TaxTMI 
TaxTMI 
TaxTMI 
2025 (2) TMI 1256
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.... total income of Rs.42,98,03,730/-. Subsequently, the assessee company revised its return of income on 26.05.2021. The said ITR was processed u/s.143(1) on 25.12.2021 on total income of Rs.42,99,14,760/- after making adjustment of Rs.1,11,030/- to the total income of the appellant. Thereafter, the case was selected for complete scrutiny under CASS. Notices u/s.143(2) and 142(1) were issued along with questionnaire. In response to the said notices, the assessee company furnished the written submissions before the Assessing Officer. The assessment was completed on 29.09.2022 u/s.143(3) of the IT Act by making following additions/disallowances :- (i) Forex gain : Rs.52,44,688/- (ii) Disallowance u/s.14A : Rs.19,61,074/- (iii) Disallowance of 80G claimed on account of CSR spends : Rs.67,87,728/ (iv) Disallowance of Education Cess : Rs.48,00,000/- (v) Late deposit of employees' contribution of PF/ESI : Rs.18,66,524/- (vi) Disallowance of deduction u/s 35(2AB) : Rs.13,46,18,011/- 3. After considering the reply of the assessee, Ld. CIT(A)/NFAC partly allowed the appeal of the ass....
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....e rate in respect of capital asset being shares of foreign company sold during the year. 4.1 The Ld AO and Ld CIT(A) ought to have considered the computation of capital gain as per rule 115 4.2 On without prejudice basis, The Ld AO and Ld CIT(A) ought not to have been taxed the amount as income which was contingent in the nature as on the last date of the Balance Sheet. 5. The appellant craves its right to add to or alter the Grounds of Appeal at any time before or during the course of hearing of the case." 6. The assessee has raised as many as five grounds of appeal. The Ground No.1 is not pressed by the assessee, the same is dismissed as not pressed. Ground no.5 is general in nature, hence needs no adjudication. 7. In Ground No.2, the assessee has challenged the disallowance of Rs.67,87,728/- claimed as deduction u/s 80G of the IT Act, being in the nature of expenditure related to Corporate Social Responsibility (CSR). 7.1 Ld. AR appearing from the side of the assessee submitted before us that the assessee has spent Rs.1,35,75,456/- towards CSR as per the guidelines issued by the Companies Act, 2013 and simultaneously the assessee has claimed 5....
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....aid to various funds is without any consideration in return and is in the nature of irrevocable contribution. Thus, such contributions partake the character of donation ● Since, all other requisite conditions under section 80G have been satisfied and not in dispute, the Appellant is eligible for deduction under section 80G of the Act. The institution to whom the Donations are made are duly registered under section 80G(5) of the Act ● The CSR expenditure is not allowed only for the purpose of section 37 for computing business income. If such expenditure is otherwise allowable as deduction under other provisions of the Act, the same cannot be disturbed. ● The donations/expenditure made by the Appellant is towards women empowerment, education, environmental research etc. and forms part of CSR expenditure as per Schedule VII of the Companies Act, 2013. ● The legislature has restricted the benefit only in two specific cases being 'Swachh Bharat Kosh' ('SBK') and 'Clean Ganga Fund' ('CGF') as per sub-clause (iiihk) and (iiihl) of section 80G(2)(a) of the Act, thereby implying that CSR contribution to other eligible institution q....
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....g claimed under above sections to be exempt, as long as it satisfies necessary conditions under section 30 to 36 of the Act, for computing income under the head, "Income from Business and Profession". 16. For claiming benefit under section 80G, deductions are considered at the stage of computing "Total taxable income". Even if any payments under section 80G forms part of CSR payments ( keeping in mind ineligible deduction expressly provided u/s.80G), the same would already stand excluded while computing, Income under the head, "Income form Business and Profession". The effect of such disallowance would lead to increase in Business income. Thereafter benefit accruing to assessee under Chapter VIA for computing "Total Taxable Income" cannot be denied to assessee, subject to fulfillment of necessary conditions therein. 17. We therefore do not agree with arguments advanced by Ld. Sr. DR. 18. In present facts of case, Ld.AR submitted that all payments forming part of CSR does not form part of profit and loss account for computing Income under the head, "Income from Business and Profession". It has been submitted that some payments forming part of CSR were clai....
