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TMI Blog2022 (6) TMI 121X X X X Extracts X X X X X X X X Extracts X X X X ..... h Court in the case of Corrtech Energy Pvt. Ltd. (supra) and upholding his impugned order giving relief to the assessee on this issue, we dismiss Ground No.1 of the Revenue s appeal. Addition on account of Mark to Market Exchange Loss on Foreign Exchange Derivatives - As contended that the assessee-company by following the Principle of Prudence recognized M2M loss as at the end of the year on outstanding SWAP contract as per Accounting Standard-11 and this method was consistently followed by the assessee regarding Forex loss/gain from M2M - HELD THAT:- We find merit in the contention raised by the learned Counsel for the assessee on this issue. Moreover, as pointed out by him, the issue under consideration is squarely covered in favour of the assessee, in addition to the judicial pronouncements referred to and relied upon by the learned CIT(A) in his impugned order, by the latest decision of the Coordinate Bench of this Tribunal rendered in other group case of M/s. Adani Hazira Port Pvt. Ltd [ 2022 (4) TMI 850 - ITAT AHMEDABAD ] wherein it is held that M2M loss on SWAP contract was allowable where loans were converted into foreign currency loan to take benefit of low interes ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... is issue. We, therefore, respectfully follow the decisions uphold the impugned order of the learned CIT(A) allowing the claim of the assessee for depreciation @ 60% on computer software. Ground No.5 of the Revenue s appeal is accordingly dismissed. Loss arising from difference in rates of Forex - Sum debited by the assessee on account of exchange difference - HELD THAT:- As relevant details and documents to support and substantiate this explanation were not furnished by the assessee either before the Assessing Officer during the course of assessment proceedings or even before the learned CIT(A) during the course of appellate proceedings. In the absence of the same, the nature of the relevant transactions could not be ascertained by the authorities below and the claim of the assessee for the loss in question as a revenue loss was disallowed by them. Even before the Tribunal the assesse has not been able to produce the relevant details and documents to explain the exact nature of relevant transactions and to establish that the loss in question is in the nature of revenue loss. The learned Counsel for the assessee, however, has made an alternative claim that the loss in question ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... empt income actually received by the assessee in the year under consideration. Addition as penalty paid by the assessee to the Ministry of Railways as compensation for overloading of cargo in railway racks - HELD THAT:- As decided in the case of M/s. Taurian Iron Steel Co. Pvt Ltd. [ 2011 (12) TMI 410 - ITAT, MUMBAI ] punitive charges paid to Railways for overloading of the wagons is compensatory in nature and the same therefore cannot be disallowed by invoking Explanation to Section 37(1) of the Act. Since the issue involved in the present case as well as all the material facts relevant thereto are similar to M/s Taurian Iron Steel Co. Pvt. Ltd. (supra) decided by Bombay Bench of this Tribunal, we respectfully follow the decision of the Tribunal rendered in the said case and uphold the impugned order of the learned CIT(A) deleting the addition. Depreciation on staff quarters - claim of the assessee for depreciation @ 10% on staff quarters was restricted by the Assessing Officer at 5% treating the same as building as upheld by CIT-A - HELD THAT:- CIT(A) upheld the action of the Assessing Officer on this issue observing that the depreciation allowed by the Assessin ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... the assessee on 29.09.2012 declaring a loss of (-) Rs.94,55,91,217/- which was subsequently revised to (-) Rs.94,24,26,666/- in the return filed on 27.09.2013. The return filed by the assessee was selected for scrutiny and during the course of assessment proceedings, it was noticed by the Assessing Officer that the assessee has continued to make an investment of Rs.10 crores in the year under consideration, the income of which was exempt from tax. No disallowance on account of expenses incurred in relation to the said investment, however, was offered by the assessee as required by the provisions of Section 14A of the Act read with Rule 8D. In this regard, the explanation offered by the assessee that there being no exempt income actually earned during the year under consideration on the investment in question, the disallowance under Section 14A of the Act is not warranted was not found acceptable by the Assessing Officer and by relying inter alia on the decision of the Delhi Special Bench of ITAT in the case of Cheminvest Ltd vs. ITO (ITA No. 87/Del/2008) as well as CBDT Circular No.5/2014 dated 11.02.2014, he proceeded to make a disallowance of Rs.29,03,478/- under Section 14A of t ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... eld to be not applicable in the case of the assessee for the year under consideration. This ground raised by the Revenue thus is infructuous and even the learned DR has not disputed this position. The same is accordingly dismissed as infructuous. 