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2020 (10) TMI 138 - AT - Income TaxBelated payment of Employee s contribution to PF - HELD THAT - This issue is squarely covered in favour of the assessee by the judgment rendered in the case of CIT vs. Sabari Enterprises 2007 (7) TMI 169 - KARNATAKA HIGH COURT and respectfully following the same, we decline to interfere in the order of CIT (A) on this issue. Disallowance of project expenses capitalised by the AO - HELD THAT - Issue decided in favour of assessee in own case 2020 (3) TMI 113 - ITAT BANGALORE as held disallowance made in the assessment order was not warranted, as the expenditure on setting up of new outlets being an expansion of the existing business, is an allowable expense. Interest incurred on borrowed funds on account of Capital Work in Progress - HELD THAT - As decided in own case as decided in own case 2020 (3) TMI 113 - ITAT BANGALORE proviso to section 36(1)(iii) inserted by the Finance Act, 2003 w.e.f. 01.04.2004 is very relevant for this issue. As per the same, till the asset for which the loan is borrowed is put to use, interest is not allowable. The judgments cited by the learned AR are for the period before insertion of this proviso and hence, not relevant. Hence, there is no merit in these grounds of the assessee and therefore, rejected. Disallowance of Forex Loss - HELD THAT - Tribunal 2020 (3) TMI 113 - ITAT BANGALORE decided similar issue in favour of the assessee by following the judgment of Hon ble Apex Court rendered in the case of Woodward Governor India Pvt. Ltd. 2009 (4) TMI 4 - SUPREME COURT - revenue could not point out any difference in facts in the present year as compared to these two years for which the tribunal order is available. Regarding the applicability of section 43A, we find that this is stated by the AO in the assessment order itself that this section is not applicable - being final fact finding authority, we made efforts to examine the facts and found that although there was import of capital assets in those years when ECB loans were borrowed but there was substantial exports also and the assertion of the assessee is this that such export proceeds were used for import of capital assets and ECB loan was not used for that purpose and the learned DR of the revenue could not bring any evidence on record to show that ECB loans were used for import of capital goods. - Decided in favour of the assessee
Issues Involved:
1. Deduction in respect of belated payment of Employee’s contribution to PF. 2. Deletion of disallowance of project expenses capitalized by the AO. 3. Deletion of disallowance of interest on capital work in progress. 4. Deletion of disallowance of Forex Loss. Issue-wise Detailed Analysis: 1. Deduction in respect of belated payment of Employee’s contribution to PF: The revenue contended that the CIT (A) erred in allowing the deduction for belated payments of Employee’s contribution to PF for the assessment years 2011-12 and 2012-13. The learned DR supported the assessment orders, while the learned AR relied on the judgment of the Karnataka High Court in CIT vs. Sabari Enterprises, 298 ITR 141. The tribunal found that this issue was squarely covered in favor of the assessee by the cited judgment and declined to interfere with the CIT (A)'s order, thereby rejecting Ground No. 2 for both years. 2. Deletion of disallowance of project expenses capitalized by the AO: The revenue challenged the deletion of disallowance of project expenses capitalized by the AO for the assessment years 2011-12 and 2012-13. The learned AR referred to the tribunal's order in the assessee’s own case for A.Y. 2013-14 and 2014-15, where the issue was decided in favor of the assessee. The tribunal, following its earlier decision, declined to interfere with the CIT (A)'s order and rejected Ground Nos. 3 to 5 for both years. 3. Deletion of disallowance of interest on capital work in progress: The revenue disputed the deletion of disallowance of interest on capital work in progress for the assessment years 2011-12 and 2012-13. The learned AR argued that the tribunal had misinterpreted the proviso to section 36(1)(iii) in the assessee's case for A.Y. 2010-11. However, the tribunal found that this issue was covered against the assessee by its orders for A.Y. 2010-11, 2013-14, and 2014-15. Consequently, the tribunal reversed the CIT (A)'s order and restored that of the AO, allowing Ground No. 6 for both years. 4. Deletion of disallowance of Forex Loss: For A.Y. 2012-13, the revenue contested the deletion of disallowance of Forex Loss by the CIT (A), who had relied on the Supreme Court's judgment in Woodward Governor India Pvt. Ltd., 312 ITR 254. The tribunal noted that the AO had disallowed the loss on the basis that it was not actual but notional. The tribunal found that this issue was decided in favor of the assessee in its own case for A.Y. 2013-14 and 2014-15, where it was established that the forex loss due to reinstatement of accounts at the financial year-end was allowable as revenue expenditure. The tribunal, finding no difference in facts for the current year, upheld the CIT (A)'s order and rejected Ground No. 7 for A.Y. 2012-13. For A.Y. 2011-12, the tribunal noted that a similar ground was raised but did not arise from the CIT (A)'s order, thus rejecting it. Conclusion: The appeals of the revenue were partly allowed, with the tribunal upholding the CIT (A)'s orders on the issues of belated PF contributions and project expenses but reversing the CIT (A) on the issue of interest on capital work in progress and upholding the CIT (A) on the issue of Forex Loss for A.Y. 2012-13.
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