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2017 (8) TMI 167 - AT - Income TaxDisallowance of unrealised exchange loss - speculation loss OR business loss - Held that:- The similar issue came for consideration before this Tribunal in the case of Majestic Exports v. Joint CIT [2015 (7) TMI 936 - ITAT CHENNAI] wherein the issue stands covered in favour of the assessee. However, we make it clear that total transaction considered for determining this business loss from derivative transactions cannot be more than the total export turnover of the assessee for the assessment year under consideration and if the derivative transaction is in excess of export turnover, then that loss suffered in respect of that portion of excess transactions to be considered as speculative loss only as that excess derivative transaction has no proximity with export turnover and the Assessing Officer is directed to compute accordingly. This ground is allowed as indicated above. Respectfully following the aforesaid order of the Tribunal, we remit this issue to the file of the Assessing Officer with a direction to pass fresh order Disallowance exchange fluctuation loss - Held that:- Packing credit foreign currency borrowings which is in the nature of working capital borrowings and the exchange fluctuation on this count to be considered as a revenue expenditure and to be allowed Disallowance u/s 40(a)(i) - leased telephone lines on the reason that there was no deduction of TDS - as per assessee reimbursement of expenditure towards leased telephone lines does not include any profit element being, so, there cannot be any TDS on this payment - Held that:- The assessee has to demonstrate that this impugned payment does not include any profit element so as to deduct TDS and it is only reimbursement of actual expenses. Before us, the learned authorised representative was not able to demonstrate that it does not include any profit element. Accordingly, we remit this issue to the file of the Assessing Officer and the assessee is directed to show that this is only reimbursement on cost to cost and it does not include any element of profit. This ground is allowed for statistical purposes for both the assessment years. Disallowance of additional depreciation under section 32(1)(iia) - Held that:- Same issue was decided against the assessee by the Tribunal in the assessee's own case for the assessment year 2007-08 as held that a perusal of the provisions of section 32 as applicable for the relevant assessment year clearly shows that additional depreciation is allowable on the plant and machinery only for the year in which the capacity expansion has taken place which has resulted in the substantial increase in the installed capacity. In the assessee's case this took place in the assessment year 2005-06 and the assessee has also claimed the additional depreciation during that year and the same has also been allowed. Each assessment year is separate and independent assessment year. The provisions of section 32 of the Act do not provide for carry forward of the residual additional depreciation, if any. In the circumstances disallowance confirmed. - Decided against assessee. Disallowance u/s 14A read with rule 8D - Held that:- We direct the Assessing Officer to disallow the expenditure under section 14A to the extent of exempted income only. This ground of appeal of assessee is partly allowed. Allocation of research and development expenditure between the eligible unit under section 10B and the non-eligible unit under section 10B unit - Held that:- The facts and circumstances of the present case are exactly identical to those involved in the assessment year 2007-08, where the Tribunal directed the Assessing Officer to examine certain factual details and apportion the research and development expenses if the research and development results are being used by the said 100 per cent. export oriented units. Respectfully following the aforesaid decision of the Tribunal this issue is remitted to the file of the Assessing Officer on similar directions. Disallowance of weighted deduction under section 35(2AB) - Held that:- In view of the decision in the case of USV Ltd. v. Deputy CIT [2012 (9) TMI 43 - ITAT MUMBAI] we are inclined to hold that this section excludes from weighted deduction only cost of land and building and not any charges and expenses related to land or building. The repairs, rent, etc., the expenditure incurred relating to research and development premises cannot form part of cost of land or building. Accordingly, the Assessing Officer is directed to pass a fresh order in the light of the above order of the Tribunal after giving opportunity to the assessee. This ground of appeal is partly allowed for statistical purposes. Non-giving of TDS credit - Held that:- If the assessee is remitted the TDS, the same credit should be given to the assessee in respective assessment years. Accordingly, we remit this issue to the file of the Assessing Officer to give due TDS credit to these assessment years and the assessee is directed to file necessary details to the Assessing Officer. This ground of appeals of the assessee is partly allowed for statistical purposes. Addition made towards corporate guarantee - Held that:- The identical issue came for consideration for the assessment year 2010-11 in the case of Redington (India) Ltd. v. Addl. CIT [2015 (8) TMI 40 - ITAT CHENNAI] to hold that the corporate guarantee given by the assessee to its associated enterprises does not involve any cost to the assessee, therefore, it has no bearing on the profits, income, loss or assets of the assessee and outside the ambit of the international transaction to which the arm's length price adjustment has to be made. According, the orders of the lower authorities are set aside and the Assessing Officer is directed to delete the addition. Reduction of claim u/s 10B - apportionment of exempt income and accordingly reducing the business profit for the purpose of computation of deduction under section 10B of the Act - Held that:- The similar issue came for consideration in the assessee's own case in Brakes India Ltd. v. Deputy CIT (LTU)[2013 (9) TMI 192 - ITAT CHENNAI ] wherein held that it is allowed to set off of loss in the 10B units with profits in other non-10B units by putting reliance upon the above named case – Decided in favour of Assessee. TDS u/s 195 - Addition u/s 40(a)(i) - agency commission, professional consultancy charges, warehousing charges, emballage cost, tool development charges etc. - Held that:- Similar issue came for consideration in the assessee's own case as held the services rendered by the said parties related to clearing, warehousing and freight charges, outside India. The logistics service rendered was essentially warehousing facility. In our opinion, this cannot be equated with managerial, technical or consultancy services. Even if it is considered as technical service, the fee was payable only for services utilised by the assessee in the business or profession carried on by the said non-residents outside India. Such business or profession of the non-residents, earned them income outside India. Thus, it would fall within the exception given under sub-clause (b) of section 9(1) of the Act. As under section 195 the assessee is liable to deduct tax only where the payment made to the non-residents is chargeable to tax under the provisions of the Act. In the circumstances mentioned above, the assessee was justified in having a bona fide belief that the payments did not warrant application of section 195 of the Act. It could not have been saddled with the consequences mentioned under section 40(a)(i) of the Act. Depreciation on printers and UPS - Held that:- Similar issue came for consideration in the assessee's own case in Brakes India Ltd. v. Deputy CIT (LTU)[2013 (9) TMI 192 - ITAT CHENNAI ] wherein Assessing Officer is directed to grant the assessee higher rate of depreciation on the UPS, which is an energy saving device.
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