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TMI Blog2014 (1) TMI 544X X X X Extracts X X X X X X X X Extracts X X X X ..... und No. 1 is general in nature and therefore no adjudication is required by us. 3. Ground No. 2 is regarding disallowance of Rs.63,32,210/- being amortization of expenses u/s.35D in relation to expenditure incurred on issue of FCCB bonds. The assessee had claimed Rs.63,32,210/- under Section 35D as amortization of expenditure on issue of FCCB Bonds. The assessing officer disallowed on the following grounds:- (a) FCCB is not an issue for public subscription. Only 150 FCCBs were issued by the assessee to overseas institutional investors. Hence, the requirement laid down in clause (c) of Sub-section (2) of Section 35D is not met. Without prejudice to this : (b) Whether the expenses of Rs.3,16,63,058/- incurred for ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... in Section 35D(3). The CIT(A) confirmed the order of the AO holding that conditions specified in 35D are not satisfied in the appellant's case and hence confirmed the disallowance of claim under Section 35D. 6. As regards the claim under Section 37(1) the CIT(A) held that it is open to the assessee to claim the expenditure in the year in which it was incurred but it was a conscious act on the part of the assessee not to claim such expenditure in the year in which it was incurred. The expenditure was not debited to the profit and loss account but met out of the share premium account. It is a fact that expenditure was not debited to the profit and loss account and therefore cannot be allowed under Section 37(1). The CIT(A) confirmed the ord ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ncurred for the purpose of business of the assessee and if it is not in the nature of capital expenditure or personal expenditure, the same is allowable under Section 37. Merely because in the accounts the assessee has set off all these expenditure against the share premium or assessee has not debited any amount in its profit and loss will not prevent the assessee to claim expenditure which is otherwise allowable under the Incometax Act. 10. We find that even if Section 35D is applicable to the instant case, expenditure on issue of debentures which is otherwise allowable u/s 37, will be allowable in full and the expenditure need not be amortised. The Calcutta High Court in CIT Vs East India Hotel reported in 252 ITR 860 and the Delhi High ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... le to the issue of debentures and the expenditure accrued this year. If it is so, the expenditure is to be allowed u/s 37 of the IT Act. This issue is considered as allowed for statistical purposes. 12. Ground No. 3 is regarding disallowance of loss arising on account of foreign exchange fluctuation of Rs.10,46,176. The CIT(A) has found it as a fact that exchange fluctuation has arisen on account of redemption of funds kept abroad in fixed deposits. As a result of the same the liability on the loans got enhanced, by Rs.10,46,176/- on account of exchange fluctuation. The CIT(A) has also observed factually that fluctuation has been arisen in connection with loans utilised for the purpose of investment in fixed assets and hence loss arising o ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e had supplied CDMA Phones to BSNL and the annual maintenance charges is part and parcel of the purchase order entered into by the BSNL. 17. It is the contention of the assessee that Annual maintenance Charges are inextricably connected with the manufacture and sale of CMDA Phones and should be considered as part of the income entitled to relief under Section 80IB. The AO and the CIT(A) has held that AMC is a separate stream of income and is not connected to the main activities of manufacture and sale of goods by the assessee. This service is rendered after the sale of goods has been completed. The AMC services can be provided independent of the sales also. Hence providing Annual maintenance Services cannot be considered as connected in th ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e lower authorities. 21. We therefore set aside this issue to the files of the AO to rework the disallowance under Section 14A after examining whether the borrowals on which interest payable in the current year, has been utilized only for the purpose of business or could any part of it have been utilized for fresh investments during the year. Thereafter the AO may rework the disallowance of indirect expenditure interest that may have been utilised for making investments which earns interest free income in accordance with law after giving reasonable opportunity to the Assessee. In the circumstances this ground of appeal regarding disallowance u/s.14A is treated as allowed for statistical purposes. 22. In the result, the Appeal of the Asses ..... X X X X Extracts X X X X X X X X Extracts X X X X
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