TMI Blog2019 (10) TMI 915X X X X Extracts X X X X X X X X Extracts X X X X ..... favour of the assessee by the decision of the Hon ble Supreme Court in the case of CIT Vs. HCL Technologies Ltd. [ 2018 (5) TMI 357 - SUPREME COURT] held that adjustment, if any made from export turnover under Explanation 2 of section 10A of the Act is also liable to be paid on total turnover to avoid unintended and absurd results Disallowance u/s 14A invoking Rule 8D - HELD THAT:- We agree with the contention of the learned counsel that disallowance as per Rule 8D(2)(iii) ought to be computed at nil, however, on perusal of the computation of Rule 8D(2)(iii) by AO we find that he has worked out investment as on 31.03.2009 at ₹ 54,94,39,000/- and investment as on 31.03.2010 at ₹ 1,68,79,28,003/- and worked out the average investment of ₹ 111,86,83,501/-. In view of above facts, the contention that there was wrong opening and closing investment is not accepted. As far as satisfaction of the Assessing Officer is concerned, firstly the Assessing Officer has rejected the claim of assessee after perusal of the account of the assessee, thereafter, he proceeded to invoke Rule 8D of the Rules. Thus, the contentions of the assessee that no dissatisfaction has ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ome is accrued to the assessee with regard to the investments or not? 2. Whether on the facts and the circumstances of the case, learned CIT(A) is right in excluding the expenditure of ₹ 54,41,03,568/- on account of telecommunication charges and foreign currency expenditure from export turnover? 3. Whether on the facts the circumstances of the case, learned CIT(A) is right in excluding the expenditure of ₹ 54,41,03,568/- on account of telecommunication charges and foreign currency expenditure from export turnover? 4. The appellant craves leave, to add, alter or amend any ground of appeal raised above at the time of the hearing. 3. Briefly stated facts of the case are that the assessee was engaged in the business of remote infrastructure management services and application services. In the year under consideration, the assessee filed return of income on 30.09.2009, declaring total income of ₹ 8,64,57,746/-. The case was selected for scrutiny and statutory notices under the Income-tax Act, 1961 (for short the Act ) were issued and complied with. In the assessment completed under Section 14 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ions following the order of the Tribunal in the case of the assessee for assessment year 2007-08 (supra) which is a binding precedent. The relevant finding of the learned CIT(A) is reproduced as under: I have considered all the facts and circumstances of the case and also the history of the case. The appellant has been granted the relief by the Hon. ITAT for assessment year 2007-08 and by the ITAT in AY 2006-07 to 2008-09 under the identical facts and circumstances. Therefore, considering the judicial precedent and the consistency on the issue, I respectfully follow the order of the Hon. ITAT as well as my esteemed colleague and the issue is decided in favour of the appellant. The licence fee paid by the appellant is treated as revenue in nature. 5.4 In view of above, we do not find any error in the finding of the learned CIT(A) and accordingly, we uphold the same. 6. Ground no. 3 of the appeal relates to whether the telecommunication charges and foreign currency expenditure has to be reduced from the export turnover for the purpose of computing deduction under Section 10A of the Act. 6.1 Before ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... y applicable and the disallowance has to be made irrespective of the fact that the exempt income is accrued to the assessee with regard to the investments or not? 2. Whether on the facts the circumstances of the case, Id. CIT(A) is right in treating the License fee paid to DOT as revenue expenditure and deleting the capitalization of license fee of ₹ 3,69,25,186/-? 3. Whether on the facts the circumstances of the case, ld. CIT(A) is right in excluding the expenditure of ₹ 32,92,61,465/- on account of telecommunication charges and foreign currency expenditure from export turnover ? 4. Whether on the facts the circumstances of the case, Id. CIT(A) is right in deleting the disallowance of unrealized foreign exchange loss on account of reinstatement of assets and liabilities of ₹ 15,97,25,873/- by ignoring the fact that this is a notional loss and not allowable to be set off against the taxable income in view of CBDT's instruction no. 3 of 2010 dated 23.03.2010? 5. The appellant craves leave, to add, alter or amend any ground of appeal raised above at the time of the hearing. ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... sallowance invoking Rule 8D need to be deleted following the decision of Hon bole Supreme Court in the case of Maxopp Investment Ltd. Vs. CIT, 402 ITR 640 (SC). He further submitted that even under the computation of Rule 8D, no disallowance can be worked out under Rule 8D(2)(iii) of the Rules as there was no opening or closing balance of the investment and thus, according to the working under Rule 8D(2)(iii), disallowance ought to be computed at nil. In support of the contention, the learned counsel relied on the following decision: 1. ACB India Ltd. Vs. ACIT, 374 ITR 108 (Del.) 2. Pr. CIT Vs. Caraf Builders Constructions Pvt. Ltd., ITA No. 1260/2018 (Del.HC) 10.3 On the other hand, learned DR relied on the order of the Assessing Officer. 10.4 We have heard the rival submissions and perused the relevant material on record. We agree with the contention of the learned counsel that disallowance as per Rule 8D(2)(iii) ought to be computed at nil, however, on perusal of the computation of Rule 8D(2)(iii) by the Assessing Officer, we find that he has worked out investment as on 31.03.2009 at ₹ 54 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 873/- is notional and not allowable. Learned CIT(A) after considering the submission of the Assessing Officer and judicial precedents available on the issue in dispute, decided the issue as under: I have considered all the facts and circumstances of the case. Where the assessee carrying on the mercantile system of accounting claimed that: (i) The additional liability arising on account of fluctuation in the rate of exchange in respect of loans taken for revenue purposes was allowable as deduction u/s 37(1) in the year of fluctuation in the rate of exchange and not in the year of repayment of such loans; and (a) The term expenditure in s. 37 covers an amount which is a loss even though the said amount has not gone out from the pocket of the assessee. The loss suffered by the assessee on account of the exchange difference as on the date of the balance sheet is an item of expenditure u/s 37(1); (b) Profits and gains are required to be computed in accordance with commercial principles and accounting standards (AS-11); (c)Accounts and the accounting method followed by an assessee ..... X X X X Extracts X X X X X X X X Extracts X X X X
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