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2015 (11) TMI 1070 - ITAT KOLKATA

2015 (11) TMI 1070 - ITAT KOLKATA - TMI - Disallowance u/s 14A - CIT(A) deleted the addition - Held that:- Share application money is only in the nature of an offer to buy shares made by the assessee. It is only after the offer is accepted by the company resulting in a concluded contract, the Assessee becomes the shareholder in a company. Till this time the Assessee becomes a shareholder, the assessee cannot have any rights to claim any dividend that may be declared by the company. In such circu .....

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tter of Shri Laxmikant Josh (HUF) dated 15.12.2011 which is at pages 91 to 93 of the assessee’s paper book clearly demonstrates the claim of the assessee. We, therefore dismiss ground no.(ii) of the revenue.- Decided against revenue.

Disallowance on account of forex forward contracts which was treated as speculative loss by the AO as against normal business expenditure/loss claimed by assessee - Held that:- We shall as a test case consider one of the contract for export of contract an .....

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.Nassa Spinning Ltd., Bangladesh. The contract was cancelled by HB Cotton who was agent of M/S.Nassa Spinning Ltd., Bangaldesh on 21.10.2008. The period of the contract for supply of cotton to Bangaldesh was upto 22.1.2009. Since the contract was cancelled by communication dated 24.10.2008, the Bank intimated the Assessee that in view of the adverse fluctuation of Euro currency, the Assessee had to bear the loss of ₹ 1,56,80,527 because the booking rate as on 17.7.2008 was 1.5711 the cance .....

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BR> Capital gains on sale of land - Assessing Officer by adopting the sale consideration relying on the provisions of sec.50C - Held that:- Though section 50C of the Act does not speak of any such variation in terms of percentage between value adopted for the purpose of stamp duty and the registration and the actual consideration received on transfer, keeping in view of the decision of the Hon’ble ITAT, Hyderabad Bench referred to above and keeping in view of the fact that the difference betwee .....

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the definition of ' total income’ " was not satisfied. Thus, in the relevant previous year and the assessment year, or even in the subsequent year, capital gains or "capital losses" did not form part of the "total income" of the assessee which could be brought to charge, and were, therefore, not required to be computed under the Act. The Hon’ble Supreme Court in Commissioner of Income-tax v. Harprasad and Co. P. Ltd. [1975 (2) TMI 2 - SUPREME Court] answered the question referred to it in favour .....

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f CIT(A). ITA No.267/Kol/2013 (Revenue s appeal) : 2. Ground No.1 raised by the revenue reads as follows :- (i)That on the facts and in the circumstances of the case, the Ld. CIT(A)-I, Kol has erred in deleting the addition of ₹ 1,95,360/- u/s 14A as made by the A.O. in the assessment order. 3. The assessee is a company engaged in the business of manufacture export and trading of goods. The assessee was in receipt of exempt income of ₹ 84,154/-. The Assessee computed the disallowance .....

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not be considered as investment made by the assessee in earning tax payer income. The AO, however was in the view that share application money ought to have been considered while determining the average value of investment. 4. The AO accordingly determined the disallowance u/s 14A of the Act as follows :- Hence revised calculation u/s 14A read with Rule-8D(2)(iii) is being invoked as under : Average Value of Investment as claimed by assessee Rs.1,82,71,923/- Add: Share Application Money Rs.2,08, .....

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under Rule 8D(2)(iii) of the Rules. CIT(A) also observed that the share application money was refunded to the Assessee at a later period. Aggrieved by the order of the CIT(A) revenue has raised ground no.(i) before the Tribunal. 6. We have heard the submissions of the ld. DR, who relied on the order of AO. The ld. Counsel for the assessee brought to our notice the decision of ITAT, Chennai Bench in the case of MSA Securities Services Pvt. Ltd. vs ACIT in ITA Nos.1523- 1524/Mds/2012 dated 17.10.2 .....

