TMI Blog2021 (11) TMI 766X X X X Extracts X X X X X X X X Extracts X X X X ..... ngly, the ground of appeal of revenue is dismissed. Excess depreciation claim on commercial vehicle - assessee submitted that it was entitled for depreciation @ 50% on purchase of new commercial vehicle on or after 1st January, 2009 but before 30th Sep, 2009 and put to use before 30th Sep, 2009 - As per AO the requirement for registration for commercial vehicle was different from private vehicles and in the case of the assessee the vehicle on which higher deprecation claimed was not registered as commercial vehicle. Therefore, the claim of depreciation was restricted to the normal rate of depreciation at 15% and the excess claim of depreciation - HELD THAT:- CIT(A) has deleted the addition after following the decision on identical issue and similar facts in the case of Voltamp Transformers Ltd. [ 2013 (3) TMI 804 - ITAT AHMEDABAD] and the decision of Sunil Kumar Dhulichand HUF [ 2013 (6) TMI 902 - ITAT AHMEDABAD] as elaborated in his findings supra in this order. Following the decision of Co-ordinate Bench, we do not find any infirmity in the decision of ld. CIT(A), therefore, this ground of appeal of the Revenue is dismissed. Disallowance of excise duty - assessee has c ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... held that where an employer has not credited sum received by it as employee s contribution to employees account in relevant fund on or before due date as prescribed in explanation to section 36(1)(va), the assessee is not entitled to deduction of such amount, therefore, we do not find any infirmity in the decision of ld. CIT(A). - Decided against assessee. Addition made u/s. 41(1) - assessee has shown sundry creditors of ₹ 506.16 crores - liability presumed to be ceased in view of the fact that till date the amount due to such parties has not been paid - HELD THAT:- It is undisputed fact that assessee has not written back the aforesaid liability and it is still shown in the books of account as payable. Therefore, considering the decision of Hon ble Jurisdictional High Court of Gujarat in the case of CIT vs. Bogilal Kamjibhai Atara[ 2014 (2) TMI 794 - GUJARAT HIGH COURT] we do not find any infirmity in the decision of ld. CIT(A) ld. CIT(A) since there was noting on record to indicate that there was cessation of liability during the year under consideration. Therefore, this ground of appeal of the revenue is dismissed. Nature of expenditure - expenditure on repairs on ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e sale of those shares would have worked out to the amount of ₹ 1,265,46,770/- as against the loss of ₹ 76,40,519/- computed in its return of income. The assessee has given the working as per which the long term capital gain of ₹ 5,30,66,091/- shown in the revised return was required to be re-stated as long term capital loss of ₹ 6,58,40,160/-. The aforesaid submission of the assessee was not considered by the Assessing Officer. Subsequently, in the appellate proceedings, the ld. CIT(A) referred the decision of CIT vs. Pruthvi Brokers and Shareholders [ 2012 (7) TMI 158 - BOMBAY HIGH COURT] and decisionin the case of MITESH IMPEX [ 2014 (4) TMI 484 - GUJARAT HIGH COURT] wherein it is stated that assessee can claim additional claim before CIT(A) even though no revised return of income is filed. Therefore, in accordance with the findings laid down in these decisions, the ld. CIT(A) has directed the Assessing Officer to allows the losses as per provision of the act after verification of the working given by the assessee - No error in the direction of the ld. CIT(A). Therefore, this ground of appeal of the revenue stands dismissed. Computation of deduction ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... of ₹ 79,34,022/- 4. During the course of assessment, the Assessing Officer noticed that assessee has earned dividend income to the tune of ₹ 16,78,260/- claimed as exempt from tax. The assessee has suo moto disallowed expenses of ₹ 3,85,728/- u/s. 14A of the act. The Assessing Officer observed that the assessee had made large investment to the amount of ₹ 300.29 crores, therefore, assessee was asked to furnish the working of disallowance u/s. 14A r.w.r. 8D of the I.T. Rule, 1962. The detailed submission of the assessee in response to the aforesaid query raised by the Assessing Officer has been reproduced at the page no. 3 and 4 of the assessment order. In its submission, the assessee has briefly stated that it has received exempt dividend income of ₹ 16,78,260/- and assessee company has already made disallowance of ₹ 3,85,728/- u/s. 14A of the Act. The assessee reported that the working of disallowance has been made as per the method prescribed under rule 8D for the purpose of computation of disallowance u/s. 14A of the Act. The assessee explained that ₹ 3,85,728/- has rightly been disallowed u/s. 14A and no other expenditure has bee ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... made. The Hon'ble Chennai ITAT, in case of ACIT V/s Best Crompton Engineering Limited (ITA No 1603/Mds/2012) dated 16th July 2012 [36 taxman.com 555] has held as under: II. Section 14A of the Income-tax Act, 1961, read with rule 8D of the Income-tax Rules, 1962 ~ Expenditure incurred in relation to income not chargeable to tax [Bank interest] - Assessment year 2009-10 - Assessing Officer while computing disallowance under section 14A read with rule 8D, included bank interest and interest on term Loan - Commissioner (Appeals) excluded said interest from calculation of disallowance as assessee had utilized both loans for purpose of purchase of machineries and for expansion of projects and these loans were specifically sanctioned for these projects ~ Whether Commissioner (Appeals) had rightly excluded such interest from purview of computation of disallowance under rule 80(2) - Held, yes [Para 11] [In favour of assessee] Further, Kolkata I. T.A. T., in case of REI Agro Limited V/s DC/7 35 Taxman.com 404 has held as under: Rule 8D(2) has three sub-parts. The first sub-part i. e. (i) deals with the amount of expenditure directly relating to the income which ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... st 16,39,20,525 Others 1,78,05,891 Interest on debentures 18,16,401 Total 20,81,71,698 Thus, disallowance of interest under Rule 8D(2)(ii) is required to be made after adopting interest expenditure of ₹ 20,81,71,698 and after considering observations made for net interest expenditure in subsequent Paras. 