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TMI Blog2012 (4) TMI 602X X X X Extracts X X X X X X X X Extracts X X X X ..... ely. Since the issues involved in both these appeals are common, they are taken up together and decided by this common order. 2. The brief facts of the case are that the assessee is a manufacturer and exporter of garments. The assessee filed return of income for the assessment year 2006-07 admitting total income of ` 11,58,09.217/- on 25.11.2006. The case of the assessee was selected for scrutiny and notice under section 143(2) was issued. Order under section 143(3) determining the total income of the assessee at ` 13,37,33,795/- was passed on 23.12.2008 by the Assessing Officer by making certain additions and disallowances. Aggrieved against the order of the Assessing Officer, the assessee filed appeal before the CIT(A)-III. The assessee ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 43(3) on 29.12.2009 determining total loss of ` 18,24,99,148/- and short term capital loss of ` 1,88,60,267/-. The Assessing Officer made the following disallowances for the relevant assessment year:- i) Disallowance of ` 1,67,64,150/- under section 14A read with Rule 8D; & ii) Disallowance of ` 17,65,29,062/- claimed as revenue expenditure i.e. the cost of construction of factory building on leasehold land. The assessee aggrieved against the assessment order dated 29.12.2009 preferred an appeal before the CIT(A)-III. The CIT(A) after considering the facts of the case, submissions of the parties and the decisions relied, partly allowed the appeal of the assesse. The learned CIT(A) dismissed the second ground of appeal of the assesse, and ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... tted that legislature never intended to give retrospective effect to the amendment, therefore it has not been mentioned in the amendment that it is applicable with retrospective effect. The learned CIT(A) has erred in relying upon the decision of the Mumbai Bench of the Tribunal in the case of Bapushaeb Nanasaheb Dhumal in ITA No.6628/Mum/2009 dated 25.6.2010. 8. As regards the fourth ground of appeal which is common in both the appeals i.e. ITA Nos.1318 & 1319/Mds/2011 relevant to the assessment years 2006-07 and 2007-08 respectively, learned D.R. submitted that while partly allowing the appeal of the assessee by restricting the disallowance made under section 14A to 5% of the dividend income earned, the learned CIT(A) has wrongly relied ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... shed between expenditure and the exempt income there can be no disallowance under section 14A of the Act. The learned A.R. further submitted that the Hon'ble Bombay High Court in the case of Godrej & Boyce Manufacturing Co. Ltd., reported as 328 ITR 81 has reversed the decision of the Special Bench of the Tribunal in the case of Daga Capital Management Pvt.Ltd. 10. We have heard the rival submissions and perused the records. With regard to the second ground i.e. foreign exchange loss, we find that the amount of ` 44,76,485/- claimed by the assessee is a loss arising out of foreign exchange rate fluctuation. The Assessing Officer in page 2 of his order has considered the context in which the loss was incurred in view of exchange rate fluctu ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... of the assessee is supported by the decision of the Hon'ble Supreme Court in the case of CIT Vs. Woodward Governor India Ltd., 312 ITR 254 where the Hon'ble Court has held that loss suffered by an assessee on account of fluctuation in the rate of foreign exchange as on the date of balance sheet is an item of expenditure under section 37(1) of the Income Tax Act, 1961. In that case Hon'ble Supreme Court was examining valuation of closing stock at the end of a particular year. In the present case also the item revalued is receivables which is analogous to closing stock in character, as both related to current assets. Therefore, we find that the Commissioner of Income Tax (Appeals) has rightly allowed the claim of loss made by the assessee. Th ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... of ` 36,98,309/- as per provisions of Rule 8D after following the decision of the Tribunal in the case of Daga Capital Management Pvt. Ltd. in ITA No.8057/Mum/2003. It would be relevant to mention here that the provisions of Rule 8D of the Income Tax Rules were notified with effect from 24.3.2008 and therefore are applicable with effect from the assessment year 2008-09. In the present case, the assessment year under consideration is 2006-07. Therefore the provisions of Rule 8D are not applicable. The Hon'ble Bombay High Court in the case of Godrej & Boyce Manufacturing Co. Ltd., reported as 328 ITR 81(Bom) has held that the provisions of Rule 8D of the Rules which have been notified on 24th March, 2008 would apply with effect from assessme ..... X X X X Extracts X X X X X X X X Extracts X X X X
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