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is likely to earn tax free dividend income. Hence, there can be no disallowance u/s 14A of the Act. 7. We have given a careful consideration to the rival submissions. We are of the view that order of CIT(A) on this issue has to be upheld. As rightly contended by the ld. counsel for the assessee, share application money is only in the nature of an offer to buy shares made by the assessee. It is only after the offer is accepted by the company resulting in a concluded contract, the Assessee becomes .....

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That on the facts and in the circumstances of the case, the Ld. CIT(A)-I, Kol has erred in deleting the addition of ₹ 15,50,779/- as disallowance of commission expenses made by the A.O. in the assessment order. (iii) That on the facts and in the circumstances of the case, the Ld. CIT(A)-I, Kol has erred in deleting the addition of ₹ 3,93,618/- u/s 41 as made by the A.O. in the assessment order. (iv) That on the facts and in the circumstances of the case, the Ld. CIT(A)-I, Kol has err .....

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576/- as Normal Business Loss instead of Speculation Loss. 9. According to the revenue the relief given by the CIT(A) which are challenged in ground nos. (ii) to (vi) as above were based on the additional evidence filed by the assessee before CIT(A). According to the revenue the additional evidence was admitted by CIT(A) in violation of Rule 46A of the Rules and therefore the additions made by the AO were deleted by the CIT(A) and which are the subject matter of challenge in ground nos. (ii) to .....

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y the revenue. As far as ground no.(vii) raised by the revenue is concerned the facts that emanate from the record are that the assessee filed four volumes of paper book with the request to treat the contents and documents in the said paper book as additional evidence with a request to admit the additional evidence in terms of Rule 46A(1) of the Rules in a hearing before CIT(A) on 07.11.2012. The CIT(A) directed the AO to file his objections on additional evidence filed by the assessee. The AO v .....

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o the various issues raised by the assessee before CIT(A). A copy of the objection of the AO in this letter dated 21.11.2012 is placed at pages 623 and 624 of the assessee s paper book. In the said letter the AO has also not made a request for liberty to file his objections on veracity of the additional evidence and its relevance to the case of the assessee at a later date. 11. The CIT(A) after considering the objections of the AO was of the view that the AO had not asked for any of the evidence .....

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ditional evidence required to be admitted, ought to have called upon the AO to file his objections with regard to the admissibility, veracity and relevance of the additional evidence to the various issues raised by the assessee before CIT(A). 13. The ld. Counsel for the assessee, on the other hand, submitted before us that Rule 46A(3) only mandates an opportunity to the AO for examining the additional evidence filed before CIT(A) or to produce evidence or documents in rebuttal to the additional .....

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ajesh Babubhai Damania vs ITO (2002) 122 Taxman 614 (Guj) wherein the Hon ble Gujarat High Court took the view that the Tribunal should not restore back to the AO to give one more innings. 14. We have given a careful consideration to the rival submissions. We are of the view that under Rule 46A (3) of the Rules, the CIT(A) is only required to afford reasonable opportunity to the AO to examine the evidence or documents produced by the assessee as additional evidence before CIT(A). In the present .....

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o the veracity and relevance of the additional evidences filed by the assessee before CIT(A). It is also clear from the decision of the CIT(A) that the AO had not asked for the additional evidence filed by the assessee before CIT(A) in the course of assessment proceedings and therefore the admissibility of the additional evidence in terms of Rule 46A(1) of the Rules cannot be found fault with. Therefore, we are of the view that there is no merit in ground no.(vii) raised by the revenue. Conseque .....

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from the assessee during the previous year. The AO therefore disallowed commission expenses to the tune of ₹ 15,50,779/. Before CIT(A) the assessee pointed out that Shri Laxmikant Joshi(HUF) vide letter dated 15.12.2011 sent by registered post to the AO informed the AO that they had in fact received commission of ₹ 15,50,779/- from the assessee and that the assesse had also deducted TDS at ₹ 1,69,962/- in respect of the commission paid to the assessee. Relevant copy of the Inco .....