3.5 It is also observed that Appellant has earned interest income of ₹ 35.54 crores which is higher than interest expenditure of ₹ 20,81 crores worked out herein above and as both interest income and expenditure are taxed as part of income from business or profession, only net interest expenditure is required to be disallowed under Rule 8D(2)(ii). Hon'ble Ahmedabad I.T.A.T., in case of Safe/ Reality P. Ltd. V/s ACIT (OSD) (AY 2010- 11) in ITA No. 1842/Ahd/2013 vide its order dated 29/11/2013 has held as under 5.3 Under the totality of the facts and circumstances of the case, we are of the considered opinion that when the interest income was more than the in ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 3,19,750/-3nd as Appellant has already made disallowance of ₹ 3,85,728/-, disallowance under Section 14A is confined to ₹ 79,34,022A. In the result, addition made by Assessing Officer for ₹ 12,37,95,730/- is restricted to ₹ 79,34,022/-. 6. Heard both the sides and perused the material on record. Without reiterating the facts as elaborated above during the course of assessment, the Assessing Officer has computed disallowance of expenditure incurred towards earning exempt income in accordance u/s. 14A r.w.r. 8D of I.T. Rule, 1962 to the amount of ₹ 12,37,95,730/-. However, the ld. CIT(A) has restricted the disallowance to the extent of ₹ 79,34,022/- after taking into consideration the submission of the assessee that it had sufficient interest free funds available with it and the nature of the expenditure incurred by the assessee was not related to investment made by it on which exempt income earned. It is undisputed fact that the total exempt income earned during the year under consideration was of ₹ 16,78,260/- only. In this regard, we observed that in a number of decisions the ITAT Ahmedabad had adjudicated that disallowance u/s. ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 5.3 I have carefully considered the Assessment Order and submission filed by appellant. The Assessing Officer has observed that the appellant has purchased car amounting to ₹ 76,80,973/- on which depreciation of ₹ 38,40,4877- at 50% has been claimed. From the provision of section 32 of the Act read with the Appendix-1 of the Income Tax Rules it can be seen that the higher rate of depreciation is allowable on the ''New Commercial Vehicle . There is distinction between commercial vehicle and private vehicle. The vehicle on which higher rate of depreciation has been claimed is not registered as Commercial Vehicle with the RTO and hence the benefit of higher rate of depreciation cannot be allowed on such vehicle. On the other hand, Appellant relied on the notification No. 10/2009/F No. 142/01/09-TPL dated 19.01.2009 issued by CBDT, in which it is clearly mentioned that a new commercial vehicle purchased on or after 01.01.2009 but before 30.09.2009 and put to use before 30.09.2009, is eligible to be depreciated at the rate of 50% per annum. Further, vide Notification No. 37/2009 [F.No. 142/01/2009-TPL], dated 21-4-2009, date of purchase of such vehicle was ex ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... was carried before the first, appellate authority, Id.CIT(A) has examined the provisions of Motor Vehicle Act and allowed the claim as follows:- 5.3. Decision: I have carefully perused the assessment order and the submissions given by the appellant. The A.O. has disallowed the claim of depreciation at higher rate as it has been held by him that the vehicle was not a commercial vehicle. The A.O. has taken the meaning of commercial vehicle in common parlance and has held that commercial vehicle is distinct and different from private vehicle and the vehicle used by the appellant is a private vehicle. The appellant has submitted that as per Note No. 6 to the Rules in Appendix-1, the word commercial vehicle has been defined to include Light Motor Vehicle as defined by Motor Vehicle Act, 1988. Further, section 2(21) of the Motor Vehicle Act define the word Light Motor Vehicle as- Light Motor Vehicle means transport vehicle or amnibus. The gross vehicle weight of either of which or a Motor Car or a Tractor or road roller, the unladen weight of any of which does not exceed 7500 Kg. The appellant has further submitted that as per the RC Book, the vehicle is LMV and ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ted 22nd March 2013 and the decision of ITAT Ahmedabad in the case of Sunil Kumar Dhulichand HUF Vs. ACIT (CPC) Bangalore ITA 454/Ahd/2013 as elaborated in his findings supra in this order. Following the decision of Co-ordinate Bench, we do not find any infirmity in the decision of ld. CIT(A), therefore, this ground of appeal of the Revenue is dismissed. Ground No. 3 (Deleting disallowance of excise duty of ₹ 6,51,16,385/-) filed by revenue 10. At the time of assessment, the Assessing Officer noticed that assessee has claimed excise duty claim adjusted against securities premium account amounting to ₹ 3,67,71,030/- and ₹ 2,83,45,355/- respectively. On query, the assessee explained that the same has not been charged to P L account rather it has been set off against the share premium account as per the scheme of capital reduction sanction by High Court of Gujarat dated 15th Feb, 2013 being an item of section 43B of the Act. It