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TMI Blog2017 (3) TMI 1871X X X X Extracts X X X X X X X X Extracts X X X X ..... on of Rs. 2.53 crores on Plant & Machinery.It was brought to our notice that identical issue was decided by the Tribunal,while adjudicating the appeal for AY 2008-09 (ITA/2421/M/2014,dt.21.12.2016). We are reproducing the relevant portion of the order and it reads as under:- "22. Ground 1: In this ground, the Revenue has challenged the action of Ld. CIT(A) in allowing depreciation of Rs. 32,87,726/- which was claimed by the assessee on the basis of letter of approval dated 10-10-2010. 23. The brief background is that during the course of assessment proceedings it was found by the AO that assessee had claimed 40% depreciation on plant and machinery under Rule 5(2) of Income-tax Rules on scrutiny of Annexure-6 to form NO.3CD. Since the assessee failed to furnish details connected to the approval and certificate given by Department of Scientific and Industrial Research (DSIR) in respect of using any technology or other know-how developed in-house, the AO rejected the claim of the assessee. The AO made a mention that similar claims made during earlier year was also rejected. 24. In the appeal before Ld. CIT(A), the assessee submitted in detail that required approval from DSIR was ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... o this direction, this ground is partly allowed." 26. During the course of hearing before us, it has been stated by the Ld. Counsel that since required certificate has been provided by the assessee which has been examined by the Ld. CIT(A), and only thereafter relief has been provided by him in line with earlier years' orders which have been confirmed by the Tribunal. Ld. DR could not point out anything incorrect or wrong in the factual finding of the Ld. CIT(A). Under these circumstances, we do not find any justification to interfere in the order of the Ld. CIT(A) on this issue. Thus, ground 1 raised by the Revenue is hereby dismissed." Respectfully following earlier year's order,we decide Ground No.1 against the AO. 3.Second Ground deals with deleting the disallowance of Rs. 72.37 lakhs. The AR and the Departmental Representative (DR) stated that issue was about claim made u/s.32(2AB) of the Act and the Tribunal had decided the issue in favour of the assessee in AY 2008-09 (supra). We find that Tribunal had held as under : "27. Ground 2 : In this ground, the Revenue has challenged the action of Ld.CIT(A) in deleting the disallowance made by the AO of claim of weighted deduct ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... . Therefore, the order of the Ld. CIT(A) is upheld. Thus, ground of the Revenue is dismissed." Respectfully following the same,Ground No.2 is decided against the AO. 4.Third Ground is about interest disallowance of Rs. 1.79 crores u/s.36(1)(iii) of the Act.We find the identical issue had been decided by the Tribunal in favour of the assessee in AY.s. 2008-09 and 2007-08.We are reproducing para 31-35 of the order of the Tribunal for the earlier AY.(supra). 31. Ground 3 : In this ground, the Revenue is aggrieved with the action of Ld.CIT(A) in deleting the disallowance made by the AO on account of interest u/s 36(1)(iii) on loans advanced to subsidiary companies, viz. M/s Aarti Healthcare Ltd & M/s Avinash Drugs Ltd. 32. The brief background is that during the course of assessment proceedings it was noted by the AO that the interest bearing funds were not utilized for advancing loan to the sister concern, the AO disallowed the claim u/s 36(1)(iii). The claim of the assessee that there is business expediency relying on the decision of SA Builders, was also not accepted by the AO. Further,since the assessee failed to discharge the onus and did not satisfactorily demonstrate that ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ered by the above order of the Hon'ble Delhi High Court. Respectfully,following the same, we dismiss Ground No.4 raised by AO. 6.Last Ground of appeal is about deleting the addition of Rs. 15.03 lakhs,received by the assessee on account of Insurance claim.During the assessment proceedings,the AO found that the assessee had claimed deduction for insurance claim of Rs. 15,03,312/-.In reply to the notices issued in that regard the assessee filed explanation vide its letter dt.07/01/2013.The AO,after considering the submission,held that insurance claim received (stock destroyed by fire Rs. 14.80 lakhs +vehicle Rs. 22,500/-) was on account of revenue expenses and had to be added to the total income of the assessee. 6.1.Before the FAA,during the appellate proceedings the assessee argued that insurance claim of Rs. 14.80 lakhs was received against the loss of Plant &Machinery due to fire and the balance was received against damage of vehicle. It referred to section 43(6)(c) of the Act. After considering the available material,the FAA held that there was a fire at the Tarapur factory of Avinash Drugs Ltd.on 01.10.2004,that Plant &Machinery were destroyed in fire, that a claim was made ag ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... fore the FAA and made elaborate submissions.Referring to his own order for the AY 2008-09, the FAA upheld the order of the AO stating that there was no change in the facts and circumstances. 7.2.Before us, the AR stated that while deciding the appeal for AY 2008-09,the Tribunal had directed the AO to delete the disallowance on account of interest expenditure and to restrict 0.5% of disallowance of expenditure by reducing investment made in subsidiary/group companies,that during the year under consideration the assessee has sufficient fund,(Rs. 341. 37 crores),that it had made investment of Rs. 15.27 crores only, that it had no objection if the order of the Tribunal for the earlier assessment year was followed. The DR left the issue to the discretion of the Bench. 7.3.We have heard the rival submissions.We find that the Tribunal in its order for AY 2008- 09 (supra) has held as under :- 7. We have gone through the orders passed by the lower authorities. It is noted from the perusal of the table reproduced by the Ld. CIT(A) in his order on page 12 that net worth of the assessee company comprising of share capital and reserves aggregated to Rs. 284.27 crores, whereas the aggregate a ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... mpanies for working out the average value of investments. For the purpose of rule 8D(2)(iii). As a result, ground 1 is partly allowed." Respectfully following the same ,we direct the AO to delete the disallowance on account of interest and follow the direction of the Tribunal with regard to other disallowance.