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....from Ld. CIT(A)'s above extracted detailed discussion. 6. We have given our thoughtful consideration to the foregoing rival stands and find no merit in the Revenue's instant sole substantive grievance. Suffice to say, the Revenue's only argument is that once the impugned expenditure is not allowable u/sec.37 of the Act; the same is also not exigible to sec.80G deduction as well. We find no substance in Revenue's instant sole substantive grievance as the Ld. CIT(A)'s detailed discussion has considered a catena of case law of various judicial forums (supra) already accepting the very issue in assessee's favour and against the department. We thus adopt judicial consistency herein as well to uphold the Ld. CIT(A)'s detailed discussion accepting the assessee's sec.80G deduction claim. Rejected accordingly." 9. Respectfully following the decision of the Co-ordinate Bench of Pune Tribunal in the case of Credit Suisse Services (India) Private Limited (supra) and in the absence of any contrary material brought on record by the Revenue to take a different view, we set aside the order of Ld. CIT(A) on the issue and allow the appeal of the assessee. 10. I....
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....ee furnishes Form 3CL, the deduction will be allowed to the assessee in accordance with Form 3CL. Since the assessee has received Form 3CL and furnished the same before the Bench as an additional evidence, the same is admitted for consideration. Admittedly, the disallowance u/s 35(2AB) of Rs.13,46,18,011/- was made for want of Form 3CL which is now available with the assessee. Considering the totality of the facts of the case and in the interest of justice, we deem it appropriate to set-aside the order passed by Ld. CIT(A)/NFAC in this regard and remit the matter to the file of the Assessing Officer with a direction to consider this Form 3CL and pass consequential order as per fact & law. Thus, ground no.3 is allowed for statistical purposes. 14. In ground no.4, the assessee has challenged the action of the Assessing Officer(AO) imposing income tax on Forex Gain as business income & subsequent direction of Ld. CIT(A)/NFAC to the Assessing Officer to tax Forex Gain of Rs.52,44,688/- as capital gain instead of not liable to tax being capital in nature. 14.1 Ld. AR appearing from the side of the assessee submitted before us that the assessee has sold shares to a foreign party an....
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....ant has considered the sale of Advik PT Indonesia to a foreign party as capital in nature and The capital pain arising out of this transaction was offered to tax. The basis of exchange rate was considered as on 14.01.2020. However, the sale consideration was not received by the appellant till 31.03.2020. This has resulted into gain of Rs.52.44 888-as the appellant has revalued the sale consideration to be received as on 31.03.2020, in is observed in this case that the main issue relates to taxation of pain on foreign exchange at the last day of the previous year. The appellant has revalued the amount receivable from the foreign party on a/c of sale of shares and recognised the gain of Rs. 52,44,688/- by following ICDS-VI but claimed that it is not taxable being a capital receipt. This issue has been examined and it is seen that the appellant has rightly followed the ICDS-VI in recognising the forex gain as on last day of the previous year but failed to offer it as income as per clause 5(10 of the same ICDS, which is as under:- "Recognition of Exchange Differences 5. (i) In respect of monetary items, exchange differences arising on the settlement thereof or on conv....
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....to the provisions of section 43A, any gain or loss arising on account of any change in foreign exchange rates shall be treated as income or loss, as the case may be, and such gain or loss shall be computed in accordance with the income computation and disclosure standards notified under sub-section (2) of section 145. (2) For the purposes of sub-section (1), gain or loss arising on account of the effects of change in foreign exchange rates shall be in respect of all foreign currency transactions, including those relating to- (i) monetary items and non-monetary items; (ii) translation of financial statements of foreign operations; (iii) forward exchange contracts; (iv) foreign currency translation reserves. 16.2 We find this section has already been considered by Ld. CIT(A). This section talks about ICDS (Income Computation & Disclosure Standards) as notified u/s.145(2) of the IT Act. The applicable/ relevant ICDS VI reads as under : F. Income Computation and Disclosure Standard VI relating to the effects of changes in foreign exchange rates Preamble This Income Computation and Disclosure Standard is applicab....
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.... (i) "Forward rate" is the specified exchange rate for exchange of two Currencies at a specified future date; (j) "Indian currency" shall have the meaning as assigned to it in section 2 of the Foreign Exchange Management Act, 1999 (42 of 1999); (k) "Monetary items" are money held and assets to be received or liabilities to be paid in fixed or determinable amounts of money. Cash, receivables, and payables are examples of monetary items; (l) "Non-monetary items" are assets and liabilities other than monetary items. Fixed assets, inventories, and investments in equity shares are examples of non-monetary items; (m) "Reporting currency" means Indian currency except for foreign operations where it shall mean currency of the country where the operations are carried out. (2) Words and expressions used and not defined in this Income Computation and Disclosure Standard but defined in the Act shall have the meaning assigned to them in the Act. Foreign Currency Transactions Initial Recognition 3(1) A foreign currency transaction shall be recorded, on initial recognition in the reporting currency, by applying to the foreign cur....
