TMI Blog2013 (11) TMI 1278X X X X Extracts X X X X X X X X Extracts X X X X ..... re is no claim of interest expenses - Assessee has not claimed any interest expenses and the total expenses claimed against turn over crores were quite reasonable and moreover the case of assessee relates to AY 2005-06 when Rule 8D was not applicable– Decided in favour of Assessee. Disallowance of Inland haulage and clearing and forwarding expenses u/s 40A (i)(iii) of Income Tax Act, 1961 – Held that:- There was no evidence to prove that nothing was payable as on 31st March - Nor a copy of balance sheet or other document showing that nothing remained to be paid was submitted nor it is a part of record – Matter remitted back to the AO for re-adjudication - Addition of DEPB Benefits - Held that:- Assessee had offered to tax, the actual amount of receipt of DEPB and the short amount received by assessee was not liable to tax - the addition was not justified - As regards, loss on sale of DEPB licenses, copies of sale of DEPB licenses are placed at paper book - The invoice bills mentions, face value of DEPB licenses along with sale value and difference represents amount which the assessee had booked as loss on the sale of such licenses - AO was not justified in making addition an ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ide. 2. On the facts and circumstances of the case and in law, the Ld. CIT(A) has erred in deleting the addition of Rs.42,27,345/- on account of foreign exchange fluctuation loss. 3. On the facts and circumstances of the case and in law, the Ld. CIT(A) has erred in deleting the addition of Rs.1,29,882/- u/s 14A. 4. On the facts and circumstances of the case and in law, the Ld. CIT(A) has erred in deleting the addition of Rs.7,18,390/- on account of DEPB benefits accrued. 5. On the facts and circumstances of the case and in law, the Ld. CIT(A) has erred in deleting the addition of Rs.26,16,800/- on account of cessation of trading liability. 6. On the facts and circumstances of the case and in law, the Ld. CIT(A) has erred in deleting the disallowance of Rs.73,460/- on account of loading /unloading expenses and Rs.46,410/- on account of carriage outward expenses u/s 40a(ia). 7. The appellant craves to leave, to add, alter or amend any ground of appeal raised above at the time of the hearing. 2. The brief facts of the case are that assessee company is engaged in the business of exports of merchandise and goods and return of income was filed declaring a ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... that word term expenditure used in section 37 of the Act, covered an amount which is a loss even though the said amount has not gone out from the pocket of the assessee. It was also submitted that appellant has been consistently following mercantile system of book keeping from the very beginning and there is no change in the method of accounting and appellant had offered similar treatment to unrealized gains in earlier year. Reliance was also placed on the decision of Hon'ble Supreme Court in the case of Sutlej Cotton Mills Ltd. vs CIT 116 ITR 1 which held that profit or loss arising out of currency conversion would ordinarily be trading profit or loss, if it was held on revenue account or as a trading asset. It was also submitted that case law of Indian Overseas Bank as cited by AO was over-ruled by Hon'ble Supreme Court in Woodward Governor India Pvt. Ltd. 312 ITR 354 (SC). Ld. CIT(A) on the basis of submissions made by assessee deleted the addition made by AO. (B). Disallowance of expenditure u/s 14 of the Act :- The AO observed that assessee had earned dividend income of Rs.10,51,096/- which was claimed as exempt. The AO held that for earning dividend income, various a ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... assessee had incurred on the sale of DEPB license. It was further submitted that practice of booking of DEPB license on accrual basis has been followed by the assessee company since it started dealing in EXIM Trade. The Ld. CIT(A) after going through the submissions of assessee held that the difference of Rs.2,38,210/- on account of DEPB license, calculation mistake and Rs.4,80,180/- loss on account of sale of DEPB licenses were explained and, therefore, the addition of Rs.7,18,390/- was deleted. (D) Addition on account of cessation of trading liability:- The AO observed that assessee had received an amount of Rs.26,16,800/- as advance from one customer and which had remained static. On a subsequent query to the assessee, the assessee could not furnish any reply and AO held that trading liability had indeed ceased to exist and, therefore, made an addition of Rs.26,16,800/-. Before Ld. CIT(A), it was submitted by assessee that advance was received from a foreign buyer for which liability had not ceased and appellant company had made the shipment in the following years. It was further submitted that in the case of UOI v J.K.Synthetics Ltd. (1993) 199 ITR 14 (Hon'ble Supreme C ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... tion is allowable was not material. 4. Ld. CIT(A) accepted the contentions of assessee with respect to carriage outward and loading/unloading charges and deleted the additions of Rs.46,410/- and Rs.73,460/- but upheld the addition of Rs.17,38,374/- represented by Rs.12,42,022/- on account of inland haulage and Rs.4,96,352/- on account of clearing and forwarding charges. 5. Aggrieved with the above, Ld. CIT(A) s order, both revenue and assessee has filed cross appeals. At the outset, the Ld. AR of the assessee filed written submissions and in assessee s appeal with respect to ground no-1, it was submitted that 5% disallowance out of administrative expenses amounting to Rs.1,32,892/- was on higher side having regard to nature of earnings by way of dividends. Our attention was invited to page 230 231 of paper book wherein a copy of written submission before Ld. CIT(A) were placed in which details of expenses were mentioned. Ld. AR argued that nature of expenses amounting to Rs.56,11,348/- do not indicate any expenses which can be said to be related to the investment made by the assessee. He further argued that total turn over of the company amounted to Rs.59.65 crores and the to ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... tion. To ground no-4 relating to disallowance on account of DEPB, Ld. AR argued that the difference has arisen due to calculation mistake and further loss on account of sale of DEPB license. In this respect, our attention was invited to pages 198 215 of the paper book wherein copies of sale bills of DEPB licenses were placed. Regarding difference in the amount of accrual of DEPB licenses and actual receipt of DEPB licenses, our attention was invited to pages 134 - 197 of paper book wherein the copies of DEPB licenses received were placed. In view of the above, it was argued that correct income after removing mistakes and after adjustment of loss on sale of DEPB licenses was offered. With regard to ground no-5 relating to cessation of liability, it was argued that liability has not ceased and rather it was got adjusted in next year. Our attention was invited to page 216 - 217 of paper book where a copy of invoice to the said customer from whom advance was received along with bank certificate for export realization was placed. 8. We have heard the rival parties and have gone through the material placed on record. We first take up the assessee s appeal which has taken two grounds ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... part of record. Therefore, we deem it appropriate to remit this point to AO for re-adjudication. After verification of the claim of Ld. AR that nothing was payable, AO on the basis of such verification can allow the claim of the assessee as per law as laid down by Special Bench in the case of Merlin Shipping Transport vs. CIT. 10. Now, we come to the appeal of the revenue. Ground no-1 is general and do not require any adjudication. Ground no-2 regarding deletion of addition on account of foreign exchange fluctuation is squarely covered by the judgement of Hon'ble Supreme Court in the case of CIT vs Woodward Governor India Pvt. Ltd wherein the Hon'ble Court had held that unrealized forex foreign exchange fluctuation loss being in the nature of revenue, should be allowed as deduction. The Hon'ble Supreme Court has expressed its opinion at para 18 of the said order. Following the above judgement of Hon'ble Supreme Court, we hold that loss due to foreign exchange fluctuation was a revenue loss and, therefore ground no-2 of revenue s appeal is dismissed. 11. Ground no-3 of revenue s appeal has already been adjudicated in assessee s appeal which has been decided in its favour, the ..... X X X X Extracts X X X X X X X X Extracts X X X X
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