KANHAIYALAL KALYANMAL, Jaipur V. ACIT, Jaipur

CO 16/JPR/2013

• Counselvise Citation: [2014] 122 COUNSELVISE.COM (IT) 9421 (ITAT-JAIPUR)
• Duration Of Justice: 1 year(s)
• Appeal Type: Cross Objection
• Pronouncement Date: 26-02-2014
• Appeal Filed By: Assessee
• Order Result: Partly Allowed
• Bench Allotted: A
• Assessment Year: 2009-2010
• Appeal Filed On: 26-02-2013
• Result in Favour of: Partly Allowed
• Court: TRIBUNAL
• Department Lawyers: D C SHARMA
• Assessee Lawyers: RAJIV PANDEY
• Keywords: Depreciation; Business expenditure; Earning of tax free income; Deemed to accrue or arise in india; Speculation loss; Speculative transactions
• Section: 43B; 14A; 43(5)

Judgement Text

IN THE INCOME TAX APPELALTE TRIBUNAL : JAIPUR BENCH : JAIPUR BEFORE SHRI HARI OM MARATHA, JUDICIAL MEMBER AND SHRI N.K. SAINI, ACCOUNTANT MEMBER. ITA NO.135, 760 &136/JP/2013 (A.YS. 2007-08, 2008-09 & 2009-10) ACIT, CIRCLE-6, VS. M/S. KANHAIYALAL KALYANMAL, JAIPUR. K.K. HOUSE, BHARAT MATA PATH, JAMNA LAL BAJAJ MARG, C- SCHEME, JAIPUR. PAN NO. AACFK 9796 K (APPELLANT) (RESPONDENT) C.O. NOS.15, 57 &16/JP/2013 (ITA NOS.135, 760 &136/JP/2013) (A.YS. 2007-08, 2008-09 & 2009-10) M/S. KANHAIYALAL KALYANMAL, VS. ACIT, CIRCLE-6, K.K. HOUSE, BHARAT MATA JAIPUR. PATH, JAMNA LAL BAJAJ MARG, C- SCHEME, JAIPUR. PAN NO. AACFK 9796 K (APPELLANT) (RESPONDENT) ASSESSEE BY : SHRI RAJIV PANDEY. DEPARTMENT BY : SHRI D.C. SHARMA - D.R. DATE OF HEARING : 23/01/2014. DATE OF PRONOUNCEMENT : 26/01/2014. 2 O R D E R PER HARI OM MARATHA, J.M THE REVENUE HAS FILED APPEALS FOR A.YS. 2007-08, 2 008-09 & 2009-10 AND THE CORRESPONDING CROSS OBJECTIONS HAVE BEEN FI LED BY THE ASSESSEE AGAINST THE ORDERS PASSED BY THE LD. CIT(A)-II, JAI PUR. IN ALL THESE APPEALS, ALMOST IDENTICAL ISSUES ARE INVOLVED. THE REFORE, FOR THE SAKE OF CONGRUENCE, BREVITY AND CONVENIENCE, WE ARE PROCEED ING TO DECIDE THEM BY A COMMON ORDER. 2 IN ALL THE REVENUES APPEALS, A COMMON ISSUE REGAR DING TO DELETION OF ADDITION MADE ON ACCOUNT OF DEPOSITION OF PF/ESI CONTRIBUTION OF EMPLOYEES BEYOND THE PRESCRIBED TIME BUT BEFORE FIL ING OF THE RETURNS FOR RESPECTIVE ASSESSMENT YEARS IS INVOLVED. THE ASSES SING OFFICER HAS NOT ALLOWED, BUT LD. CIT(A) HAS ALLOWED AS PER SECTION 36(1)(VA) OF THE I.T. ACT, 1961 (HEREINAFTER REFERRED TO AS THE ACT IN SHORT). ANOTHER COMMON ISSUE IS REGARDING DELETION OF ADDITION MADE BY THE ASSESSING OFFICER BY DISALLOWING 80% DEPRECIATION ON COMPLETE STRUCTURE OF WIND TURBINE GENERATOR (WTG) MACHINE. FOR THE SAKE OF C ONVENIENCE, WE WILL NARRATE FACTS OBTAINING IN THE A.Y. 2007-08. 