TaxTMI 
TaxTMI 
TaxTMI 
2021 (11) TMI 766
X X X X Extracts X X X X
X X X X Extracts X X X X
....t in brief is that the return of income declaring loss of Rs. 107,67,77,438/- was filed on 14th October, 2020. The case was subject to scrutiny assessment and notice u/s. 143(2) of the Act was issued on 25th August, 2011. Assessment u/s. 143(3) of the Act was finalized on 29th March, 2014. Ground No. 1. (Disallowance of Rs. 11,41,72,708/- u/s. 14A r.w.r. 8D(2)(ii) of the Act) and ground no. 2 of cross objection filed by the assessee in sustaining disallowance u/s. 14A r.w.r. 8D(2)(ii) of Rs. 79,34,022/- 4. During the course of assessment, the Assessing Officer noticed that assessee has earned dividend income to the tune of Rs. 16,78,260/- claimed as exempt from tax. The assessee has suo moto disallowed expenses of Rs. 3,85,728/- u/s. 14A of the act. The Assessing Officer observed that the assessee had made large investment to the amount of Rs. 300.29 crores, therefore, assessee was asked to furnish the working of disallowance u/s. 14A r.w.r. 8D of the I.T. Rule, 1962. The detailed submission of the assessee in response to the aforesaid query raised by the Assessing Officer has been reproduced at the page no. 3 and 4 of the assessment order. In its submission, the assessee has bri....
X X X X Extracts X X X X
X X X X Extracts X X X X
....enditure under Rule 8D(2)(ii) of the Act includes interest on term loan, buyer's credit, packing credit, overdue interest, transit period interest, discounting charges, interest paid to vendors, etc., and such funds cannot be attributable to investment activities. Once interest expenditure is paid for specific business purpose and not for making investment in shares, proportionate disallowance under Rule 8D(2)(ii) cannot be made. The Hon'ble Chennai ITAT, in case of ACIT V/s Best & Crompton Engineering Limited (ITA No 1603/Mds/2012) dated 16th July 2012 [36 taxman.com 555] has held as under: "II. Section 14A of the Income-tax Act, 1961, read with rule 8D of the Income-tax Rules, 1962 ~ Expenditure incurred in relation to income not chargeable to tax [Bank interest] - Assessment year 2009-10 - Assessing Officer while computing disallowance under section 14A read with rule 8D, included bank interest and interest on term Loan - Commissioner (Appeals) excluded said interest from calculation of disallowance as assessee had utilized both loans for purpose of purchase of machineries and for expansion of projects and these loans were specifically sanctioned for these projects ~ W....
X X X X Extracts X X X X
X X X X Extracts X X X X
....e on general borrowing and Appellant has not proved direct nexus with business activity hence such interest expenditure is considered for making disallowance of interest as per Rule 8D(2)(ii). Particulars Amount (Rs.) Interest on inter-corporate deposit 2,46,28,881 Bank interest 16,39,20,525 Others 1,78,05,891 Interest on debentures 18,16,401 Total 20,81,71,698 Thus, disallowance of interest under Rule 8D(2)(ii) is required to be made after adopting interest expenditure of Rs. 20,81,71,698 and after considering observations made for net interest expenditure in subsequent Paras. 3.5 It is also observed that Appellant has earned interest income of Rs. 35.54 crores which is higher than interest expenditure of Rs. 20,81 crores worked out herein above and as both interest income and expenditure are taxed as part of income from business or profession, only net interest expenditure is required to be disallowed under Rule 8D(2)(ii). Hon'ble Ahmedabad I.T.A.T., in case of Safe/ Reality P. Ltd. V/s ACIT (OSD) (AY 2010- 11) in ITA No. 1842/Ahd/2013 vide its order dated 29/11/2013 has held as under "5.3 Under the totality of the facts and circumstances of the case, ....
X X X X Extracts X X X X
X X X X Extracts X X X X
....of average investment works out to Rs. 83,19,750/-3nd as Appellant has already made disallowance of Rs. 3,85,728/-, disallowance under Section 14A is confined to Rs. 79,34,022A. In the result, addition made by Assessing Officer for Rs. 12,37,95,730/- is restricted to Rs. 79,34,022/-." 6. Heard both the sides and perused the material on record. Without reiterating the facts as elaborated above during the course of assessment, the Assessing Officer has computed disallowance of expenditure incurred towards earning exempt income in accordance u/s. 14A r.w.r. 8D of I.T. Rule, 1962 to the amount of Rs. 12,37,95,730/-. However, the ld. CIT(A) has restricted the disallowance to the extent of Rs. 79,34,022/- after taking into consideration the submission of the assessee that it had sufficient interest free funds available with it and the nature of the expenditure incurred by the assessee was not related to investment made by it on which exempt income earned. It is undisputed fact that the total exempt income earned during the year under consideration was of Rs. 16,78,260/- only. In this regard, we observed that in a number of decisions the ITAT Ahmedabad had adjudicated that disallowance u....
