TaxTMI 
TaxTMI 
TaxTMI 
2019 (2) TMI 2135
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....isallowance of car depreciation. (3) That the ld.CIT(A) erred in law and on facts in deleting the addition of Rs. 11,14,386/- made on account of disallowance of additional depreciation claimed on Rolling Mills Rolls. (4) That the ld.CIT(A) erred in law and on facts in deleting the addition of Rs. 1.06,568/- made u/s. 36(1)(iii) of the I.T. Act, on account of disallowance of interest expenses in respect of capital work in progress. (5) That the ld.CIT(A) erred in law and on facts in deleting the addition of Rs. 34,60,766/- made on account of disallowance of foreign exchange loss. 3. The 1st issue raised by the Revenue is that the Ld.CIT (A) erred in deleting the addition made by the AO for Rs. 91,73,496/- on account of excess interest paid to the related parties. 4. The facts of the case are that the assessee in the present case is a private Ltd company and engaged in the business of manufacturing of cold rolled/hot rolled strips/sheets. The AO during the assessment proceedings found that the assessee has borrowed money on interest at the rate of 18% per annum from the related parties. As per the AO prevailing market rate of interest on the money borrowed is at the rate of 1....
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....nt of Hon'ble High Court of Delhi in case of Oracle India (P.) Ltd. reported in 11 taxmann.com 139. 8.3 We also note that the ITAT in the own case of the assessee as discussed above has deleted the addition made by the AO vide order dated 12 July 2016. The relevant extract of the order is reproduced as under: 10. We have given a thoughtful consideration to the rival contentions and have carefully perused the order of the authorities below. The only basis of the Assessing Officer for making the disallowance was that the assessee has paid interest to unrelated parties at varying rates of 6%, 12% and 16%. In our considered opinion, solely because assessee had paid interest at different rates to different parties, that itself could not be a ground to come to the conclusion that payment of interest to related parties at rate other than that paid to other party was excessive and unreasonable. Our view is fortified by the decision of the Hon'ble Jurisdictional High Court of Gujarat given in the case of Sarjan Realities Ltd. in Tax Appeal no. 657 of 2014 50 taxmann.com 52. The relevant part of the decision of the Hon'ble Jurisdictional High Court reads as under:- "It is requir....
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.... for the purchase of these cars has been made from the fund of the company. The cars were registered in the individual name of the employees in order to save the registration charges levied by the state government. 9.3 However, the AO was dissatisfied with the contention of the assessee and therefore disallowed the depreciation amounting to Rs. 65,583/- only. Accordingly the same was added to the total income of the assessee. 10. The aggrieved assessee preferred an appeal to the Ld.CIT (A) who deleted the addition made by the AO after having a reliance on the order of his predecessor in the own case of the assessee pertaining to the assessment year 2010-11 and 2011-12. 11. Being aggrieved by the order of the Ld.CIT (A) Revenue is in appeal before us. 12. Both the Ld. DR and AR before us relied on the order of authorities below as favorable to them. 13. We have heard the rival contentions and perused the materials available on record. At the outset, we find that the Hon'ble ITAT in the own case of the assessee pertaining to the assessment year 2010-11 and 2011-12 vide ITA no. 1717 and 1971/AHD/2015 vide order dated 1st February 2018 has deleted the addition made by the AO. The ....
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....f section 32(1)(iia) of the Act. Thus the AO disallowed the accelerated depreciation of Rs. 11,14,386/- and added to the total income of the assessee 17. Aggrieved assessee preferred an appeal to the Ld.CIT (A). The assessee before the Ld.CIT (A) submitted that it has been claiming additional depreciation consistently in the earlier years which was allowed by the AO. Therefore the same needs to be considered for the additional depreciation for the year under consideration. 17.1 The assessee also claimed that it had claimed depreciation and additional depreciation as per Appendix I under rule 5 of Income Tax Rule at Part-A serial no. III, 8(vii), which contains a separate entry for the depreciation of rolling mills Rolls. 17.2 The Ld.CIT (A) after considering the submission of the assessee observed that rolling mills rolls are not office equipment. There is separate entry appearing in appendix I for claiming depreciation in respect of rolling mills rolls. The rolling mills rolls is an integral part of the machinery without which the machine cannot function. Thus the Ld.CIT (A) held that when the plant and machinery is eligible for additional depreciation, then the part of the pla....
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....o take a different view of the matter-and if there was no change it was in support of the assessee-we do not think the question should have been reopened and contrary to what had been decided by the Commissioner in the earlier proceedings, a different and contradictory stand should have been taken. We are, therefore, of the view that these appeals should be allowed and the question should be answered in the affirmative, namely, that the Tribunal was justified in holding that the income derived by the Radhasoami Satsang was entitled to exemption under sections 11 and 12." 21.3 We also note that there is no dispute about the use of rolling mills rolls in the activity of manufacturing. Accordingly, we are of the view that where the machinery is allowed for additional depreciation used in the activity of manufacturing, then the parts of the machinery should also be eligible for additional depreciation under section 32(1)(iia) of the Act. Thus we do not find any infirmity in the order of the Ld.CIT (A). Hence we decline to interfere in the same. Thus the ground of appeal of the Revenue is dismissed. 22. The issue raised by the Revenue in ground no. 4 is that the Ld.CIT (A) erred in de....
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....d Tribunal". 28.1 Similarly, we also rely on the judgment of the Hon'ble Bombay High Court in the case of CIT vs. HDFC Bank Ltd reported in 366 ITR 505 (Bom). The relevant extract of the order is reproduced below:- "Where assessee's capital, profit reserves, surplus and current account deposits were higher than the investment in tax-free securities, it would have to be presumed that investment made by the Assessee would be out of the interest-free funds available with Assessee and no disallowance was warranted u/s 14A." 28.2 Similarly, we also find support from the judgment of Hon'ble Gujarat High Court in the case of UTI Bank Ltd. reported in 32 Taxmann.com 370 where the headnote reads as under : "If there are sufficient interest free funds to meet tax free investments, they are presumed to be made from interest free funds and not loaned funds and no disallowance can be made under section 14A". In view of the above proposition, we hold that no disallowance of interest expense claimed by the assessee can be made on account of fund involved in the capital work-in-progress as discussed above. Hence, we do not find any reason to disturb the finding of ld. CIT-A. Accordingly....
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....he order of the authorities below as favorable to them. 35. We have heard the rival contentions and perused the materials available on record. In the instant case, the assessee has claimed a loss on account of foreign currency fluctuation amounting to Rs. 34,60,766/- which was disallowed by the AO on the ground that it is a notional loss. As such the assessee has not suffered any loss on account of reinstatement of current liabilities as on 31-3-2012. Accordingly, the addition was made by the AO. 35.1 From the preceding discussion, we note that the fact that such loss is arising to the assessee on account of reinstatement of current liabilities has not been doubted. Thus it is transpired that the assessee has claimed the loss concerning the import of goods and overseas commissions which were not paid till the balance sheet date i.e. 31st March 2012. 35.2 The assessee has carried out certain transactions in foreign currencies which were outstanding as on the balance sheet date as on 31 March 2012. As per accounting standard, the assessee has to record such transaction on the balance sheet date after converting the value of such transaction in Indian currency. It is obvious that t....