TMI Blog2020 (7) TMI 246X X X X Extracts X X X X X X X X Extracts X X X X ..... . As such it was allowable as a trade loss - disallowance on the ground of speculative transaction requires to be deleted hence we delete the disallowance.- Decided in favour of assessee. Disallowance of prior period expenses - Addition towards ESI payment - AO held that the expenditure is not related for this assessment year, therefore, the entire expense under the head prior period expense was disallowed - HELD THAT:- During the earlier year i.e. prior to the A.Y 2014-15, the assessee company was unaware to the ESI provision and its applicability to the organization. Hence, on becoming aware of the provisions and its applicability to the organization, the assessee deposited the entire sum as required under the ESI Act which included payments for the AY 2013-14. - provisions of Section 43B of the Act which provides that certain expenditure / payments which are otherwise eligible for deduction under the Act shall be allowed as a deduction only in the year of actual payment irrespective of the year of accrual of such expenditure. Since the assessee made payments relating to AY 2013-14 during the relevant assessment year 2014-15, applying the provisions of section 43B of the Act ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... nt craves leave to add, alter, adduce or amend any ground or grounds on or before the date of hearing of the appeal. 3. Ground No. 1 relates to addition of ₹ 1,45,374/- on account of loss on forward booking of foreign exchange. 4. Brief facts qua the issue are that during the scrutiny proceedings the Assessing Officer noticed that the assesses company haddebited profit and loss account of ₹ 1,45,374/- on account of loss of forward contract cancellation. In this regard, assessee company was asked to explain the allowability of this expense. In reply,the assessee company filed letter dated 16/12/2016. Relevant portion of the letter is reproduced below:- We are an importer and in order to minimize the risk of currency fluctuation we book foreign currency in advance with the banks for the specified date in which we were to make the payment. At times, due to non- availability of fund partial amount of the foreign currency needs to be cancelled. The differential rates of forward booking and cancellation are then debited to our account which is being charged under the head loss on Forward Cancellation. This is not the speculative transaction as the same is being d ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... appeal before us. 7. The ld. Counsel for the assessee has relied on the submissions made before the authorities below and on the other hand the ld. DR has primarily reiterated the stand taken by the Assessing Officer which we have already noted in our earlier para and the same is not being repeated for the sake of brevity. 8. We have heard both the parties and carefully gone through the submission put forth on behalf of the assessee along with the documents furnished and the case laws relied upon, and perused the fact of the case including the findings of the ld CIT(A) and other materials available on record. We note that this ground relates to disallowance of loss on forward booking of ₹ 1,45,374/- considering the same as speculative in nature. The assessee company being an importer has foreign currency exposure. Hence in order to hedge its foreign currency exposure, the assessee company enters into an agreement with the bank in advance for the specified date on which the payments are to made.There are instances where due to lack of availability of funds the forward contact entered by the assessee company with the banks cannot be executed. In such a situation the forwa ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... scrutiny proceedings the Assessing Officer noticed that prior period expense of ₹ 1,12,214/-had been debited in the accounts by the assessee company. On query, the assessee company submitted that said expense is related to the ESI payment related to the previous year 2012-13. The Assessing Officer rejected the plea of the assessee and held that the expenditure is not related for this assessment year, therefore, the entire expense under the head prior period expense was disallowed. 11. Aggrieved by the order of the Assessing Officer the assessee carried the matter in appeal before the ld. CIT(A) who has confirmed the action of the Assessing Officer observing the followings: I have considered the grounds of appeal, statement of facts and submission of the authorized representative of the appellate company as well as the order of the Assessing Officer framed in the light of the materials available on record before the Assessing Officer during the assessment proceedings. The Assessing Officer has mentioned that these expenses does not pertain to the year under consideration. I agree with the view as taken by the Assessing Officer. Keeping in view of the facts as menti ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... conveyance expenses therefore, Assessing Officer made ad hoc disallowance.We have heard ld. D.R. for the Revenue and noted that Assessing Officer has passed the order u/s 143(3) of the Act but the assessee has failed to submit few bills and vouchers relating to travelling expenses/conveyance expenses before the AO for his verification, therefore we disallow ₹ 50,000/- out of ₹ 1,78,912/- to fill the gap of small anomalies done by the assessee. It is made clear that instant adjudication shall not be treated as a precedent in any preceding or succeeding assessment year. Therefore, we direct the Assessing Officer to delete the balance amount of ₹ 1,28,912/- (1,78,912 50,000). Hence, ground No.3 raised by the assessee is partly allowed. 15. Before parting, it is noted that the order is being pronounced after 90 days of hearing. However, taking note of the extraordinary situation in the light of the Covid-19 pandemic and lockdown, the period of lockdown days need to be excluded. For coming to such a conclusion, we rely upon the decision of the Coordinate Bench of the Mumbai Tribunal in the case of DCIT vs. JCB Limited in ITA No. 6264/Mum/2018 and ITA No. 6103/Mum ..... X X X X Extracts X X X X X X X X Extracts X X X X
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