X X X X Extracts X X X X
X X X X Extracts X X X X
.... the Assessment Order and submission filed by appellant. The Assessing Officer has observed that the appellant has purchased car amounting to Rs. 76,80,973/- on which depreciation of Rs. 38,40,4877- at 50% has been claimed. From the provision of section 32 of the Act read with the Appendix-1 of the Income Tax Rules it can be seen that the higher rate of depreciation is allowable on the ''New Commercial Vehicle". There is distinction between commercial vehicle and private vehicle. The vehicle on which higher rate of depreciation has been claimed is not registered as "Commercial Vehicle" with the RTO and hence the benefit of higher rate of depreciation cannot be allowed on such vehicle. On the other hand, Appellant relied on the notification No. 10/2009/F No. 142/01/09-TPL dated 19.01.2009 issued by CBDT, in which it is clearly mentioned that a new commercial vehicle purchased on or after 01.01.2009 but before 30.09.2009 and put to use before 30.09.2009, is eligible to be depreciated at the rate of 50% per annum. Further, vide Notification No. 37/2009 [F.No. 142/01/2009-TPL], dated 21-4-2009, date of purchase of such vehicle was extended upto 30/09/2009. The Appellant has ref....
X X X X Extracts X X X X
X X X X Extracts X X X X
....le Act and allowed the claim as follows:- "5.3. Decision: I have carefully perused the assessment order and the submissions given by the appellant. The A.O. has disallowed the claim of depreciation at higher rate as it has been held by him that the vehicle was not a commercial vehicle. The A.O. has taken the meaning of commercial vehicle in common parlance and has held that commercial vehicle is distinct and different from private vehicle and the vehicle used by the appellant is a private vehicle. The appellant has submitted that as per Note No. 6 to the Rules in Appendix-1, the word commercial vehicle has been defined to include Light Motor Vehicle as defined by Motor Vehicle Act, 1988. Further, section 2(21) of the Motor Vehicle Act define the word Light Motor Vehicle as- "Light Motor Vehicle means transport vehicle or amnibus. The gross vehicle weight of either of which or a Motor Car or a Tractor or road roller, the unladen weight of any of which does not exceed 7500 Kg." The appellant has further submitted that as per the RC Book, the vehicle is LMV and the weight of the car is 2074 Kg. and the unladen weight is 1454 Kg. which was less than 7500 Kg. Therefore, the appell....
X X X X Extracts X X X X
X X X X Extracts X X X X
..../Ahd/2013 as elaborated in his findings supra in this order. Following the decision of Co-ordinate Bench, we do not find any infirmity in the decision of ld. CIT(A), therefore, this ground of appeal of the Revenue is dismissed. Ground No. 3 (Deleting disallowance of excise duty of Rs. 6,51,16,385/-) filed by revenue 10. At the time of assessment, the Assessing Officer noticed that assessee has claimed excise duty claim adjusted against securities premium account amounting to Rs. 3,67,71,030/- and Rs. 2,83,45,355/- respectively. On query, the assessee explained that the same has not been charged to P & L account rather it has been set off against the share premium account as per the scheme of capital reduction sanction by High Court of Gujarat dated 15th Feb, 2013 being an item of section 43B of the Act. It has been claimed on payment basis. The detailed explanation of the assessee vide submission dated 27.01.2014 is reproduced as under:- "8. Your good self has asked the assesses company to explain the allow/ability of excise duty claim of Rs. 3,67,71,030/- and Rs. 2,83,45,355/-. In this regard, the. assessee company submits that the said liability has not been charged to P&L ac....
X X X X Extracts X X X X
X X X X Extracts X X X X
....is attached herewith vide Annexure-2B. Pursuant to the order so received, the assessee adjusted the said liability against the liability frozen (Rs. 2,48,59,319/-). The copy of letter, dated 25/05/2010, informing the Commissioner of Central Excise, Ahmedabad- II about the adjustment of liability and payment of interest thereon is attached herewith vide Annexure-2C. It was a/so intimated that the balance of Rs. 76, 38, 289/- will be utilized in due course. In this context, the copy of Cenvat Credit Register for the period from 01/05/2010 to 30/05/2010 showing the credit entry of Rs. 76,38, 289/- is attached herewith vide Annexure-2D. Pursuant to order received by the assessee, as mentioned above, wherein the final liability of Excise was arrived at Rs. 1, 72, 2 1, 030/-, the assessee was liable to pay the interest thereon amounting to Rs. 18,42,068/-. The copy of challan, dated 25/02/2010 reflecting the said payment is attached herewith the Annexure-3 18,42,068/- Pursuant to the Order no. V.52/15-66/Off/OA2004-05 of The Commissioner of Central Excise, the Excise duty to the tune of Rs. 4,16,41,543/- and Interest of Rs. 44, 11, 7447- .was reversed/paid. The copy of the sa....
