TaxTMI 
TaxTMI 
2021 (4) TMI 639
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....return of income declaring income of Rs. 2,33,19,03,480/- was filed on 12th Sep, 2011. The case was subject to scrutiny assessment and notice u/s. 143(2) of the Act was issued on 3rd August, 2012. The assessee company is engaged in the business of manufacturing and dealing in cotton, synthetics plastic etc. The Assessing Officer completed the assessment u/s. 143(3) of the Act on 20th March, 2013 and total income was assessed at Rs. 2,79,13,06,590/- after making various additions and disallowances. The assessee filed appeal before the ld. CIT(A) against the order of Assessing Officer. The ld. CIT(A) has partly allowed the appeal of the assessee. The Revenue has filed the instant appeal against the decision of ld. CIT(A) in deleting the additions/disallowances made by the Assessing Officer. The various grounds of these issues filed by revenue are adjudicated as follows:- Ground No. 1(Deleting the disallowance of deduction u/s. 80IC under the head interest and financial charges, common expenses of corporate expenses and common expenses of corporate and plastic division) 4. This ground relates to allocation of common interest and financial charges of Rs. 891.99 lacs to the Baddi Unit....
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....cted the Assessing Officer to allocate common interest & finance charges on the basis of investment in the Baddi units at the place of sale/turnover. In respect of addition on account of allocation common head expenses, the ld. CIT(A) has allowed the appeal of the assessee after following the order of his predecessor for assessment year 2009-10 and 2010-11 holding that when allocation of common head expenses are made on actual basis then there is no need for further allocation of such expenses on the basis of sales ratio. Similarly in respect of addition on account of expenses pertaining to plastic and corporate division, the ld. CIT(A) has also allowed the appeal of the assessee after following the decision of his predecessor of assessment year 2009-10 and 2010-11 holding that the Assessing Officer failed to put any reasoning to allocate such expenses on the basis of sales/turnover ratio. 6. During the course of appellate proceedings before us, the ld. counsel has submitted that aforesaid issue of allocation of expenses has been adjudicated by Co-ordinate Bench of the ITAT in favour of the assessee itself vide ITA No. 1548/Ahd/2012. The ld. Departmental Representative was fair en....
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.... charges in the ratio of sales made from the products of 80IC units vis-a-vis the total sales made by the company, because, we have observed that such expenditure is to be worked out on the basis of actual investment made in 80IC units. With this analogy, when we examine the details, for the purpose of allocation under the present head, then it would reveal that the assessee has been maintaining separate accounts for these units. It has debited expenditure on actual basis. The AO did not find any error in that attribution. He simply jumped to make allocation on the basis of sales made by these units vis-a-vis the total sales. That is not a scientific 'criteria for making disallowance. The Id.CIT(A) has accepted the contention of the assessee, it has considered all these expenditure, and where there is a direct nexus with the activity of 80IC units, vis-a-vis this expenditure, it has already made disallowance. Let us take an example. As far as security charges are concerned, the assessee already accounted the security charges relevant for the purpose of 80IC units. Why allocation out of the expenditure incurred at head office ought to be made to this unit. Similarly, it has allo....
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....& ground no. 4 of assessee vide ITA No. 2702/Ahd/2017 confirming disallowance of Rs. 1.766 crore u/s. 14A of the act) 8. During the course of assessment, the Assessing Officer noticed that assessee company has received dividend income of Rs. 85,49,180/-. However, the assessee had disallowed only Rs. 1,42,083/- in respect of expenditure incurred for earning exempt income. On query, the assessee explained that investment was made out of surplus and internal accrual available with the company and no borrowed fund was used. The Assessing Officer has not accepted the contention of the assessee that no expenditure has been incurred in relation to exempt income and computed the disallowance to the amount of Rs. 23,31,86,985/- after applying the rule 8D of the I.T. Rule, 1961. 9. The assessee has filed appeal before the ld. CIT(A) . The ld. CIT(A) has partly allowed the appeal of the assessee and restricted disallowance to the amount of Rs. 1.78 crores. 10. During the course of appellate proceedings before us, the ld. counsel submitted that on similar issue disallowance made for assessment year 2010- 11 was deleted by the ITAT vide ITA No. 1598/Ahd/2012 and the Hon'ble High Court has a....