3 3. THE ASSESSEE IS ENGAGED IN THE BUSINESS OF MANUFAC TURING AND EXPORTS OF READYMADE GARMENTS. FOR A.Y. 2007-08, T HE ASSESSEE-FIRM FILED ITS RETURN OF INCOME ON 19/10/2007, DECLARING TOTAL INCOME OF RS. 5,85,49,410/-. AS PER ANNEXURE-B TO THE FORM 3 CD, IT WAS NOTICED THAT THE EMPLOYEES CONTRIBUTION TO PF/ESI HAS BEEN DEPOSITED LATE. THE ASSESSEE WAS ASKED TO EXPLAIN AS TO WHY THIS DELAYE D PAYMENT SHOULD NOT BE DISALLOWED. IN RESPONSE TO THE SAME, THE ASSESS EE SUBMITTED AS UNDER:- ASSESSEE SUBMITTED THAT IT HAS GIVEN DETAILS OF P F AND ESI CONTRIBUTION OF EMPLOYEES DEDUCTED AND PAID. THE DUE DATE OF DEPOS IT OF PF & ESI IS 15 DAYS FROM DATE OF PAYMENT OF WAGES ETC. WHICH IN AS SESSEES CASE IS 7 TH DAY OF THE MONTH FOLLOWING IMMEDIATE PREVIOUS MONTH I.E . WAGES OF MARCH ARE PAID BY 7 TH APRIL AND SO ON. AS SUCH THE DUE DATE OF PAYMENT OF PF & ESI WAS DUE ON 21 ST OF THE MONTH I.E. MARCH DUES ARE PAYABLE BY 21 ST APRIL AND SO ON. ON ACCOUNT OF ABOVE ANNEXURE B OF TAX AUD IT REPORT MAY BE PERUSED AND ALL DEPOSITS ARE IN TIME. THE ASSESSEE FIRM IS DILIGENT IN DEPOSITING THE PAYMENTS BY 15 TH OF EACH MONTH HOWEVER ON ACCOUNT OF HOLIDAY/NON-BANKING DAY THE DATE SOMETIMES EXCEEDS 15 TH OF THE MONTH. THE ASSESSEE FIRM HAS ALWAYS PAID THE AMOUNT DEDUCT ED BEFORE DUE DATE I.E. 21 ST OF THE MONTH. SINCE THE AMOUNT HAS BEEN PAID BEFO RE FILING OF RETURN OF INCOME AND HENCE NOTHING SHOULD BE DISALL OWED. WE RELY ON ALLIED MOTORS PVT. LTD. VS. CIT 224 ITR 677 (SC); 2 98 ITR 141 (KAR). HOWEVER, THE ASSESSING OFFICER WAS NOT AGREEABLE A ND AFTER MENTIONING THAT DEDUCTION ON ACCOUNT OF ANY DEEMED INCOME IS AVAILABLE ONLY AS PER SECTION 36(1)(VA) OF THE ACT AND IF SUC H INCOME IS CREDITED BY THE ASSESSEE TO THE EMPLOYEES ACCOUNT IN THE RELEVA NT FUND OR FUNDS ON OR 4 BEFORE DUE DATE. ACCORDING TO ASSESSING OFFICER, D UE DATE DOES NOT MEAN DUE DATE OF FILING OF RETURN BUT IT MEANS THE DATE WHICH IS PRESCRIBED IN THE CORRESPONDING PF/ESI ACT, BY WHICH THE AMOUNT S HOULD BE DEPOSITED WITH THAT FUND. ACCORDINGLY, HE HAS DISALLOWED THE LATE DEPOSITED AMOUNT OF RS. 82,098/- AS THE ASSESSEE HAS FAILED TO COMPL Y WITH THE PROVISIONS OF SECTION 36(1)(VA) OF THE ACT AND THIS AMOUNT HAS BE EN TREATED AS ASSESSEES DEEMED INCOME UNDER SECTION 2(24)(X) OF