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2015 (3) TMI 360 - AT - Income TaxDisallowance of general expenses on ad-hoc basis - Held that:- Evidences were not furnished to the Assessing Officer by the assessee as the Assessing Officer did not call for such details. Otherwise, it is a fact that the assessee only submitted the breakup of the expenses and not evidences. The very nature of the expenses does not appear very is an essential expenditure; but it is likely some of the expenditure may not be wholly and exclusively for the purpose of business. In principle, we are of the opinion that some disallowance has to be done in the assessment if not 1/5th of the claim of the assessee as done by the Assessing Officer. As such, there is no basis for adopting 1/5th as a factor for computing the disallowance. Therefore, in our opinion, some ad-hoc disallowance should meet the ends of the justice. Thus, we are of the opinion, considering the facts of the present case for the year under consideration disallowance of a sum of ₹ 3 lakhs should meet the requirement of law. - Decided partly in favour of assessee. Treatment of gains arising on cancellation of forward contracts in foreign exchange - AO denied the claim of deduction u/s 80HHC on the said income - Held that:- The issues relating to the “independent income” are required to be adjudicated by the lower authorities after granting a reasonable opportunity of being heard to the assessee. Further, regarding the cancellation of forward contracts, the Tribunal has explained the relevant provisions in its order in the case of London Star Diamond Company (I) Pvt Ltd (2013 (11) TMI 424 - ITAT MUMBAI), where one of us (AM) is a party and the same should also be considered by the Assessing Officer in the remanding proceedings. There is a need for giving definite finding of fact if the impugned profits are „independent income‟ or part of the normal business profits of the assessee. In any case, speculative nature of profit is ruled out by the Tribunal in the assessee's own case in earlier years. Assessing Officer shall make use of the explanation given by the jurisdictional High Court in the case of Pfizer Ltd (2010 (6) TMI 433 - Bombay High Court ) after analyzing the dates of the contracts, connection to the invoices and also the reasons for conclusion. We also find that the judgment of the Bombay High Court in the case of Shah Originals (supra) delivered in the context of different facts i.e, gain on account of exchange rate fluctuations and EEFC account and the same was relied upon by the Tribunal in the case of K. Mohan & Co. (Exports) (2011 (4) TMI 1278 - ITAT MUMBAI). Of course, the other orders of the Tribunal relied upon by the Ld DR must also be considered. - Decided in favour of assessee for statistical purpose. Gain arising on revaluation of foreign currency borrowings - Held that:- It is not a “receipt” of any amount but only resulted in reduction of liability, the said amount cannot be excluded as specified in clause (baa) of Explanation to section 80HHC of the Act. Thus, the impugned gains does not constitute "independent income" as discussed by the Hon'ble Supreme Court in the case of Ravindranathan Nair (2007 (11) TMI 10 - Supreme Court of India). On perusal of the order, we find the Revenue Authorities have not examined the above stated contention of the assessee. Therefore, we remand this issue to the file of the Assessing Officer for fresh adjudication. In the remanding proceedings, Assessing Officer is directed to apply the principles relating to "independent income" as mandated by the above cited relevant judgment of the Hon'ble High Court and also speak on how this kind of gains on revaluation of the balance in foreign currency at the end of the FY constitutes “receipts” as expressed in clause (baa) of Explanation to section 80HHC of the Act. Assessing Officer is directed to give a reasonable opportunity of being heard to the assessee in the remanding proceedings. - Decided in favour of assessee for statistical purpose. Denial of deduction u/s 80HHC of the Act in respect of interest on fixed deposits - Held that:- The said income has to be now treated as per the provisions of the said clause (baa) of Explanation to section 80HHC of the Act. It is the prayer of the assessee before us that while applying the said provisions of clause (baa) of Explanation to section 80HHC of the Act, the net interest income may be considered as. For this, Ld Counsel for the assessee relied on the judgment of the Hon'ble Supreme Court in the case of ACG Associated Capsules Pvt Ltd vs. CIT [ 2012 (2) TMI 101 - SUPREME COURT OF INDIA]. We find merit in the same. Therefore, alternative submissions made by the assessee are found not required to be entertained. Assessing Officer is directed to give an opportunity of being heard to the assessee and decide the issue applying the said judgment of the Apex Court. - Decided in favour of assessee for statistical purpose.
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