." 3.1.(iii) After hearing both sides and on carefully examining the issue, we....
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....o the income earned from the dividend, Ld. Assessing Officer opined that 2% of dividend income as decided by the Tribunal on earlier occasions, which amounted to Rs. 72,740/- can be estimated as the expenses related for earning the dividend income and accordingly disallowed the same. However, when the matter cropped up before the Ld. CIT (A), the Ld. CIT (A) held that, Rule 8D of Income Tax Rules, 1962 has to be applied in making such disallowance. Before us, Ld. A.R. pointed out that the Rule 8D of the Rules is not applicable for the relevant assessment year 2006-07 since it came into force w.e.f 24.03.2008 by the 5th Amendment Rules, 2008. Ld. A.R. further relied on the decision of the Godrej & Boyce Vs. DCIT [2010] 328 ITR 81 (Bom.), wherein it was held that the AO can adopt a reasonable basis for apportioning the disallowable expenses. Ld. D.R. supported the order of the Ld. CIT (A). After hearing both sides and carefully perusing the materials on record, we find that Rule 8D of the Income Tax Rules is not applicable in the case of the assessee because it came into effect only w.e.f 24.03.2008. Prior to this date the decision pointed out by the Ld. A.R. would be applicable. In ....
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....tained. 3.3.(v) We have heard the rival submissions and carefully perused the materials available on record. As pointed out by the Ld. A.R., this issue was held in favour of the assessee by the decision of the Tribunal in ITA No.91/Mds,/2011 for the assessment year 2007-08 which is reproduced herein-below for reference:- "8. The assessee has raised additional grounds of appeal with regard to deferred payment of Sales tax collected. This issue was not raised before the lower authorities. The assessee has retained sales tax collected from customers during the period between 1998-99 to 2004-05 to be paid to the Government in the year 2008-09 onwards in accordance with the scheme introduced by the Government of Maharashtra. The state Government for early recovery of sales tax collected, gave liberty to the assessees to preceding assessment year future sales tax liability on net present value basis. Under the scheme, the assessee opted for early repayment at discounted value and thus, difference of Rs. 87,21,582/- arose, which was treated as 'income from other sources'. The ld. Counsel has contended that the said difference does not amount to remission of liability U/s....
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....mission' for the purpose of deciding the case before us under the Income tax Act and our decision is based on the provisions of the Income Tax Act, 1961." We find that the issue in hand is similar to the one adjudicated by the Special Bench of the Tribunal. Therefore, respectfully following the same, this ground of appeal of the assessee is allowed." 3. 3.(vi) However, from the above it is apparent that this issue was neither before the Ld. Assessing Officer nor before the Ld. CIT (A) for consideration. Therefore, in the interest of justice we hereby remit the matter back to the file of Ld. Assessing Officer for consideration and to decide the matter according to law and merits. 4. Grounds of the assessee in ITA No.06/Mds./10:- 4.1. Disallowance of expenditure U/s. 14A by applying Rule 8D: Since in the assessee's appeal in ITA No. 43/Mds./10 for the relevant assessment year 2006-07, this issue is decided by us hereinabove by confirming the order of the Ld. Assessing Officer, this appeal has become infructuous and dismissed as such. 5. Grounds of the Revenue in ITA No.251/Mds./10:- 5.1. Disallowance of Loss on account of exchange fl....
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....to allow such losses as business expenditure. The Ld. Assessing Officer also observed that it is not clear from the facts of the case that how the assessee was claiming the loss of Rs. 42.39 lakhs which was in the nature of "provision" on account of market to market to derivative instrumental transactions as an expenses incurred for the purposes of business, since it is contingent in nature. For the aforesaid reasons, the Ld. Assessing Officer added the amount of Rs. 1,08,49,000/- to the income of the assessee for the relevant assessment year. 5.3. The Ld. CIT (A) after examining the issue arrived at the following conclusion:- "3.6. I have carefully considered the facts of the case and the various submissions made by the appellant. Merely because there is no specific provision in the Act, it cannot be said that a particular expenditure or loss can be disallowed. Each expenditure or loss has to be seen in the context in which it was incurred. It is not disputed that the appellant had substantial transactions in foreign exchange and therefore, it is natural that it had to take hedge against potential loss. Though the term used 'derivative' the transactions are basic....
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.... cancellation charges cannot be disallowed. 3.9. With regard to the loss in respect of Mark to Market losses of derivative contracts, as explained by the AR, these were entered into for the purpose of hedging the current assets and current liabilities which form part of the circulating capital of the appellant. It was held by the Supreme Court in the case of Ld. CIT vs Cananar Bank (63 ITR 328) that the loss on account of fluctuation of exchange which arise in the course of trading operations and which is incidental to trading operations is allowable as deduction. In the instant case the loss has arisen in the course of appellants trading operation only. This view is also supported by the decision of Bombay High Court in the case of CIT Vs. Bank of India (218 ITR 371). Further the decision of Apex Court in CIT vs. Woodward Governor India P. Ltd. (312 ITR 254) also fortifies the case of the appellant. The Hon'ble Court in that case had observed as under:- "Loss" suffered by the assessee on account of fluctuation in the rate of foreign exchange as on the Balance Sheet date is an item of expenditure U/s. 37(1) of the Income Tax Act, 1961. As clearly laid down by the ....