has been claimed on payment basis. The detailed explanation of the assessee vide submission dated 27.01.2014 is reproduced as under:- 8. Your good self has asked the assesses company to explain the allow/ability of excis ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... of ₹ 2,48:59,319/- is attached herewith vide Annexure-2A. 1,72,21,030/- The final order of The Commissioner of Central Excise, Ahmedabad-II was issued on 04/05/2010, wherein the final liability arrived at ₹ 1, 72, 21, 030/-- The copy of the said order is attached herewith vide Annexure-2B. Pursuant to the order so received, the assessee adjusted the said liability against the liability frozen (₹ 2,48,59,319/-). The copy of letter, dated 25/05/2010, informing the Commissioner of Central Excise, Ahmedabad- II about the adjustment of liability and payment of interest thereon is attached herewith vide Annexure-2C. It was a/so intimated that the balance of ₹ 76, 38, 289/- will be utilized in due course. In this context, the copy of Cenvat Credit Register for the period from 01/05/2010 to 30/05/2010 showing the credit entry of ₹ 76,38, 289/- is attached herewith vide Annexure-2D. Pursuant to order received by the assessee, as mentioned above, wherein the final liability of Excise was arrived at ₹ 1, 72, 2 1, 030/-, the assessee was liable to pay the interest ther ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... mputing the business income, the assessee would like to bring to your reference the fact that the payment of Excise duty can be made //, following two ways. a) By debiting the PLA account. - In this case, PLA account in maintained with - the Excise Department; wherein the debit balance is maintained by making payment through cash or bank. Payment of Excise duty can be made through such account b) By utilizing the Cenvat credit - In this case, Excise duty payable on sales is adjusted against the Cenvat Credit receivable which has been availed on purchases. The records of such Cenvat credit is maintained in RG 23 register as per the Excise law. 73 In the instant case, Cenvat Credit in respect of the excess electricity cleared outside the factory at the contractual rates was in dispute and the same was settled against the assessee; wherein it was held that cenvat credit attributable to inputs used for the generation of electricity passed on / sold out by the assessee to Ahoka Spintex and Arvind Polycot Limited is required to be reversed/paid. The copies of the orders, wherein the said matter was settled have already been submitted vide submission dated 29/01/2014. ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ave been reported in Enclosure-9 to the Tax Audit Report. It has been clearly mentioned that the excise duty paid on raw materials is debited to the Modvat credit receivable account and the Excise duty payable is adjusted against the modvat credit receivable account- In view of the above, it is submitted that the reversal of cenvat credit is deemed to be payment and therefore the same cannot be disallowed. However, the Assessing Officer has not accepted the submission of the assessee stating that the assessee has reversed the CENVAT credit on the order of excise department and the same was not certified by the auditor in his report in form 3CD. The Assessing Officer was of the view that assessee has not paid excise duty actually, therefore, the same was not allowable u/s. 43B of the Act. Therefore, the claim of excise duty adjusted against securities premium account amounting ₹ 6,51,16,385/- (₹ 3,67,71,030 + ₹ 2,83,45,355/-) was disallowed and added to total income of the assessee. 11. Aggrieved assessee has filed appeal before the ld. CIT(A). The ld. CIT(A) has allowed the appeal of the assessee. The relevant part of the decision of ld. CIT(A) ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... hand, Appellant has argued that is following an exclusive method of accounting the purchase and sales in the profit and loss account are reflected at net of Excise duties. It was further submitted that manner in which payment of excise duty can be made is either by debiting the PLA account or by utilizing the CENVAT credit. The Assessing Officer has disallowed the CENVAT Credit so reversed on the ground that actual payment has not been made which is a pre-requisite for admissibility for the expenses covered u/s 438 of the Act. It was also submitted that credit means a subsequent claim of set-off for something paid earlier. When CENVAT credit receivable is adjusted against CENVAT Payable/excise duty, it is deemed to be a payment. The main reason for insertion of CENVAT (erstwhile MODVAT) was to ensure that cascading effect of tax does not take place and tax on tax is not levied in the chain of goods produced by a manufacturer being passed through various hands and ultimately reaching the end or final consumer. When the CENVAT credit initially receivable was subsequently reversed, the nature of such reversal would be Excise Duty Payable hence it could be set-off against CENVAT receiv ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... available with it as per mechanism provided in Excise Act, it is in fact reducing CENVAT credit available with it and to that extent payment is already made to Excise Authorities. Whether utilization of such CENVAT credit is eligible for deduction under Section 438 or not is already held in favour of Appellant by Hon'ble Mumbai ITAT in the case of Hawkins Cookers Limited v/s ITO 14DTR 206 wherein it is held as under: In case of where there is no actual payment but adjustable against MODVAT Account, whether the assessee is entitled to claim deduction under section 43B. For this purpose, we would like to refer to the decision of ITAT Special Bench, Chandigarh in the case of Dy. C/T V Glaxo Smithkline Consumer Healthcare Limited 107 ITD 343 (CHD)(SB) wherein it was held that the MODVAT balance as such does not amount to payment. The balance becomes equivalent to payment only at the point of time the assessee exercises his option to set off the balance against the Central Excise liability and not before. It is to note that the issue pertaining to simple adjustment of balance in MODVAT account was before the ITAT Special Bench, Chandigarh. While giving effect of section 145A ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... uty paid and allowed as a deduction under section 43B cannot be added to the value of the closing stock. 