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TMI Blog2015 (11) TMI 1070X X X X Extracts X X X X X X X X Extracts X X X X ..... rt of the total income u/s 14A of the Act r.w. Rule 8D (2)(iii) of the Rules, a sum of Rs. 91,360/-. The AO on perusal of the aforesaid computation noticed that the assessee while working out the average value of investments for the purpose of application of Rule 8D (2)(iii) of the Rules had not considered the share application money to the extent of Rs. 2,08,00,000/- . According to the Assessee share application money cannot be considered as investment made by the assessee in earning tax payer income. The AO, however was in the view that share application money ought to have been considered while determining the average value of investment. 4. The AO accordingly determined the disallowance u/s 14A of the Act as follows :- " Hence revised calculation u/s 14A read with Rule-8D(2)(iii) is being invoked as under : Average Value of Investment as claimed by assessee Rs.1,82,71,923/- Add: Share Application Money Rs.2,08,00,000/- Revised average value of investment An amount equal to one half per cent of the Average value of investment, income of which does Not form part of total income. Rs.3,90,71,923/- 0.5% of Rs. 3,90,71,923/- Rs. 1,95,360/- Total disallowance u/s 14A ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... commission expenses made by the A.O. in the assessment order. (iii) That on the facts and in the circumstances of the case, the Ld. CIT(A)-I, Kol has erred in deleting the addition of Rs. 3,93,618/- u/s 41 as made by the A.O. in the assessment order. (iv) That on the facts and in the circumstances of the case, the Ld. CIT(A)-I, Kol has erred in deleting the addition of Rs. 32,11,437/- as disallowance u/s 43B made by the AO in the assessment order. (v) That on the facts and in the circumstances of the case, the Ld. CIT(A)-I, Kol has erred in deleting the addition of Rs. 5,618/- as disallowance of Prior Period Expenses as made by the AO in the assessment order. (vi) That on the facts and in the circumstances of the case, the Ld. CIT(A)-I, Kol has erred in directing the A.O. to treat the loss to the tune of Rs. 21,01,52,576/- as Normal Business Loss instead of Speculation Loss." 9. According to the revenue the relief given by the CIT(A) which are challenged in ground nos. (ii) to (vi) as above were based on the additional evidence filed by the assessee before CIT(A). According to the revenue the additional evidence was admitted by CIT(A) in violation of Rule 46A of the Rule ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... filed by the assessee. 12. The submission of the ld. DR on ground no.(vii) was that the CIT(A) called upon the AO to file his objections only with regard to the admission of additional evidence. The CIT(A) having come to the conclusion that the additional evidence required to be admitted, ought to have called upon the AO to file his objections with regard to the admissibility, veracity and relevance of the additional evidence to the various issues raised by the assessee before CIT(A). 13. The ld. Counsel for the assessee, on the other hand, submitted before us that Rule 46A(3) only mandates an opportunity to the AO for examining the additional evidence filed before CIT(A) or to produce evidence or documents in rebuttal to the additional evidence produced by the assessee. According to him in the light of the admitted position that the additional evidence filed by the assessee was confronted to the AO and opportunity having been given to the AO to examine the evidences or documents there was no further requirement of specifically calling upon the AO to file objections on the admissibility, veracity and relevance of the additional evidences. He also placed reliance on the decision o ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... d that the assesse had also deducted TDS at Rs. 1,69,962/- in respect of the commission paid to the assessee. Relevant copy of the Income tax acknowledgement of Shri Laxmikant Joshi for A.Y.2009-10 and his bank statement was also enclosed along with the letter. The AO had passed order of the assessment on 27.12.2011. This letter was apparently not taken cognizance by the AO. After taking notice of the aforesaid letter of Shri Laxmikant Joshi(HUF), CIT(A) deleted the addition made by the AO. 16. The grievance projected by the revenue in ground no.