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6) of the Act alone ought to have been considered. In our view the submission made by the revenue cannot be accepted. This is because the payment in question has been made by cheques and TDS has also been made by the assessee. The annexures to the letter of Shri Laxmikant Josh (HUF) dated 15.12.2011 which is at pages 91 to 93 of the assessee s paper book clearly demonstrates the claim of the assessee. We, therefore dismiss ground no.(ii) of the revenue. 17. As far as ground no.(iii) is concerned .....

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ule-O. The break-up of miscellaneous receipt has been given which contains other miscellaneous receipts which is referable to the insurance claim by the assessee from National Insurance Company Ltd. The auditors also certified that the Tax Auditors Report contains wrong statement. These documents are available at pages 94 to 98 of the assessee s paper book -(1). The CIT(A) taking note of the aforesaid evidence deleted the addition made by the AO. The limited request of the ld. DR before us is to .....

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ax Audit Report, the AO noticed that the assessee failed to pay import duty of ₹ 31,90,837/- and service tax of ₹ 20,600/- before the due date of furnishing the return of income u/s 139(1) of the Act. Invoking the provision of section 43B of the Act, the AO added a sum of Rs/.32,11,437/- as disallowance u/s 43B of the Act to the total income of the assessee. 20. Before CIT(A) assessee pointed out that no duty of service tax was outstanding. The assessee furnished certificate of the a .....

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ssee was justified and therefore the addition made by the AO is deleted. The request of the ld. DR before us was that fresh opportunity be given to the AO to examine the additional evidence filed by the assessee. 21. We have also decided ground no.7 that the AO had enough opportunity to look into the additional evidence filed by the assessee before CIT(A). In these circumstances the plea of the revenue for a fresh opportunity to the AO cannot be accepted. Accordingly ground No.(iv)4 is hereby re .....

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ncial year 2006-07. The bill dated 31.10.2008 which is at page 123 of the assessee s paper book shows that the liability accrued to the assessee only on 31.10.2008 on receipt of the aforesaid bill. The CIT(A) taking note of the evidence deleted the addition made by the AO. We are of the view that the order on this issue does not call for any interference. Consequently the same is dismissed. 24. As far as ground no.(vi) raised by the revenue is concerned the facts are that the assessee claimed as .....

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against speculative income in future. As a result a sum of ₹ 21,01,52,576/- which is part of ₹ 23,66,02,947/- was added to the total income of the assessee. 25. On appeal by the assessee the CIT(A) held as follows :- After careful consideration of assessment order and A/R s written submission it is noticed that ground no.9 relates disallowance of ₹ 23,66,02,947/- on account of forex forward contracts which was treated as speculative loss by the AO as against normal business exp .....

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derivatives and a gain of ₹ 1,82,181/- on account of gold as mentioned in page 4 of the assessment order as under :- Euro Booking Rs.4,11,29,143/- Point Booking Rs.4,81,16,647/- JPY (Profit) ₹ 17,19,818/- Swiss Frank ₹ 28,79,030/- Normal Forward Contract-SBI Rs.10,46,38,183/- Normal Forward Contract-Federal Bank Rs.1,51,09,391/- Derivatives Rs.2,66,32,552/- Gold (Profit) ₹ 1,82,181/- Total Rs.23,66,02,947/- The AO issued a notice u/s 142(1) along with the questionnaire on .....

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cancelled vis-à-vis forex contract cancelled and made additions of ₹ 23,66,02,947/- as he treated the above loss as speculative loss u/s 43(5) of Income Tax Act by relying upon CBDT instruction dated 23.03.2010 and the AO held that nexus between losses suffered due cancellation of forex forward contracts with corresponding value of export contracts which got cancelled could not be established. During the appellate proceedings assessee filed a paper book containing pages 1 to 621 and .....

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e Profit & Loss Account and the same was claimed as business loss. For the first time on 2nd December 2011, the Assessing Officer asked us to clarify why Forward Forex Contract Loss has been claimed as Business Expenditure . On 8th December, 2011 our authorized representative appeared before Assessing officer and explained the aforesaid matter and produced before him the relevant documents and evidences relating to aforesaid claim. The explanation was also filed in letter dated 07.12.2011. H .....

