TMI Blog2011 (3) TMI 1028X X X X Extracts X X X X X X X X Extracts X X X X ..... 7/- plus Rs.16,64,746.68) as against Rs.50,05,239.82 made by the authorities below. Regarding investment allowance & foreign exchange fluctuation - assessee debited in the Profit and Loss A/c. under the head "Miscellaneous Expenses" a sum of Rs.17,77,269 - In the return filed by the assessee, the assessee did not claim investment allowance as per section 32AB of the Act as the assessee claimed the said loss under the head "Revenue Expenditure" - Held that:- As relying on Century Enka Limited -vs.- ACIT [2009 (1) TMI 427 - CALCUTTA HIGH COURT] wherein held that additional liability due to exchange rate fluctuation to pay foreign currency loan taken for purchase of plant and machinery is a capital loss and the assessee is entitled to depreciation and investment allowance on the increased cost of the plant and machinery resulting from increase in the liability to repay the foreign currency loan incurred - thus the assessee is entitled for investment allowance under section 32AB of the Act on the increased liability due to exchange rate fluctuation. Re computation of the claim for depreciation - Held that:- Merits in the contention of the A.R. that the Assessing Officer was not ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... assessee, it would not alter the position. Against assessee. - ITA No. 555/Kol./2007 - - - Dated:- 25-3-2011 - B.R. Mittal, C.D. Rao, JJ. S. Adak, V. Shah and N. Verma, AR, for the Appellant Sumant Sinha, DR, for the Respondent ORDER B.R. Mittal: The assessee has filed this appeal for the assessment year 1990-91 against the order of ld. Commissioner of Income Tax (Appeals)-X, Kolkata dated 14.11.2006 disputing the confirmation of the additions/disallowances made by the Assessing Officer. 2. Ground No. 1 of the appeal is as under:- (a) That on the facts and in the circumstances of the case, ld. CIT(Appeals) was not justified and erred in upholding disallowance of Rs.50,05,249/- on account of interest paid on loan to purchase tax free securities. (b) That on the facts and in the circumstances of the case and without prejudice to the ground 1(a) the ld. CIT(Appeals) was not justified and erred in upholding the computation made by the Assessing Officer. 3. Before we take up this ground of appeal for our consideration, it is relevant to state that the assessee filed return for the assessment year under consideration on 27.02.1991 alongwit ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... CIT(Appeals) has stated that the assessee has not furnished any alternative computation or stated in detail any error in the computation made by the Assessing Officer. Hence, the ld. CIT(Appeals) has stated that in the absence of any details, the assessee's contention regarding erroneous computation of disallowance of interest is unsubstantiated and confirmed the disallowance made by the Assessing Officer. Therefore, the assessee is in further appeal before the Tribunal. 7. At the time of hearing, the ld. Authorized Representative of the assessee referred pages 81 to 85 of the paper book, which is a copy of the letter dated 11.03.1993 stated to be filed before the Assessing Officer and submitted that it contains the details of the loans taken and investment made by the assessee. He further submitted that the details of Units and shares purchased by the assessee are also contained at page 9 of the assessment order. The ld. A.R. further referred to pages 92 and 93 of the paper book, which is an Annexure to the letter dated 18.03.1993 stated to be filed before the Assessing Officer at the time of assessment proceedings and submitted that it contains the details of interest paid an ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... advances are also given from mixed accounts, the interest on borrowed fund cannot be denied. The assessee also placed reliance on the decision of the Hon'ble ITAT, Mumbai Bench in the case of ACIT -vs.- Claridges Investments and Finance (Pvt.) Ltd. [18 SOT 390] and also the decision of the Hon'ble Apex Court in the case of Rajasthan State Warehousing Corporation -vs.- CIT [242 ITR 450]. 7.2. The ld. A.R. submitted that the disallowance made by the Assessing Officer is not justified. 8. On the other hand, the ld. Departmental Representative supported the orders of the authorities below. He submitted that the assessee did not file details inspite of giving various opportunities and filed the details during the assessment proceedings only when the case was becoming time barred. The ld. D.R. submitted that the Assessing Officer has made detailed analysis in the assessment order at pages 3 to 10 in respect of the loan raised and its utilization and also the credit facility availed from Bank and thereafter computed the interest paid by the assessee in respect of income not chargeable to tax. The ld. D.R. also referred to page 2 of the order of the ld. CIT(Appeals) and submitted t ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... , erects, installs and commissions a wide range of Cooling Towers and Air cooled finned tube heat exchanger for use in power generation, petroleum refining, chemical processing, steel, cement, sugar, air conditioning, refrigeration industries, among others. (2) The company manufacturers, supplies, and exports high density polypropelene woven bags for use in packing of fertilizers, cement, chemicals, grains, etc. (3) The company leases and rents plant and machinery to various parties for use and invests its moneys, not immediately required in stocks of securities from time to time. 10.1. On perusal of the above, it is a fact that the assessee is not in the primary business of dealing in shares and making investment in Bonds/Units. Be that as it may, the Hon'ble ITAT, Special Bench, Delhi in the case of Chem Invest Limited -vs.