X X X X Extracts X X X X
X X X X Extracts X X X X
....The records of such Cenvat credit is maintained in RG 23 register as per the Excise law. 73 In the instant case, Cenvat Credit in respect of the excess electricity cleared outside the factory at the contractual rates was in dispute and the same was settled against the assessee; wherein it was held that cenvat credit attributable to inputs used for the generation of electricity passed on / sold out by the assessee to Ahoka Spintex and Arvind Polycot Limited is required to be reversed/paid. The copies of the orders, wherein the said matter was settled have already been submitted vide submission dated 29/01/2014. In view of the orders so received, the assessee has reversed/paid cenvat credit attributable to the generation of electricity sold out by it. Further, the interest thereon has also been paid and the proofs regarding the same have already been submitted vide submission dated 29/01/2014, 7.4 In the instant case, the payment has been made by way of utilizing Cenvat credit balance and therefore the same is deemed to be paid. Had the assessee was not having balance in cenvat credit receivable^ it^ would have made the payment respect of such liability settled, by PLA account ....
X X X X Extracts X X X X
X X X X Extracts X X X X
....ied by the auditor in his report in form 3CD. The Assessing Officer was of the view that assessee has not paid excise duty actually, therefore, the same was not allowable u/s. 43B of the Act. Therefore, the claim of excise duty adjusted against securities premium account amounting Rs. 6,51,16,385/- (Rs. 3,67,71,030 + Rs. 2,83,45,355/-) was disallowed and added to total income of the assessee. 11. Aggrieved assessee has filed appeal before the ld. CIT(A). The ld. CIT(A) has allowed the appeal of the assessee. The relevant part of the decision of ld. CIT(A) is reproduced as under:- "7.3 I have carefully considered the Assessment Order and submission filed by Appellant. The brief facts pertaining to above addition made by Assessing Officer are that the appellant had been using Naphtha as fuel in gas turbine for the generation of Electricity. A part of the electricity so generated was for captive consumption in the manufacture of final product and part of electricity so generated was wheeled (sold) out to Ashoka Spintex and Arvind Polycot Limited. The CENVAT credit on fuel used in the generation of electricity is admissible for electricity used within the factory for production i.e.....
X X X X Extracts X X X X
X X X X Extracts X X X X
....eivable is adjusted against CENVAT Payable/excise duty, it is deemed to be a payment. The main reason for insertion of CENVAT (erstwhile MODVAT) was to ensure that cascading effect of tax does not take place and tax on tax is not levied in the chain of goods produced by a manufacturer being passed through various hands and ultimately reaching the end or final consumer. When the CENVAT credit initially receivable was subsequently reversed, the nature of such reversal would be Excise Duty Payable hence it could be set-off against CENVAT receivable. Adjustment of CENVAT credit deemed to be one of the modes of payment of excise duty under Excise rules and such adjustment made by Appellant is not disputed by Excise Authorities. The appellant relies on the following decisions: i) Hawkins Cookers Ltd. vs ITO, 14 DTR 206 (Mumbai ITAT) ii) ACIT vs Kaiser Industries ltd. (Delhi ITAT) [2011] 10 taxmann.com 133 ITA No. 555/Del/2010 dated 18.02.2011 iii) CIT vs Shakti Spring Industries Pvt. Ltd. (Jharkhand high Court) [2013] 39 taxmann.com 19 So far as argument of Assessing Officer that the appellant has reversed the CENVAT credit on the order of excise department but the same is not ce....
X X X X Extracts X X X X
X X X X Extracts X X X X
....se of Dy. C/T V Glaxo Smithkline Consumer Healthcare Limited 107 ITD 343 (CHD)(SB) wherein it was held that the MODVAT balance as such does not amount to payment. The balance becomes equivalent to payment only at the point of time the assessee exercises his option to set off the balance against the Central Excise liability and not before. It is to note that the issue pertaining to simple adjustment of balance in MODVAT account was before the ITAT Special Bench, Chandigarh. While giving effect of section 145A, the adjustment of balance in MODVAT account was not before the ITAT Special Bench, Chandigarh. In cases where there are statutory compellation under section 145A to give adjustment in closing stock, in such cases it has to presume that the assesses has exercised his option to set off against MODVAT Account. On the basis of the ratio laid down by the ITAT Special Bench Chandigarh in the case of Dy. CIT V Glaxo Smithkline Consumer Healthcare Limited 107 ITD 343(CHD)(SB) it is to be presumed that the assesses exercises his option to set off MODVAT account against excise liability, which amounts to payment of excise duty and accordingly the assessee is entitled to deduction under ....