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....s 7. The financial statements of a foreign operation shall be translated using the principles and procedures in paragraphs 3 to 6 as if the transactions of the foreign operation had been those of the person himself. Forward Exchange Contracts 8. (1) Any premium or discount arising at the inception of a forward exchange contract shall be amortised as expense or income over the life of the contract. Exchange differences on such a contract shall be recognised as income or as expense in the previous year in which the exchange rates change. Any profit or loss arising on cancellation or renewal shall be recognised as income or as expense for the previous year. (2) The provisions of sub-para (1) shall apply provided that the contract: (a) is not intended for trading or speculation purposes; and (b) is entered into to establish the amount of the reporting currency required or available at the settlement date of the transaction. (3) The provisions of sub-para (1) shall not apply to the contract that is entered into to hedge the foreign currency risk of a firm commitment or a highly probable forecast transaction. For this purpose....
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....rd after taking into account the income or expenses, if any, recognised in respect of said contracts for the previous year ending on or before the 31st March, 2016. 16.3 From the perusal of above ICDS VI clause 4(a), we are of the considered opinion that the assesse has rightly converted the receivable foreign currency on last day of the previous year which resulted into forex gain of Rs 52,44,688/- & as per ICDS VI clause 5(i) the assesse was also required to disclose the forex gain of Rs.52,44,688/- as income of the previous year which he failed to disclose. To this extent alone, we agree with the finding of Ld. CIT(A) wherein he holds that the forex gain is taxable during the period under consideration but we do not find favour with the second part of his finding wherein he directs to tax the impugned forex gain as capital gain income for which the Revenue is in appeal. We find that ICDS VI is applicable to Income from Profits & gains of business or profession & to Income from other sources only but does not apply to Income from capital Gain. We further find that the AO in his order has categorically stated that the transaction of sale of share (related to capital Gain) was o....
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....ground no.4, the Revenue has challenged the direction of Ld. CIT(A)/NFAC to tax the foreign gain of Rs.52,44,688/- as capital gains instead of normal income as held by the AO. In the preceding paragraphs while deciding the appeal of the assessee, we have already discussed the related issue in details & for the reasons mentioned in the above paragraphs the appeal filed by the revenue on this ground is allowed. Accordingly we set-aside the order passed by Ld. CIT(A)/NFAC on this issue and the order passed by the AO on this issue is upheld. Accordingly, this ground no.4 raised by the Revenue is allowed. 21. In Ground Nos.1, 2 and 3, the Revenue has challenged the direction of Ld. CIT(A)/NFAC to the Assessing Officer to allow the deduction as claimed by the assessee u/s.80IA of Rs.2,77,33,581/- and u/s 80IC of Rs.7,17,05,933/-. Ld. DR appearing from the side of the Revenue submitted before us that the order passed by Ld. CIT(A)/NFAC in this regard is unjustified. It was submitted by Ld. DR that Ld. CIT(A)/NFAC has not conducted any enquiry before allowing the deduction u/s 80IA and 80IC as claimed by the assessee. Accordingly, it was requested by Ld. DR to confirm the disallowance m....
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....ts, it is observed that the appellant had claimed 80-IA and 80-IC I the original ITR as well as revised returns and the AO didn't taken any adverse view in the assessment order with respect to these deductions. Further, it is seen that there was a disallowance of Rs. 1,11,030/- only in intimation order u/s 143(1), which also confirm that there was no denial of deduction u/s 801A and 80IC in the processing order. The appellant has raised this issue before the AO after passing of the assessment order after perusal of the computation sheet provided to it by filing a rectification order. In view of the above facts, I don't find any reason for denial of deduction u/s 801A & 80IC in the computation sheet and the time limit for passing the rectification order has already been passed. Therefore, AO is directed to allow these deductions in computation sheet of tax and revised the tax liability accordingly. Thus, this ground of appeal is hereby allowed." 24. In this regard we find that LD CIT(A) has appreciated the fact that the Assessing Officer has not discussed anything about the disallowance of these deductions in his assessment order. However, from the perusal of computation ....