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2017 (4) TMI 867 - AT - Income TaxDisallowance of exemption u/s 10AA - Held that:- Profit derived from the units situated at SEZ, engaged in the business of trading activity in the nature of import and re-export of goods falls within the definition of the term ‘services’ as defined in section 10AA of the Act. Consequently, the assessee is eligible for exemption u/s 10AA of the Act, towards export profit derived from eligible unit located at SEZ. The CIT(A), after considering the relevant provisions of the Act, has rightly deleted additions made by the A.O. towards disallowance of exemption u/s 10AA of the Act. We do not find any error in the order passed by the CIT(A). Hence, we uphold CIT(A) order and reject the ground raised by the revenue.- Decided against revenue Disallowance of bad debt written off in respect of debts receivable from export sales - Held that:- The assessee has written off bad debts as irrecoverable in the books of accounts. We further observed that these debts are offered as income in computing income in the earlier years. The conditions prescribed u/s 36(1)(vii) and 36(2) of the Act has been fulfilled. Therefore, we are of the view that merely because assessee had not obtained approval of RBI to write off debts pertaining to foreign party, the claim of the assessee could not be disallowed. The CIT(A) after considering the relevant provisions of the Act and also relied upon the decision of Hon’ble Supreme Court in the case of TRF Limited Vs. CIT (2010 (2) TMI 211 - SUPREME COURT ), has rightly deleted additions made by the A.O. towards disallowance of bad debt written off. - Decided against revenue Disallowance on loss of forward contracts - Held that:- The assessee has entered into a forward exchange contracts with its bankers to hedge the export receivables in foreign currency, in order to safeguard against price fluctuation in realization of trade debtors. During the year, in respect of such hedging contracts, the assessee incurred loss of an amount of ₹ 3,41,583/-. We further observed that the assessee has achieved an export turnover of over ₹ 100 crores. We further observed that the transaction entered into by the assessee with its bankers is not in the nature of speculative transaction as defined u/s 43(5)(d) of the Act. Therefore, we are of the view that any loss incurred on forward contracts entered with its bankers to hedge the export receivables, in order to safeguard against price fluctuations in realization of trade debtors is in the nature of business loss, but not speculation loss as defined u/s 43(5)(d) of the Act. The CIT(A) after considering the relevant details has rightly deleted additions TDS u/s 194C - disallowance of clearing and forwarding charges u/s 40(a)(ia) of the Act, for non- deduction of tax at source - Held that:- No disallowance can be made u/s 40(a)(ia) of the Act, for the amounts which have been paid on or before the end of the financial year. However, the assessee has failed to file necessary evidences with regard to paid and payable. Therefore, we set aside the issue to the file of the A.O. and direct the A.O. to examine the issue with reference to the books of accounts of the assessee to ascertain the fact of paid and payable and if expenditure is paid within the same financial year, then the A.O. is directed to delete additions made u/s 40(a)(ia) of the Act. In other words, the A.O. is directed to restrict disallowance to the extent amount remaining payable at the end of the financial year.
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