TMI Blog2016 (7) TMI 1695X X X X Extracts X X X X X X X X Extracts X X X X ..... nditure under section 14A. See M/S. BEACH MINERALS COMPANY PVT LTD. [ 2015 (8) TMI 1031 - ITAT CHENNAI] Addition of foreign exchange loss relating to interest on loan for acquisition of fixed assets under normal provisions as well as u/s 115JB - Under normal provisions - HELD THAT:- As observed by the Revenue that the assessee had debited to its profit loss account net foreign exchange loss related to interest on the loan obtained for acquiring assets. Therefore, the learned Assessing Officer added the same to the profit of the assessee by capitalizing the interest and added the same to the cost of the asset by virtue of section 43A of the Act, but however gave the benefit of depreciation @ 15%. No infirmity in the orders of the Revenue on this issue because section 43A of the Act provides that such expense has to be capitalized. AO has capitalize the loss and granted the benefit of depreciation. Hence the order of the Revenue is hereby confirmed on this issue. Under section 115JB of the Act - The same ratio mentioned herein above in para 4.3 will be applicable because section 43A of the Act and section 115JB of the Act both has a legal fiction and therefore section 43 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... The learned DRP as well as the learned Assessing Officer has erred in disallowing an estimated amount of Rs.1,55,27,938/- as expenditure attributable for earning exempt dividend income under section 14A r.w.r.8D of the Rules under normal computation as well as in computing the book profit under section 115JB of the Act. ii) The learned DRP as well as the learned Assessing Officer has erred in disallowing an amount of Rs.65,90,076/- as allowable deduction being foreign exchange loss relating to the interest on loan for acquiring assets by treating it to be capitalized under normal computation as well as in computing book profit under section 115JB of the Act. iii) The learned DRP as well as the learned Assessing Officer has erred in making addition of Rs.3,04,15,010/- in relation to interest on loan for acquiring fixed assets by treating it to be capitalized under normal computation as well as in computing book profit under section 115JB of the Act. iv) The learned DRP as well as learned Assessing Officer erred in confirming the order of the learned Assessing Officer in making addition of Rs. 1,54,19,582/- in relation to provision for doubtful debts while arriving ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... he profit and loss under normal computation. Disallowance under section 14A of the Act r.w.r.8D of the Rules under section 115 JB of the Act: 4.3 On this issue, this Bench of the Tribunal in the case of M/s. Beach Minerals Company P.Ltd. Vs. ACIT reported in 64 Taxmann.com 218 has held that disallowance under section 14A cannot be made while computing profit and loss of the assessee under section 115JB of the Act because a section with legal fiction cannot be imposed on another section with legal fiction. Undoubtedly both sections 14A 115JB of the Act are provisions with legal fictions. For the aforesaid reasons, this Bench of the Tribunal in the case cited supra has decided that while computing profit and loss under section 115JB of the Act disallowance under section 14A of the Act cannot be made. The relevant portion of the order in the case of M/s. Beach Minerals Company P.Ltd (supra) is extracted herein below for reference. 8.1. Ground No.5.(a) Computation of book profit U/s.115JB of the Act by giving effect to the disallowance of expenditure made invoking the provisions of the Section-14A of the Act for Rs.3,11,34,630/- and also the disallowance of expendit ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ) To (j) ----------------------------------------------------- From the above it is apparent that the aforesaid provision of the Act does not refer to any disallowance made U/s.14A of the Act while arriving at the Book Profit for the purpose of Section- 115JB(2) of the Act. Further Section 14A of the Act is a provision with fiction disallowing the deemed expenditure attributable to exempt income viz., dividend income U/s. 10 of the Act and Section 115JB of the Act is also a provision with fiction for payment of tax in respect of deemed income. Therefore while computing the profit for the purpose of Section 115JB of the Act another provision with fiction cannot be superimposed. Hence the question of increasing the Book Profit due to the disallowance U/s.14A of the Act will not arise. However, in the instant case of the assessee, since we have already deleted the addition made U/s.14A, increasing the book profit will not arise. Further the decision of Hon ble Apex Court cited by the assessee in the case M/s.Apollo Tyres Ltd. Vs. CIT reported in 255 ITR 273 is also squarely applicable to the case of the assessee. The gist of the same is reproduced herein below for reference:- ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... normal provisions as well as under section 115JB of the Act:- Under normal provisions 5.1 It was observed by the Revenue that the assessee had debited to its profit loss account net foreign exchange loss related to interest on the loan obtained for acquiring assets. Therefore, the learned Assessing Officer added the same to the profit of the assessee by capitalizing the interest and added the same to the cost of the asset by virtue of section 43A of the Act, but however gave the benefit of depreciation @ 15%. We do not find any infirmity in the orders of the Revenue on this issue because section 43A of the Act provides that such expense has to be capitalized. Accordingly the learned assessing officer has capitalize the loss and granted the benefit of depreciation. Hence the order of the Revenue is hereby confirmed on this issue. Under section 115JB of the Act 5.2 As regards addition of foreign exchange loss relating to interest on loan for acquiring fixed assets, under section 115JB of the Act, the same ratio mentioned herein above in para 4.3 will be applicable because section 43A of the Act and section 115JB of the Act both has a legal fiction and ther ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... .5: Determining the arm s length price of the international transaction relating to the commission paid by the assessee to Saint-Gobain Exproover of Rs.5,02,99,206/- towards availing marketing services. 8.1 The assessee had made export sales through its two AEs outside India. For the sales made through its AE Saint Gobain Exprover, the assessee had paid commission of Rs.5,02,99,206/- for availing market services. However, for the sales made through its AE Saint Gobain Autover, the assessee had not paid any commission. The learned TPO opined that the transaction of the assessee with its two AEs is essentially comparable. The Assessing Officer therefore adopting the internal cup method disallowed the commission paid to its AEs Saint Grover Exprover. At the outset, learned Authorized Representative submitted that the scope of transactions between both the AEs is altogether different. The learned Authorized Representative further submitted that for the sale made through Saint Gobin Exprover, the AE Saint Gobain Exprover only acted as a commission agent and products were directly sold by the assessee to the purchaser. However, with regard to transaction with respect to Saint Goba ..... X X X X Extracts X X X X X X X X Extracts X X X X
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