THE ACT. 4. HOWEVER, THIS ADDITION HAS BEEN DELETED BY LD. CI T(A) BY FOLLOWING THE SETTLED POSITION OF LAW ON THIS ISSUE. IT IS A SETTLED POSITION OF LAW THAT EVEN IF THE EMPLOYEES CONTRIBUTION IS PAID BEL ATEDLY, BUT BEFORE THE DUE DATE OF FILING OF THE RETURN, IT CANNOT BE DISA LLOWED UNDER SECTION 36(1)(VA) OF THE ACT. ADMITTEDLY, THE PAYMENTS WERE MADE BEFORE FILING OF RETURN OF INCOME IN ALL THE YEARS. LD. CIT(A) H AS RELIED ON THE TRIBUNALS ORDER RENDERED IN THE CASE OF THIS ASSES SEE FOR A.Y. 2005-06. A COPY OF THIS ORDER IS ALSO AVAILABLE IN THE ASSESSE ES PAPER BOOK. 5. BEFORE US BOTH THE PARTIES HAVE REITERATED THEIR E ARLIER ARGUMENTS. THE LD. D.R. DID NOT DENY THE FACT THAT THIS ISSUE STANDS COVERED IN THE FAVOUR OF THE ASSESSEE BY THE T.O. IN ASSESSEES OW N CASE FOR A.Y. 2005- 06, BUT HE HAS JUSTIFIED THE ACTION OF THE ASSESSIN G OFFICER. AFTER 5 CONSIDERING THE RIVAL SUBMISSIONS WE ARE SATISFIED THAT THE LAW ON THE ISSUE STANDS SETTLED THAT IN CASE ASSESSEE DEPOSITS PF/ESI EMPLOYEES CONTRIBUTION BEFORE THE DUE DATE OF FILING OF RETUR N, IT CANNOT BE DISALLOWED UNDER SECTION 36(1)(VA) OF THE ACT. WE HAVE GONE THROUGH THE DECISION OF THE TRIBUNAL INTER-ALIA , THEREFORE, BY RESPECTFULLY FOLLOWING THE SAME SPECIFICALLY THE TRIBUNALS ORDER IN ASSES SEES OWN CASE, FOR A.Y. 2005-06 DATED 13/01/2011, WE CONFIRM THE IMPUGNED D ELETION AND CANNOT ALLOW GROUND NO. (I) OF THE REVENUES APPEAL. 6 . THE OTHER COMMON GROUND RAISED, AS GROUND NO.(II) IS REGARDING ALLOWANCE OF 80% DEPRECIATION ON THE COMPLETE STRUC TURE OF WIND TURBINE GENERATOR MACHINE (WTGM) BY THE LD. CIT(A) AS AGAIN ST NOT ALLOWED BY THE ASSESSING OFFICER. 7 . FACTS OF THIS GROUND ARE THAT THE ASSESSEE HAS CL AIMED DEPRECIATION ON THE ENTIRE WTGM OF RS. 1,77,20,157/- @ 80% I.E. HALF RATE WHICH COMES TO RS. 78,70,222/- BY TREATING THE CIVIL CONS TRUCTION AND OTHER PARTS AS THE ESSENTIAL PARTS OF WTGM. THE ASSESSIN G OFFICER, HOWEVER, DISALLOWED DEPRECIATION TO THE TUNE OF RS. 19,32,92 3/- WHICH PERTAINED TO CIVIL CONSTRUCTION AND OTHER ALLIED PARTS WHICH ARE NOT FOUND BY HIM AS ELIGIBLE FOR DEPRECIATION @ 80%. HOWEVER, LD. CIT( A) HAS HELD THAT THE 6 EXPENDITURE INCURRED ON INSTALLATION AND COMMISSION ON WTGM CANNOT BE SEGREGATED AS HAS DONE BY THE ASSESSING OFFICER. T HE LD. CIT(A) HAS FOLLOWED THE DECISION OF ITAT, JAIPUR BENCH, RENDER ED FOR A.Y. 2005-06 & 2006-07 IN ASSESSEES OWN CASE WHERE DEPRECIATION O N WIND MILL INCLUDING CIVIL CONSTRUCTION AND OTHER ALLIED ACTIVITIES HAS BEEN ALLOWED @ 80% WITHOUT SEGREGATING THE BUILDING AND THE PLANT. 