X X X X Extracts X X X X
X X X X Extracts X X X X
.... Assessee has claimed advance payment of excise duty as deduction under Section 43B whereas in the Appellant's case, it has utilized available CENVAT credit balance for making payment of excise duty which actually represents payment of excise duty. It is further observed that above liability of excise is raised in year under consideration was settled by utilizing CENVAT credit during the year under consideration itself and if the contention of the Assessing Officer is accepted, entire utilization of CENVAT credit balance for making payment of excise duty arising out of sale made during the year would be allowed as deduction as there is no 'payment as alleged by Assessing Officer and this is not the intention of providing CENVAT mechanism under the Excise Act. In the present case it is observed that appellant was having CENVAT balance with excise authorities which is nothing but excise payment at the time of purchase of goods/materials and it had utilized such balance for making payment of CENVAT referred supra and after such utilization, its available balance with excise authorities have got reduced and the same is nothing but payment of excise to concerned authorities. Thu....
X X X X Extracts X X X X
X X X X Extracts X X X X
....lier for certain period. However, the matter was in dispute and ultimately it was held that CENVAT credit attributable to input used for generation of electricity sold to Ashoka Spintex and Arvind Polycot Ltd. is required to be reversed/paid, therefore, an amount of Rs. 6,51,16,385/- was reversed/paid to excise authority by adjusting CENVAT receivable account. The ld. counsel has further submitted that decision of Hon'ble Supreme Court in the case of Maruti Udhyog Lt, relied upon by the Assessing Officer was not related to the issue pertained to the case of the assessee. The ld. counsel has relied upon the decision of ld. CIT(A). 13. Heard both the sides and perused the material on record. The assessee has been using Naptha as fuel gas turbine for the generation of electricity. A part of the electricity so generated was for captive consumption for the manufacture of final product and part of the electricity so generated was sold out to one of sister concerns of the assessee. The CENVAT credit of fuel used for the generation of electricity is admissible for electricity used within the factory for production i.e. input used for generation of electricity cleared outside the factory i....
X X X X Extracts X X X X
X X X X Extracts X X X X
.... CENVAT credit is maintained in RG 23 register as per excise law and adjustment of CENVAT credit is one of the mode of payment of excise duty under Excise Rule. Considering the above facts and findings, we do not find any infirmity in the decision of ld. CIT(A). Accordingly, this ground of appeal of revenue is dismissed. Ground No. 3 (adding quantum of disallowance u/s. 14A for computing book profit u/s. 115JB of the Act) of Cross Objection filed by assessee 14. At the outset, the ld. counsel submitted that this issue is covered in favour of the assessee as per the decision of Special Bench of ITAT in the case of the ACIT Vs. Vinit Investment Pvt. Ltd. (2017) 82 taxman.com 415 wherein it is held that expenses incurred to earn exempt income not to be added for computing book profit u/s. 115JB of the Act. The ld. Departmental Representative is fair enough not to controvert these undisputed fact that issue is squarely covered by the decision of Special Bench. Following the decision of Special Bench as above, we consider that disallowance made u/s. 14A is not required to be added for computing book profit u/s. 115JB of the Act. Therefore, this ground of cross objection of the assesse....
X X X X Extracts X X X X
X X X X Extracts X X X X
....milar as in ITA No. 2057/Ahd/2016 Assessment Year 2011-12, therefore, after applying the decision adjudicated vide C.O. No. 43/Ahd/2016 as supra in this order, this ground of appeal of the revenue is dismissed. Ground No. 3 (Deleting the addition of Rs. 14,06,339/- made u/s. 41(1) of the act) filed by assessee 20. During assessment, the Assessing Officer noticed that assessee has shown sundry creditors of Rs. 506.16 crores. On perusal of the detail filed, the Assessing Officer noticed that assessee has shown sundry creditors in respect of six parties as on 31st March, 2009, 31st March, 2010, 31st March, 2011, 28th Feb, 2015 to the amount of Rs. 14,06,339/-. The Assessing Officer asked the assessee that why this liability should not be presumed to be ceased in view of the fact that till date the amount due to such parties has not been paid. The assessee explained that this liability is still existed and the same has not to be ceased. The Assessing Officer has not agreed with the submission of the assessee and disallowed the amount of Rs. 14,06,339/- as deemed income of the assessee as per provision of section 41(1) of the Act. 21. The assessee has filed appeal before the ld. CIT(....
X X X X Extracts X X X X
X X X X Extracts X X X X
....fficer has disallowed the expenditure claimed by the assessee as incurred on repair/maintenance on plant and machinery. It is clear from the facts as elaborated above in the finding of ld. CIT(A) that the assessee has incurred the expenditure for repairing of existing spare parts as evident from the invoices and detail of contract note mentioned in the finding of ld. CIT(A). The Revenue has not controverted the facts reported in the finding of the ld. CIT(A), therefore, following the decision of Co-ordinate Bench of the ITAT as referred by the ld. CIT(A), we do not find any infirmity in the decision of ld. CIT(A). Therefore, this ground of appeal of the revenue stands dismissed. Ground No. 6 (Deleting the addition of Rs. 59,27,640/- made on account of disallowance of commission expenditure) 26. During the course of assessment, the Assessing Officer observed that assessee has incurred commission and brokerage expenditure of Rs. 29.16 crores and claimed commission expenditure pertaining to assessment year 2010 of Rs. 59,29,640/- in the current year without establishing that such expenditure was crystalised in the current year. The assessee explained that it has been consistently ma....