2. To this extent, the Department succeeds and accordingly we direct the High Court to decide the above questions under section 260A in the Income-tax Appeal pending before it (ITA 1683 of 2006). Thus, it is very clear that Hon'ble Supreme Court has directed Delhi High Court to insider and decide the question of law pending before it along with above question of law and not held that adjustment of unutilized MODVAT Credit of earlier year is not actual payment of excise authorities as observed by Assessing Officer. It is observed that even reference was made to Supreme Court for the case where Assessee has claimed advance payment of excise duty as deduction under Section 43B whereas in the Appellant's case, it has utilized available CENVAT credit balance for making payment of excise duty which actually represents payment of excise duty. It is further observed that above liability of excise is raised in year under consideration was settled by utilizing CENVAT credit during the year under consideration itself and if the contention of the Assessing Officer is accept ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... A part of electricity generated was for captive consumption in the manufacture of final product and part of electricity so generated was sold out to Ashoka Spintex and Arvind Polycot Ltd. The CENVAT credit on the fuel used for the generational of electricity was admissible for electricity use within the factory, for production for example input use for generation of electricity cleared outside the factory is not entitled for credit. Therefore, the assessee had accordingly reversed CENVAT credit of duty availed on input Naptha attributable to the electricity passed on to other entities. However, from March, 2014 the assessee stopped reversing credit and also suo motto took re-credit of CENVAT credit reversed by them earlier for certain period. However, the matter was in dispute and ultimately it was held that CENVAT credit attributable to input used for generation of electricity sold to Ashoka Spintex and Arvind Polycot Ltd. is required to be reversed/paid, therefore, an amount of ₹ 6,51,16,385/- was reversed/paid to excise authority by adjusting CENVAT receivable account. The ld. counsel has further submitted that decision of Hon ble Supreme Court in the case of Maruti Udhyog ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... efore the assessee has adjusted CENVAT credit receivable against CENVAT payable/excise duty. The assessee has exercised his option to set off CENVET credit against excise liability, which amounts to payment of excise duty, therefore, assessee is entitled to deduction u/s. 43B of the Act. As referred in para 12 of this order, the facts in the case of the issue are distinguishable from the facts of the case law cited by the Ld. DR in the case of CIT vs. Maruti Vdygo Ltd. 86 taxman as in that case the assessee has claimed advance payment of excise duty as deduction under section 43B whereas in the case of the assessee as elaborated above the assessee has used the CENVAT credit balance for making payment of excise duty. The records of CENVAT credit is maintained in RG 23 register as per excise law and adjustment of CENVAT credit is one of the mode of payment of excise duty under Excise Rule. Considering the above facts and findings, we do not find any infirmity in the decision of ld. CIT(A). Accordingly, this ground of appeal of revenue is dismissed. Ground No. 3 (adding quantum of disallowance u/s. 14A for computing book profit u/s. 115JB of the Act) of Cross Objection filed by ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ture of ₹ 3,97,291/- u/s. 14A r.w.r. 8D of the Act) filed by assessee 18. As the facts and issue involved in ground no. 1 of appeal vide ITA No. 249/Ahd/2016 Assessment Year 2010-11 are similar as in ITA No. 2057/Ahd/2016 Assessment Year 2011-12, therefore, after applying the decision adjudicated vide ITA No. 249/Ahd/2016 as supra in this order, the disallowance is restricted to exempt income earned by the assessee to the amount of ₹ 52,37,680/-. Therefore, the appeal filed by the revenue on this issue is dismissed and the appeal of the assessee on this issue is partly allowed. Ground No. 2 (Deleting addition u/s. 14A for computing book profit u/s. 115JB) filed by revenue 19. As the facts and issue involved in ground no. 3 of appeal vide C.O. No. 43/Ahd/2016 Assessment Year 2010-11 are similar as in ITA No. 2057/Ahd/2016 Assessment Year 2011-12, therefore, after applying the decision adjudicated vide C.O. No. 43/Ahd/2016 as supra in this order, this ground of appeal of the revenue is dismissed. Ground No. 3 (Deleting the addition of ₹ 14,06,339/- made u/s. 41(1) of the act) filed by assessee 20. During assessment, the Assessing O ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... fficer was of the view that expenses to the amount of ₹ 86,89,448/- paid to Mouvo Pignone on account of spare parts was not on account of current repairs but was on account of assets which was having enduring benefit. The assessee explained that these expenditure was of the nature of repair to maintain a already existing asset. However, the Assessing Officer was of the view that purchasing of spare parts to the amount of ₹ 86,89,448/- was of the nature of enduring benefit, therefore, the Assessing Officer has capitalized the same