8. In Ground No.3, the Revenue has challenged the action of the learned CIT(A) in deleting the addition of Rs.32,50,27,494/- made by the Assessing Officer on account of Mark to Market Exchange Loss on Foreign Exchange Derivatives. 8.1 In the Profit Loss account filed along with the return of income, a sum of Rs.32,50,27,494/- was debited by the assessee being loss on account of derivative transactions for conversion of foreign currency loan on port. During the course of assessment proceedings, the assessee-company was called upon by the Assessing Officer to explain the nature of the said Markto- Market Exchange Losses and to furnish the relevant details relating to loss on derivatives / swap contracts. In reply, the following submission was made by the assessee:- 1.1 In this regard, we would like to submit that the assessee has taken a rupee term loan of Rs. 500 Crores with an effective rate of interest @ 11.75% as is clearly ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... cation of accounting policies are:- a. Prudence In view of the uncertainty attached to future events, profits are not anticipated but recognised only when realised though not necessarily in cash. Provision is made for all known liabilities and losses even though the amount cannot be determined with certainty and represents only a best estimate in the light of available information. Accordingly, we submit that the assessee company has, in view of principle of conservatism also known as prudence being fundamental factor governing selection of accounting policy, recognised M2M loss as at the end of year on outstanding SWAP contracts to give true and fair view of the financial affairs of the year under consideration. 1.3 Your good self's attention is invited to Note No 37 of the Audited Financial statements wherein the information regarding INR-foreign currency derivative principal only swap (POS) to hedge loan and interest liabilities is provided. Your good self's attention is further drawn to Note No 2(i) on significant accounting policy in respect of foreign currency transaction wherein accounting policy on initial recognition, conversion and exchange dif ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... st prevailing in globally compared to India. As mentioned in para 1.2 hereinabove, the assessee company has reduced the interest cost by Rs 3.89 Crores in the year under consideration, Rs 8.39 Crores in F.Y.12-13 and Rs 9.74 Crores in F.Y.13-14 as can be seen from perusal of Annexure-4 of this submission and thereby, saved huge amount of money by swapping rupee loans with foreign currency loans. Further, we submit that since, the entire amount of interest expense pertaining to assets which have capitalized is charged to P L account, marked to market foreign exchange loss on loans taken for said assets is also charged to P L account as for the assessee company interest cost on foreign currency loan comprises of lower interest expense on foreign currency loan plus foreign exchange fluctuation on said loan. Had the assessee company not converted rupee term loans into foreign currency loan, the P L account would have been hit by higher interest expenditure. Therefore, we submit that the Swap transaction should not be seen isolation but its impact on interest expenditure i.e. rate of interest plus cost of forex loss/gain should be considered to determine the nature of loss. Additionally ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... swap) until their final values are known. Therefore, the assessee's claim of M2M losses amounting to Rs.32.50 crores is not allowable. Though the assessee is at liberty to report of such notional losses to adhere or comply with the accounting guidelines, however, the same does not make it (M2M losses) deductible for income tax purposes. The provisions of Income tax Act. 1961 do not allow any such deduction of notional loss for which the liability has not crystallized. Therefore, M2M losses on account of revaluation of forex derivative (swap contract) are only notional and cannot be deductible as business losses under Income tax provisions. It is very well for the assessee company to comply with the relevant Accounting Standard to finalize its Balance sheet as on 31/03/2012 and to account for its liability, however, since the assessee has not actually suffered such losses or has not actually paid such liability, and therefore, the losses are remained notional, uncrystallized, and therefore, not allowable and deductible. The assessee has also contended that the said loans were taken for the purpose of acquiring the fixed assets and the M2M losses are thus required to be allowed. ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... For the reasons given above, the Assessing Officer held that the foreign exchange derivative losses amounting to Rs.32,50,27,494/- claimed by the assessee were notional losses and same could not be allowed as deduction being contingent in nature. 