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M/s. Essel Propack Ltd. Versus DCIT RG 6 (2) , Mumbai

2018 (1) TMI 398 - ITAT MUMBAI

Disallowance u/s.14A - Held that:- During the year under consideration also assessee has not earned any exempt income, accordingly following the order of the Tribunal in assessee’s own case, we do not find any merit for the disallowance made u/s.14A. - Disallowing foreign exchange loss on forward contracts treating the same as speculation loss - Held that:- As the facts and circumstances during the year under consideration are same, respectfully following the order of the Tribunal in assesse .....

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le of spares, royalty receivable, service charges and the expenses incurred on their behalf such as traveling expenses, establishment expenses, financial guarantees, communications expenses, etc. The assessee does not have system of charging interest on such debits of expenses incurred on their behalf. Such advances did not attract any adjustment in Transfer Pricing order also. However, the Ld. AO considered these debit balances as advances without interest and disallowed ₹ 1,07,54,398/- o .....

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e grievance of assessee relates to disallowance made u/s.14A and disallowance of foreign exchange loss on forward contracts. Revenue is aggrieved for deleting disallowance of interest u/s.36(1)(iii) on the plea that assessee was having sufficient own funds for investment in subsidiary company. 3. At the outset, learned AR placed on record the order of the Tribunal for A.Y.2008-09 dated 11/09/2017, wherein both the issues raised by assessee during the year under consideration were decided in favo .....

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companies it got the dividend income. The assessee has not claimed the said dividend income as exempt. The dividend income has been shown as income from other sources and due tax has been computed by the assessee in the computation statement. Therefore no question arises on making disallowance in respect of investment made in foreign subsidiary company. The assessee has also made investments in Indian companies but did not earn any dividend income. In view of the decision of the Hon'ble Delh .....

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e year under consideration also assessee has not earned any exempt income, accordingly following the order of the Tribunal in assessee s own case, we do not find any merit for the disallowance made u/s.14A. 5. Next grievance of assessee relates to disallowing foreign exchange loss on forward contracts treating the same as speculation loss. 6. We found that this issue is also covered in favour of assessee by the order of the Tribunal. We have gone through the order of the Tribunal dated 11/09/201 .....

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ommodity' including shares and stocks but does not include currency. (a) The term 'commodity' is defined neither in the Income-tax Act nor in the General Clauses Act. (b) Dictionary meaning of the term 'commodity' is 'raw material or agricultural product that can be bought and sold - something useful or valuable'. (c) Another definition for the term 'commodity' is 'any product that can be used for commerce or an article of commerce which is traded on an au .....

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as held as under: 8 "Foreign currency or any currency is neither commodity nor shares. The Sale of Goods Act specifically excludes cash from the definition of goods. Besides, no person other than authorised dealers and money changers are allowed in India to trade in foreign currency, much less speculate. S. 8 of the Foreign Exchange Regulations Act, 1973, provides that except with prior general or special permission of the RBI, no person other than an authorised dealer shall purchase, acqui .....

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rities should be also considered as commodities as the underlying shares and securities as specifically included within the term commodities. Accordingly, transactions in security derivatives are subject to the provisions of S. 43(5). However, a currency cannot be termed as a commodity so as to attract the provisions of S. 43(5). Jurisdictional Bombay High Court in the case of Badridas Gauridu (P) Ltd. 261 ITR 256 has held that the assessee is not a dealer in foreign exchange but an exporter. In .....

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of the case and in law, the Tribunal was justified in deleting the addition of Mark to Market‟ Loss of ₹ 78,10,000/- made by the Assessing Officer on account of disallowance of loss on foreign exchange forward contract loss and not appreciating the fact that the said loss was a notional loss and hence cannot be allowed. The Hon'ble High Court after discussing the submissions of both parties held as under: - 7. The impugned order of the Tribunal has, while upholding the finding of .....

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ction entered into by the Respondent assessee was speculative in nature. It further holds that at no point of time did Revenue challenge the assertion of the Respondent assessee that the activity of entering into forward contract was in the regular course of its business only to safeguard against the loss on account of foreign exchange variation. Even before the Tribunal, we find that there was no submission recorded on behalf of the Revenue that the Respondent assessee should be called upon to .....

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ed on the ground that it was notional. Lastly, the reliance placed on the decision in S. Vinodkumar (supra) in the Revenue's favour would not by itself govern the issues arising herein. This is so as every decision is rendered in the context of the facts which arise before the authority for adjudication. Mere conclusion in favour of the Revenue in another case by itself would not entitle a party to have an identical relief in this case. In fact, if the Revenue was of the view that the facts .....

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notice of the Tribunal when it rendered its decision in S. Vinodkumar (supra). In the above case, this court has held that forward contract in foreign exchange when incidental to carrying on business of cotton exporter and done to cover up losses on account of differences in foreign exchange valuations, would not be speculative activity but a business activity. 14. Similarly the Hon'ble Bombay High Court in the case CIT vs. M/s. London Star Diamond Co. (India) Pvt. Ltd. in appeal No. 712 of .....

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n & Co. and that ofCIT vs. M/s. Jaimin Jeweller Exports Pvt. Ltd. 15. The learned D.R. before us vehemently relied on the order of the CIT(A) but could not convince us that the facts involved in the case of the assessee are different to the decisions as has been given by the Hon'ble Bombay High Court in the above noted case law. 16. Respectfully following the decisions of the Hon'ble Bombay High Court we set aside the order of the CIT(A) on this issue and delete the disallowance of & .....

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