8 . BEFORE US SIMILAR ARGUMENTS WERE REITERATED. IT WAS SUBMITTED BY LD. A/R THAT THIS ISSUE STANDS COVERED IN THE FAVOU R OF THE ASSESSEE BY THE ORDER OF THIS VERY BENCH RENDERED IN THIS ASSESSEE S OWN CASE. THIS POSITION HAS NOT BEEN DENIED BY LD. D.R. BUT IN TH E REFERENCE TO ASSESSING OFFICERS ORDER HE HAS TRIED TO SUPPORT HIS GROUND OF APPEAL. WE HAVE FOUND IT FOR A FACT THAT THIS ISSUE STANDS FULLY CO VERED BY THE ORDER OF ITAT DATED 13/01/2011 IN THE CASE OF THIS VERY ASSESSEE RENDERED FOR A.Y. 2005-06 & 2006-07 IN I.T.A.NOS. 935 & 936/JAIPUR/20 10. ACCORDINGLY, WE DO NOT FIND ANY REASON TO DEVIATE FROM THE TRIBUNAL S ORDER RENDERED IN EARLIER ASSESSMENT YEARS. ACCORDINGLY, WE CANNOT A LLOW GROUND NO. (II) OF THE REVENUES APPEAL. 9 . THE ASSESSEE HAS FILED CROSS OBJECTION NO. 15/JAI PUR/2013, IN WHICH NO MATERIAL GROUND HAS BEEN RAISED. THE CO HAS BEE N FILED IN SUPPORT OF 7 LD. CIT(A)S FINDINGS GIVEN IN REGARD TO THE ABOVE 02 ISSUES. THEREFORE, THE CO ALSO STAND DISMISSED. 10 . RESULTANTLY, THE APPEAL OF THE REVENUE AND CO OF THE ASSESSEE STAND DISMISSED. 11 . I.T.A.NO. 760/JAIPUR/2013 FOR A.Y. 2009-10 AND CO 57/JAIPUR/2013. THIS APPEAL IS DIRECTED AGAINST THE ORDER OF LD. CI T(A) DATED 26/07/2013. IN THIS REVENUES APPEAL, THE FOLLOWING GROUNDS HAV E BEEN RAISED:- 1. (I) WHETHER ON THE FACTS AND IN THE CIRCUMSTANC ES OF THE CASE AND IN LAW THE LD. CIT(A) AS ERRED IN DELETING ADDITIO N OF RS. 1,14,871/- MADE FOR DEPOSITING THE EMPLOYEES CONT RIBUTION TO ESI & PF BEYOND THE PRESCRIBED TIME LIMIT PROVIDED IN THE RESPECTIVE ACTS. (II) WHETHER ON THE FACTS AND IN CIRCUMSTANCES OF THE CASE AND IN LAW THE LD. CIT(A) HAS ERRED IN HOLDING THAT EMPLO YEES CONTRIBUTION TO ESI & PF ARE GOVERNED BY THE PROVI SION OF SECTION 43B AND NOT BY SECTION 36(1)(VA) R.W.S. 2( 24)(X) OF I.T. ACT. 2. (I) WHETHER ON THE FACTS AND IN THE CIRCUMSTANCE S OF THE CASE AND IN LAW THE LD. CIT(A) HAS ERRED IN DELETING ADDITI ON OF RS. 16,38,227/- MADE BY THE AO ON ACCOUNT OF DISALLO WANCE OF EXCESS DEPRECIATION CLAIMED ON WIND TURBINE GENERA TOR MACHINE. (II) WHETHER ON THE FACTS AND CIRCUMSTANCES OF THE CASE AND IN LAW THE LD. CIT(A) HAS ERRED IN HOLDING THAT DEPRECIAT ION @ 80% HAS TO BE ALLOWED ON WIND TURBINE GENERATOR MACHINE WI THOUT SEGREGATION INVESTMENT ON BUILDING PART AND ON ELE CTRIC ITEM 8 WITHOUT APPRECIATION THAT DEPRECIATION @ 80% IS AL LOWABLE ON WIND TURBINE GENERATOR MACHINE AND NOT ON ELECTRIC AL FITTINGS AND BUILDING ETC. 3. THE APPELLANT CRAVES ITS RIGHT TO ADDITIONAL, AM END OR ALTER ANY OF THE GROUNDS ON OR BEFORE THE HEARING. 