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2023 (12) TMI 402 - AT - Income TaxDisallowance on account of exchange rate fluctuation - speculative loss or not - HELD THAT - As decided in own case 2023 (5) TMI 577 - ITAT DELHI Appellant is an NBFC and inter-alia is in the business of acquiring loan for onward lending. Appellant has incurred loss on foreign exchange fluctuation on account of ECB liability only. Therefore, the conclusion of the AO derived on the basis of CBOT Instruction No. 3 of 2010 in the above circumstances is not fit to be supported with respect to loss incurred on account of re-instatement of ECB liability. AO has not given concrete findings on the explanation of assessee that Instruction No. 3 of 2010 issued by CBDT is applicable only where there is trading in forex derivatives, which situation does not exist in the instant case, as the AO herself has mentioned the nature of appellant's business as that of Information Technology line, i.e., IT related purchase/sales or services. Therefore, the conclusion of the AO derived on the basis of CBDT Instruction No. 3 of 2010 in the above circumstances is not fit to be supported that the foreign exchange fluctuation loss is a speculative loss The issue has been decided in favour of the assessee by the decision (supra) of the Tribunal in its own case. Respectfully following the Tribunal s decision (supra) and agreeing with the submissions of the assessee, we delete the impugned disallowance. Disallowance u/s 36 (i) (viii) - whether taking cognizance of timeline prescribed under section 80IA to make the impugned disallowance u/s 36(1)(viii) is in accordance with law or not? - assessee submitted that it satisfies all the conditions prescribed under section 36(1)(viii) to claim deduction for the amount transferred to special reserve and taking cognisance of timelines prescribed under section 80IA for making any disallowance is not called for - The contention of the assessee is that section 36(1)(viii) is a complete code in itself and reference to section 80IA beyond what has been stated in the section itself is not warranted - HELD THAT - Section 36(1)(viii) of 1961 Act corresponds to section 10(2)(xiva) of 1922 Act meaning thereby that the provision of special deduction to an specified entity existed in Income Tax Act 1922 and was retained in 1961 Act whereas the provision of section 80IA came into being w.e.f. 1.4.1991 and the provision for benefit of deduction has been amended many a times and at present section 80IA shall not apply to any enterprise which starts the development or operation and maintenance of infrastructure facility on or after 01.04.2017. There is nothing like that in section 36(1)(viii) of the Act. We, therefore hold that the Ld. AO erred in taking cognizance of timeline prescribed under section 80IA in making the impugned disallowance. The contention of the Ld. AR that the Revenue has allowed the claim of the assessee in AY 2017-18 and 2018-19 has not been refuted by the Ld. CIT-DR. We therefore do not find any justification in making the impugned disallowance which we hereby delete in both the assessment years. Disallowance of advertisement expenses - AO made the impugned disallowance for want of supporting documents - HELD THAT - CIT(A) restored the matter to the Ld. AO with a direction to him to decide it afresh on production of ledger account containing the details of expenses with bills/vouchers by the assessee. The only grievance of the assessee has been lack of adequate opportunity given to it. Since opportunity to present its case again before the Ld. AO has been allowed by the Ld. CIT(A) we decline to interfere. Disallowance u/s 14A and Rule 8D - AO did not accept the explanation of the assessee and relying on several decisions held that investment decisions are very strategic decisions in which top management is involved and therefore proportionate management expenses are required to be deducted while computing the exempt income from dividend - HELD THAT - It is observed that before the Ld. CIT(A) it was vehemently argued by the assessee duly supported by judicial pronouncements that disallowance cannot exceed the amount of exempt income earned during the year. The Ld. CIT(A) has accepted this argument of the assessee. We find no reason to interfere with the order of the Ld. CIT(A) and accordingly reject this ground of the assessee. Disallowance of depreciation - assessee has made investment in windmill to earn income from investments and such investment activity cannot be equated with activities in the nature of trade or business or adventure - CIT(A) deleted the impugned disallowances holding that the assessee can claim depreciation as it owns the assets and the same is put to use for business - HELD THAT - The parties agree that this issue is covered against the Revenue by the decision of Hon ble Delhi Court 2023 (1) TMI 70 - DELHI HIGH COURT - The appeal of the Revenue pertaining to AY 2012-13 against the deletion of similar disallowance by the Ld. CIT(A) has been dismissed by the Tribunal 2023 (5) TMI 577 - ITAT DELHI Following the precedent as above, we find no merit in the appeals of the Revenue which we hereby reject. These grounds are dismissed. TDS u/s 194C or 194J - short deduction/non deduction of TDS - AO payments made by the assessee to Suzlon Energy Ltd. was in the nature of technical and professional services - CIT(A) relying on the decision of Hon ble Calcutta High Court in CIT vs. S.K. Tekriwal 2012 (12) TMI 873 - CALCUTTA HIGH COURT deleted the impugned disallowance - HELD THAT - As decided in Future First Info Services (P) Ltd. 2022 (7) TMI 748 - DELHI HIGH COURT that in cases of short deduction of TDS disallowance under section 40(a)(ia) could not be made. The correct course of action would be to invoke section 201 of the Act. We therefore uphold the order of the Ld. CIT(A) and reject the appeal of the Revenue in both the AYs involved. Disallowance u/s 14A r.w.r. 8D - assessee itself computed disallowance on a prudent and reasonable basis - CIT(A) restricted the disallowance to the extent of exempt income and deleted the additional disallowance - HELD THAT - As relying on assessee own case for earlier AYs ITA No. 349/2022 2023 (1) TMI 70 - DELHI HIGH COURT , 1268/Del/2015 2023 (5) TMI 507 - ITAT DELHI and 4985/Del/2017 2023 (5) TMI 577 - ITAT DELHI we confirm the order of the Ld. CIT(A) in both the AY(s) and consequently reject the appeals of the Revenue on the issue.