8.3 The disallowance of Rs.32,50,27,494/- made by the Assessing Officer on account of its claim for deduction for Mark-to-Market Exchange Loss in respect of Foreign Exchange Derivatives was challenged by the assessee in an appeal filed before the learned CIT(A) and during the course of appellate proceedings before the learned CIT(A), the assessee in addition to reiterating the submissions made before the Assessing Officer also made the following submissions in writing:- 1. During the course of appellate proceedings your good honor has asked the appellant to submit the details of mark to market losses currency derivative contract. The appellant herein submits that as per the accounting policies of the company provides for mark to market losses arising on Derivatives/Swsp Contracts. Similarly, in the event when the appellant company earns gain on such contracts, the same is offered to tax following the accounting policies on the consi ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... A.Y. 2014-15 9,73,66,902 A.Y. 2015-16 11,36,68,981 A.Y. 2016-17 6,47,92,330 A.Y. 2017-18 21,51,98,327 Total 61,39,75,691 4. It is apparent from the above details that the appellant company has reduced the interest liability to the extent of Rs. 61,39,75,691/- by entering into the swap contract. Thus, it is evident that the swap contracts were entered solely for the purpose of business with a view to reduce the appellant's interest expenditure on the rupee term loan and therefore loss pursuant to such contract is allowable u/s 37 of the Act. As stated supra, the Ld. Assessing Officer while making the disallowance has majorly relied on the Instruction No.03/2010 issued by CBDT. The appellant would herein like to draw your honor's attention to the fact that the jurisdictional authority cannot simply rely on the Instruction issued by CBDT and proceed to make disallowance on account of foreign exchange fluctuation without considering the legal and factual position. E ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... change loss on Balance Sheet date. Thus, he made disallowance of Rs 32,50,27,494 treating it as contingent liability. During the course of appellate hearing, ARs of the appellant has mainly relied upon submission as filed before AO and contended that transactions have been carried out to reduce interest saving over a period and also submitted tabular chart showing that appellant company has reduced its interest cost by making Swap Transactions. The appellant has a/so drawn attention to the fact that it has consistently followed same accounting policy to provide M2M losses/gain in subsequent financial years and even M2M gains have been offered to tax. The ARs of the appellant has also argued that treatment given by it to provide for M2M loss is as per AS 1 as well as AS 11. The ARs of the appellant has contended that in view of decision of Hon'ble Supreme Court in the case of CIT v/s Woodward Governor India Pvt Limited (supra), OH Natural Gas Corporation Limited (SC)(Supra), losses are not contingent and allowable revenue expenditure u/s 37(1) of the Act. The ARs of the appellant have also argued that when issue has already been settled by decision of Hon'ble Supreme ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ROFITS , MEANINGS OF. Loss suffered by the assessee on account of fluctuation in the rate of foreign exchange as on the date of the balance-sheet IS AN ITEM OF EXPENDITURE under section 37(1) of the Income-tax Act, 1961. Decision of the Delhi High Court in CIT v. Woodward Governor India P. Ltd. [2007] 294 ITR 451 affirmed. For valuing the closing stock at the end of a particular year, the value prevailing on the last date is relevant. This is because profit/losses embedded in the closing stock. While anticipated loss is taken into account, anticipated profit in the shape of appreciated value of the closing stock is not brought into account, as no prudent trader would care to show increase in profits before actual realization. This is the theory underlying the rule that closing stock is to be valued at cost or market price whichever is lower. Decision of the Delhi High Court affirmed. The expression any expenditure has been used in section 37 of the Income-tax Act, 1961, to cover both expenses incurred as well as an amount which is really a loss EVEN THOUGH SUCH AMOUNT HAS NOT GONE OUT FROM THE POCKET OF THE ASSESSEE. Profits and gains of the pr ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... and import of commodities, loss incurred in said contract being in respect of circulating/working capital is allowable business loss . It is also observed that on this very issue, Hon'ble Ahmedabad ITAT in the case of Heavy Metal and Tubes Limited in ITA No 1951/Ahd/2011 dated 30/06/2014 decided the issue in favour of assessee. In the said case, farts are that Assessee has claimed loss on account of foreign exchange derivative amounting to Rs. 5,89,29,812/-. It was assessee's submission that it had availed foreign currency loan for importing raw materials and it had shifted its loan liability in dollar to Swiss Franc and the loss