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2020 (4) TMI 843 - AT - Income TaxDeduction for loss arising from foreign exchange fluctuation - hedging contract to cover foreign exchange credit provided by ICICI Bank for payment for the purpose of imported raw material upon accounting of the outstanding hedging contract on market to marked basis at the end of the year - outstanding liability in foreign currency towards import either to the suppliers or to the bank - buyer’s credit liability was due in May, 2008 and it was an option contract and in order to hedge against the foreign currency liability the assessee entered a foreign option contract with ICICI Bank - sudden and unexpected fall in the value of USD Vs. Swiss currency in the math of March 2008, the assessee has incurred foreign exchange loss - HELD THAT:- The assessee was engaged in the business of manufacturing of vanaspati and refining of edible oil and the forward contract has been entered in the ordinary course of its business in respect of under lying import/export business. The transactions were carried out for the sole purpose of hedging against losses that may arise on account of adverse fluctuation in the foreign exchange rates. As decided in Hon’ble High Court of Bombay in the case of CIT vs. De Chetan & Co. [2016 (10) TMI 629 - BOMBAY HIGH COURT] wherein it is held that forward contract for purpose of hedging in course of normal business activities of import and export done to cover up losses on account of differences in foreign exchange valuation would not be speculative activity but business activity - Decided against revenue. LTCG - Addition after invoking section 50C on transaction of sale of immovable property in the form of land - HELD THAT:- It is noticed that the assessing officer has made addition of ₹ 15 lacs on the assumption that @ 20 lacs per acre the total market value works out to ₹ 1,22,50,000/- as against the consideration of ₹ 1,07,50,000/- shown by the assessee. It will be appropriate to restore this issue to the file of the assessing officer for deciding afresh after referring the issue to the departmental valuation officer for determining the fair market value of the land sold. Accordingly, the issue is restored to the file of assessing officer for deciding afresh as directed above, therefore, this ground of Cross Objection of the assessee is allowed for statistical purposes. Addition for expenditure incurred on the acquisition of computer software - entitled to depreciation @ 60% - HELD THAT:- It is noticed that Hon’ble Gujarat High Court in the case of NJ India Invest Ltd. [2013 (7) TMI 738 - GUJARAT HIGH COURT] has held that software development and upgradation would include data administration services, information and technology support services, software asset management services, etc., which was in nature of maintenance, back up and support service to existing hardware and software and did not give any fresh or new benefit. Further we have seen that Hon’ble Gujarat High Court in the case of Oriental Bank of Commerce [2018 (4) TMI 1534 - DELHI HIGH COURT] has allowed the deduction on software expenses u/s. 37(1) of the act holding that use of software did not confer any enduring right of assessee. Moreover the assessee’s objective was not to augment software business rather it used computer software as a tool to maximize its purpose and streamline its efficiency. Disallowance u/s. 40A(2) - HELD THAT:- Total income of the payee KTB Food Pvt. Ltd. for the assessment year 2010-11 was to the amount of ₹ 849,80,730/- on which tax was paid at higher marginal rate @ 30%. We have also gone through the decision of Hon’ble High Court in the case of Pr. CIT Vs. Gujarat Gas Financer Services Ltd. [2015 (7) TMI 743 - GUJARAT HIGH COURT] wherein it is held that where assessee company as well as assessee’s parent company both were assessed to tax at maximum marginal rate, it could not be said that service charge was paid by the assessee company to parent company at unreasonable rate to evade tax. Since revenue could not point out that assessee evaded payment of tax therefore, invocation of section 40A(2) was not valid. Disallowance u/s. 14A - HELD THAT:- No exempt income was earned by the assessee therefore following the decision of Hon’ble Jurisdictional High Court of Gujarat in the case of Corrtech Energy Pvt. Ltd. [2014 (3) TMI 856 - GUJARAT HIGH COURT] no disallowance is to be made. Disallowance as bad debts written off - amount in question had been taken into income under the head capital gains in earlier assessment years - CIT(A) justification in restricting the addition on the ground that loss was of the nature of capital loss - HELD THAT:- As relying on SAGAR DRUGS & PHARMACEUTICALS PVT LTD VERSUS JOINT COMMISSIONER OF INCOME TAX, RANGE-8, AHMEDABAD [2019 (1) TMI 1762 - ITAT AHMEDABAD] we restore this issue contested in the cross objection of the assessee to the file of assessing officer for examination of the alternate claim of the assessee to allow impugned loss as capital loss.
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