Home Case Index All Cases Income Tax Income Tax + AT Income Tax - 2013 (2) TMI AT This
Forgot password New User/ Regiser ⇒ Register to get Live Demo
2013 (2) TMI 601 - AT - Income TaxProportionate interest attributable to the advances given to subsidiary/group companies at concessional interest rate or interest free - disallowance - Held that:- As decided in assessee's case in [2004 (6) TMI 589 - MUMBAI BENCH ‘B’ (THIRD MEMBER)] the relevant advances having been made by the assessee to its subsidiary company wholly and exclusively for the purpose of its business, the disallowance of interest attributable to the said advance was not justified - in favour of assessee. Disallowance of interest on share application money - CIT (A) allowed the claim - Held that:- As decided in assessee's own case for previous years there being no diversion of interest bearing funds for non business purpose as alleged by the AO, there was no justification in making any disallowance on account of interest paid on the borrowed funds. It was also noted that the share application money was finally refunded to the assessee with interest at the rate of 19% and the interest so received was duly offered to tax by the assessee in the relevant year - in favour of assessee. Addition on account of notional gain on conversion of foreign exchange deposit placed with its wholly owned subsidiary company relying on AS-11 - Held that:- As per the classification made in AS-11, monetary items mainly include amounts held on current account, such as, cash receivables, payables etc. while non-monetary items include amounts held on capital account, such as, fixed assets, investment in shares etc. In the present case, the shareholders’ deposit represented the amount held by the assessee on capital account inasmuch as it was convertible into equity shares within a period of 10 years and if not so converted, it was liable to be refunded to the assessee company only after a period of 10 years thus the said amount thus was in the nature of non-monetary item which was required to be reported/recognized at the exchange rate prevailing on the date of relevant transaction even as per AS-11 as rightly held by the CIT(Appeals) - no infirmity in the impugned orders of the CIT(Appeals) deleting the additions made by the AO on this issue and upholding the same -in favour of assessee. Deduction u/s 80HHC with regard to meals supplied by its flight kitchen units to foreign airlines - Held that:- Claim of the assessee for deduction allowed holding that the same constituted export eligible for deduction u/s 80HHC relying on earlier year case. Claim for deduction on account of expenditure incurred on replacement of carpets - Held that:- Decided in favour of assessee relying on CIT vs. Lake Palace Hotels and Motels [2002 (4) TMI 29 - RAJASTHAN HIGH COURT] - in favour of assessee. Interest levied u/s 234D cancelled by CIT(A) - Held that:- As section 234D has been amended by the Finance Act, 2012 with retrospective effect from 01-06-2003 whereby Explanation 2 has been inserted declaring that the provisions of section 234D shall also apply to assessment year commencing before the first day of June, 2003 if the proceedings in respect of such assessment year is completed after the said date. In the present case, the assessment year involved in assessment year 2001-02 which is commencing before the first day of June, 2003 and since the assessment for the same has been completed on 22-03-2004 i.e. after 1st June, 2003, the provisions of section 234D are clearly applicable and the assessee is liable to pay interest u/s 234D as per the amendment made by the Finance Act, 2012 with retrospective effect from 01-06-2003 - set aside the impugned order of the CIT(Appeals) cancelling the interest levied by the AO u/s 234D and restore that of the AO charging such interest - against assessee. Addition made on account of reversal of interest claimed in the earlier years by crediting the same in the books of account for the year under consideration - Held that:- The accounting entries passed by the assessee in its books of account reversing interest debited in the earlier year and including the same in the cost of relevant fixed asset did not result in any remission or cessation of any liability and it cannot be said that there was any such remission or cessation of any liability by universal act by the assessee so as to invoke Explanation 1 to section 41(1). It is just a case of capitalizing the interest expenditure to comply with the monetary requirements of AS-10 by passing the necessary entries in the books of account which has not resulted in any advantage or benefit to the assessee either by way of remission or cessation of any liability or in any other manner. The addition made by the AO and confirmed by the CIT(Appeals) on this issue thus is not sustainable and deleting the same, allow assessee’s appeal.
|