after providing depreciation @ 15% to the assessee. The ld. CIT(A) has allowed the appeal of the assessee after placing reliance on the decision of ITAT Ahmedabad in the case of Banco Product Ltd. ( ITA No. 1105/Ahd/2020 dated 25th October, 2010) 25. Heard both the sides and perused the material on record. Without reiterating the facts as above, the Assessing Officer has disallowed the expenditure claimed by the assessee as incurred on repair/maintenance on plant and machinery. It is clear from the facts as elaborated above in the finding of ld. CIT(A) that the assessee has incurred the expenditure for repairing of existing spare parts as ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e on mercantile basis on year to year basis at the end of financial year on the basis of sales made in that financial year. At the beginning next accounting year, said provision is reversed and when party raises bill for commission, expenditure is debited in commission account hence above commission is settled against provision made in earlier year and expenditure is not a prior period expenditure. It is also argued that even if it is held that expenditure pertains to preceding Assessment Year, same need to be allowed in current year as effective tax rate for both Assessment Years remained the same. On careful consideration of entire facts, it is observed that Appellant provides for 'commission payable on sales at year end and expenditure is debited in the year to which it relates. On the basis of such accounting policy it has provided for aggregate provision of ₹ 1.44 crores in A.Y. 2010-11. The provisions made in A.Y. 2010-11 is reversed in A.Y. 2011-12 on 1st April, 2010 which means that ledger account of commission expenditure is credited by reversal of provision made in earlier year. Against above provision Appellant has received bill of commission agent in cu ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... rystallize during the year on receipt of bills is allowable. This is followed by (2010) 328 ITR 17 (Del) CIT vs. Exxon Mobil Lubricants Pvt. Ltd upholding CIT(A)'s and tribunal's view that if the assesses admits prior period income which was not excluded while working out relevant previous year income, it is unreasonable to allow one part of prior period adjustment i.e. prior period expenditure. We come to Revenue's case law now. The first one is (2013) 33 taxmann.com 92 (Bang) Bearing Point Business Solutions vs. DCIT and (2013) 35 taxmann.com (Hyd) now Bharat Ventures Ltd vs. CIT deciding the issue in Revenue's favour. We find that these tribunal's decisions do not confirm to different views of various Hon'ble high courts hereinabove. Next case law (2013) 42 taxmann.com 142 (Guj) CIT vs. Gujarat Mineral Development Corporation is an admission order after framing substantial question of law wherein the main case is still pending for final disposal. We observe that this latter order does not settle a ratio. We take into account above stated discussions, relevant facts and case law to conclude that both the lower authorities have wrongly disallowed ass ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... areful, consideration of entire facts, it is observed that Appellant has submitted details regarding stock written off for ₹ 20.24 crores against security premium. The Appellant's reply dated 25 1 March, 2015 is reproduced at page 35 to 36 of Assessment Order wherein it is apparent Appellant has submitted such details vide Annexure-2. The Assessing Officer has accepted the details tor /?s. 18.39- crores pertaining to stock written off against security premium for other division but, confirmed the disallowance on the ground that details regarding fabric division is not submitted. The Appellant has submitted such details before undersigned. However, the Appellant is unable to prove its contention that such details are already on record of Assessing Officer and part of submission dated 2 5 March, 2015. Secondly, from the details submitted, it is difficult to verify the stock written off for ₹ 1,84,89,600/~ being fabric garments. Considering these facts, disallowance made by Assessing Officer for ₹ 1,84,89,600/-is confirmed. This ground of appeal is dismissed. 32. During the course of appellate proceedings before us, the ld. counsel referred its submissio ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ready restricted the disallowance to the extent of ₹ 24,72,982/- and after reducing the suo moto disallowance of ₹ 10,49,653/-, further disallowance of ₹ 2,47,294/- were made by the ld. CIT(A). Keeping in view the finding of ld. CIT(A) has rightly restricted the disallowance to the exempt income therefore we do not find any infirmity in the decision of ld. CIT(A). Accordingly, the appeal of the revenue and cross objection of the assessee both are dismissed. Ground No. 2 (Addition of ₹ 8,86,45,931/- is not to be made while computing the book profit u/s. 115JB of the Act) filed by revenue 37. At the outset, the ld. counsel submitted that this issue is covered in favour of the assessee as per the decision of Special Bench of ITAT in the case of the ACIT Vs. Vinit Investment Pvt. Ltd. (2017) 82 taxman.com 415 wherein it is held that expenses incurred to earn exempt income not to be added for computing book profit u/s. 115JB of the Act. The ld. Departmental Representative is fair enough not to controvert these undisputed fact that issue is squarely covered by the decision of Special Bench. Following the decision of Hon ble Delhi Special Bench in the ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ar under consideration by debiting to P L account. The assessee has furnished the relevant detail and submitted that the corresponding income was offered to tax in the earlier years when the sale was made. In respect of claim of ₹ 9.54 crores, the assessee explained that it referred to bad debt written off during the year under consideration against provision for doubtful debt credited in earlier year. The assessee explained that it has rightly claimed deduction in respect of bad debt written off against the provision for bad debt as per the provisions of section 36(1)(vii) of the Act. The Assessing Officer has not accepted the submission of the assessee stating that since 2000-01, the assessee has consistently reduced doubtful debt from total debtor by making a provision and the figure reduced from debtor does not match the provisions made by the assessee in the profit and loss account. Therefore, assessee s claim of ₹ 9,54,12,435/- was disallowed and added to the total income of the assessee. 