- ITO [121 ITD 318 (SB)] while considering the issue of deduction of interest in respect of investment in shares, vis- -vis, applicability of section 14A of the Income Tax Act has held that interest expenditure incurred by assessee for borrowing money used for the purposes of investment in shares for trading as well as investment purposes has to suf ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... see is allowed in part by restricting the disallowance of Rs.44,03,373.68. 13. Ground No. 2 of the appeal is as under:- "2(a) That on the facts and in the circumstances of the case, the ld. CIT(Appeals) was not justified in upholding disallowance on account of investment allowance under section. 32AB amounting to Rs.17,77,269/- on foreign exchange fluctuation in respect of loan taken for the purchase of plant and machinery. 2(b) That on the facts and in the circumstances of the case, the ld. CIT(Appeals) erred in holding that no claim has been made before the Assessing Officer for investment allowance under section. 32AB". 14. During the assessment year under consideration, the assessee debited in the Profit and Loss A/c. under the head "Miscellaneous Expenses" a sum of Rs.17,77,269/- on account of loss on fluctuation of exchange rate on the amount of loan payable to ICICI Limited. The said loan was taken for purchase of machinery. The Assessing Officer stated that the said liability of the assessee debited by the assessee as revenue expenditure is disallowed as the loan was taken to acquire capital asset. The Assessing Officer stated that the assessee will be entit ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e giving effect to our above order will see that the assessee has complied with the conditions laid down under section 32AB of the Act to allow investment allowance to the assessee. The Ground No. 2 of the appeal taken by the assessee is allowed as mentioned above. 18. Ground No. 3 of the appeal is as under:- "That on the facts and in the circumstances of the case, the ld. CIT(Appeals) erred in upholding addition on account of profit on sale of fixed assets amounting to Rs.30,22,361/- to the business income of the appellant. 19. The Assessing Officer while computing the income of the assessee excluded profit on sale of fixed assets amounting to Rs.30,22,361/-. Being aggrieved, the assessee filed appeal before the ld. CIT(Appeals). 20. The ld. CIT(Appeals) vide para 3 of the impugned order confirmed the action of the Assessing Officer on the ground that the assessee has not furnished evidence regarding the adjustment of the profit on sale of fixed assets in the depreciation schedule. Hence, the assessee is in further appeal before the Tribunal. 21. During the course of hearing, the ld. A.R. referred pages 107 and 108 of the paper book, which is a copy of the lett ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... submitted that the assessee made initial contribution of Rs.1,00,000/- to the Pension Fund and the said Pension Fund is an approved one. However, the ld. A.R. at the time of hearing filed a copy of letter dated 26.05.1989 of ld. CIT according approval of Executive Staff Pension Fund constituted under the Trust Deed dated 06.01.1987. 27. Considering the fact that the assessee could not produce the said letter before the authorities below but has placed copy of the same before us at the time of hearing, we in the interest of justice, consider it prudent to restore this issue to the file of the Assessing Officer after setting aside the orders of the authorities below. The Assessing Officer will consider the claim of the assessee in accordance with law after giving due opportunity of hearing to the assessee. Hence, Ground No. 4 of the appeal taken by the assessee is allowed for statistical purposes. 28. Ground No. 5 of the appeal is as under:- "That on the facts and in the circumstances of the case, the ld. CIT(Appeals) grossly erred in not directing the ld. Assessing Officer to recompute the claim for depreciation as a result of appeal orders of earlier years, and other a ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... d No. 6 of the appeal is as under:- "That on the facts and in the circumstances of the case, the ld. CIT(Appeals) was not justified in upholding the disallowance of loss on purchase and sale of units of UTI amounting to Rs.14,80,880/-". 34. The Assessing Officer has discussed the details of purchase and sale of Units of U.T.I. at pages 5 to 8 of the assessment order. The Assessing Officer has stated that there is no evidence regarding the identity of the Units traded. He has stated that the transactions resulted into loss on Units as claimed by the assessee appeared to be tainted and thus disallowed the loss claimed by the assessee. Being aggrieved, the assessee filed appeal before the ld. CIT(Appeals). 35. On behalf of the assessee, it was contended that the loss was incurred in the transactions of purchase and sale of Units on the same day. Since the transactions having been entered on the same day, the transactions were completed without taking delivery of the Units. The ld. CIT(Appeals) has held that such transactions are covered by the definition of the speculation transactions within the meaning of section 43(5) of the Act. Hence, the ld. CIT(Appeals) has stated t ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... the decision of the Hon'ble Apex Court in the case of Apollo Tyres Ltd. -vs.