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2018 (2) TMI 1806 - AT - Income TaxDisallowance u/s 14A read with Rule 8D - Held that:- Own funds available in the form of capital and reserves and surplus were ₹ 15769.49 lacs and whereas the investments in mutual funds were only ₹ 43.81 lacs as on 31.03.2010. The net profit earned during the year and available for appropriation was ₹ 1736.90 lacs. These facts clearly prove that the investments were made only out of own funds. Accordingly, we hold that the CIT(A) rightly deleted the disallowance made under second limb of Rule 8D(2) of the Rules. With regard to the disallowance made under third limb of rule 8D(2), we hold that only dividend bearing investments in shares and mutual fund debt schemes should be considered by the ld. AO for working out the disallowance at 0.5% of average value of investment. This finding is in consonance with the decision rendered by this Tribunal in REI Agro Ltd. [2013 (9) TMI 156 - ITAT KOLKATA]. Disallowance of provision for leave encashment - neither statutory liability nor contingent liability - disallowance u/s 43B(f) - Held that:- We find that though the Hon’ble Calcutta High Court in the case of Exide Industries Ltd vs Union of India [2007 (6) TMI 175 - CALCUTTA HIGH COURT] had struck down the provisions of section 43B(f) of the Act as unconstitutional. The revenue had carried the matter further to the Hon’ble Supreme Court in [2008 (9) TMI 921 - SUPREME COURT] it could be inferred that the Hon’ble Supreme Court had not stayed the judgement of the Hon’ble Calcutta High Court during Leave proceedings. But the Hon’ble Supreme Court had only passed an interim order on the impugned issue. Hence we deem it fit and appropriate , in the interest of justice and fair play, to remand this issue to the file of the ld AO to pass orders based on the outcome of the main appeal on merits by the Hon’ble Supreme Court as stated supra. Accordingly, the Ground No. 2 of assessee appeal for Asst Year 2010-11 is allowed for statistical purposes. Addition towards provision for mark to market loss - Held that:- CIT(A) has applied this decision of the Tribunal in the assessee’s own case and granted relief. We find no infirmity in the same and dismiss this ground of the revenue.” Accordingly, we find that the assessee would be given double deduction if relief is granted in assessment year 2010-11 for the very same provision of ₹ 2,12,48,372/-, Hence, we hold that the Ld. CIT(A) had rightly dismissed the plea of the assessee. Disallowance of other income while computing the deduction u/s 10B - Held that:- The details of other income to the tune of ₹ 18,20,101/- as detailed hereinabove pertains to 100% EOU as could be evident from the segmental profit and loss account of 100% EOU furnished by the assessee before the lower authorities. Hence the entire other income becomes the profits of the business of the undertaking (i.e 100% EOU) . Then automatically the assessee is entitled for deduction as per the computation mechanism provided in section 10B(4) of the Act. Disallowance of additional depreciation - use for a period of less than 180 days - Held that:- The assessee is entitled to claim 20% of depreciation equal to the actual cost of plant and machinery, but, where as the 2nd proviso to section 32(1) of the Act restrains the authority to allow depreciation to 50% of such 20% if the subjected plant and machinery acquired during the previous year and is put to use for a period of less than 180 days in that previous year. According to AO in his order at page no-4 referred that the assessee put to use new plant and machinery for less than 180 days and confirmed by the CIT-A in para-8 of impugned order and it is a requirement under 2nd proviso to section 32(1) which lifts the restriction on AO allow the further depreciation of 10% of which remained unclaimed out of 20% as referred in Clause (iia) to sub-section (1) of section 32 of the Act - As relying on CIT & Anr Vs. Rittal India Pvt. Ltd. [2016 (1) TMI 81 - KARNATAKA HIGH COURT ] assessee is entitled to claim remaining 50% depreciation of such 20% which is equal to the actual cost of new plant and machinery, accordingly ground no-1 raised by the assessee is allowed. Disallowance of provision for mark to market loss - Held that:- Loss incurred on restatement of foreign currency liabilities in conformity with exchange rate prevailing on the balance sheet date is not a contingent liability but defined and ascertained liability and therefore the loss incurred on restatement is liable to be allowed in the case of an assessee who follows mercantile system of accounting. Further such loss is allowable if the underlying asset or underlying liability is incurred on trading account. In the appellant’s case, it had entered into foreign exchange forward contracts for hedging exchange fluctuation risks in respect of export orders. As such the underlying transaction in relation to forward contract entered into by the assessee was trading transaction and therefore any loss connected with such trading transaction and was in the revenue field and therefore to be allowed in view of the ratio laid down by the Hon'ble Supreme Court in the case of CIT vs. Woodward Governor India (P) Ltd. (2006 (1) TMI 68 - GUJARAT HIGH COURT ) and O.N.G.C. vs. CIT (2010 (3) TMI 81 - SUPREME COURT ).
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