12. IN THE CO, NO MATERIAL GROUND HAS BEEN RAISED AND I T SIMPLY SUPPORTED WITH THE FINDING OF LD. CIT(A). AFTER HE ARING BOTH SIDES, WE ARE OF THE OPINION THAT THE GROUNDS RAISED BY THE REVEN UE IN THIS YEAR ALSO ARE SAME AND SIMILAR. THEREFORE, WITH THE SIMILAR REAS ONING, WE DISMISS GROUNDS NOS. 1 & 2 OF REVENUES APPEAL. THE CO BEI NG SIMPLY SUPPORTED HAS TO BE DISMISSED EITHER. 13 . ACCORDINGLY, THE APPEAL OF THE REVENUE AND CO OF THE ASSESSEE STAND DISMISSED. 14. I.T.A.NO. 136/JAIPUR/2013 AND CO NO. 16/JAIPUR/201 3 ARE DIRECTED AGAINST THE ORDER OF LD. CIT(A) DATED 27/11/2012. IN REVENUES APPEAL, THE FOLLOWING GROUNDS HAVE BEEN RAISED:- (I) DELETING ADDITION OF RS. 2,94,463/- MADE ON AC COUNT OF DEPOSITING THE PF/ESI CONTRIBUTION OF EMPLOYEES BEYOND THE PRE SCRIBED TIME DESPITE THE FACT THAT AS PER SECTION 36(1)(VA) EMPL OYEES CONTRIBUTION SHOULD HAVE BEEN DEPOSITED IN TIME AS PRESCRIBED IN THE RELEVANT LAW. SECTION 43B PERMITS DELAYED PAYMENT IF PAID BEFORE FILING ROI AS PER SECTION 139(1) IN CASE OF EMPLOYERS CONTRIBUTION N OT IN THE CASE OF EMPLOYEES CONTRIBUTION. 9 (II) DELETING THE ADDITION OF RS. 1,25,39,326/- MAD E BY THE AO BY TREATING FORWARD CANCELLATION CHARGES AS SPECULATION LOSS. (III) DELETING THE ADDITION MADE BY THE AO BY DISAL LOWING THE 80% DEPRECIATION ON COMPLETE STRUCTURE OF WIND TURBINE GENERATOR MACHINE. IN CROSS OBJECTION, THE FOLLOWING GROUNDS HAVE BEEN RAISED:- 1. THE RESPONDENT SUBMITS THAT THE DELETION BY LD. CIT (A) ARE CORRECT AND AS PER LAW NAMELY:- (I) DELETING ADDITION OF RS. 2,94,463/- MADE ON ACCOUNT OF DEPOSITING THE PF/ESI CONTRIBUTION OF EMPLOYEES. (II) DELETING THE ADDITION OF RS. 1,25,39,326/- MADE BY THE AO TREATING FORWARD CANCELLATION CHARGES AS SPECULATIO N LOSS. (III) DELETING THE DISALLOWANCE OF DEPRECIATION CLAIMED O N WIND TURBINE AND ALLOWING RATE OF DEPRECIATION @ 80% CLA IMED ON COMPLETE WIND MILL. 2. THE RESPONDENT SUBMITS THAT LD. CIT(A) HAS ERRED IN CONFIRMING DISALLOWANCE OF EXPENSE AMOUNTING TO RS. 82,583/- I N TERMS OF S. 14A BEING EXPENDITURE INCURRED ON EXEMPT INCOME AND IN NOT FOLLOWING PROVISIONS OF LAW. 15 . WE HAVE HEARD RIVAL