resulted due to fall in the value of Swiss Franc vis-a-vis dollar on the Balance sheet date was undertaken to minimize the risk of foreign exchange fluctuation. The AO disallowed such loss in assessment order on the ground that Assessee company has claimed loss on account of re-statement of loans/credit liability existing as' on the date of balance sheet by swapping the loan from Dollar to Swiss Franc to reduce its Forex exposer risk and therefore the loss claimed by the Assessee was not of Revenue in nature but was an unascertained and notion ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... of the appellant company that as per the consistent prudent practice and requirements of Accounting Standards issued by the ICAI, it follows accounting of transactions for purchase Sales in foreign currency at the prevailing foreign exchange rate at the time of executing transactions and difference if any between the amount of purchase/sales and amount at which the transactions is actually settled by the payment to/from suppliers/debtors is accounted as Loss/Gain on foreign exchange fluctuation . In the Trading Profit Loss Account, the Purchase and sales are disclosed after set off on account of the Loss or Gain due to fluctuation in rates of foreign exchange on account of transactions of import purchase and export sales in foreign exchange. Such gain or loss in foreign exchange transactions settled during the year is part of the cost of import purchase or value of export sales. It is further submitted that at times, it happens that the forward contract to buy/sell foreign exchange remains outstanding at the last date of Balance Sheet. As per the prudent accounting policy of mercantile/accrual system of accounting and Accounting Standards issued by the ICAI, the unsettled ou ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... nufactured goods in the normal course of business. The liability for payment to suppliers for import purchase in foreign exchange is subject to risk of losses on account of fluctuation in exchange rate of foreign currency. To safe guard against such losses and to hedge against the unforeseen future loss due to fluctuation in rate of foreign exchange transactions of purchase sales company makes the forward contract in the normal course of business to buy/sell the foreign exchange as per the market condition and advice of the bank. Thus, losses incurred in forward contracts for foreign exchange in the normal course of business are not speculative transactions and similar the said transactions not regarded as speculative transaction as per the proviso (a) below the Section 43(5) of the Act and is a business loss covered by section 28 of the Act. It is submitted that as per the Accounting Standard-11 (AS-11) issued by the ICAI and RBI's guidelines, the companies were required to revalue un-matured contracts as per rates of exchange notified by Foreign Exchange Dealer's Association of India (FEDAI). Accordingly, on the balance sheet date, based on the exchange rate on tha ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ies from its bankers for purchase of raw material. We find that CIT(A) while allowing the appeal of we Assessee has given a finding that the dealing of Assessee in foreign exchange was in the normal course of business and to safeguard the future losses against foreign exchange rate fluctuations it had entered into hedging transaction. He has further noted that the loss incurred by the Assessee on account of foreign exchange hedging transactions in forward contracts was backed by the trading liability on account of import purchases and therefore the loss was revenue in nature and was not a speculative loss. He is further given a finding that the loss falls under proviso (a) to Section 43(5) of the Act and therefore the loss on account of fluctuation in the rate of foreign exchange in forward contract was not speculative transaction but is a business loss covered by Section 28 of the Act CIT(A) has further noted that the A. O has failed to bring any material evidence on record to support its stand that the loss suffered by the Assessee was speculative loss. We further find that in the case of CIT vs. Woodward Governor the head notes of the decision of Hon'ble Apex Court reads as ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... foreign exchange difference income of Rs 1,12,55,515 under the head Other Income but when he probed the matter further, he found that this amount of Rs 1,12,55,515 has been worked cut after allowing a set off of foreign exchange difference loss of Rs.71,22,045. It was explained by the assessee that all the forward contracts are with respect to exports, that these contracts are entered into on the basis of soot rates plus premium element, that, in terms of the requirements of AS-11, the exposure to such contracts is required to be evaluated on the basis of difference in the foreign exchange rates at the year ending vis-a-vis foreign exchange rates committed under the contracts, and that, it is a result of this exercise that the loss of Rs 71,22,045 has been quantified. The Assessing Officer was, however, of