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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 ..... the case of assessee itself, the ITAT had in earlier years i.e A.Y 2009-10 2010-11 held that no addition on account of notional gain or loss on account of foreign exchange fluctuation was warranted as per the provisions of Section 43A of the Act. - Assessee appeal allowed. - ITA Nos. 1477 And 1478/Ahd/2019 - - - Dated:- 25-3-2022 - Ms. Annapurna Gupta, Accountant Member And Shri Mahavir Prasad, Judicial Member For the Appellant : Shri Ajai Pratap Singh, CIT/D.R. For the Respondent : Ms. Amrin Pathan, A.R. ORDER PER : ANNAPURNA GUPTA, ACCOUNTANT MEMBER:- The present appeals have been filed by the Revenue against the order passed by the Commissioner of Income Tax (Appeals)-8, Ahmedabad, (in short referred to as CIT(A)), dated 17-07-2019, u/s. 250(6) of the Income Tax Act, 1961(hereinafter referred to as the Act ) pertaining to Assessment Years (A.Ys) 2015-16 2016-17. 2. At the outset itself, it was stated that the issues arising in both the appeals are identical, therefore both the appeals were taken up together for hearing. We shall be dealing with the appeal of the Revenue relating to assessment year 2015-16 in ITA No. 1477/Ahd/2019 and our dec ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ct, 1961. 3) Whether the Ld. CIT(A) has erred in law and facts in deleting the disallowance of Forex Gain of ₹ 1,08,61,686/-. 7. We have gone through the findings of the Ld. CIT(A) at Para 6.3 of the order which is as under: 6.3 Further, reliance is placed on the following judgments: (i) Decision of Hon'ble High Court of Haryana in case of Principal Commissioner of Income Tax v/s. State Bank of Patiala dated 14/11/2017 (IT APPEAL NO. 359 OF 2017) Section 14A, read with section 263, of the Income-tax Act, 1961 -Expenditure incurred in relation to income not includible in total income (Computation of) - Assessment year 2010-11 - In course of assessment, Assessing Officer made addition on account of apportionment of expenses against exempted income under section 14A - Commissioner passed a revtsional order directing Assessing Officer to enhance amount of addition under section 14A - Tribunal set aside revisional order as well as consequent assessment order passed by Assessing Officer enhancing addition made under section 14A -High Court upheld order of Tribunal holding that amount of disallowance under section 14A could be restricted to amount of exempt inc ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... no stretch of imagination can Section 14A or Rule 8D be interpreted so as to mean that the entire tax exempt income is to be disallowed. The window for disallowance is indicated in Section 14A, and is only to the extent of disallowing expenditure incurred by the assessee in relation to the tax exempt income . This proportion or portion of the tax exempt income surely cannot swallow the entire amount as has happened in this case As the ratio of the above judgment is applicable to the case at hand the disallowance made by the AO u/s.14A is restricted to the exempt income i.e. ₹ 33,220/-.The related grounds of appeal are partly allowed. 8. On going through the above, we find that while restricting the disallowance of expenses u/s. 14A of the Act to the extent of exempt income earned, the Ld. CIT(A) followed the decision of the Hon ble Gujarat High Court in the case of Corrtech Energy Pvt. Ltd. (2014) 223 Taxmann.com 130 and also that of the Hon ble High Court of Madras in the case of CIT vs. Chhetinad Logistics Pvt. Ltd. (2017) 80 Taxmann.com 221 which decision he noted was upheld by the Hon ble Supreme Court on merits. The SLP filed by the revenue against the said j ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... vant findings of the Ld. CIT(A) at para 7.1 of the order is as under: 7. Ground No.15 relates to grievance of appellant on addition of disallowance u/s.14A amounting to ₹ 33,40,84,101/- to the book profits calculated under the provisions of section 115JB of the Act. 7.1 In the assessment order AO computed disallowance u/s.14A r.w.r. 8D amounting to ₹ 33,40,84,101/- and added the same to the book profits u/s.115JB. no discussion on this issue has been made in the assessment order. In the course of appellate proceedings appellant made the following submission: 1) Addition u/s 