TMI Blog2021 (1) TMI 641X X X X Extracts X X X X X X X X Extracts X X X X ..... 8D - assessee made non-trade investments - HELD THAT:- AO has not stated any exempted income having earned by the assessee in the assessment year under consideration. The ld. Counsel for the assessee has also not filed any details with regard to the quantum of exempt income earned by the assessee. Accordingly, we direct the Assessing Officer to verify as to whether the assessee has earned any exempt income or not and in case, if no exempt income is found, then the Assessing Officer is directed to delete the addition made under section 14A of the Act in view of various decisions including the decision in the case of CIT v. Chettinad Logistics (P) Ltd.[ 2018 (7) TMI 567 - SC ORDER] . Thus, the ground raised by the assessee is allowed for statistical purposes. - I.T.A. No. 1258/Chny/2018 - - - Dated:- 4-12-2020 - Shri Duvvuru RL Reddy, Judicial Member And Shri G. Manjunatha, Accountant Member For the Appellant : Shri G. Baskar, Advocate For the Respondent : Shri AR.V. Sreenivasan, Addl. CIT ORDER PER DUVVURU RL REDDY, JUDICIAL MEMBER: This appeal filed by the assessee is directed against the order of the ld. Commissioner of Income Tax (Appeals) 6, Chenna ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... fixed assets schedule in respect of R D Unit, the Assessing Officer noted that the assessee has claimed deduction of depreciation @ 100% under section 35(1)(iv) of the Act of ₹.7,34,340/- representing the cost of purchase or vehicle Bolero . Since the MUV is not a scientific apparatus or a plant machinery which is put to use inside the R D Unit, the Assessing Officer was of the opinion that the claim of 100% is untenable. Thus, as per normal fixed asset schedule, by allowing depreciation @ 15%, the Assessing Officer disallowed the balance of ₹.6,27,189/- and brought to tax. On appeal, after considering the submissions of the assessee, the ld. CIT(A) confirmed the disallowance. 3. On being aggrieved, the assessee is in appeal before the Tribunal. By relying upon the decision in the case of CIT v. Smith Kline French (India) Ltd. [1994] 77 TAXMAN 153 (Kar.), the ld. Counsel for the assessee has submitted that the vehicle Bolero Van was purchased and used for the R D unit transporting R D materials as well as personnel connected to the research development and therefore, the assessee was entitled to the benefit of section 35(1)(iv) of the Act and ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... of two buses valued at ₹ 2,83,310. The assessee claimed that this was a capital expenditure incurred for the purposes of facilitating research. The claim was made on the ground that the buses were used to transport the research personnel and was not related to the business of the assessee other than scientific research. The ITO was of the view that this was a conveyance which the assessee was required to provide in respect of its employees and it was the normal transportation expenses, and the mere fact that scientific research personnel were carried in those buses did not convert the transport expenses into expenditure on scientific research. The Commissioner (Appeals), however, accepted the plea of the assessee. He was of the view that the expenditure incurred in purchasing the buses could be treated as expenses for prosecution of scientific research and the distinction as sought to be made out by the IAC was not correct. He was also of the view that all expenditures which are necessary for the purpose of carrying on scientific research, whether directly or indirectly, so long as they are used only for scientific research, should come within the purview of 'expenditure ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... st the revenue. 4.1 The ld. DR could not controvert the above decision of the Hon ble Karnataka High Court. Respectfully following the above decision in the case of CIT v. Smith Kline French (India) Ltd. (supra), the claim of 100% depreciation under section 35(1)(iv) of the Act stands allowed. 5. The next ground raised in the appeal of the assessee relates to confirmation of disallowance of ₹.14,46,000/- being the loss on silver futures. Since the assessee has not provided the supporting documents in proof of loss on commodities trading in silver futures, the Assessing Officer has observed that the loss is allowable only when the contract is settled actually. He further observed that in case of cancellation or swapping or mark to market (MTM), the losses cannot be allowed since they are not actual ones but a notional loss. Since the assessee could not produce any evidence as to whether the loss in silver futures is an actual or otherwise, the Assessing Officer disallowed the loss claimed by the assessee at ₹.14,46,000/- and brought to tax. On appeal, after considering the remand report of the Assessing Officer and explanation offered by the assessee, the ld. C ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... , the Tribunal held that the claim of the assessee for deduction of unrealized loss due to foreign exchange fluctuation as on the last date of the previous year was deductible. The said order of the Tribunal was upheld by the Hon ble High Court. On further appeal by the Department, the Hon ble Supreme Court held that the loss suffered by the assessee is on revenue account towards foreign exchange difference as on the date of balance sheet and is an item of expenditure deductible under section 37(1) of the Act. It further observed that an enterprise has to report outstanding liability relating to import of raw material using closing rate of foreign exchange and any difference, loss or gain, arising on conversion of said liability at closing rate should be recognized in profit and loss account for reporting period. From the judgment of the Hon ble Supreme Court, it can be clearly deduced that unrealized loss due to foreign exchange fluctuation in foreign currency transactions on revenue item as on the last date of the accounting year is deductible. 5.4 Similar issue was further considered by the Hon ble Supreme Court in the case of Oil Natural Gas Corporation Ltd. v. CIT 322 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... Court was reversed and it was held that (a) that the loss claimed by the assessee on account of fluctuation in the rate of foreign exchange as on the date of the balance-sheet was allowable as an expenditure u/s 37(1), and (b) that the assessee was entitled to adjust the actual cost of imported assets acquired in foreign currency on account of fluctuation in the rate of exchange at each of the relevant balance sheet dates, pending actual payment of the liability u/s 43A, prior to its amendment by Finance Act, 2002. 5.5 In view of above decisions, it is clear that the loss due to foreign exchange fluctuation in foreign currency transactions in derivatives has to be considered on the last date of accounting year and it is deductible under section 37(1) of the Act. Accordingly, we set aside the orders of authorities below and direct the Assessing Officer to allow the loss claimed by the assessee. 6. The next ground raised in the appeal of the assessee relates to remanding the issue relating to the disallowance under section 14A of the Act r.w. Rule 8D. The assessee made non-trade investments amounting to ₹.60.33 lakhs held in M/s. Ponni Sugars (Erode) Ltd., Seshasayee Pap ..... X X X X Extracts X X X X X X X X Extracts X X X X
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