42. Aggrieved assessee has filed appeal before the ld. CIT(A). The ld. CIT(A) has allowed the appeal of the assessee. The relevant part of decision of ld. CIT(A) is as und ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... nt and such amount was not claimed as deduction in computation of total income. The Appellant has also submitted tabular chart adopting the figure compared by AO and contended that AO has wrongly compared the figure of provision for bad and doubtful debt debited in profit loss account of two companies being ABL and ACL with provision reduced from debtors pertaining to Appellant Company. As ABL and ACL were not merged with Appellant in A. Y.2004- 05 to 2006-07, provision reduced from debtors in annual accounts of Appellant does not include figure of provision pertaining to above two companies. So far as mismatch of A. Y. 2008-09 and 2009-10 is concerned, ARs of the Appellant have contended that AO has taken the figure of provision for bad and doubtful debt in profit loss account from annual accounts of appellant company and same were compared with consolidated Balance Sheet of appellant company which includes figures of all the subsidiaries and associate companies and due to such wrong comparison he has arrived at conclusion that there is mismatch in both the figures. The Appellant has submitted following reconciliation statement as to how figure of ₹ 9,45,12,435/- arrived ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 2007-08 4467845 0 4467845 Disallowed in return 437725 2008-09 Total:- 12257991 G 10744255 135139701 39727266 95412435 On the basis of above reconciliation Appellant has reiterated its contention that whenever provision for doubtful debt was created in profit loss account, same was disallowed in return of income and corresponding income is already offered to tax. The Appellant has also submitted that during the course of Assessment Proceedings, it has submitted copy of ledger account of parties whose balances are written off in current year and contended that AO has not objected to the fact that bad debt was reduced from ledger balances of the such parties. It was also contended by Appellant that instead of crediting profit loss account b ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... nd same was not claimed as deduction in respect Assessment Years. These facts are also not disputed by AO. The Appellant has adopted method of account by which it has reduced provision for bad and doubtful debts appearing in Balance Sheet instead of adopting method of account by which crediting profit loss account by provision for bad and doubtful debts written back and correspondingly claiming bad debt in profit loss account. By adopting both the methods of accounting the net result remains the same and parties' accounts are already reduced by bad debt. This issue is elaborately discussed by Hon'ble Ahmedabad ITAT in the case of Gujarat State Cooperative Bank Limited V/s DCIT (referred supra) and allowed the claim of Appellant for bad debt not debited in profit loss account. This decision is further upheld by Hon'ble Gujarat High Court in 85 taxmann. com 259 wherein it is held as under: Section 36(1)(vii) of the Income-tax Act, 1961 - Bad debts (Writing off of debt) - Assesses was a co-operative bank - It claimed deduction on account of bad debts written off which comprised of debt shown in statement of income and outside statement - Assessing Officer n ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... crepancy has arisen only on account of incorrect comparison made by Assessing Officer which cannot be basis for making addition of ₹ 9,54,12,435/-. In view of detailed discussion made herein above and relying upon the decision referred supra, disallowance of ₹ 9,54,12.435/- made by AO is deleted. This ground of appeal is allowed. 43. Heard both the sides and perused the material on record. Without reiterated the facts as above, it is noticed that the assessee has claimed deduction of bad debt of ₹ 9,54,12,435/-. The Assessing Officer has rejected the claim mainly on the ground that the bad debt has not been debited in the P L account reduced against the provision for bad and doubtful debt in the Balance Sheet. The assessee explained that provisions were created in the hands of Arvind Brand Ltd. (Garment Division) which was merged with the assessee company. Subsequently, bad debt claimed was pertained to such units and related income were already offered to tax in the earlier years. In this regard, it is noticed that in pursuance of the order of Hon ble Gujarat High Court, Arvind Clothing Ltd. was merged with Arvind Brand Ltd. w.e.f. 01-04-2013 and there ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 7; 16,08,17,279/- is pertained to loss arising on account of market to market valuation of such forward/derivative contracts which were outstanding pending for settlement till 31st March, 2009. The assessee explained that such loss was not speculation loss as the assessee entered into foreign exchange contract, covered the losses in exchange variation, therefore, transaction is not speculation transaction. It is also submitted that such hedging transaction is not a speculation transaction as provided in section 43(5) rather the same is a normal business transaction. The assessee has also placed reliance a number of judicial pronouncements reported at the page no. 11 of the assessment order of the Assessing Officer. However, the Assessing Officer was not agreed with the submission of the assessee and he was of the view that market to market loss is not allowable and same was of contingent in nature arising out of past contract and cannot be really estimated until the occurrence of future uncertainty event. Therefore, foreign exchange derivative losses amounting to ₹ 16081729/- was disallowed by the Assessing Officer and added to the total income of the assessee company. 