X X X X Extracts X X X X
X X X X Extracts X X X X
....ersed in A.Y. 2011-12 on 1st April, 2010 which means that ledger account of commission expenditure is credited by reversal of provision made in earlier year. Against above provision Appellant has received bill of commission agent in current year and such expenditure is debited as commission expenditure in current year and TDS is also deducted. As expenditure of Rs. 59,27,640/- is lower than provision made in earlier year, in fact, Appellant has not claimed such expenditure in current year but same were claimed in earlier year to which it relates. Considering this fact, it is observed that Assessing Officer is incorrect in observing that Appellant has claimed prior period expenditure in current Assessment Year. It is also observed that Assessing Officer has not doubted the genuineness of such expenditure and if such expenditure pertains to earlier year, it can be allowed as expenditure in said Assessment Year and even this exercise is tax neutral as held by Hon'ble Delhi High Court in the case of Vishnu Industrial Glasses and Shriram Piston & Rings Ltd. It is also observed that Hon'ble Ahmedabad ITAT in the case of Adani Enterprises Limited (ITA No. 1859/Ahd/2011, dated 1st ....
X X X X Extracts X X X X
X X X X Extracts X X X X
....l disposal. We observe that this latter order does not settle a ratio. We take into account above stated discussions, relevant facts and case law to conclude that both the lower authorities have wrongly disallowed assessee's claim or prior period expenditure. The same stands deleted. This first substantive ground is treated as allowed." Considering the facts discussed herein above, addition of Rs. 59.27640/- is deleted. This around of appeal is allowed." 28. Heard both the sides and perused the material on record. In view of the decision of Hon'ble Co-ordinate Bench of the ITAT in the case of Adani Enterprises as elaborated in the finding of ld. CIT(A) as above, we do not find any infirmity in the decision of ld. CIT(A). Therefore, this ground of appeal of the revenue stands dismissed. Ground No. 4 ( Addition of Rs. 65,80,813/- on account of employee's contribution to Provident Fund and ESI) filed by assessee 29. As the facts and issue involved in ground no. 4 of appeal vide C.O. No. 43/Ahd/2016 Assessment Year 2010-11 are similar as in ITA No. 1846/Ahd/2016 Assessment Year 2011-12, therefore, after applying the decision adjudicated vide C.O. No. 43/Ahd/2016 as supra in th....
X X X X Extracts X X X X
X X X X Extracts X X X X
.... of appeal is dismissed." 32. During the course of appellate proceedings before us, the ld. counsel referred its submission reproduced at page no. 53 of the ld. CIT(A)'s order. The ld. counsel has also referred page no. 154 to 157 of the paper book which was submitted during the course of assessment and appellate proceedings before the lower authorities containing complete details and accounts of stock written off . The ld. counsel submitted that ld. CIT(A) has wrongly sustained the erroneous addition made by the Assessing Officer. On other hand, the ld. Departmental Representative supported the order of lower authorities. 33. During the course of assessment, the Assessing Officer disallowed the claim of stock written off of Rs. 1,84,89,600/- on the ground that assessee has not furnished relevant supporting detail pertaining to the stock written off. In this regard, we have gone through the copies of document placed at page no. 154 to 157 of the paper book i.e. the complete detail of the fabric stock including quantity, original rate value adopted and other relevant particulars. The Assessing Officer has not made any discussion on the aforesaid details furnished by assessee in th....
X X X X Extracts X X X X
X X X X Extracts X X X X
.... the decision of Hon'ble Delhi Special Bench in the case of Vinit Investment Pvt. Ltd. 82 taxman.com 415, we do not find any infirmity in the decision of ld. CIT(A) after applying the finding as per above, the appeal of the Revenue stands dismissed. Ground No. 3 (Deleting the disallowance of Rs. 2,19,738/- on account of depreciation on motor vehicles which are not commercial vehicles) filed by revenue 38. As the facts and issue involved in ground no. 2 of appeal vide ITA. No. 249/Ahd/2016 Assessment Year 2010-11 are similar as in ITA No. 273/Ahd/2018 Assessment Year 2013-14 therefore after applying the decision adjudicated vide I.T.A. No. 249/Ahd/2016 as supra in this order, this ground of appeal of the revenue is dismissed. Ground No. 4 (Deleting the addition of Rs. 9,87,664/- made on account of cessation of liability u/s. 41(1) of the I.T. Act) filed by revenue 39. As the facts and issue involved in ground no. 3 of appeal vide ITA. No. 249/Ahd/2016 Assessment Year 2010-11 are similar as in ITA No. 273/Ahd/2018 Assessment Year 2013-14 therefore after applying the decision adjudicated vide I.T.A. No. 249/Ahd/2016 as supra in this order, this ground of appeal of the revenue is d....