the view that such a treatment is incorrect since loss has not fructified till the end of the year and it is still a notional loss which is contingent upon the events in future. He also relied upon the CBDT instruction no. 3 of 2010, dated 23rd March 2010, which holds that such losses, being purely notional, are not deductible in computation of business income. Accordingly, the ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... notional in nature and contrary to the CBDT guidelines, but then, in the same breath, he taxes the gains on foreign exchange which are computed on the same basis. If losses are held to be notional, even the gains must be held notional too. However, this aspect of the matter is conveniently ignored. As a matter of fact, it was somewhat similar situation in the case before Hon'ble Supreme Court and Their Lordships could not-help remarking that it may be stated that there is no dispute that in the previous years whenever the dollar rate stood reduced, the Department had taxed the gains which accrued to the assessee on the basis of accrual and it is only in the year in question when the dollar rate stood increased, resulting in loss that the Department has disallowed the deduction/debit. This fact is important. It indicates the double standards adopted by the Department. In the present case, the facts are even more glaring in as much as the gains on foreign exchange contracts in the same year have been taxed as other income , the losses on foreign exchange contracts have not been allowed as deduction. Such an approach cannot meet any judicial scrutiny. As we say so, we must make ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ing the facts discussed herein above and relying upon the decisions referred supra including decisions of Hon'ble Jurisdictional ITAT and High court, disallowance of loss of Rs 32,50,27,494/- made by AO is deleted. This ground of appeal is allowed. 8.5 We have heard the arguments of both the sides on this issue and also perused the relevant material available on record. The learned DR in support of the Revenue s case on this issue has mainly relied on the order of the Assessing Officer. The learned Counsel for the assessee, on the other hand, has contended that this issue is squarely covered in favour of the assessee by the various judicial pronouncements which have been referred to and discussed in details by the learned CIT(A) in his impugned order while giving relief to the assessee. As submitted by him, the assessee-company had taken rupee term loan and with a view to reduce effective rate of interest from 11.75% to 6.67%, it entered into Principal Only Swap (POS) contract with ICICI Bank Ltd and Axis Bank Ltd to convert the Rupee Loans to US Dollar Loans. He has submitted that the assessee-company by this way saved interest cost of Rs.61.39 crore during the Assessment ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... reply, it was explained by the assessee that all the relevant equipment such as CCTV, EPBAX, water cooler, air conditioners etc. were installed at site and the same being an integral part of the plant and machinery, depreciation @ 15% was claimed. In support of its contention, reliance inter alia was placed by the assessee on the decision of the Ahmedabad Bench of ITAT in the case of Madhu Industries Vs. ITO, [2010] 132 TTJ 233 (Ahd.) wherein it was held that electrical installation being an integral part of plant and machinery was eligible for higher rate of depreciation under the block of plant and machinery. The submission made by the assessee was not found favour with the Assessing Officer who proceeded to restrict the claim of the assessee for depreciation on these assets at the rate of 10% as against 15% claimed by the assessee as applicable to the block Furniture Fittings including office equipments . On appeal, learned CIT(A) allowed the claim of the assessee for depreciation @ 15% by relying on the decision of the Hon ble Bombay High Court in the case of CIT vs. Park Devis (India) Ltd, reported in 214 ITR 587, wherein it was held that fans installed in the administrati ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... d the claim of the assessee for depreciation @ 25% and disallowed the excess depreciation of Rs.3,55,446/- allegedly claimed by the assessee. On appeal, the learned CIT(A) deleted the addition made by the Assessing Officer on this issue and allowed the claim of the assessee for depreciation @ 60% on computer software for the following reasons given in paragraph Nos. 7.3 7.4 of his impugned order:- 7.3 I have carefully considered the Assessment Order and the submissions made by the Appellant. The Assessing Officer has observed that Appellant has claimed depreciation on computer software @ 60%. He observed that license to run software and computer software is an intangible asset and hence depreciation u/s 32 of the Act is allowable @ 25% and thus he disallowed excess claim of depreciation of Rs.3,55,446/-. On the other hand, the Appellant argued that Appendix-I of the Income Tax Rules,1962 expressly provided for depreciation @ 60% on Computer including Computer