14A added to book profit under section 115JB of the Act We would like to submit before your kind goodself that learned AO has made addition amounting to ₹ 33,40,84,101/- as per provisions of rule 8D of IT Rules 1962 read with provisions of section 14A of IT Act. Learned AO has made same amount of addition to book profit as per provisions of section 115JB of the IT Act without any discussion to assessment order passed u/s 143(3) of the IT Act. In this connection, we would like to submit before your kind goodself that disallowance u/s 14A of the IT Act cannot be made to the boo ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... Respectfully, following the judgment of jurisdictional! ITAT it is held that disallowance u/s. 14A cannot be added in the book profits u/s.115JB. Hence, the additions made by AO to the book profits u/s.115JB towards 15. Before us ld. Counsel for the assessee pointed out that the issue was covered in favour of the assessee by the decision of Special Bench of ITAT in the case of ACIT vs. Vireet Investment Pvt. Ltd. reported in 165 ITD 27. 16. Ld. D.R. was unable to controvert the above contention of the ld. Counsel for the assessee before us nor was able to bring to our notice any subsequent judgment of Hon ble High Court or Hon ble Supreme Court to the contrary. 17. We have heard both the parties and have also gone through the order of the Ld. CIT(A). As rightly pointed out by the ld. Counsel for the assesse, the Special Bench of the ITAT in the case of Vireet Investment (supra) has categorically held that for the purposes of calculating book profits u/s. 115JB of the Act, no adjustment of expenses disallowed u/s. 14A of the Act is warranted. 18. Since no contrary judgment has been brought to our notice by the Ld. D.R., we have no hesitation in upholding the orde ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... . Further CIT(A) in appeal pertaining to A.Y. 2011-12 and A.Y. 2014-15 allowed the appellant's appeal on this issue. Relevant part of the order of Hon'ble ITAT on this issue is reproduced as below: 51 .we have considered rival contentions and gone through the record carefully. In the case of ACIT vs. Elecon Engineering (supra), the Hon'ble Supreme Court has considered the scope of section 43A and observed that where the assessee has acquired asset outside India for the purpose of his business, and that asset was acquired by borrowed funds, the amount by which the liability stood increased or reduced on account of foreign exchange rate during the previous year, they be added to or deducted from the actual cost of the asset as defined in section 43(1) of the Income Tax Act. The observation of the Hon'ble Supreme Court has been noticed by the Ld. CIT(A) while taking note of assessee's submissions on page no.49 of the impugned order . the observation of the Hon'ble Supreme Court reads as under: 9. Section 43A: before its substitution by a new section 43A vide Finance Act, 2002, was inserted by Finance Act, 1967 with effect from 1-4-1967, after the de ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... here is an increase or reduction in the liability of the assessee as expressed in Indian currency for making payment towards the whole or part of the cost of the asset or for repayment of the whole or part of the moneys borrowed by hirrrfgr the purpose of acquiring the asset, the amount by which the liability stood increased or reduced during the previous year shall be added to or deducted from the actual cost of the asset as defined in sectJon 43(1). 52. The issue in dispute before us squarely covered by the above preposition. In view of the above decision, we do not find any merit in this ground of appeal. It is rejected. Facts of the case remain same and hence following the decision of Hon'ble ITAT in the appellant's own case, the addition made by the AO on this account amounting to ₹ 1, 08,61 ,686/- is deleted. Appeal on this ground is allowed. 24. We have gone through the order of the ld. CIT(A) and have noted that the Ld. CIT(A) deleted the addition finding that in identical set of facts in the case of assessee itself, the ITAT had in earlier years i.e A.Y 2009-10 2010-11 held that no addition on account of notional gain or loss on account of f ..... X X X X Extracts X X X X X X X X Extracts X X X X
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