X X X X Extracts X X X X
X X X X Extracts X X X X
....the Assessment Order and submission filed by the Appellant. The Appellant has claimed deduction of bad debt of Rs. 9,54,12,435/- in return of income. The AO has observed that such amount is not debited in profit & loss account but reduced against provision for bad and doubtful debts in Balance Sheet- The Appellant has submitted its explanation which is reproduced at page No.3 to 5 of Assessment Order which includes details regarding provision for doubtful debts created in earlier Assessment Years, copy of return of income for such Assessment Years, etc. In such submission Appellant has also contended that provisions were created in the hands of Arvind Clothing Limited which was merged into Arvind Brands Limited and Arvind Brands Limited (Garment Division) was merged with Appellant subsequently and bad debt claimed pertains to such units and incomes were already offered to fax in earlier Assessment Years. However, the claim of Appellant was rejected by AO on the ground that though provision considered doubtful were reduced from debtor, no such provision was made in profit & loss account. The AO has also made a tabular chart showing year-wise amount pertaining to total debtors, provi....
X X X X Extracts X X X X
X X X X Extracts X X X X
....fore Assessing Officer: STATEMENT OF BAD DEBTS WRITTEN OF AGAINST PROVISION FOR BAD & DOUBTFUL DEBTS Fin. Year Provision as per Return Remark Claimed debt Net debt ABL ACL Total Debt Debt 1815530 Prior to FY 2000 not identifiable 0 2000-01 12334040 864321 13198361 Disallowed in return 0 2001-02 12546152 3701992 16248144 Disallowed in return 0 2002-03 2739947 1846985 4586932 Disallowed in return 700000 2003-04 11068000 2891054 13959054 Disallowed in return 0 2004-05 7115240 1439903 8555143 Disallowed in return 0 2005-06 21195262 0 21195262 Disallowed in return 38589541 2006-07 26502117 0 26502117 Disallowed in return 0 2006-07 24611313 0 24611313 Created from Share Premium A/c. 0 2007-08 4467845 0 4467845 Disallowed in return 437725 2008-09 Total:- 12257991 G 10744255 135139701 39727266 95412435 On the basis of above reconcili....
X X X X Extracts X X X X
X X X X Extracts X X X X
....only dispute raised by AO was that Appellant has not debited profit & loss account of current year by amount of bad debt but this contention of AO cannot be accepted as Appellant has debited the profit & loss account in the year in which provision for bad and doubtful debts were created and such amounts wore already disallowed in return of income. The Appellant has also submitted copies of return of income of all the previous Assessment Years to prove that bad debt which is claimed in current year is out of provision for bad and doubtful debts created in earlier Assessment Years and same was not claimed as deduction in respect Assessment Years. These facts are also not disputed by AO. The Appellant has adopted method of account by which it has reduced provision for bad and doubtful debts appearing in Balance Sheet instead of adopting method of account by which crediting profit & loss account by provision for bad and doubtful debts written back and correspondingly claiming bad debt in profit & loss account. By adopting both the methods of accounting the net result remains the same and parties' accounts are already reduced by bad debt. This issue is elaborately discussed by Hon&#....
X X X X Extracts X X X X
X X X X Extracts X X X X
....A.Y.2007-08 with stand alone Balance Sheet of Appellant, such figures would have been matched and there would not have been any variation as stated by AO. This claim of Appellant is also apparent from published annual account of Appellant Company and annual accounts of ABL and ACL already filed with the Department along with return of income. The Appellant has also explained the above discrepancy in tabular chart reproduced in its submission. On careful consideration of such reconciliation it is found that there is no discrepancy as alleged by AO and discrepancy has arisen only on account of incorrect comparison made by Assessing Officer which cannot be basis for making addition of Rs. 9,54,12,435/-. In view of detailed discussion made herein above and relying upon the decision referred supra, disallowance of Rs. 9,54,12.435/- made by AO is deleted. This ground of appeal is allowed." 43. Heard both the sides and perused the material on record. Without reiterated the facts as above, it is noticed that the assessee has claimed deduction of bad debt of Rs. 9,54,12,435/-. The Assessing Officer has rejected the claim mainly on the ground that the bad debt has not been debited in the P ....
