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2019 (3) TMI 990 - AT - Income TaxDisallowance u/s 14A read with rule 8D - HELD THAT:- The amount of divided earned by the assessee from its own subsidiary as well from outside / other companies, in our view, a total disallowance of ₹ 5 lacs will be justified in this case on account of administrative expenses. However, since the assessee itself has suo motu made disallowance of ₹ 2 lacs, the assessee will be given the benefit of the same. Disallowance of interest on notional basis u/s 36(i)(iii) - HELD THAT:- In the light of the decision of the on Supreme Court in the case of ‘CIT (LTU) Vs. Reliance Industries Ltd.’ [2019 (1) TMI 757 - SUPREME COURT], no disallowance is attracted under this head as the assessee has demonstrated that it had sufficient own funds to meet the investments / advances given etc. This issue is accordingly decided in favour of the assessee. Allowability of Premium paid on redemption of Foreign Currency Convertible Bonds (FCCB) as business expenditure - capital receipt OR Revenue expenditure - HELD THAT:- Tribunal in assessee's own case [2010 (3) TMI 1242 - ITAT CHANDIGARH] held that the said expenditure is to be treated as Revenue expenditure, in the year of payment Disallowance of export commission for non deduction of TDS u/s 195 - addition u/s 40(a)(ia) - HELD THAT:- The assessee had paid certain commission to foreign agents for procuring orders. The assessee has justified the payment of aforesaid commission by stating that those foreign agents had direct liaison with the parties, they not only fulfilled the procurement of orders but also are helpful in acquiring the payments of the sales made. AO disallowed the aforesaid commission holding that the assessee was liable to deduct tax at source in respect of the aforesaid payments. After going through the assessment orders, we find that the Assessing officer has not disputed that the aforesaid payments were made to foreign agents who were not taxable in India. Since income, if any, received or accrued to foreign agents was not taxable in India, hence, as per the settlement law, the expenditure cannot be disallowed for non-deduction of TDS on such payments.- No justification on the part of the lower authorities in disallowing the expenditure under this head. - Decided in favour of assessee Interest received - head of income - ‘Income from other sources’ OR ‘Business and Profession’ - Characterization of income - HELD THAT:- It is an undisputed fact on the file that the aforesaid amount of interest has not been received by the assessee during the course of business i.e. to say that from customers or suppliers etc., hence, the same, in our view, cannot be treated as ‘income from business or profession’. Netting of the interest expenditure and the interest income received from other parties / banks etc. - alternative contention - We accordingly direct the Assessing officer to allow the expenditure incurred by the assessee for earning of the interest income i.e., if assessee is able to bring nexus between the expenditure incurred and the interest income earned, net of the income will be taxable under the head ‘income from other sources’. This ground is accordingly partly allowed in favour of the assessee. Treating the income from the profits of the units eligible for deduction u/s 80IB / 80IC of the Act - HELD THAT:- So far as the claim of deduction in respect of the insurance claim, which admittedly was on account of loss of trading assets is concerned, it has been held time and again that if the loss therein is indemnified by way of compensation received from insurance company that can be said to be not a separate income, rather, the same will have effect for reducing loss / expenditure. Hence, if the assessee has booked the aforesaid loss, in relation to which insurance claim has been received, as expenditure, then the amount received by the assessee from insurance company will be eligible for deduction u/s 80IB/80IC of the Act. This issue is accordingly restored to the file of the Assessing officer for verification of the facts. Gains on the foreign exchange rate fluctuation - HELD THAT:- The foreign exchange fluctuation gain is in respect of export receipts / receivable of the assessee and any gain in respect of receivable on account of foreign exchange fluctuation in fact contributes to the profits of the assessee from the sale/ export of the products. The assessee is held to be eligible to claim deduction u/s 80 IB / 80 IC of the Act in this respect. We direct the AO to verify whether these are independent receipts, if found so, the Assessing officer is directed to allow the income from sundry balance written back, commission / discount received and exchange rate fluctuation as the same is related to the business activity of the assessee, however, the income from rent is not allowable to be eligible u/s 80IC / 80IB of the Act. So far as the Misc. receipts is concerned, since we do not have exact details of such Misc. receipts, hence, the assessee has submitted that he does not press the issue relating to Misc. Receipts under the head ‘Misc. Income’. So far as the ‘prior period income’ is concerned, the same is also not pressed. Ground No. 9 is accordingly partly allowed. Adjustment of head office expenses to claim deduction u/s 80IC/ 80IC - HELD THAT:- As decided in assessee's own case upheld the findings of the CIT(A) to allocate the net of head office expenses. Following the same proposition and for the sake of consistency, the Assessing officer is directed to allocate the net of head office expenditure, and not the gross net expenditure under this issue. Treating interest reimbursement under Technology Upgradation Fund Scheme (TUFS) as capital receipt. Sales tax subsidy treated as a capital receipt. Treating the line/bay charges - capital receipt OR Revenue receipt - HELD THAT:- As decided in assessee's own case [2010 (3) TMI 1242 - ITAT CHANDIGARH] Tribunal after discussing the details upheld the order of the CIT(A) in that year treating the aforesaid expenditure as Revenue expenditure. No contrary decision has been cited before us. In view of this, the issue is accordingly decided in favour of the assessee. Interest received from customers / suppliers whether - treated as business income or not - HELD THAT:- Admittedly, the interest received form customers / suppliers is a part of the business transaction and is received in the regular course of business, hence, we do not find any infirmity in the order of the CIT(A) while treating it as business income of the assessee.
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