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2014 (11) TMI 1174 - ITAT DELHIDisallowance u/s 14A - Held that:- CIT(Appeals) has given a factual finding that no interest expenditure was incurred for earning taxable income. Loan was from the government and it was for working capital assistance. Interest was paid on delayed payment of electricity bills, PF and ESI dues and interest to Selling Agents on the security deposits, interest to employees on the security deposits etc. This factual finding could not be controverted by the Ld.CIT, D.R. Thus the deletion of the disallowance of ₹ 1,07,82,277/- by the FAA is upheld. The third element is disallowance of other indirect expenses under Rule 8D(2)(iii). AO’s finding has been upheld by the Ld.CIT(A) and hence there is no grievance to the Revenue. In the result this ground of the Revenue is dismissed. Disallowance of prior period expenses - Held that:- The assessee has incurred prior period expenses of ₹ 16,61,43,508/-. It had prior period income of ₹ 10,22,60,782/-. The net prior period amount of ₹ 63,88,272/-, was already added by the assessee in the computation of income. Thus, the finding of the First Appellate Authority that there is a double addition of ₹ 63,88,272/- is factually correct. As far as the balance amount is concerned the assessee’s contention is that the amount has crystallised during the year, as the assessee came to know about these expenses only in the F.Y. 2008-09. 7.4. The second limb of the argument of the assessee is that, which has been consistently following the policy of netting out prior period income with prior period expenses and the net effect was disclosed in the computation of income. It was also submitted that such a treatment was accepted by the Revenue for the AY 2007-08 and 2008-09. First Appellate Authority has, on the principle of consistency, accepted the contentions of the assessee. Disallowance of foreign exchange fluctuation loss - Held that:- The assessee claimed foreign exchange fluctuation loss under the head “financial charges” in the Profit and Loss a/c. Admittedly the foreign exchange fluctuation loss pertains to the rate difference arising on account of purchase of plant and machinery. The disallowance was upheld by the FAA. The alternative contention of the assessee was that the foreign exchange rate difference goes to increase the cost of plant and machinery as per provisions of S.43A read with S.32(1)(ii) and (ii a) of the Act. CIT(A) directed grant of depreciation @ 15% and an additional depreciation @ 20%. This finding could not be controverted by the Ld.CIT,DR. Thus the same is upheld.
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