X X X X Extracts X X X X
X X X X Extracts X X X X
....derivative/forward contract of foreign exchange that it is in business of manufacturing and trading of textile, readymade garments and tele-communication. In view of its overseas operation on purchase and sale, the assessee company is exposed to risk on account of foreign exchange fluctuation and to protect itself from adverse fluctuation on exchange rates of foreign currency, the assessee company has entered into derivative/forward contracts for the purpose of its business. The assessee company submitted that Rs. 16,08,17,279/- is pertained to loss arising on account of market to market valuation of such forward/derivative contracts which were outstanding pending for settlement till 31st March, 2009. The assessee explained that such loss was not speculation loss as the assessee entered into foreign exchange contract, covered the losses in exchange variation, therefore, transaction is not speculation transaction. It is also submitted that such hedging transaction is not a speculation transaction as provided in section 43(5) rather the same is a normal business transaction. The assessee has also placed reliance a number of judicial pronouncements reported at the page no. 11 of the a....
X X X X Extracts X X X X
X X X X Extracts X X X X
....arch, 2010 issued by CBDT and contended that Marked-to-Market Loss for derivative transactions cannot be allowed as actual loss. During the course of Appellate Proceedings Appellant has claimed that it has taken forward derivative contracts for hedging of its USD exports by taking USD-INK forward contract and in such transactions, il has incurred losses due to devaluation of Indian currency. The Appellant has further claimed that due to adoption ofAS-30, it has claimed Marked-to-Market Loss pertaining to such derivative contracts executed upto 1si July, 2008 as business loss in return of income and Marked-to-Market Loss pertaining to contracts executed after such date were debited to hedge reserve account in Balance Sheet. So far as contention of AO that such foss is notional loss is concerned, Appellant has contended that transactions were carried for purely hedging purpose and such hedging was against its USD export which is not denied by AO. The ARs of the Appellant hove relied upon decision of Hon'b/e Supreme Court in case of Woodward Governor (India) Limited (supra) and ONGC in support of Appellant's claim that such loss is allowable business loss. With regard to rel....
X X X X Extracts X X X X
X X X X Extracts X X X X
....gnized in profit and loss account for reporting period ~ Held, yes" - it is observed that Hon'ble Ahmedabad ITAT in the case of Ac/an/ Enterprises Limited 55 taxmann.com 375 (2015), group case of Appellant has held that 'Where Assessee Company has entered into currency swap contracts for working capital loans which was prerequisite for its business of export and import of commodities, loss incurred in the said contract being in respect of circulating/working capital is allowable business, it is observed that on this very issue, Hon'ble Ahmedabad ITAT In the case of Heavy Metal and Tubes Limited in ITA No.1951/Ahd/2011, dated 30/06/2014 decided the issue in favour of Assessee. In the case of Heavy Metal and Tubes Limited, facts are that Assessee has claimed loss on account of foreign exchange derivative amounting to' Rs. 5,89, 29,8127-. It was Assessee's submission that it had availed foreign currency loan for importing raw materials and it had shifted its loan liability in Dollar to Swiss Franc and the loss resulted due to fall in the value of Swiss Franc vis-a-vis dollar on the Balance Sheet date was undertaken to minimize the risk of foreign exchange fluctua....
X X X X Extracts X X X X
X X X X Extracts X X X X
....d as one of the most stable currency as compared to Dollar and accordingly, the loss, if any on account of foreign exchange fluctuation can be minimized. However, there was fall in the value of Swiss Frank vis-a-vis Dollar and on the balance sheet date i.e. 31-03-2008, the appellant company booked the loss of Rs. 5,Q9,29,812/-. This facts have not been disputed by the A.O. 8. 2 It is further submitted by the authorized representative of the appellant company that as per the consistent prudent practice and requirements of Accounting Standards issued by the ICAI, it follows accounting of transactions for purchase & Sales in foreign currency at the prevailing foreign exchange rate at the time of executing transactions and difference if any between the amount of purchase/sales and amount at which the transactions is actually settled by the payment to/from suppliers/debtors is accounted as "Loss/Gain on foreign exchange fluctuation". In the Trading & Profit & Loss Account, the Purchase and sales are disclosed after set off on account of the Loss or Gain due to fluctuation in rates of foreign exchange on account of transactions of import purchase and export sales in foreign exchange. S....
X X X X Extracts X X X X
X X X X Extracts X X X X
....A.Y.2009-10 on settlement of the said 2 forward contracts, there was a gain of Rs. 1,96,26,284/- which is credited to the Profit & Loss A/c and shown as business income in the financial year 2008-09 relevant to A.Y.2009-10. Hence, the net foreign currency derivative loss is of Rs. 3,93,03,528/- (Rs. 5,89,29,812/-Less Rs. 1,96,26,284/-). 8.5 The appellant company made the transactions of import purchase of raw materials and export sales of manufactured goods in the normal course of business. The liability for payment to suppliers for import purchase in foreign exchange is subject to risk of losses on account of fluctuation in exchange rate of foreign currency. To safe guard against such losses and to hedge against the unforeseen future loss due to fluctuation in rate of foreign exchange transactions of purchase & sales company makes the forward contract in the normal course of business to buy/sell the foreign exchange as per the market condition and advice of the bank. Thus, losses incurred in forward contracts for foreign exchange in the normal course of business are not speculative transactions and similar the said transactions not regarded as speculative transaction as per the ....