SUBMISSIONS ON THE ABOVE GROU NDS. FROM THE VERY PERUSAL OF THE GROUNDS RAISED BY THE REVENUE P ARTICULARLY GROUNDS NO. (I) & (III), IT IS REVEALED THAT THESE ARE IN R ELATION TO EMPLOYEES CONTRIBUTION TOWARDS PF & ESI AND DEPRECIATION ON W TGM. EXCEPT FOR THE AMOUNTS OF ADDITION INVOLVED THEREIN ALL OTHER FACTS ARE SIMILAR AND IDENTICAL TO THE EARLIER YEARS. THEREFORE, ON SIMIL AR REASONING, WE CANNOT 10 ALLOW GROUNDS NO. (I) & (III) OF THE REVENUES APPE AL AND DISMISS THE SAME. LIKEWISE, THE GROUNDS NO. 1(I) TO 1(III) OF ASSESSEES CO HAVE BEEN RAISED IN THE SUPPORT OF LD. CIT(A)S FINDINGS. TH EREFORE, THEY DO NOT REQUIRE ANY ADJUDICATION TO THAT EXTENT. HOWEVER, I N REVENUES APPEAL ONE MORE GROUND I.E. GROUND NO. (II) HAS BEEN RAISE D WHICH RELATES TO THE DELETION OF ADDITION OF RS. 1,25,39,326/- MADE BY T HE ASSESSING OFFICER BY TREATING FORWARD CANCELLATION CHARGES AS SPECULAT ION LOSS. 16. THIS DELETION HAS BEEN SUPPORTED BY THE ASSESSEE V IDE GROUND NO. 1(II) OF ITS CROSS OBJECTION. SIMILARLY, THE ASSES SEE HAS RAISED ONE MORE GROUND AS GROUND NO.2 IN ITS CO, WHICH PERTAINS TO DISALLOWANCE OF EXPENSES UNDER SECTION 14A OF THE ACT. 17. THE FACTS APROPOS GROUND NO. (II) OF REVENUES APP EAL ARE THAT FROM THE BANK INTEREST CHARGED AND DEBITED IN THE P & L ACCOUNT AMOUNTING TO RS. 1,56,99,642/- WHICH INCLUDED AMOUNT DEBITED BY WAY OF FORWARD CANCELLATION CHARGES AMOUNTING TO RS. 1,27,50,914/- AND RS. 2,11,588/- WHICH WERE DEBITED AND CREDITED RESPECTIVELY WERE N OTICED BY THE ASSESSING OFFICER. THE ASSESSING OFFICER SOUGHT EX PLANATION FROM THE ASSESSEE-FIRM, WHO WAS EXPORTING FASHIONABLE READYM ADE GARMENTS. THE 11 ASSESSEE EXPLAINED THAT IN ORDER TO PROTECT AGAINST VOLATILITY OF DOLLAR PRICE WHICH COULD BE DOWNWARD ANYTIME, THE ASSESSEE ENTERED INTO A FORWARD CONTRACT WITH THE BANK OF BARODA, IBB BRANC H, JAIPUR, AND HAS ASSESSEE INCURRED A LOSS OF RS. 1,25,39,326/- (RS. 1,27,50,914/- - RS. 2,11,588/-), BUT THE ASSESSING OFFICER HAS DISA LLOWED THIS NET AMOUNT OF RS. 1,25,39,326/- ON THE REASONING THAT IT IS A SPECULATION LOSS, WHICH IS NOT COVERED UNDER THE PROVISO APPENDED TO SECTION 4 3(5) OF THE ACT WHICH DEFINES SPECULATIVE TRANSACTION TO MEAN A TRANSAC TION IN WHICH A CONTRACT FOR THE PURCHASE OR SALE OF ANY COMMODITY, INCLUDING STOCKS AND SHARES IS PERIODICALLY, ARE ULTIMATELY SETTLED OTHE RWISE THAN BY THE ACTUAL DELIVERY OR TRANSFER OF THE COMMODITY OR SCRIPTS. ACCORDING