- CIT [255 ITR 273], wherein it was held that Units are neither stocks nor shares nor commodities as contemplated under section 43(5) of the Act. Further the ld. D.R. also could not contradict the submission of the ld. A.R. that the transactions shown in Sl. Nos. 11 and 12 and 13 and 14 at page 74 of the paper book were on account of purchase from VCK Share and Stock Broking Service (P) Ltd. and sale to AMAX Bank. It could be effective by actual delivery of Units. We observe that the Assessing Officer had disallowed the claim of loss by doubting the genuineness of the transactions and whereas the ld. CIT(Appeals) has denied the claim of the assessee by considering the loss as speculative in nature. We are of the considered view that this issue be restored to the Assessing Officer with a direction to re-decide the same after giving due opportunity of hearing to the assessee and considering such details as may be filed by the assessee. Hence, Ground No. 6 of the appeal is allowed for statistical purposes by restoring the issue to the Assessing Officer. 39. In Ground No. 7 of the appeal, the assessee has d ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... icer while computing the income of the assessee disallowed Rs.44,005/- on the ground that articles presented and the value of which articles exceeded Rs.50/-. In the first appeal, the ld. CIT(Appeals) has confirmed the action of the Assessing Officer on the ground that the assessee could not lead any evidence during the assessment proceedings or during appeal proceedings that the articles did not have advertisement value and is allowable as a deduction. Hence, the assesesee is in further appeal before the Tribunal. 45. At the time of hearing, the ld. A.R. reiterated the above submission as made before the ld. CIT(Appeals). Further, he contended that the similar issue was considered by the Tribunal in assessee's own case for assessment year 1996-97 in ITA Nos. 787 and 813/Cal./2000, copy of which placed at pages 124 to 127 of the paper book (incomplete copy). However, in reply to a query from the Bench, the assessee conceded that the details of the articles and the expenditure incurred on each of the item could not be furnished before the authorities below to substantiate that the articles did not have any advertisement value and, therefore, the said expenditure does not fall un ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... to give the details to establish that the said expenditure was incurred wholly and necessarily for the business of the assessee. Hence, the Ground No. 9 of the appeal taken by the assessee is rejected. 51. In Ground No. 10 of the appeal, the assessee has disputed the order of ld. CIT(Appeals) in upholding the disallowance of prior period expenses amounting to Rs.1,86,917/-. 52. The Assessing Officer while making the assessment observed that the assessee debited to the Profit and Loss A/c. a sum of Rs.2,88,904/- towards earlier year's expenses and disallowed the same. Being aggrieved, the assessee filed appeal before the first appellate authority. 53. The ld. CIT(Appeals) considered that the said sum of Rs.2,88,904/- includes the sum of Rs.1,01,987/- relating to bonus of earlier years paid during the previous year relevant to the assessment year under consideration. The ld. CIT(Appeals) has stated that the said expenditure is allowable as per section 43B of the Act in the assessment year under consideration. In respect of the balance amount of Rs.1,86,917/-, the ld. CIT(Appeals) has stated that no evidence has been led to prove that the said expenditure has crystallized ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... the dividend income while computing deduction allowable under section 80M of the Act. 61. Since we have already decided Ground No. 1 of the appeal against the assessee, the Ground No. 12 of the appeal taken by the assessee is consequential and accordingly the order of the ld. CIT(Appeals) is confirmed by rejecting the Ground No. 12 taken by the assessee. We may state that while deducting the interest income, as mentioned while deciding Ground No. 1 of the appeal, Assessing Officer will compute the correct interest paid by the assessee and accordingly consider the claim of deduction under section 80M of the Act. 62. Ground No. 13 of the appeal is as under:- "That on the facts and in the circumstances of the case, the ld. CIT(Appeals) erred in upholding that interest on deposits, interest on fixed deposits and speculation income as income from other sources and excluding them from the profits of the business, resulting in reduced deduction claimed under section. 80HHC". 63. In the return of income filed, the assessee treated the interest on deposit of Rs.19,10,397/-, interest on fixed deposits of Rs.6,98,198/- and speculative income of Rs.2,98,900/- as business incom ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... he Act. 70. The Assessing Officer made the disallowance of Rs.2,50,405/- as per section 40A(9) of the Act. Being aggrieved, the assessee filed appeal before the first appellate authority and contended that the said contribution was made to the approved pension fund and referred page 28 of the paper book, which is a copy of Form No. 3CD. However, during the course of hearing, the ld. A.R. submitted that a letter has been received by the assessee approving the fund but the same could not be filed by the assessee before the authorities below. The ld. D.R. supported the orders of the authorities below and submitted that the assessee has not placed any such document on record approving the above fund. However, at the time of hearing, the ld. A.R. filed a copy of the letter dated 26.05.1989 giving the approval by ld. Commissioner of Income Tax of Pension Fund to the assessee. 71. It is a fact and the ld. A.R. conceded that the said copy of the order of ld. CIT giving approval to the Executive staff, Pension Fund, was not filed before the authorities below and has been filed for the first time before us irrespective of the fact that the said letter is dated 26.05.1989, we, however ..... X X X X Extracts X X X X X X X X Extracts X X X X
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