X X X X Extracts X X X X
X X X X Extracts X X X X
....(A), the Hon'ble Ahmedabad bench has allowed the issue in favour of assesse. Tho ratio of the above judgment squarely applies to the facts of the present case wherein forward contract was entered only to mitigate the risk of exposure towards change in the rate of exchange against purchase of raw material for the purpose of business. It is immaterial that contract was entered between USD and Swiss Dollar instead of Rupee since the ultimate purpose was to settle liability for purchase of raw material in USD for the purpose of business. 6.6. It is observed that AO has denied such loss mainly relying on instruction No.3/2010 which was issued by CBDT on 23'" March, 2010 and on the date of filing the return such Instruction was not on Statute hence it cannot be made applicable in current year. It is also observed that Hon'ble Ahmedabad ITAT in above referred case has decided the issue in favour of Assessee even after above referred CBDT Instruction. It is also observed that Hon'ble Ahmedabad ITAT in the case of DC/7 V/s Elite Core Technologies Pvt Limited in ITA No. 197 and 508/Ahd/2016, dated 31st March, 2010 has held that CBDT Instruction No. 3/2010 do not bind the ap....
X X X X Extracts X X X X
X X X X Extracts X X X X
....es Ltd. (55 taxman.com 375), case of Heavy Metal Tubes Ltd. vide ITA No. 1951/Ahd/2011 dated 30th June, 2014 and decision of DCIT vs. Flite Core Tech. Pvt. Ltd. In the light of the above facts and finding reported in the order of ld. CIT(A) as elaborated above and after considering the decision of Co-ordinate Benches of ITAT Ahmedabad cited in the order of ld. CIT(A) on similar issue and facts, we do not find any infirmity in the decision of ld. CIT(A). Therefore, this ground of appeal of the revenue is dismissed. Ground No. 3 to 3.1 (restricting addition made on account of disallowance u/s. 14A r.w.r. 8D of I.T. Act from Rs. 5,62,68,667/- to Rs. 17,21,275/-) filed by revenue 47. As the facts and issue involved in ground no. 1 of appeal vide I.T.A. No. 249/Ahd/2016 Assessment Year 2010-11 are similar as in ITA No. 2054/Ahd/2018 Assessment Year 2009-10, therefore, after applying the decision adjudicated vide I.T.A. No. 249/Ahd/2016 as supra in this order, this ground of appeal of the revenue is dismissed. Ground No. 1 (Sustaining disallowance of administrative expenditure to the extent of Rs. 17,21,275/- u/s. 14A) filed by assessee 48. As the facts and issue involved in ground n....
X X X X Extracts X X X X
X X X X Extracts X X X X
....t which was also part of submission during Assessment Proceedings that Appellant has reimbursed travelling tickets of candidates which does not involve any contractual payment as observed by AO. This expenditure is purely reimbursement of expenditure which does not require deduction of TDS hence the addition made by the AO for Rs. 1,14,741/- is deleted. This ground of appeal is allowed. 52. Heard both the sides and perused the material on record. Without reiterating the facts as above, we do not find any infirmity in the decision of ld. CIT(A), since the Assessing Officer has not disproved the fact that assessee has made payment on account of reimbursement of expenditure on which no TDS is deductable. Therefore, this ground of appeal of the Revenue stands dismissed. Ground No. 6 & 6.1 (long term capital loss of Rs. 6,58,40,160/- as against long term capital gain of Rs. 5,30,66,091/- offered in the original return of income and revised return of income) filed by revenue 53. During the course of assessment the assessee has brought to the knowledge of the Assessing Officer vide letter dated 29th March, 2012 that because of error in computing the income under the head long term capi....
X X X X Extracts X X X X
X X X X Extracts X X X X
.... administrative expenditure to the extent of Rs. 3,07,53,555/-) filed by assessee 57. During the course of assessment, the Assessing Officer noticed that the assessee has earned dividend income to the extent of Rs. 1,01,23,808/- which was claimed as exempt. The assessee has suo moto disallowed a sum of Rs. 24,33,945/- u/s. 14A of the Act. On query, the assessee has given detailed submission incorporated at page no. 3 to 10 of the assessment order pointing out that no other expenditure has been incurred during the year under consideration which is attributable to earning of exempt income. However, the Assessing Officer has not agreed with the submission of the assessee and computed the disallowance u/s. 14A in accordance with Rule 8D of the I.T. Rule, 1962 to the amount of Rs. 31,61,434/-. 58. The ld. CIT(A) has restricted the disallowance to the extent of Rs. 3,07,53,555/- after taking into consideration that assessee has also earned long term capital gain of Rs. 9.69 crore which was exempt u/s. 10(38) of the Act. 59. During the course of appellate proceedings before us, the ld. counsel has vehemently contended that Assessing Officer has not given explicit finding as to why suo ....