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2018 (2) TMI 1998 - AT - Income TaxUnabsorbed Depreciation u/s. 10B - assessee claimed deduction u/s 10B before setting off of brought forward unabsorbed depreciation allowances - HELD THAT:- This issue is squarely covered by the judgement of Supreme Court in the case of Yokogawa India Ltd. [2016 (12) TMI 881 - SUPREME COURT] From a reading of the relevant provisions of Section 10A it is more than clear to us that the deductions contemplated therein is qua the eligible undertaking of an assessee standing on its own and without reference to the other eligible or non-eligible units or undertakings of the assessee. The benefit of deduction is given by the Act to the individual undertaking and resultantly flows to the assessee. Though Section 10A, as amended, is a provision for deduction, the stage of deduction would be while computing the gross total income of the eligible undertaking under Chapter IV of the Act and not at the stage of computation of the total income under Chapter VI. - Decided in favour of assessee. Deduction of gains arising out of foreign exchange fluctuations u/s. 10B - AO excluded foreign exchange fluctuations from the business profits holding that the gains on transfer of funds between two accounts ie EEFC & PCFC in India is not on account of export receivables and hence it is to be treated as income from other sources - HELD THAT:- Assessing Officer has to see whether there is any premature cancellation of forward contract of foreign exchange and that transaction should be taken out for the purpose of considering the business loss and only the transactions which are completed to be considered for the purpose of determining the business loss from this foreign exchange forward contract and remitted the matter to Assessing Officer for fresh consideration. We are in agree with the proposition that the MTM loss on forward contracts is not contingent loss and it is a business loss to set off against the business income of assessee. However, the AO has to consider the transaction equivalent to the export turnover to determine the MTM loss and also if there is any premature cancellation of forward contract of foreign exchange, it shall be excluded to consider the business loss and these transactions are speculative transaction. With this observation, we remit the issue to the file of AO for fresh consideration. Levy of interest u/s 234B is mandatory. See ANJUM MH GHASWALA AND OTHERS [2001 (10) TMI 4 - SUPREME COURT]. Disallowance u/s. 14A r.w.r. 8D - CIT(A) held that invoking of Rule 8D by the AO is in order and directed the AO to examine whether the interest payment is for the loan obtained for specific purpose and not for investments - HELD THAT:- CIT(A) has applied the ratio in the case of Godrej Boyce Manufacturing Co. Ltd. [2010 (8) TMI 77 - BOMBAY HIGH COURT]. Further, his direction to the AO to verify whether the interest expenditure is related to the impugned investments being a fact finding exercise for applying the correct law, we do not find any infirmity in his order, supra. Thus, the assessee’s appeal grounds are dismissed. So also the grounds of appeal filed by the Revenue. Expenditure incurred in foreign currency - deduction u/s. 10B - CIT-A directed the AO to exclude them from both the export turnover as well as from the total turnover for computing the deduction u/s. 10B - HELD THAT:- the decisions rendered by the CIT(A) are based on the decisions of M/S. GEM PLUS JEWELLERY INDIA LTD. [2010 (6) TMI 65 - BOMBAY HIGH COURT] and Sak Soft Ltd [2009 (3) TMI 243 - ITAT MADRAS-D] they do not require any interference, so we do not find merit in the Revenue’s grounds and dismiss them. Disallowance of Mark-to-Market ‘MTM’ loss on forward contracts - AO held that the assessee failed to add back the provision for MTM losses on forward contracts which are contingent in nature and a provision created on such notional loss cannot be allowed and the profits of business should not include speculation loss - CIT(A) following his decision taken in order for AY 2009-10 [2016 (7) TMI 1051 - ITAT CHENNAI] remitted this issue to the AO holding that “MTM loss on forward contracts is not contingent loss and it is a business loss to set off against the business income of assessee - HELD THAT:- Since, the CIT(A) has applied the ratio laid by this tribunal in the assessee’s own case, we do not find any infirmity in the order of the CIT(A) and hence the corresponding grounds of the Revenue are dismissed.
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