(ii) is that the reply of Shri Laxmikant Joshi (HUF) in response to notice u/s 133(6) of the Act alone ought to have been considered. In our view the submission made by the revenue cannot be accepted. This is because the payment in question has been made by cheques and TDS has also been made by the assessee. The annexures to the letter of Shri Laxmikant Josh (HUF) dated 15.12.2011 which is at pages 91 to 93 of the assessee's paper book clearly demonstrates the claim of the assessee. We, therefore dismiss ground no.(ii) of the revenue. 17. As far as ground no.(iii) is concerned, the AO noticed from column no.20 of the Tax Audit Report that ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e claim made by the assessee was justified and therefore the addition made by the AO is deleted. The request of the ld. DR before us was that fresh opportunity be given to the AO to examine the additional evidence filed by the assessee. 21. We have also decided ground no.7 that the AO had enough opportunity to look into the additional evidence filed by the assessee before CIT(A). In these circumstances the plea of the revenue for a fresh opportunity to the AO cannot be accepted. Accordingly ground No.(iv)4 is hereby rejected. 22. As far as ground no.(v) raised by the revenue is concerned, the AO found that in the Tax Audit Report the auditor reported that a sum of Rs. 5,618/- was prior period expenses which was inadmissible for deduction. The AO accordingly added back a sum of Rs. 5,618/- to the total income of the assessee. 23. Before CIT(A) the assessee pointed out that a sum of Rs. 5,618/- was professional fee paid to Shri B.P.Agarwal for preparation and uploading of annual returns for the financial year 2006-07. The bill dated 31.10.2008 which is at page 123 of the assessee's paper book shows that the liability accrued to the assessee only on 31.10.2008 on receipt of the afo ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... imed by assessee as per order sheet entry on 02.12.2011 which was clarified by assessee vide letter dated 16.12.2011. The AO passed the order u/s 143(3) on 27.12.2011 after the hearing on 08.12.2011, 16.12.2011 and 22.12.2011 when he sought certain clarification from the assessee on matters other than the above forex loss. The AO never asked for the detailed evidences of export contract cancelled vis-à-vis forex contract cancelled and made additions of Rs. 23,66,02,947/- as he treated the above loss as speculative loss u/s 43(5) of Income Tax Act by relying upon CBDT instruction dated 23.03.2010 and the AO held that nexus between losses suffered due cancellation of forex forward contracts with corresponding value of export contracts which got cancelled could not be established. During the appellate proceedings assessee filed a paper book containing pages 1 to 621 and requested for fresh evidence in its petition dated 07.11.2012. The relevant portion relating to ground no.9 is as under : Forward Forex Contract Loss On course of assessment proceedings, the authorized representatives of the Assesseecompany had appeared before the Assessing officer and had furnished/filed/prod ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 1 We submit that the aforesaid additional evidences are vital and essential for rendering justice and in deciding the instant appeal and therefore the same may be admitted under Rule 46A of the Income Tax Rules, 1962. We refer to the decision of Hon'ble Third Member of Patna Income Tax Appellate Tribunal in the case of Abhay Kumar Shroff vs Income Tax Officer reported in 63ITD 144 (Pat) TM. We refer to the following observations made by Hon'ble Tribunal in the said decision : "It was that the assessee as a matter of right could not file or filed them before the Tribunal as a matter of course. If the assessee produces some documents at the appropriate time, they have to be taken into consideration subject of course to all just exceptions, such as their relevance, etc. if not done at the assessment stage, the admission of documents has to be governed by rule 46A of the I.T.rules 1962., if produced for the first time before the first appellate authority. Having missed the bus and the matter having travelled to the Tribunal, the admission of documents is to be governed by Rule 29 of the Appellate Tribunal Rules. Hence, if the documents sought to be admitted even at the second ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ncellation of export orders and are duly reflected in the books account of assessee. In assessment year 2008-09 there was a net gain in cancellation of foreign exchange contracts with the banks due to cancellation of export orders and the net gain was assessed under the head income from business and profession as per order u/s 143(3). The net losses (after setting of the profits on account of cancellation of export