(0.5% dis - allwoance).First Ground of appeal is decided in favour of the assessee,in part. 8.Next Ground of appeal (GOA-3) is about computation of book profit with regard to disallwoance u/s.14A.As the issue is consequential to Ground No.2,same is allowed for statistical purposes . 9.Fourth Ground deals with disallowance of foreign exchange fluctuation, of Rs. 11.86 crores. During the assessment proceedings,the AO found that the assessee had availed foreign currency term loan from SBI(Rs. 1.30 crores.) and loan by way of External Commercial Borrowing(Rs. 3.09 crores).He directed it to file details of realised and unrealised foreign exchange fluctuation gains/loss on account of above loan.After considering the submission of the assessee,the AO held that the loan was utilised for capital asset, that the loss arising on account of exchange fluctuation was capital in nature,t ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... loss on the capital side,would depend on the facts of each case.The question, however,is not one of pure fact but a mixed question of fact and law and the decided cases indicate how the matter is to be viewed in the context of the facts.It has been held that the problem must be approached in such cases in the light of the intention of the assessee,having regard to the legal requirements which are associated with the concept of trade or business. ii).The list of allowances enumerated in sections 30 to 43A of the Act is not exhaustive and an item of business loss can be deducted in computing the profits and gains of the business,if it is deductible according to ordinary commercial principles of accounting. iii).The mere fact that there is some remote connection between a loss and the business would not bring the loss within the expression "loss incidental to the business".It should spring directly from the carrying on of the business.In short,in order to entitle a deduction on the ground of business loss,the loss should not only have been incurred in the course of the business,but it should also be in the nature of a revenue loss. iv).Assessee having treated the loss as a revenue l ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... and had assumed the new character of stock-in-trade or circulating capital,the loss that occurred on account of devaluation shall be a revenue loss and not a capital loss. In the case of Dempo & Co. Pvt.Ltd. (supra),the Hon'ble Bombay High Court has held as under: "In determining whether a loss is allowable as a business loss the principles applicable are- (i) A loss arising in the process of conversion of foreign currency which is part of the trading asset of the assessee is a trading loss as any other loss. (ii) The cause which occasions the loss is immaterial; what is material is whether the loss has occurred in the course of carrying on the business or is incidental to it. (iii) If there is loss in a trading asset, it would be a trading loss, whatever be its cause, because it would be a loss in the course of carrying on the business. (iv) Loss in respect of circulating capital is revenue loss whereas loss in respect of fixed capital is not. (v) Loss resulting from depreciation of foreign currency which is utilised or intended to be utilised in business and is part of the circulating capital, would be a trading loss, but depreciation of fixed capital on account ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... .capital asset. Similarly,in the case of Cooper Corporation of India(supra)the Tribunal was dealing with business assets and not capital assets. Considering the peculiar facts and circumstances of the matter before us,we are of the opinion that the order of the FAA does not suffer from any technical or legal infirmity.So, confirming the same,we decide ground no.4 against the assessee. 10.Next ground pertains to disallowance of additional depreciation u/s.32(1)(iia)of the Act. During the assessment proceedings,the AO directed the assessee to give explanation as to why 10% of depreciation amounting to Rs. 1.85 crores on machinery purchased during AY 2008-09should not be disallowed.After considering the submission of the assessee and referring to the provisions of clause(ii) of sec 32(1), the AO held that the assessee was not entitled to claim depreciation @10% for the year under appeal. 10.1.Before the FAA ,the assessee made submissions and referred to MITS Rolling Mills Pvt. Ltd.,Cosmo Films Ltd. (139ITD628); SIL Investment Ltd. (54SOT54).The FAA referred to amended provisions of Section 32(1)(iia) and held that additional benefit in the form of additional allowance was a onetime ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... aid expenditure in the AY.2010-11 by adding back the same to its income, that the expenses were booked in the next accounting year,that the same were not claimed as deduction in subsequent years.Alternatively,it was argued that if the expenses were to be disallowed for the year under appeal same should be allowed for AY 2010-11. 11.2.The AR argued,before us,that expenditure was incurred for business purposes,that the difference of opinion was about the year in which it has to be allowed.The DR left the issue to the discretion of the Bench. We find that the AO or the FAA has not doubted the genuineness of incurring of expenditure, that the assessee had on its own disallowed the expenses in question in AY.2010-11,that taxes were deducted and paid before the due date i.e.the due date of filing of return of income as per the provisions of section 139(1)of the Act.Considering the peculiar circumstances and facts of the case,we direct the AO the allow the expenditure during the year under appeal. GOA-7 is decided in favour of the assessee. 12.Next Ground is about alleged wrong entry passed by Amarjyot Chemicals Limited (ACL), amounting to Rs. 25,036/-.During the assessment proceedings ..... X X X X Extracts X X X X X X X X Extracts X X X X
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