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d and explained and produced the details and evidences of export contracts cancelled by the buyers. Such details and evidences were never asked by the Assessing officer to be filed before him. It is only in the assessment order Assessing Officer has alleged that such details were not filed. We enclosed the Xerox copy of the order sheet in respect of assessment proceedings, which would reveal all the aforesaid facts. In these circumstances, we submit that there was reasonable cause for not filing .....

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ence to Sale invoices and Banks advices 151-595 8 13 Statement of gains in Forex Exchange Fluctuation include din Sales Account 596-606 9 14 Statement of month-wise inventory of Stock of Cotton 607-621 We submit that the aforesaid additional evidences are vital and essential for rendering justice and in deciding the instant appeal and therefore the same may be admitted under Rule 46A of the Income Tax Rules, 1962. We refer to the decision of Hon ble Third Member of Patna Income Tax Appellate Tri .....

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ssment stage, the admission of documents has to be governed by rule 46A of the I.T.rules 1962., if produced for the first time before the first appellate authority. Having missed the bus and the matter having travelled to the Tribunal, the admission of documents is to be governed by Rule 29 of the Appellate Tribunal Rules. Hence, if the documents sought to be admitted even at the second appellate stage are of nature and quantitatively such that they render assistance to the Tribunal in passing o .....

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vital and essential for rendering justice and in deciding appeals. However, it was necessary to give the department a reasonable opportunity of rebutting it according to the principle of nature justice and for that purpose the matter was restored to the file of the AO. The AO was confronted with the additional evidences on 07.11.2012 and AO filed written submission vide letter dated 21.11.2012 with a request not to admit the additional evidences as per Rule 46A. The paper book pages 132 to page .....

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ore these additional evidences are admitted in terms of Rule 46A. In the financial year under consideration assessee-company had exported raw cotton mainly to Bangladesh with export turnover of ₹ 187.88 crores. In the paper book assessee had filed a summary statement of loss made on the forward booking at page 132 to 147 of the paper book and assessee also furnish a details statement about the contract number, date, foreign currency booked and cancellation of the contract (due to cancellat .....

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ion of export orders and the net gain was assessed under the head income from business and profession as per order u/s 143(3). The net losses (after setting of the profits on account of cancellation of export orders) debited due to cancellation of export with the SBI and Federal Bank were to the tune of ₹ 23,66,02,947/- minus ₹ 2,66,32,552/- plus ₹ 1,82,181/- = ₹ 21,01,52,576/-. The page 147 to 150 of paper book contain the statement of profit and loss on account of forei .....

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cancellation foreign exchange contracts with the banks was normal business expenditure. The foreign exchange derivative loss for ₹ 2,66,32,552/- with no supporting of export orders is treated as speculative loss u/s 43(5) of the Income Tax Act and can only be set off against speculative profits of gold in the financial year for ₹ 1,82,181/- and the addition made by AO for net amount of ₹ 2,64,50,371/- is confirmed. Therefore ground no.9 is partly allowed. Aggrieved by the orde .....

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ding before deleting the addition made by the AO. He therefore prayed that the addition made by the AO be restored. In the alternative it was prayed that the order of the CIT(A) be set aside and the issue may be remanded to the AO for fresh consideration in the light of the additional evidence filed by the Assessee before the CIT(A). The learned counsel for the Assessee reiterated submissions made before CIT(A) and the order of the CIT(A). It is seen from the evidence on record that in A.Y. 2008 .....

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paper book. The statement of gains in forex forward contract included in the sales account is at pages 596 to 606 of the assessee s paper book. The statement of month-wise inventory of stock of cotton is at pages 607- 621 of Assessee s paper book. 27. We have considered the rival submissions. We shall as a test case consider one of the contract for export of contract and the forward contract entered into by the Assessee in connection with such export contract. Page 134 of the Assessee s paper bo .....

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n 21.10.2008. The period of the contract for supply of cotton to Bangaldesh was upto 22.1.2009. Since the contract was cancelled by communication dated 24.10.2008, the Bank intimated the Assessee that in view of the adverse fluctuation of Euro currency, the Assessee had to bear the loss of ₹ 1,56,80,527 because the booking rate as on 17.7.2008 was 1.5711 the cancellation date was 22.1.2009 on which date the rate was 1.2613. Thus the Assessee suffered a loss on the forward contract in quest .....