orders) debited due to cancellation of export with the SBI and Federal Bank were to the tune of Rs. 23,66,02,947/- minus Rs. 2,66,32,552/- plus Rs. 1,82,181/- = Rs. 21,01,52,576/-. The page 147 to 150 of paper book contain the statement of profit and loss on account of foreign exchange derivatives and statement of gold booking for Rs. 2,66,32,552/- (loss) and profit of Rs. 1,82,181/- respectively. These transactions are not related to assessee's business of export of raw cotton and other miscellaneous products while the other transactions incurring the loss of Rs. 21,01,52,576/- were related to the cancellation of export orders. Therefore addition made by the AO for Rs. 21,01,52,576/- is deleted as cancellation of export orders and resulting loss on cancellation foreign ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... nnection with such export contract. Page 134 of the Assessee's paper book contains the list of contract in which forward contract in Euro currency were booked. KS-0000026 is a forward contract dated 17.7.2008 entered into by the Assessee with State Bank of India Trade Finance CPC, Kolkata. The Assessee had an export order for Indian Raw Cotton of 4409200 LBS of the value of 31,74,624 US $ equivalent to 10,00,000 Euros, to supply to one M/S.Nassa Spinning Ltd., Bangladesh. The contract was cancelled by HB Cotton who was agent of M/S.Nassa Spinning Ltd., Bangaldesh on 21.10.2008. The period of the contract for supply of cotton to Bangaldesh was upto 22.1.2009. Since the contract was cancelled by communication dated 24.10.2008, the Bank intimated the Assessee that in view of the adverse fluctuation of Euro currency, the Assessee had to bear the loss of Rs. 1,56,80,527 because the booking rate as on 17.7.2008 was 1.5711 the cancellation date was 22.1.2009 on which date the rate was 1.2613. Thus the Assessee suffered a loss on the forward contract in question. From the sample case set out above it is clear that the forward contract in question was purely hedging transactions entered int ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... capital gain. 31. We have considered the submissions made on behalf of the ld. Counsel for the assessee. Though section 50C of the Act does not speak of any such variation in terms of percentage between value adopted for the purpose of stamp duty and the registration and the actual consideration received on transfer, keeping in view of the decision of the Hon'ble ITAT, Hyderabad Bench referred to above and keeping in view of the fact that the difference between the valuation for the stamp duty and the actual consideration received by the assessee is less than 2% we are of the view that addition sustained by CIT(A) should be deleted. Accordingly ground no.1 raised by the assessee in cross objection is allowed. 32. Ground No.2 raised by the assessee in the Cross Objection reads as follows :- "2. That the learned Commissioner of Income Tax (Appeals) erred in confirming the disallowance of loss of Rs. 5,00,160 incurred by the assessee company on sale of Long Term investment in shares." 33. The assessee incurred a loss of Rs. 5,00,160/- on sale of listed shares. This was claimed as deduction in the computation of the total income. The AO was of the view that in section 10(38) of t ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... Section 2(4A) and " capital asset " was defined as " property of any kind held by an assessee, whether or not connected with his business, profession or vocation ", and the definition then excluded certain properties mentioned in that clause. The definition of " income " was also expanded, and " income " was defined so as to include " any capital gain chargeable according to the provisions of Section 12B ". Section 6 of the Income-tax Act was also amended by including therein an additional head of income, and that additional head was " capital gains, " Section 12B, provided that the tax shall be payable by an assessee under the head " capital gains " in respect of any profits or gains arising from the sale, exchange or transfer of a capital asset effected after 31st March, 1946, and that such profits and gains shall be deemed to be income of the previous year in which the sale, exchange or transfer took place. The Indian Finance Act, 1949, virtually abolished the levy and restricted the operation of section 12B to " capital gains " arising before the 1st April, 1948. But section 12B, in its restricted form, and the VIth head, " capital gains " in section 6, and sub-sections (2A) a ..... X X X X Extracts X X X X X X X X Extracts X X X X
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