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TMI Blog2018 (4) TMI 869X X X X Extracts X X X X X X X X Extracts X X X X ..... ehalf of certain foreign subsidiaries and Indian subsidiary and shown them under the head Advances Recoverable. The assessee has not made any non business advance to the these companies, but these amount represents various debits in the nature of sale of spares, royalty receivable, service charges and the expenses incurred on their behalf such as traveling expenses, establishment expenses, financial guarantees, communications expenses, etc. The assessee does not have system of charging interest on such debits of expenses incurred on their behalf. Such advances did not attract any adjustment in Transfer Pricing order also. AO considered these debit balances as advances without interest and disallowed as interest u/s. 36(1)(iii). We do not find any merit for the disallowance so made by the A.O. - Decided in favour of assessee. - I.T.A. No. 581/Mum/2016 - - - Dated:- 12-4-2018 - SHRI SHAMIM YAHYA, AM AND SHRI RAM LAL NEGI, JM For The Assessee : Shri Jay Bhansali For The Revenue : Shri V. Justin ORDER Per Shamim Yahya, A. M.: These are cross appeals by the assessee and the Revenue arising out of the order of the ld. Commissioner of Income Tax (Appea ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ary to the facts of the case and against the provisions of law. c) Without prejudice to other grounds of appeal, the Ld. CIT(A) ought to have allowed set-off of brought forward MTM loss (FX Loss) on open forward contracts treated as speculation loss against MTM gain (FX gain) on the same nature of transactions in the year under appeal. The reasons given by her for doing so are wrong, contrary to the facts of the case and against the provisions of law. d) Without prejudice to above, the Ld. AO erred in law and facts in not reversing / set off speculation loss brought forward when the MTM loss is reversed and netted off against other business loss in the subsequent year 3. The above grounds / sub-grounds are without prejudice to each other. Apropos ground relating to the disallowance u/s. 14A: 3. Brief facts on this issue noted by the Assessing Officer are as under: The balance-sheet of the assessee shows that there were investments in equity/ redeemable preference shares totaling to ₹ 573,39,87,298/-. Out of this, investment of ₹ 495,41,55,660/- was in foreign subsidiaries and of ₹ 77,98,31,638/- was in Indian subsidiaries. The assessee had r ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... Industries Ltd. (TfA No.4475 4537/Mum/2007) Thus it was submitted that the addition of ₹ 1,91,28,205/- made to book profit u/s.115 JB should be deleted. Thus in the light of Hon'ble Apex Court and jurisdictional ITATs orders the A.O. is directed not to add the amount of ₹ 1,91,28,205/- u/s.115 JB for computation of Book Profit. The disallowance of ₹ 1,91,28,205/- U/S.14A r.w.s. 8D by the A.O. under normal provisions is confirmed. Thus Ground of Appeal No.l is partly allowed. 6. Against the above order, the assessee and the Revenue are in cross appeal before us. 7. We have heard both the counsel and perused the records. The ld. Counsel of the assessee contended that as regards the dividend on foreign investment, the assessee has duly offered the same for taxation. As regards the investment in domestic companies, the ld. Counsel of the assessee submitted that no dividend income has been earned. He submitted that the Hon ble Delhi High Court in the case of Cheminvest Ltd vs CIT [2015] 378 ITR 33 (Del) is in favour of the assessee. He submitted that in assessee s own case in ITA No. 5312/Mum/2015 for assessment year 2009-10, this tribunal has adjudic ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 122/- 9. On this issue, the ld. Counsel of the assessee submitted that the issue raised has now become infructuous, as the ITAT for the preceding year has held the impugned income to be business income. Hence, the ld. Counsel of the assessee pleaded that the adjustment of brought forward loss no longer arises. Accordingly, in view of the above submissions of the ld. Counsel of the assessee we hold that this ground raised has become infructuos and the same is dismissed as such. Revenue s appeal 10. Grounds of appeal in Revenue s appeal reads as under: 1. Whether on the facts and circumstances of the case and in law, the Ld. CIT(A) erred in deleting the disallowance ofRs. 2,91,28,205/- u/s 14A r.w.r.SD of the Income Tax Act, 2961 for purpose of calculating the MAT u/s 115JB of the Act without considering the facts that book profit should be increased by disallowance u/s 14A r.w.r. 8D 2. On facts and in the circumstances of the case and in law, the Ld. CIT(A) erred in deleting disallowance of interest of ₹ 37,61,89s/- made by the Assessing Officer u/s 36(l)(iii) of the Income Tax Act without appreciating the fact that the assessee had failed to prov ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... t-free loans and advances given to the subsidiaries is worked out. The assessee was asked to submit the details of advances on similar line as made in preceding assessment year. The same is as under; Calculation of Disallowance u/s 36(1)(IU) ADVANCE AGAINST EXPENSES Closing Balance Interest 1 The Egyptian India Co. for Modern Packaging S.A.E., Egypt 592,801 132,751 2 Essel Packaging (Guangzhou) Ltd. 583,019 752,312 3 Tubopack De Columbia S,A, 335,040 130,534 4 Essel Propack de Venezuela C.A. 1,856824 198,932 5 Essel Propack Philippines Inc. 191,517 108,863 6 Essel Propack LLC, Russia 1,416,007 126,394 7 Essel de Mexico, S.A. de C ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... T(A) since A.Y.2003-04 to 2008-09 on identical issues, however, Department did not file any appeal and accepted assessee's contention. 10. We have considered rival contentions and found from record that the assesses has incurred expenses on behalf of certain foreign subsidiaries and Indian subsidiary and shown them under the head Advances Recoverable. The assessee has not made any non business advance to the these companies, but these amount represents various debits in the nature of sale of spares, royalty receivable, service charges and the expenses incurred on their behalf such as traveling expenses, establishment expenses, financial guarantees, communications expenses, etc. The assessee does not have system of charging interest on such debits of expenses incurred on their behalf. Such advances did not attract any adjustment in Transfer Pricing order also. However, the Ld, AO considered these debit balances as advances without interest and disallowed ₹ 1,07,54,398/- out of interest u/s. 36(1)(iii). We do not find any merit for the disallowance so made by the A.O. 17. We find that the ld. Departmental Representative has not disputed that fact for this year are not ..... X X X X Extracts X X X X X X X X Extracts X X X X
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