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TMI Blog2022 (3) TMI 1277X X X X Extracts X X X X X X X X Extracts X X X X ..... No. 1477/Ahd/2019 for A.Y. 2015-16. 4. Ground no. 1 raised by the revenue reads as under: 1) Whether the Ld. CIT(A) has erred in law and on facts in deleting the disallowance of Rs. 33,40,84,101/- made u/s 14A of the Income Tax Act, 1961 and restricting the same to the extent of exempt income earned by the assessee. 5. As is evident from the above ground, the issues relates to disallowance of expenses incurred for the purposes of earning exempt income, which had been restricted by the Ld. CIT(A) in the present case to the extent of exempt income earned. The facts relating to the case being that the assessee had earned dividend income of Rs. 33,220/- which was claimed as exempt u/s. 10(34) of the Act. The assessee had suo moto disallowed a sum of Rs. 775/- on account of expenses pertaining to this exempt income. The A.O. however was not satisfied with the suo moto disallowance who in turn computed the disallowance as per formula provided in Rule 8D of the Income Tax Rules, 1962, which amounted to Rs. 33,40,84,101/-. 6. The assessee carried the matter in appeal before the ld. CIT(A) wherein it was argued that the disallowance made by the A.O. was unwarranted for the reason that ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... aid decision is dismissed by Supreme Court on 08/11/2018 [20181 99 taxmann.com 286 (SC). (ii) Decision of Hon'ble IT AT Ahmedabad in case of Paras Harish Shah C/o.v. ITO, Ward- 5(2)(3), Ahmedabad [ITA No. 2727/Ahd/2016] dated 15.02.2018: "I find that neither the AO has mentioned exact amount of dividend _ income or exempt income earned by the assessee in the assessment order nor Id. CIT(A). According to the assessee details available at page no.28 of the paper book indicate the dividend income of Rs. 13,870/-. However, it is not discernible from the record whether these details were given to the AO or not, and whether the AO has verified this or not. Considering this aspect, I deem it appropriate to set aside the issue to the file of AO with direction that the Id.AO shall verify quantum of dividend income/exempt income and restrict the disallowance out of interest expenditure equivalent to the exempt income/dividend income." (iii) Decision of Hon'ble ITAT Ahmedabad in case of Chudgar Ranchodlal Jethalal vs. The DCIT(OSD), Range-1, and l.T.A. No. 245/AHD/2013 dated27-03-2015 "13. Considering the totality of, the facts and in view of the fact that the provisions of Ru ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ryana in the case of PCIT vs. State Bank of Patiala (supra), Noting that the SLP filed by the revenue against the said decision was dismissed by the Hon'ble Apex Court on 08.11.2018 (2018) 99 Taxmann.com 286. 9. Clearly therefore the proposition of law applied by the Ld. CIT(A) while restricting the disallowance of expenses u/s. 14A to the extent of exempt income earned stands affirmed and is based on the proposition of law laid down by the Hon'ble Apex Court as noted above by the Ld. CIT(A). 10. Ld. D.R. was unable to distinguish the present case either in law or on facts from the decisions relied upon by the Ld.CIT(A). 11. In view of the above, we see no reason to interfere in the order of the Ld. CIT(A) restricting the disallowance of expenses u/s. 14A to the extent of exempt income earned amounting to Rs. 33,220/-following the proposition of law laid down in this regard by various Hon'ble High Courts and SLP filed by the revenue against which was dismissed by the Hon'ble Apex Court in one of the cases, as noted above, on merits also. 11.1. Ground no. 1 is therefore dismissed. 12. Ground no. 2 reads as under: 2) Whether the Ld. CIT(A) has erred in law and on facts in dele ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 3178/Ahd/2011) 4. ACIT vs. Vireet Inv Pvt 165ITD 27 (Spl Bench) Your kind goodself has considered the abo^e submission for the Assessment Year -2013- 14 & 2014-15 and directed to learned AO to give relief accordingly and copies of CIT(A) orders passed by your kind goodself are attached herewith vide Annexure No. 09A & 9B respectively. In view of above submission and judgment of jurisdiction Hon'ble Might Court of Gujarat and Hon'ble ITAT Ahmedabad and decision in our own case by your kind goodself, we hereby request your kind goodself to please consider the above submission and delete impugned addition us/ 14A made to book profit u/s 115JB of lT Act." 7.2 I find that the issue is squarely covered by the judgment of Hon'ble Ahmedabad ITAT in the case of Torrent Cable Ltd v/s ACIT vide ITA no: 3178/Ahd/2011 dated 02/01/2017 wherein it has been held : "6 We have carefully considered the rival submission on the issue involved. The assessee has relied upon the Judgment of Hon'ble Gujarat High Court in the case of Alembic Ltd. (supra). The relevant operative para of the order of the Hon'ble Gujarat High Court is reproduced hereunder- 8, Taking into consideration t ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... of Forex Gain of Rs. 1,08,61,686/- 21. The above ground relates to addition made to the income of the assessee on account of gains earned on foreign exchange fluctuation amounting to Rs. 1,08,61,686/- which was deleted by the ld. CIT(A). 22. The facts of the case are that the A.O. had disallowed a sum of Rs. 1,08,61,686/- being gain on account of foreign exchange fluctuation on the last day of the year on the outstanding foreign currency loan (FCCB) which was utilized for investment in subsidiary. The assessee had outstanding FCCB loan of Rs. 151.14 crores as at the end of the year i.e. on 31.03.2015 and following Accounting Standard -11 the liability was recomputed on the basis of prevailing exchange rate which resulted into a gain as above. This was not offered to tax for the reason that the gain was only notional and as per the provisions of Section 43A only the actual gain or loss was to be considered and to be adjusted from the cost of acquisition of the asset for the purposes of Section 48. The assessee also contended that it had been following this system consistently and had not claimed a loss of identical nature in the preceding assessment year amounting to Rs. 16,05,91, ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ess an asset was acquired and the liability existed, before the change in the rate of exchange. When the assessee buys an asset at a price, its liability to pay the same arises simultaneously. This liability can increase on account of fluctuation in the rate of exchange. An assessee who becomes the owner of an asset (machinery) and starts using the same, it becomes entitled to depreciation allowance. To work out the amount of depreciation, one has to look to the cost of the asset in respect of which depreciation is claimed. Section 43A was introduced to mitigate hardships which were likely to be caused as a result of fluctuation in the rate of exchange. Section 43A lays down, firstly, that the increase or decrease in liability should be taken into account to modify the figure of actual cost and, secondly, such adjustment should be made in the year in which the increase or decrease in liability arises on account of fluctuation in the rate of exchange. It is for this reason that though section 43A begins with a non obstante clause, it makes section 43(1) its integral part. This is because section 43A requires the cost to be recomputed in terms of section 43A for the purposes of depre ..... X X X X Extracts X X X X X X X X Extracts X X X X
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