Software and thus it has correctly claimed depreciation @ 60%. The Appellant argued that there is a specific provision in law which provides that depreciation on computer software is to be allowed @ 60% and hence genera ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... material available on record. It is observed that the claim of the assessee for depreciation @ 60% on computer software has been allowed by the CIT(A) vide his impugned order by relying on the decisions of Co-ordinate Bench of this Tribunal in the cases of M/s. Voltamp Transformers Ltd (supra) and Zydus Infrastructure (P) Ltd (supra), wherein a similar issue has been decided by the Tribunal in favour of the assessee. At the time of hearing, learned DR has not cited any case law which is in favour of the Revenue on this issue. We, therefore, respectfully follow the decisions of Co-ordinate Bench of this Tribunal in the cases of M/s. Voltamp Transformers Ltd (supra) and Zydus Infrastructure (P) Ltd (supra) and uphold the impugned order of the learned CIT(A) allowing the claim of the assessee for depreciation @ 60% on computer software. Ground No.5 of the Revenue s appeal is accordingly dismissed. 11. Now we take up the assessee s appeal for AY 2012-13 being ITA No.1398/Ahd/2018, Ground No.1 of which relates to the issue of addition of Rs.1,71,60,343/- made by the Assessing Officer and confirmed by the learned CIT(A) on account of loss arising from difference in rates of Forex. ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... on, which has been consistently followed by the Appellant is mentioned. Further, the Appellant has submitted that as per the accounting policy, foreign exchange difference relating to capital asset for Rs.2485.20 lacs is capitalized under cost of fixed assets in books of accounts during the year (though for claiming depreciation as per Income Tax, only realized loss of Rs.68,34,130/- is considered which is evident from Annexure 2 of Tax Audit Report) and balance exchange difference for Rs.171.60 lacs is recognized in P L Account. The appellant has claimed that such exchange difference is not relating to any fixed assets or had arisen after assets were put to use hence same is charged to Profit Loss Account. However, during the course of assessment proceedings, appellant has only submitted ledger account of such loss but has not explained nature of the transactions with supporting evidences. The loss cannot be held as allowable revenue loss only on theoretical basis which is not supported by evidences. In absence of any corroborative evidences, deduction for loss of Rs.1,71,60,343/- being foreign exchange difference loss as revenue loss cannot be allowed. Thus, disallowance made b ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... d by the assessee being CO No. 89/Ahd/2019, which is directed against the order of learned CIT(A)-5, Ahmedabad dated 30.05.2018. 15. Ground No.1.1 of the Revenue s appeal for Assessment Year 2013-14 and Ground No.1 of the assessee s Cross Objection for Assessment Year 2013-14 relates to the disallowance of Rs.73,46,940/- made by the Assessing Officer under Section 14A r.w. Rule 8D while computing the total income of the assessee under the normal provisions of the Act which is sustained by the learned CIT(A) to the extent of Rs.6,83,250/-. 15.1 We have heard the arguments of both the sides on this issue and also perused the relevant material available on record. Although this issue is similar to the one involved in Revenue s appeal for AY 2012-13, the relevant facts as involved in the year under consideration i.e. AY 2013-14 are different from AY 2012-13 inasmuch as the assessee has earned dividend income of Rs.43,26,603/- in AY 2013-14 which is claimed to be exempt from tax. Since no disallowance under Section 14A r.w. Rule 8D was offered by the assessee, the Assessing Officer made a disallowance of Rs.73,46,940/- under Section 14A of the Act by applying Rule 8D on account of ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... various judicial pronouncements cited on behalf of the assessee. In this regard, it is noted that a similar issue is decided by the Coordinate bench of this Tribunal in the case of M/s. Mazda Limited Vs. DCIT vide its order dated 15.07.2019 passed in ITA Nos. 3075 and 3338/Ahd/2015 vide paragraph Nos. 11 to 11.5 as under:- 11.1 We also note that in the recent judgment of Special Bench of Hon ble Delhi Tribunal in the case of ACIT vs. Vireet Investment Pvt. Ltd. reported in 82 Taxmann.com 415 has held that the disallowances made u/s 14A of the Act r.w.r. 8D cannot be the subject matter of disallowances while determining the book profit u/s 115JB of the Act. The relevant portion of the said order is reproduced below: In view of above discussion, the computation under clause (f) of Explanation 1 to section 115JB(2), is to be made without resorting to the computation as contemplated under section 14A, read with rule 8D of the Income-tax Rules, 1962. 