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TMI Blog2019 (11) TMI 1799X X X X Extracts X X X X X X X X Extracts X X X X ..... al and reserves, representing interest free funds and not out of borrowed funds. The exempted income was earned out of the investments made long before - HELD THAT:- We deem it fit to remit this issue back to the AO for a fresh examination. The assessee shall lay all materials in support of its contention before the Assessing Officer and comply with the requirements of the AO in accordance with law. The Assessing Officer is also free to conduct appropriate enquiry as deemed fit, however, he shall furnish due opportunity to the assessee on the materials etc., to be used against the assessee. Additional depreciation on electrical installation - AO held that additional depreciation is allowed in respect of new machinery or plant which has been acquired and installed in the business of manufacture of production - assessee pleaded that air circulators installed in the factory on which the additional depreciation was not allowed, it constitutes plant and machinery and thus eligible for depreciation allowed for plant and machinery - HELD THAT:- We find that this issue has not been examined with reference to the facts and circumstances, while the assessee pleads that the impugned asse ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... envisaged in Sec.9(1) - CIT(A) deleted the addition relying on the decision of the Hon'ble Apex Court in the case of GE Technological Centre Pvt. Ltd. [ 2010 (9) TMI 7 - SUPREME COURT] - Decided against revenue. Deduction as loss from cancellation of forward contracts - AO observed that this expenditure was incurred not for business of the appellant company but only to hedge against the currency fluctuation and therefore not allowable u/s 37 - HELD THAT:- The assessee has entered into forward contract for hedging purposes against the underlying receivables (exports) and payables (imports) transactions in foreign currencies. As rightly explained by the assessee derivative products are intangible and are not capable of delivery or transfer. It was also explained that forex derivatives are not traded on security markets and therefore has no application of Sec.43(5). The assessee has entered into forward contracts for the purpose of its business and there was no dispute on this issue. As on the closing date, the foreign exchange was restated which resulted into loss and the assessee relied on Woodward Governor of India Ltd. [ 2009 (4) TMI 4 - SUPREME COURT] wherein it was ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... unit engaged in the business of turbo charger assembly and core assembly at Rudrapur, Uttarakhand for these assessment years. The 80IC unit at Rudrapur has been carrying on Production/manufacture of turbochargers and parts thereof. The raw material (components) as input under goes various operations and finally emerged as a turbocharger. The turbochargers and parts of turbochargers sold as a final product from the 80IC unit is totally different from the input components and is distinct object by itself with different structure. The entire process of production/manufacture in the 80IC unit segment falls within the definition of Section 2(29BA) of Income Tax Act. During January 2015, the 80IC unit received a notice elated 09/01/2015 from the Income Tax Officer, Rudrapur calling for production of books of accounts, records and his intention to visit our 80IC facility as directed by DCIT, Large Tax Payer unit, Chennai calling for certain information u/s,133 of the Income Tax Act. The Income Tax Officer inspected the premises on 23/01/2015 along with his team and all details called for were furnished during their visit. The ITO also checked the manufacturing activities carried out by t ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... that the report dated 28.01.2015 submitted by the Income Tax Officer I(4), Rudrapur was not furnished to the assessee, we required the Revenue to place it on record. The Revenue placed them. The relevant portion of the order is extracted as under:- 2. In this connection it is submitted that the spot enquiries has been made in this case and found that M/s.Turbo Energy Ltd is located at Khasra No.403/1, Village- Shimla Pistaur, Kichha Road, PostLalpur, Distt.U.S.Nagar which is a notified area by the Central Govemment. The assessee is engaged in manufacturing of Turbo Chargers and Core Assembly. Raw material in the form of parts of Turbo charger and core assembly is purchased by head office at Cher.nai and transferred to this plant(Purchase register enclosed). . These parts are assembled as per the process chart (Annexure E) to manufacturing Turbo Charger and Core Assembly. These finished products are then sold to customers as enclosed as Annexure-D. The bills of plant and machinery have been verified at the site. 3. The required information is being submitted as under for necessary action at your end: i. The invoices of plant and machinery as Annexure A ii. List of e ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ot, independent of the audit report from the Central Excise. Therefore, we deem it fit to remit all these issues back to the AO for a fresh examination for the impugned assessment years. The assessee shall lay all materials in support of its contention before the Assessing Officer and comply with the requirements of the Assessing Officer in accordance with law. The AO shall also furnish the copy of Remand Report and its annexures to the assessee and consider the assessee s submissions on them and on due examination, shall pass appropriate orders for the impugned assessment years, in accordance with law. 4. The next issue is disallowance U/s.14A. While making the assessment for assessment years 2011-12 to 2014-15, the Assessing Officer found that the assessee earned substantial dividend income and made investments in equity shares and mutual funds. The company also debited expenses such as rent, salaries, communication, travel, printing, stationery, interest, etc., part of which would have been incurred towards earning exempt income. Therefore, invoking Section 14A r.w.s. 8D(i), (ii) (iii), the Assessing Officer worked out the disallowance, from which he debited the amount alre ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... circumstances upheld the disallowance based on earlier year order. 5.2 We heard the rival submissions. We find that this issue has not been examined with reference to the facts and circumstances, while the assessee pleads that the impugned asset is air circulator and it is a plant machinery, without any discussion on this issue, the assessee s claim is considered as electrical installation. Therefore, we remit this issue back to the AO for a fresh examination and due decision. 