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.... under the said Act. In other words, the requirement of the Assessing Officer embarking upon a determination of the amount of expenditure incurred in relation to mpt income would be triggered only if the Assessing Officer returns a finding that he is not satisfied with the correctness of the claim of the assessee in respect of such expenditure. Therefore, the condition 'precedent for the Assessing Officer entering upon a determination of the amount of the expenditure incurred in relation to exempt income is that the Assessing Officer must record that he is not satisfied with the correctness of the claim of the assessee in respect of such expenditure. Sub-sect/on (3) is nothing but an offshoot of sub-section (2) of Section 14A. Sub-section (3) applies to cases where the assessee claims that no expenditure has been incurred in relation to income which does not form part of the total income under the said Act. In other words, sub-section (2) deals with cases where the assessee specifies a positive amount of expenditure in relation to income which does not form part of the total income under the said Act and sub-section (3) applies to cases where the assessee asserts that no expe....
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....22 crores on sale of such investment for taxation as short/long term capital gain. Similarly, in the Asstt.year 2010-11, a sum of Rs. 8.23 crores has been offered. The investment made by the assessee was not out of interest bearing fund. It has its own surplus fund out of which investment has been made. The assessee has demonstrated that it had own funds of Rs. 1981.55 crores in the Asstt.Year 2009-10 and investment in the mutual fund was only Rs. 144.51 crores. The assessee has also submitted that its investment in earning exempt income has been reduced during the year from 78.45 crores to Rs. 18.09 crores. The assessee has submitted these details in its submissions reproduced by the AO. Similarly, in the Asstt.Year 2010-11, it has reserve fund of Rs. 2319.17 crores and made investment of Rs. 111.09 crores. The Id.AO has not given any heed to these submissions or figures submitted by the assessee. The assessee has further made disallowance of Rs. 5.12 lacs in the Asstt.Year 2009-10. This was mainly for management of investment. He simply discussed the background for bringing section 14A as well Rule 8D on the statute book. He has specifically not worked out the amounts even on....
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.... appellant that merely on account of gain in foreign exchange fluctuation related to liability towards FCCB, the A.O. treated them as taxable u/s 28 of the Act though the foreign exchange loss in earlier years on the same issue were not dealt accordingly. I am also inclined with the contention that in view of provisions of section 43A of the Act and clear instruction / explanation / clarification from the CBDT in various circulars as well as legal proposition, the nature of such foreign exchange gain will remain capital in nature and required to be adjusted towards cost of shares of subsidiary at the time of payment of FCCB. There is no dispute as far as amount of foreign exchange gain related to liability of FCCB loan related to its utilization for shares of subsidiary company. It is therefore considering the facts, provisions of section 43A of the Act, CBDT circulars, ratio of various case laws relied on by appellant and ratio of my predecessor in the case of appellant in appeal order for A.Y. 10-11, the A.O. is not justified in treating Rs. 5,28,10,870/- as taxable gain. The A.O. is directed to treat the same as notional gain of capital nature and delete the addition so made. Th....
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.... exchange. When the assessee buys an asset at a price, its liability to pay the same arises simultaneously. This liability can increase on account of fluctuation in the rate of exchange. An assessee who becomes the owner of an asset (machinery) and starts using the same, it becomes entitled to depreciation allowance. To work out the amount of depreciation, one has to look to the cost of the asset in respect of which depreciation is claimed. Section 43A was introduced to mitigate hardships which were likely to be caused as a result of fluctuation in the rate of exchange. Section 43A lays down, firstly, that the increase or decrease in liability should be taken into account to modify the figure of actual cost and, secondly, such adjustment should be made in the year in which the increase or decrease in liability arises on account of fluctuation in the rate of exchange. It is for this reason that though section 43A begins with a non obstante clause, it makes section 43(1) its integral part. This is because section 43A requires the cost to be recomputed in terms of section 43Afor the purposes of depreciation [Sections 32 and 43(1)]. A perusal of section 43A makes it clear that insofa....
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....arlier assessment years as well as subsequent assessment year and the treatment given by the assessee has been accepted. Therefore, the leaned CIT(A) as well as the Tribunal has rightly deleted the disallowance of Rs. 39,48,81,350/- = made on account of foreign gain. Even otherwise, the issue involved in the present Tax Appeal is squarely answered in favour of the assessee by the decision of the Hon'ble Supreme Court in the case of ACIT v. Elecon Engineering Company Limited, reported in 189 Taxmann 83 [2010] 10.1 At this stage, decision of Division Bench of this Court in the case of Principal Commissioner of Income-tax v. India Gelatine & Chemicals Limited, [2015] 376 ITR 553 [Guj] needs a reference where the Division Bench has held and observed that when the assessee had sufficient interest free funds out of which concerned investments had been made, disallowance under Section 14A of the Act is not justified. 11. Considering the aforesaid facts and circumstances, it cannot be said that the learned Tribunal has committed any error in deleting the disallowance of expenditure of Rs. 39,48,81,350/- incurred towards foreign exchange gain. We concur with the findings recorded by the....