TMI Blog2016 (8) TMI 602X X X X Extracts X X X X X X X X Extracts X X X X ..... and not earning any income out of investment. The ld Assessing Officer had not established any nexus between borrowed fund with investments made in shares on which dividend earned. The case laws relied by the ld. AR are squarely applicable, therefore, we uphold the order of the ld CIT(A)in deleting the addition. - Decided against revenue. Addition made on account of foreign exchange gain - Held that:- It is undisputed fact that the debtors was in dispute since F.Y. 2007-08 and 2008-09, there was a remark by the Auditor on account of foreign exchange gain in the audit report and clarified that amounting to ₹ 37,05,685/- had not been credited in the account of the assessee. The assessee has explained the reasons that it has not received this income. There is a dispute with the Brazilian party on account of quality of goods. The original bill amount was in dispute, therefore he has not shown this increase in foreign exchange gain. The interest income on sticky loans, which has calculated on the basis of hypothetical income not real income of the finance company. In this case also, the ld Assessing Officer has calculated this foreign exchange gain on notional basis, which was ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... f the Act. 2. Whether on the facts and in the circumstances of the case and in law the Id. CIT (A) has erred in deleting the disallowance of ₹ 2,64,320/- made by the AO under the provisions of section 14A r.w. rule 8D of the I T. Rules, 1962. 3. (i) Whether on the facts and in the circumstances of the case and in law the Id. CIT (A) has erred in deleting addition of ₹ 37,05,685/- made on account of foreign exchange gain. (ii) Whether on the facts and in the circumstances of the case and in law the Id. CIT(A) has erred in not following the decisions of Hon ble Supreme Court in the case of CIT Vs. Woodward Governor India Ltd., (312 ITR 254) where it was held that the loss/gain on account of foreign exchange fluctuation on restatement of the liability on the balance sheet date is required to be taken into account in computation of income. Ground of assessee s appeal:- 1. On the facts and circumstances Ld. CIT(A) has grossly erred in sustaining the addition made by ld. AO of ₹ 90,51,858/- u/s 43B arbitrarily, thus addition sustained deserves to be deleted in toto. 1.1 That the Ld. CIT(A) has further erred in ignoring the fact th ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... Vinay Cements 213 CTR 268 and Hon ble Jurisdictional High Court decision in the case of CIT Vs. SBBJ 363 ITR 70 (Raj). Deduction only on actual payment with regard to provident fund and ESI contributions made before filing return is allowable U/s 36(1)(va) r.w.s. 43B of the Act. Accordingly, he deleted the addition. 3.1 Now the revenue is in appeal before us. The ld DR has vehemently supported the order of the Assessing Officer and relied on the case laws referred by the ld Assessing Officer in his assessment order. At the outset, the ld AR of the assessee has reiterated the arguments made before the ld CIT(A) and argued that as the amount has paid before due date of filing of return and case laws referred by the ld CIT(A) is squarely applicable. Accordingly, he prayed to uphold the order of the ld CIT(A). 3.2 We have heard the rival contentions of both the parties and perused the material available on the record. It is undisputed fact that the assessee had paid both the amounts before due date of return. The Hon ble Jurisdictional High Court decision in the case of CIT Vs SBBJ (supra) is squarely applicable, therefore, we uphold the order of the ld. CIT(A). This ground of re ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... o expenditure was incurred by it in relation to the said dividend income and the interest claimed by it pertained to earning of the taxable income. Therefore no disallowance was possible U/s 14A read with Rules 80D of the Rules. The ld Assessing Officer also failed to record the satisfaction before invoking the provisions of Section 14A that the interest bearing funds were utilized for making investments. He has further relied on the decision of Hon ble Punjab Haryana High Court in the case of CIT Vs./ Hero Cycles Ltd. 323 ITR 518 and various other cases of the Hon'ble High Courts as well as the Tribunal and prayed to confirm the order of the ld CIT(A). 4.3 We have heard the rival contentions of both the parties and perused the material available on the record. It is undisputed fact that the investments in shares were made up to F.Y. 2005-06. During the year, no investment has been made by the assessee. The assessee had share capital of ₹ 3.14 crores and reserve and surplus of ₹ 4.57 crores. It is further found that investments made in subsidiary company not in the share of any other unrelated party. Therefore, the primary object of the investment was holding a ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... addition made by the Assessing Officer by observing that the notional income on account of foreign exchange gain cannot be treated as income because it is a hypothetical income, which was never received by the assessee. 5.2 Now the revenue is in appeal before us. The ld DR has vehemently supported the order of the ld Assessing Officer. At the outset, the ld AR of the assessee has reiterated the arguments made before the ld CIT(A). It is submitted that in F.Y. 2007-08 and 2008-09, the assessee company had exported goods to Brazil out of certain bills remained unpaid till 31/3/2011 due to the fact that the goods were not accepted by the customer being was of sub-standard quality. Further since the recovery of original amount is doubtful, exchange difference on the closing value of debtors was also not recognized. The assessee requested to the banker for granting permission for writing off the said amounts in the books of accounts and the necessary permission in respect of few bills was received and submitted before the ld Assessing Officer during the course of assessment proceedings. The ld AR has drawn our attention on page No. 15-17 of the paper book. Finally this amount had bee ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... the assessee had claimed advance VAT payment of ₹ 90,51,858/-. As per Assessing Officer, it is not allowable U/s 43B, therefore, he gave reasonable opportunity of being heard to the assessee, which was availed by the assessee vide letter dated 14/3/2014. It is submitted before the Assessing Officer that this expense is allowable on the basis of payments made during the year under consideration U/s 43B of the Act. The ld Assessing Officer considered Section 43B of the Act which has been reproduced on page No. 11 of the assessment order. After considering the assessee s reply, the ld Assessing Officer held that this amount is not allowable U/s 43B, which has been confirmed by the ld CIT(A) by observing that the assessee had claimed advance VAT payment by relying on the Hon'ble Supreme Court decision in the case of Allied Motors (P) Ltd. Vs CIT (1997) 224 ITR 667 and Hon ble Calcutta High Court in the case of Paharpur Cooling Towers Ltd. Vs CIT 244 CTR 502 irrespective of the fact that liability of paying such amount was incurred or not in the previous year relevant to assessment year under appeal. He further analysed Section 43B of the Act and held that during the year, th ..... X X X X Extracts X X X X X X X X Extracts X X X X
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