6. The assessee claimed weighted deduction U/s.35(2AB) on the R D expenditure incurred during the assessment years 2011-12 2012-13, which was disallowed by the AO. Aggrieved, the assessee filed appeals before the CIT(A). Before the ld.CIT(A), the assessee pleaded that this issue was decided in its favour by the ITAT in ITA No.351/Mds/2013 dated 03.05/.2017. However, the ld.CIT(A) held that A.Y. 2011-12 : On verification of records for the assessment year 2011-12, it is seen that out of the total revenue expenditure claimed by the appellant of Rs.1657.41 lakhs, DSIR certified only an amount of Rs.1612.61 lakhs leaving an uncertified amount of Rs.44.80 lakhs. In view of the above, the disallowanc ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... d that UPS cannot be considered to be an integral part of computer, since it is neither an input device nor an output device of a computer. UPS has other uses independent of a computer since it can be used in conjunction with other electrical devices like refrigerators, television sets, etc., and hence, confirmed the rate of depreciation at the rate of 15% as against the assessee s claim at the rate of 80%. 7.1 Aggrieved the ld.AR submitted that following the ITAT order No.351/Mds/2013 dated 03.05.2017, the depreciation at the rate of 60% may be allowed. 7.2 We heard the rival submissions and gone through the above submissions. Since, the lower authorities have not recorded as to where and how the impugned UPS was claimed to have been used and has not recorded any finding as to how the claim was different from the impugned ITAT order relied on by the assessee, we deem it fit to remit this issue back for a fresh examination and pass due order, in accordance with law, after affording opportunity to the assessee. 8. The assessee claimed leave salary U/s.43B r.w.s.35(2AB) for assessment years 2011-12 2012-13. The AO observed that the assessee not only claimed provision for l ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ny for rendering the following services outside India. a) Import customs clearance including liaison with appropriate agencies b) Transporting the custom cleared containers to warehouse and unloading containers. c) Unpacking cases/cartons and transferring contents to pallets. d) Delivering components to supplier as per schedule. e) After delivery acknowledgements from supplier to be forwarded to Turbo Energy Ltd f) To maintain running account of pallets received from supplier and delivered back to them and reconcile these figures on monthly basis. g) To provided in all pallets delivered to supplier, details of part number, quantity and the related master consignment reference h) To send stock status report to Turbo Energy Limited on weekly basis. 8.1 The AO held that the payments were made for managerial services and taxable u/s. 9(1)(vii) of IT Act. Since the assessee failed to deduct the tax at source u/s.195 of the IT Act, disallowed the payments u/s.40(a)(i) of IT Act. The Ld.CIT(A) deleted the addition finding that the services rendered by non-resident do not fall under managerial or technical services within the meaning of IT Act and the services a ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e by the AR. Respectfully following the above decision of the Hon'ble ITAT, the AO is directed to delete the disallowance of payment to Logistic Services made u/s 40(a)(i) for the assessment years under consideration. The appellant succeeds on this ground. Since the ld.CIT(A) followed the order of this Tribunal, supra, we do not find any reason to interfere with the order of the ld.CIT(A). The corresponding grounds of the Revenue s appeals are dismissed. 10. The assessee claimed deduction of Rs.1,62,43,545/- as loss from cancellation of forward contracts for the assessment year 2011-12. The AO observed that this expenditure was incurred not for business of the appellant company but only to hedge against the currency fluctuation and therefore not allowable u/s 37. Aggrieved, the assessee filed appeal before the CIT(A). The ld.CIT(A) following this Tribunal decision in the assessee s case allowed the appeal. Aggrieved against that order, the Revenue filed this appeal. The ld.DR presented the case on the lines of grounds of appeal. Per contra, the ld.AR supported the order of the ld.CIT(A). 10.1 We heard the rival submissions. The relevant portion of the order of the ld. ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ; as used in section 37 may, in circumstances of a particular case, cover an amount which is really a 'loss', even though said amount has not gone out from pocket of assessee - Held, yes - Whether loss suffered by assessee on account of foreign exchange difference as on date of balance sheet is an item of expenditure under section 37(1) - Held, yes - Whether accounting method followed by an assessee continuously for a given period of time needs to be presumed to be correct till Assessing Officer comes to conclusion for reasons to be given that said system does not reflect true and correct profits - Held, yes - Whether an enterprise has to report outstanding liability relating to import of raw material using closing rate of foreign exchange and any difference, loss or gain, arising on conversion of said liability at closing rate should be recognized in profit and loss account for reporting period - Held, yes. The Ld.CIT(A) allowed the assessee's appeal following the decision of the Hon'ble Apex Court cited supra. Therefore, we do not find any error in the order of the Ld.CIT(A) and the same is upheld. The Revenue's appeals on this issue for the A.Y.2007-08 and ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... er apportioned the impugned expenditure in proportion to the turnover of those units and disallowed the apportioned expenditure related to the units claiming deduction U/s.80IC 10B. 11.1 Aggrieved, the assessee filed appeal before the CIT(A). The ld.CIT(A) allowed the appeal relying on the Tribunal order in ITA Nos.203, 204 205/Mds/2014 dated 03.05.2017 in the assessee s case related to assessment year 2007-08. Aggrieved, the Revenue is an appeal. 11.2 The ld.DR submitted that the unit claiming deduction U/s.80IC was set up in 2009-10 at Rudrapur in Uttarkhand and commenced its production on 11.02.2010. Admittedly about 25 components manufactured in Chennai unit are assembled at this unit. The Assessing Officer has recorded a finding that the assessee has not furnished any proof in support of its claim that no sale in respect of BV 35 BV 43 were made during the assessment year 2011-12 from the 80IC unit and the assessee is silent on the proposal to apportion the royalty payment to 10B unit. The ld.CIT(A) without considering the facts and circumstances brought out in the assessment order, merely applied the Hon ble Tribunal decision and hence the ld.DR supported the orde ..... X X X X Extracts X X X X X X X X Extracts X X X X
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