TMI Blog2023 (5) TMI 577X X X X Extracts X X X X X X X X Extracts X X X X ..... wance should be made for interest. This aspect may be verified by the AO. Another plea of the assessee is that only dividend yielding investments should be considered for computing amount of disallowance under Rule 8D (iii). We agree with this proposition also as it has the mandate of ACB INDIA LIMITED (FORMERLY M/S ARYAN COAL BENEFICATIONS (P) LTD. [ 2015 (4) TMI 224 - DELHI HIGH COURT] and case of Vireet Investment (P) Ltd. [ 2017 (6) TMI 1124 - ITAT DELHI] . Addition of foreign exchange loss - HELD THAT:- As we agree with the submissions of assessee that the decision of Woodward Governor India (P) Ltd. [ 2009 (4) TMI 4 - SUPREME COURT] is applicable. Facts highlighted by the ld. Counsel of the assessee also show that Woodward Governor India (P) Ltd. (supra) extensively discussed the judgment of Indian Molasses Co. P. Ltd. [ 1959 (5) TMI 5 - SUPREME COURT] and duly distinguished the same. Another factor in favour of the assessee is that during AYs 2017-18 2018-19, assessee earned income on reinstatement of ECB and the same was duly offered to tax and the same was accepted by the assessing officer during the assessment proceedings. So, when the Revenue is accepting th ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... the AO and CIT(A) have grossly erred on facts and in law in invoking Sec 14A and Rule 8D against the appellant and have erred in ignoring the important aspects of the case. 7. That without prejudice the calculations done under Rule 8D are highly excessive and should be reduced substantially in view of various judicial pronouncements. 8. That without prejudice the voluntary disallowance of Rs.23.06 lakhs made by the assessee itself should be included in the final amount of disallowance computed. 9. That the documents, explanations filed by the Assessee and the material available on record has not been properly considered and judicially interpreted and have been wrongly ignored. 4. Brief facts of the case are that the assessee is a Non-Banking Financial Company (NBFC). It is promoted by PTC India Ltd. It is engaged in the business of making principal investment in, and providing financial solutions for companies with projects across the energy value chain, generation and distribution of electricity. For AY 2011-12, it filed its return on 30.09.2011 declaring income of Rs. 39,86,60,290/-. The return was processed under section 143(1) of the Income-tax Act, 1961 (for short ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... d depreciation etc. be disallowed. The assessee submitted a detailed reply dated 10.01.2014 which has been incorporated by the Ld. AO at pages 2-4 of his assessment order. It is observed that the assessee cited clause 24 of the objects incidental or ancillary to the attainment of the main object of the Memorandum of Association to explain that it covers the activity of power generation and sale of such power to consumer by the company. It was also submitted that as per the main object clause the company invests or provides finance to companies engaged in generating power and that investment in own power generation unit (i.e. windmill) should also get covered within such object clause. It was also submitted that the assessee had acquired the windmill in the financial year 2009- 10 relevant to AY 2010-11 and income from generation of power and sale of such power was offered to tax as business income which has been accepted by the predecessor Ld. AO in the preceding year. However, the successor Ld. AO rejected the explanation of the assessee by saying that the principle of res-judicata does not apply to income tax proceedings. No doubt the principle of res-judicata does not apply to t ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e assessee had borrowed funds which was used for business purposes and was paying interest on these funds and this fact was not controverted through any of the documents on the record by the Assessing Officer as well as by the Revenue at the time of hearing before us, Hence, the findings given by the CIT(A) is proper and there is no need to interfere with the findings of the CIT(A). Ground No. 3 is dismissed. 9. When the Revenue went up in appeal before the Hon ble Delhi High Court, the Hon ble Court vide judgment dated 22.09.2022 in ITA No. 349/2022 sustained the order (supra) of the Tribunal by observing on both the issues in para 4, 5, 6 and 7 as under:- 4. A perusal of the paper book reveals that the AO rejected the assessee company s computation on the ground that the assessee company had raised substantial amount of loans for investment in new ventures on which substantial amount of interest was paid . However, the Appellate Authorities below held that the investments were made out of assessee s own funds and no borrowed funds were used to acquire investments. Consequently, there was no interest expenditure which could be directly or indirectly attributed to the exemp ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... n account of short deduction of TDS : The AO noted that the assessee had made payment for the services provided by Suzlon Energy Ltd. According to the AO, the services provided by Suzlon Energy Ltd. were in the nature of technical and professional services liable for deduction u/s 194J of the Act @ 10% whereas the assessee had incorrectly treated the impugned payment as payment for work as per contract within the section 194C @ 2%. 11. Before the ld. CIT (A), assessee stated that section 40(a)(i) is attracted where tax has not been deducted at soruce or after deduction the same has not been paid as per provisions of the subject section. Considering the above, ld. CIT (A) held that it is not the case of the AO that TDS has not been made on the aforesaid payment by the assessee. Only the issue is that as per AO, it should be 10% and as per assessee, it should be 2%. Ld. CIT (A) held that AO was not justified and the section does not cover short deduction. Accordingly ld. CIT (A) directed that the addition be deleted. 12. Against this order, Revenue is in appeal before us. We have heard both the parties and perused the records. 13. Ld. DR of the Revenue relied upon the order ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... TR 272) Delhi HC [Refer Para 42 on Page 20 of case law compilation binder]. ii. Consolidated Photo Finvest Ltd. [2012] 25 taxmann.com 371 Delhi HC [Refer Page 24 of case law compilation binder] iii. Godrej and Boyce Mfg. co. ltd. Vs. DCIT [2010] 194 taxman 203 Bombay HC [Refer Page 28 of case law compilation binder] The Appellant has sufficient shareholder funds/owned funds for making investments i.e. the shareholders funds available with the Company as on March 31, 20 II was INR 117,196.28 lacs viz-a-viz the investment of INR 42, 110.14 lacs [Refer Page. 1 of PB}. Reliance is placed upon the SC judgment passed in the case- South India Bank [2021] 438 ITR 1 (SC), wherein SC held that if investments is made out of common funds and the assessee has available, non-interest-bearing funds larger than the investments made in tax-free securities then in such cases, disallowance under section 14A cannot be made [Refer Para 17 and 20 on Page 77c and 77d, respectively of case law compilation binder]. Without prejudice, all borrowed funds were utilized for the purpose of the business of the Appellant i.e., for onward lending activities. Reference is invited to Form 83 pertai ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... eld by Hon ble Supreme Court, the same treatment as in loss should apply in case of gain also. It is therefore held that the loss/gain may be computed in year of final settlement. In case the transaction matured in FY 2011-12, the amount may be treated as speculation profit (following the order of Ld. CIT (A)-7 as to nature of transaction). If no final settlement is made in FY 2011-12, it may not be treated as income for AY 2012-13 (same lines as that of loss). The AO has also netted off the loss with profit. So there remains no cause of appeal by the assessee. 24. Against this order, assessee has filed appeal before us. We have heard both the parties and perused the records. 25. Arguments of the ld. Counsel for the assessee in this regard are as under :- Appellant is an NBFC and engaged in the business of providing long term loans to infrastructure/power projects and the proceeds of ECBs were utilized by the Company for its business objective of onward lending. These loans were not utilized by the Company for the acquisition of any capital assets. Accordingly, foreign exchange loss in relation to the reinstatement of ECBs liability is an allowable deduction under Sectio ..... X X X X Extracts X X X X X X X X Extracts X X X X
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