Issues Involved:
1. Legality of additions/disallowances made by the CIT(A). 2. Disallowance of foreign exchange fluctuation loss. 3. Deduction under Section 36(1)(viii) of the Income Tax Act. 4. Disallowance of advertisement expenses. 5. Charging of interest under Sections 234B and 234C. 6. Depreciation on windmill investment. 7. Disallowance for short deduction/non-deduction of TDS. 8. Disallowance under Section 14A. Summary: 1. Legality of Additions/Disallowances: The Tribunal addressed various grounds taken by the assessee and the Revenue for AY 2013-14 and 2014-15, finding that the additions/disallowances made by the CIT(A) were partly justified but also required certain deletions and restorations. 2. Disallowance of Foreign Exchange Fluctuation Loss: The CIT(A) confirmed the disallowance of Rs. 20,54,47,894/- and Rs. 18,64,61,000/- for AY 2013-14 and 2014-15, respectively, on account of notional loss booked under foreign exchange loss. The Tribunal, however, deleted these disallowances, following its own decision in the assessee's case for AY 2012-13, and held that foreign exchange loss related to ECBs is an allowable deduction under Section 37(1) of the Act, as per the Supreme Court's judgment in CIT vs. Woodward Governor India (P) Ltd. 3. Deduction under Section 36(1)(viii): The CIT(A) restored the matter to the AO for both AYs concerning the disallowance under Section 36(1)(viii). The Tribunal found that Section 36(1)(viii) is a complete code in itself and does not warrant reference to Section 80IA for allowing deductions. The Tribunal deleted the disallowances of Rs. 1,76,16,528/- for AY 2013-14 and Rs. 2,89,99,437/- for AY 2014-15. 4. Disallowance of Advertisement Expenses: The CIT(A) restored the matter to the AO to decide afresh on the production of ledger accounts and bills/vouchers by the assessee. The Tribunal upheld this decision, emphasizing the need for adequate opportunity for the assessee. 5. Charging of Interest under Sections 234B and 234C: The Tribunal noted that this issue is consequential and did not require separate adjudication. 6. Depreciation on Windmill Investment: The CIT(A) deleted the disallowances of Rs. 57,05,766/- for AY 2013-14 and Rs. 11,41,153/- for AY 2014-15. The Tribunal upheld this deletion, following the precedent set by the Hon'ble Delhi High Court and its own decisions in the assessee's case for previous AYs. 7. Disallowance for Short Deduction/Non-Deduction of TDS: The CIT(A) deleted the disallowances of Rs. 56,97,665/- for AY 2013-14 and Rs. 59,58,893/- for AY 2014-15. The Tribunal upheld these deletions, agreeing that Section 40(a)(ia) is not applicable for short deduction of TDS, as supported by the Calcutta High Court and Delhi High Court judgments. 8. Disallowance under Section 14A: The CIT(A) restricted the disallowance to the extent of exempt income earned by the assessee, deleting additional disallowances of Rs. 1,16,97,590/- for AY 2013-14 and Rs. 1,05,63,232/- for AY 2014-15. The Tribunal upheld these deletions, following the precedent set by the Hon'ble Delhi High Court and its own decisions in the assessee's case for previous AYs. Conclusion: The appeals of the assessee for AY 2013-14 and 2014-15 were partly allowed, and the appeals of the Revenue for the same AYs were dismissed.
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