11.2 The ratio laid down by the Hon ble Tribunal is squarely applicable to the present facts of the case. Thus it can be concluded that the disallowance made under section 14A r.w.r. 8D cannot be applied while determining t ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... proceedings and unnecessary litigation. Thus we direct the AO to make the disallowance at 1% of the exempted income as discussed above under clause (f) to Explanation-1 of Sec. 115JB of the Act. We also find to bring this fact on record that we have restored other cases involving identical issues to the file of AO for making the disallowance as per the clause (f) to Explanation-1 of Sec. 115JB of the Act independently. But now we note that there is no mechanism provided under the clause (f) to Explanation-1 of Sec. 115JB of the Act to make the disallowance independently. Therefore our action for restoring back the issue to the file of AO would unnecessarily cause further litigation. Thus we limit the disallowance on an ad-hoc basis @ 1 % of the exempted income as per the clause (f) to Explanation-1 of Sec. 115JB of the Act. Thus the ground of appeal of the assessee is partly allowed. 16.1 As the issue involved in the present case as well as all the material facts relevant thereto are similar to the case of M/s. Mazda Limited (supra), we respectfully follow the decision rendered by the Co-ordinate Bench in the said case and sustain the disallowance made by the Assessing Office ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... essee for depreciation @ 60% on computer software and dismiss Ground No.4 of the Revenue s appeal for AY 2013-14. 20. As regards the issue involved in Ground No.5 of the Revenue s appeal for AY 2013-14 relating to the deletion by the learned CIT(A) of the addition of Rs.7,93,042/- made by the Assessing Officer on account of penalty paid by the assessee to the Ministry of Railways as compensation for overloading of cargo in railway racks, it is observed that this issue is squarely covered in favour of the assessee by the decision of Bombay Bench of this Tribunal in the case of M/s. Taurian Iron Steel Co. Pvt. Ltd. Vs. ACIT, rendered vide its order dated 14.12.2011 in ITA Nos. 847 and 1613/Mum/2010 wherein it was held that punitive charges paid to Railways for overloading of the wagons is compensatory in nature and the same therefore cannot be disallowed by invoking Explanation to Section 37(1) of the Act. Since the issue involved in the present case as well as all the material facts relevant thereto are similar to M/s Taurian Iron Steel Co. Pvt. Ltd. (supra) decided by Bombay Bench of this Tribunal, we respectfully follow the decision of the Tribunal rendered in the said case ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... uting the total income of the assessee under the normal provisions of the Act which is sustained by the learned CIT(A) to the extent of Rs.8,66,500/-, it is observed that the same is similar to Ground No.1.1 of the Revenue s appeal for AY 2013-14 which has been already decided by us in the foregoing portion of this order. Following our conclusion drawn on the similar issue for AY 2013-14, we uphold the impugned order of the learned CIT(A) deleting the disallowance made by the Assessing Officer on account of interest under Section 14A r.w. Rule 8D. Ground No.1 of the Revenue s appeal for 2014-15 is accordingly dismissed. 26. So far as Ground No.1 of the Cross-Objection raised by the assessee for AY 2014-15 regarding the disallowance made by Assessing Officer under Section 14A r.s. Rule 8D(2)(iii) is concerned, we have already dealt with this issue in the foregoing portion of this order while dealing with assessee s Cross Objection for AY 2012-13. We accordingly direct the Assessing Officer to re-compute the disallowance on account of common administrative expenses as per Rule 8D(2)(iii) by taking into consideration only those investments from which dividend income was actually ea ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... CIT(A) allowing the claim of the assessee for deprecation at a higher rate of 15% on office equipment and dismiss Ground No.5 of the Revenue s appeal for AY 2014-15. 30. With regard to the issue raised in Ground No.6 of the Revenue s appeal for AY 2014-15 relating to the deletion by the learned CIT(A) of the addition of Rs.10,21,114/- made by the Assessing Officer on account of excess claim of depreciation on computer software, it is observed that the same is similar to Ground No.5 of the Revenue s appeal for AY 2012-13 which has been already decided by us in the foregoing portion of this order. Following our conclusion drawn on the similar issue for AY 2012-13, we uphold the impugned order of the learned CIT(A) allowing the claim of the assessee for depreciation @ 60% on computer software and dismiss Ground No.6 of the Revenue s appeal for AY 2014-15. 31. Insofar as the ground No.2 raised by the assessee in its Cross Objection for Assessment Year 2014-15 relating to the disallowance made on account of depreciation on staff quarters is concerned, it is observed that the same is similar to Ground No.3 of assessee s Cross Objection for AY 2013-14 which has been already decided ..... X X X X Extracts X X X X X X X X Extracts X X X X
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