TO ASSESSING OFFICER, THE FORWARD CONTRACT IS A CONTRACT BETWEEN TWO PARTIES IN WHICH UNDER ONE PARTY AGREES TO BUY A COMMODITY OR FINANC IAL ASSET ON A DATE IN THE FUTURE AT A FIXED PRICE WHILE THE OTHER AGREES TO DELIVER THE COMMODITY OR ASSET AT THE PRE-DETERMINED PRICE. HE HAS TREATED THE FORWARD CONTRACT IN THE NATURE OF DERIVATIVES WHICH ARE COMMONLY USED AS INSURANCE COVER AGAINST CERTAIN TYPES OF BUSINESS R ISKS SUCH AS FLUCTUATIONS IN THE RATE OF FOREIGN EXCHANGE ETC. AS PER ASSESS ING OFFICER, THE DEFINITION OF SPECULATIVE TRANSACTION UNDER SECTION 43(5) OF THE ACT EXCEPT AS DEFINED IN CLAUSE (D) OF THE PROVISO TO THAT SEC TION, ALL TRANSACTIONS IN 12 DERIVATIVES ARE SPECULATIVE TRANSACTIONS. HE HAS T REATED THE FORWARD CONTRACT ONLY AS A SPECULATIVE TRANSACTION. AS AGA INST THE ABOVE, LD. CIT(A) HAS REVERSED THE FINDING OF THE ASSESSING OF FICER BY OBSERVING THAT THE ASSESSEE DELIVERS READYMADE GARMENTS TO BUYERS IN USA AND THUS, THE ASSESSEE IS ENGAGED IN MERCHANTING BUSINESS WHICH I S COVERED UNDER CLAUSE (A) OF PROVISO TO SECTION 43(5) OF THE ACT. AS PER BANK OF BARODA CERTIFICATE, THE ASSESSEE USED TO PURCHASE FORWARD CONTRACT FOR THE SALE OF US DOLLAR TO OFFSET THEIR EXPORT PROCEEDS TO HEDGE THE FLUCTUATION RISK OF FOREIGN CURRENCY. ACCORDING TO LD. CIT(A), THE CAS E LAWS CITED BY THE ASSESSING OFFICER ARE IN RELATION TO SPECULATION WH EREAS THIS IS NOT THE CASE OF THE ASSESSEE BECAUSE THE ASSESSEE DOES NOT DEAL IN THE FOREIGN EXCHANGE AND HAS INVOLVED THE BANK OF BARODA TO PRO TECT ITS INTERESTS IN THE EVENTUALITY OF FLUCTUATIONS IN THE PRICE OF DOL LARS. 18 . BEFORE US, BOTH THE PARTIES REITERATED THEIR SAME AND SIMILAR ARGUMENTS. AFTER CONSIDERING THE RIVAL SUBMISSION S, WE ARE ALSO SATISFIED THAT THE CASE OF THE ASSESSEE IS COVERED UNDER THE PROVISO (A) APPENDED TO 43A (5) OF THE ACT AND ACCORDINGLY THE AMOUNT OF RS. 1,25,39,326/- CANNOT BE TREATED AND ADDED AS A SPECULATION LOSS. IN THIS REGARD, THE DECISION OF HON'BLE SUPREME COURT RENDERED IN THE C ASE OF CIT VS. ELECON 13 ENGINEERING COMPANY LTD. (2010) 322 ITR 20(SC) AND THAT OF BOMBAY HIGH COURT RENDERED IN THE CASE OF CIT VS. BADRIDAS GAURIDU (P) LTD. 261 ITR 256 (BOM) AND THAT OF HON'BLE CALCUTTA HIGH COURT RENDERED I N THE CASE OF CIT VS. SOORAJMULL NAGARMULL 129 ITR 169 (CAL) ARE RELEVANT. IN ALL THESE CASES, IT HAS BEEN HELD THAT WHERE THE FOREIGN EXCH ANGE CONTRACTS WERE ONLY INCIDENTAL TO THE ASSESSEES REGULAR COURSE OF BUSINESS, THESE CANNOT BE TREATED AS DISALLOWANCE IN FOREIGN EXCHANGE RESU LTING IN SPECULATION LOSS. ACCORDINGLY, WE ARE ALSO SATISFIED WITH THE FINDINGS OF LD. CIT(A) AND DO NOT FIND MERIT IN THE REVENUES APPEAL AND A S SUCH GROUND NO. (II) STANDS DISMISSED. 