4 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... o-Market Loss pertaining to such derivative contracts executed upto 1si July, 2008 as business loss in return of income and Marked-to-Market Loss pertaining to contracts executed after such date were debited to hedge reserve account in Balance Sheet. So far as contention of AO that such foss is notional loss is concerned, Appellant has contended that transactions were carried for purely hedging purpose and such hedging was against its USD export which is not denied by AO. The ARs of the Appellant hove relied upon decision of Hon'b/e Supreme Court in case of Woodward Governor (India) Limited (supra) and ONGC in support of Appellant's claim that such loss is allowable business loss. With regard to reliance placed by AO that such loss is not allowable business loss as per Instruction No.3/2010, Appellant has argued that said Instruction was issued by CBDT on 23l(t March, 2010, which is subsequent to filing of return for current Assessment Year hence same is not applicable in current Assessment Year. Apart from above, Appellant has referred to various decision of Ahmedabad ITAT, Bangalore ITAT and Delhi High Court wherein it is held that CBDT Instruction cannot override decisio ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... working capital is allowable business, it is observed that on this very issue, Hon'ble Ahmedabad ITAT In the case of Heavy Metal and Tubes Limited in ITA No.1951/Ahd/2011, dated 30/06/2014 decided the issue in favour of Assessee. In the case of Heavy Metal and Tubes Limited, facts are that Assessee has claimed loss on account of foreign exchange derivative amounting to' ₹ 5,89, 29,8127-. It was Assessee's submission that it had availed foreign currency loan for importing raw materials and it had shifted its loan liability in Dollar to Swiss Franc and the loss resulted due to fall in the value of Swiss Franc vis-a-vis dollar on the Balance Sheet date was undertaken to minimize the risk of foreign exchange fluctuation. The AO disallowed such loss in Assessment Order on the ground that Assessee Company has claimed loss on account of restatement of loans/credit liability existing as on the date of Balance Sheet by swapping the loan from Dollar to Swiss Franc to reduce its Forex Exposure risk and therefore the loss claimed by the Assessee 'Was riot of Revenue in nature but was an unascertained and notional loss. He was of the view that the loss claimed by the Asse ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... the appellant company that as per the consistent prudent practice and requirements of Accounting Standards issued by the ICAI, it follows accounting of transactions for purchase Sales in foreign currency at the prevailing foreign exchange rate at the time of executing transactions and difference if any between the amount of purchase/sales and amount at which the transactions is actually settled by the payment to/from suppliers/debtors is accounted as Loss/Gain on foreign exchange fluctuation . In the Trading Profit Loss Account, the Purchase and sales are disclosed after set off on account of the Loss or Gain due to fluctuation in rates of foreign exchange on account of transactions of import purchase and export sales in foreign exchange. Such gain or loss in foreign exchange transactions settled during the year is part of the cost of import purchase or value of export sates. It is further submitted that at times, it happens that the forward contract to buy/sell foreign exchange remains outstanding at the last date of Balance Sheet. As per the prudent accounting policy of mercantile/accrual system of accounting and Accounting Standards issued by the ICAI, the unsettled outs ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... raw materials and export sales of manufactured goods in the normal course of business. The liability for payment to suppliers for import purchase in foreign exchange is subject to risk of losses on account of fluctuation in exchange rate of foreign currency. To safe guard against such losses and to hedge against the unforeseen future loss due to fluctuation in rate of foreign exchange transactions of purchase sales company makes the forward contract in the normal course of business to buy/sell the foreign exchange as per the market condition and advice of the bank. Thus, losses incurred in forward contracts for foreign exchange in the normal course of business are not speculative transactions and similar the said transactions not regarded as speculative transaction as per the proviso (a) below the Section 43(5) of the Act and is a business loss covered by section 28 of the Act. It is submitted that as per the Accounting Standard-11 (AS-11) issued by the ICAl and RBI's guidelines, the companies were required to revalue un-matured contracts as per rates of exchange notified by Foreign Exchange Dealers' Association of India (FEDAI). Accordingly, on the balance sheet date, ba ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ween USD and Swiss Dollar instead of Rupee since the ultimate purpose was to settle liability for purchase of raw material in USD for the purpose of business. 