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s and Friends Shipping Pvt.Ltd., Tax Appeal No.251 of 2010 dated 23.8.2011 and CIT Vs. Panchmahal Steel Ltd. Tax Appeal No.131 of 2013 dated 28.3.2013 by the Hon ble Gujarat High Court. The conclusions of the CIT(A) on this issue, in our view therefore deserve to be upheld. Accordingly, the ground of appeal raised by the revenue in this regard is rejected. 28. In the result the appeal of the revenue is dismissed. C.O.No.29/Kol/2013 (by the assessee) 29. As far as Cross Objection is concerned gro .....

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the property on which long term capital gain was declared by the assessee. The actual sale consideration received on transfer was a sum of ₹ 60,00,000/-. The sale consideration adopted by the assessee for the purpose of registration and stamp duty was a sum of ₹ 61,22,330/-. The AO computed the long term capital gain by adopting the sale consideration at ₹ 61,22,330/- resulting in addition to the capital gain declared by the assessee amounting to ₹ 61,22,330/-/. CIT(A) co .....

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e adopted for the purpose of computing the long term capital gain. 31. We have considered the submissions made on behalf of the ld. Counsel for the assessee. Though section 50C of the Act does not speak of any such variation in terms of percentage between value adopted for the purpose of stamp duty and the registration and the actual consideration received on transfer, keeping in view of the decision of the Hon ble ITAT, Hyderabad Bench referred to above and keeping in view of the fact that the .....

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company on sale of Long Term investment in shares. 33. The assessee incurred a loss of ₹ 5,00,160/- on sale of listed shares. This was claimed as deduction in the computation of the total income. The AO was of the view that in section 10(38) of the Act any income arising from the long term capital assets being equity shares is exempt from tax. The AO was of the view that even where there is loss in view of section 10(38) of the Act the loss will not enter the computation of total income o .....

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claimed capital loss on sale of shares of ₹ 28,662 during the previous year relevant to assessment year 1955-56. The Income-tax Officer disallowed the loss on the ground that it was a loss of a capital nature. The CIT(A) confirmed the order of the ITO. Before Tribunal the Assessee modified its claim and sought that the loss which had been held to be a " capital loss " by the authorities below, should be allowed to be carried forward and set off against profits and gains, if any, .....

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by the Hon ble Supreme Court: "Whether, on the facts and in the circumstances of the case, the capital loss of ₹ 28,662 could be determined and carried forward in accordance with the provisions of section 24 of the Indian Income-tax Act, 1922, when the provisions of section 12B of the Income-tax Act, 1922, itself were not applicable in the assessment year 1955- 56. " The Hon ble Supreme Court held : Under the Income Tax Act, 1922 capital gain was not included as a head of income .....

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uot; income " was also expanded, and " income " was defined so as to include " any capital gain chargeable according to the provisions of Section 12B ". Section 6 of the Income-tax Act was also amended by including therein an additional head of income, and that additional head was " capital gains, " Section 12B, provided that the tax shall be payable by an assessee under the head " capital gains " in respect of any profits or gains arising from the sa .....

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(2A) and (2B) of section 24 were not deleted and continued to form part of the Act. The Finance (No. 3) Act, 1956, reintroduced the " capital gains " tax with effect from the 31st March, 1956. It substantially altered the old section 12B and brought it into its present form. As a result of the Finance (No. 3) Act of 1956, "capital gains " again became taxable in the assessment year 1957-58. The position that emerges is that " capital gains " arising between April 1, .....

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other words, loss is negative profit. Both positive and negative profits are of a revenue character. Both must enter into computation, wherever it becomes material, in the same mode of the taxable income of the assessee. Although section 6 classifies income under six heads, the main charging provision is section 3 which levies income-tax, as only one tax, on the " total income " of the assessee as defined in section 2(15). An income in order to come within the purview of that definitio .....

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