19 . WITH OUR ABOVE FINDING, SUPPORTIVE GROUND TAKEN B Y THE ASSESSEE IN ITS CO AS BECOME ONLY OF ACADEMIC IN INTEREST. 20. THE ASSESSEE HAS RAISED ONE MORE MATERIAL GROUND T AKEN AS GROUND NO.2 WHICH IS AGAINST CONFIRMED ADDITION OF RS. 82, 583/- UNDER SECTION 14A OF THE ACT. 21. FACTS OF THIS GROUND ARE THAT THE ASSESSING OFFICE R DISALLOWED PROPORTIONATE EXPENDITURE OF RS. 82,583/- UNDER RUL E 8D INCURRED TO EARN 14 TAX FREE DIVIDEND INCOME OF RS. 1,06,762/-. THE CA SE OF THE ASSESSEE IS THAT IT HAD INVESTED A SUM OF RS. 4,11,48,707/- IN VARIOUS MUTUAL FUNDS AND AFTER REDEMPTION MADE OUT OF ABOVE, IT WAS LEFT WITH THE CLOSING BALANCE OF RS. 1,00,63,279/- AT THE END OF THE YEAR . AS PER ASSESSING OFFICER, MAKING OF INVESTMENT, MAINTAINING OR CONTI NUING INVESTMENT AND TIME OF EXIT FROM INVESTMENT ARE WELL INFORMED AND WELL COORDINATE MANAGEMENT DECISIONS INVOLVING NOT ONLY INPUTS FROM VARIOUS SOURCES BUT ALSO ACUMEN OF SENIOR MANAGEMENT FUNCTIONARIES. TH US, THE ASSESSEE INCURRED INCIDENTAL EXPENDITURE LIKE TELEPHONE, FOL LOW UP ETC. TO EARN THE DIVIDEND INCOME AND SUCH EXPENDITURE HAS BEEN DEBIT ED IN THE NORMAL BUSINESS EXPENSES SHOWN TOWARDS EARNING OF TAXABLE INCOME. WE HAVE FOUND FROM THE RECORD THAT THE REASONING GIVEN TO D ISALLOW THIS IMPUGNED AMOUNT HAS NOT BEEN DISPUTED SPECIFICALLY BY STATIN G THAT THE ASSESSEE DID NOT INCUR INCIDENTAL EXPENDITURE LIKE TELEPHONE ETC . BUT IT WAS ARGUED THAT THE ASSESSEE DID NOT USE BORROWED FUNDS ON WHI CH INTEREST HAD BEEN PAID AND WAS NOTHING SHOULD BE DISALLOWED UNDER SEC TION 14A OF THE ACT. 22 . IN THAT VIEW OF THE MATTER, WE ARE IN AGREEMENT W ITH THE FINDINGS OF LD. CIT(A) AND THEREFORE CONFIRM THE IMPUGNED DELET ION AND CANNOT ALLOW GROUND NO;2 OF THE CO. 15 23. RESULTANTLY, THE APPEAL OF THE REVENUE FOR A.Y. 20 09-10 IS DISMISSED AND THAT OF CO IS PARTLY ALLOWED. (ORDER PRONOUNCED IN THE COURT ON 26 TH FEBRUARY, 2014). SD/- SD/- (N.K.SAINI) (HARI OM MARATHA) ACCOUNTANT MEMBER JUDICIAL MEMBER DATED : 26 TH FEBRUARY, 2014. VR/- COPY TO: 1. THE APPELLANT 2. THE RESPONDENT 3. THE LD.CIT 4. THE CIT(A) 5. THE D.R ASSISTANT REGISTRAR, ITAT, JAIPUR.