6.6. It is observed that AO has denied such loss mainly relying on instruction No.3/2010 which was issued by CBDT on 23' March, 2010 and on the date of filing the return such Instruction was not on Statute hence it cannot be made applicable in current year. It is also observed that Hon'ble Ahmedabad ITAT in above referred case has decided the issue in favour of Assessee even after above referred CBDT Instruction. It is also observed that Hon'ble Ahmedabad ITAT in the case of DC/7 V/s Elite Core Technologies Pvt Limited in ITA No. 197 and 508/Ahd/2016, dated 31st March, 2010 has held that CBDT Instruction No. 3/2010 do not bind the appellate Authorities and decision of Woodward Governor dealing with deducibility of foreign exchange Marked-to-Market Loss would prevail on such instruction. The Hon'ble Delhi High Court in the case of Munjal Showa Limited V/s DCIT has also held that CBDT Instruction No. 3/2010 cannot override the existing decision of Hon'ble Supreme Court/High Court on similar issue ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... f ITAT Ahmedabad cited in the order of ld. CIT(A) on similar issue and facts, we do not find any infirmity in the decision of ld. CIT(A). Therefore, this ground of appeal of the revenue is dismissed. Ground No. 3 to 3.1 (restricting addition made on account of disallowance u/s. 14A r.w.r. 8D of I.T. Act from ₹ 5,62,68,667/- to ₹ 17,21,275/-) filed by revenue 47. As the facts and issue involved in ground no. 1 of appeal vide I.T.A. No. 249/Ahd/2016 Assessment Year 2010-11 are similar as in ITA No. 2054/Ahd/2018 Assessment Year 2009-10, therefore, after applying the decision adjudicated vide I.T.A. No. 249/Ahd/2016 as supra in this order, this ground of appeal of the revenue is dismissed. Ground No. 1 (Sustaining disallowance of administrative expenditure to the extent of ₹ 17,21,275/- u/s. 14A) filed by assessee 48. As the facts and issue involved in ground no. 1 of appeal vide ITA No. 249/Ahd/2016 Assessment Year 2010-11 are similar as in ITA No. 1960/Ahd/2018 Assessment Year 2009-10, therefore, after applying the decision adjudicated vide ITA No. 249/Ahd/2016 as supra in this order, ld. CIT(A) has rightly restricted the disallowance to ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... is purely reimbursement of expenditure which does not require deduction of TDS hence the addition made by the AO for ₹ 1,14,741/- is deleted. This ground of appeal is allowed. 52. Heard both the sides and perused the material on record. Without reiterating the facts as above, we do not find any infirmity in the decision of ld. CIT(A), since the Assessing Officer has not disproved the fact that assessee has made payment on account of reimbursement of expenditure on which no TDS is deductable. Therefore, this ground of appeal of the Revenue stands dismissed. Ground No. 6 6.1 (long term capital loss of ₹ 6,58,40,160/- as against long term capital gain of ₹ 5,30,66,091/- offered in the original return of income and revised return of income) filed by revenue 53. During the course of assessment the assessee has brought to the knowledge of the Assessing Officer vide letter dated 29th March, 2012 that because of error in computing the income under the head long term capital gain, it has omitted to take correct cost of acquisition while computing the long term capital loss of ₹ 7,640,519/- on the sale of ₹ 7,13,383 shares of Arvind Br ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... course of assessment, the Assessing Officer noticed that the assessee has earned dividend income to the extent of ₹ 1,01,23,808/- which was claimed as exempt. The assessee has suo moto disallowed a sum of ₹ 24,33,945/- u/s. 14A of the Act. On query, the assessee has given detailed submission incorporated at page no. 3 to 10 of the assessment order pointing out that no other expenditure has been incurred during the year under consideration which is attributable to earning of exempt income. However, the Assessing Officer has not agreed with the submission of the assessee and computed the disallowance u/s. 14A in accordance with Rule 8D of the I.T. Rule, 1962 to the amount of ₹ 31,61,434/-. 58. The ld. CIT(A) has restricted the disallowance to the extent of ₹ 3,07,53,555/- after taking into consideration that assessee has also earned long term capital gain of ₹ 9.69 crore which was exempt u/s. 10(38) of the Act. 59. During the course of appellate proceedings before us, the ld. counsel has vehemently contended that Assessing Officer has not given explicit finding as to why suo motto disallowance is not acceptable. He has also submitted that Asses ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... , we set aside the order of the ld. CIT(A) for the impugned assessment year and restore the matter to the file of the Assessing Officer to make a de-novo order after following the ratio laid down in Vineet Investment Pvt. Ltd. (supra) after giving a reasonable opportunity of being head to the assessee. In the result, this ground of appeal of Revenue and assessee are partly allowed for statistical purpose. Ground No. 2 (Deleting the addition of ₹ 31,61,27,434/- while computing the book profit u/s. 115JB of the Act) filed by revenue 62. As the facts and issue involved in ground no. 3 of cross objection vide CO No. 43/Ahd/2016 Assessment Year 2010-11 are similar as in ITA No. 2182/Ahd/2016 Assessment Year 2015-16, therefore, after applying the decision adjudicated vide CO No. 43/Ahd/2016 as supra in this order, this ground of appeal of the revenue is dismissed. Ground No. 2 (Sustaining the addition of ₹ 2058614/- on account of employee s contribution to Provident Fund and ESI) filed by assessee 63. As the facts and issue involved in ground no. 4 of cross objection vide CO No. 43/Ahd/2016 Assessment Year 2010-11 are similar as in ITA No. 2182/Ahd ..... X X X X Extracts X X X X X X X X Extracts X X X X
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