M/s JCBL India Pvt. Ltd., Chandigarh V. ACIT, Chandigarh

ITA 368/CHANDI/2012

• Counselvise Citation: [2015] 120 COUNSELVISE.COM (IT) 9932 (ITAT-CHANDIGARH)
• Duration Of Justice: 3 year(s) 2 month(s) 17 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 15-06-2015
• Appeal Filed By: Assessee
• Order Result: Partly Allowed
• Bench Allotted: SMC
• Next Hearing Date: 10-06-2015
• Assessment Year: 2007-2008
• Appeal Filed On: 28-03-2012
• Result in Favour of: Partly Allowed
• Court: TRIBUNAL
• Department Lawyers: MANJIT SINGH
• Assessee Lawyers: NEHA KANSAL
• Keywords: Opportunity of being heard; Proportionate interest
• Section: 14A; 80IB

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL CHANDIGARH BENCHES SMC CHANDIGARH BEFORE SHRI H.L.KARWA, HON'BLE VICE PRESIDENT ITA NO. 368/CHD/2012 ASSESSMENT YEAR: 2007-08) M/S JCBL INDIA PVT. LTD., VS. THE A.C.I.T., PLOT NO.75, INDL. AREA, PHASE 1, CIRCLE 2(1), CHANDIGARH. CHANDIGARH. PAN NO. AABCJ3518Q (APPELLANT) (RESPONDENT) APPELLANT BY : MS.NEHA KANSAL RESPONDENT BY : SHRI MANJIT SINGH, DR DATE OF HEARING : 11.06.2015 DATE OF PRONOUNCEMENT : 15.06.2015 O R D E R PER H.L.KARWA, VP : THIS APPEAL FILED BY THE ASSESSEE IS DIR ECTED AGAINST THE ORDER OF THE LEARNED COMMISSIONER OF INCOME TAX (APPEALS), CHANDIGARH DATED 16.1.2012 RELATING TO A SSESSMENT YEAR 2007-08. 2. GROUND NO.1 OF THE APPEAL IS GENERAL IN NATURE AND HENCE, NO COMMENTS ARE BEING GIVEN. 3. GROUND NO.2 OF THE APPEAL READS AS UNDER : 2 2. THAT THE LEARNED C.I.T.(A) HAS ERRED IN SUSTAINING THE DISALLOWANCE OF REBATE U/S 80IC RS.5,50,866/- AS PER RULE 8D READ WITH SECTION 14A. 4. BRIEFLY STATED, THE FACTS OF THE CASE ARE THAT THE ASSESSEE HAD EARNED DIVIDEND INCOME, WHICH IS EXEMP T AND HAD NOT SHOWN ANY EXPENDITURE AGAINST THE DIVIDEND INCOME. THE ASSESSING OFFICER DISALLOWED TOTAL AMOUNT OF RS.8,21,516/- UNDER RULE 8D OF THE INCOME TAX RULES , 1962. OUT OF RS.8,21,516/-, THE CIT (APPEALS) DELETED AN AMOUNT OF RS.2,70,650/-, AGAINST WHICH NO APPEAL HAS BEEN FIL ED BY THE REVENUE. THE BALANCE AMOUNT OF RS.5,50,866/- (RS. 8,21,516 RS.5,50,866 = RS.2,70,650/-) WAS ADDED BY THE ASS ESSING OFFICER AS UNDER : THE ASSESSEE HAS CLAIMED TOTAL INTEREST OF RS.13,74,875/-. THE DISALLOWANCE COMPUTED AS PER T HE FORMULA GIVEN IN RULE 8D(2)(II) COMES TO RS.4,00,63 8/-. RULE 8D(2)(III) AN AMOUNT EQUAL TO ONE HALF PERCENT OF THE AVERAGE OF THE VALUE OF INVESTMENT, INCOME FROM WHICH DOES NOT OR SHALL NOT FORM PART OF THE TOTAL INCOME, AS APPEARING IN THE BALANCE SHEET OF THE ASSESSEE, ON THE FIRST DAY AND THE LAST DAY OF THE PREVIOUS YEAR. ACCORDINGLY, THE AMOUNT CALCULATED UNDER THIS SUB RULE COMES TO RS.1,50,228/-. 5. THE LEARNED CIT (APPEALS) DIRECTED THE ASSESSIN G OFFICER TO VERIFY THE COMPUTATION SUBMITTED BY THE ASSESSEE, 3 REPRODUCED IN THE IMPUGNED ORDER. HE FURTHER DIREC TED THE ASSESSING OFFICER TO ALLOW RELIEF, IF ANY. 6. I HAVE HEARD THE RIVAL SUBMISSIONS. IT IS REL EVANT TO OBSERVE THAT THE HON'BLE BOMBAY HIGH COURT IN THE C ASE OF GODREJ & BOYCE MFG. CO. LTD. VS. DCIT (2010) 328 IT R 81 (BOM) HAS HELD THAT RULE 8D IS APPLICABLE FROM ASSE SSMENT YEAR 2008-09. IT HAS NO APPLICATION PRIOR TO ASSE SSMENT YEAR 2008-09. IN THE INSTANT CASE, THE ASSESSMENT YEAR IS 2007- 08. IT IS PERTINENT TO STATE HERE THAT FOLLOWING THE DECISION OF THE HON'BLE BOMBAY HIGH COURT IN THE CASE OF GOD REJ & BOYCE MFG. CO. LTD. (SUPRA) DIFFERENT BENCHES HAVE SET ASIDE THE MATTERS BACK TO THE ASSESSING OFFICER WHERE THE ADDITIONS WERE MADE ON THE BASIS OF RULE 8D. IN VIEW OF THE JUDGMENT OF THE HON'BLE BOMBAY HIGH COURT IN THE CASE OF GO DREJ & BOYCE MFG. CO. LTD. (SUPRA), RULE 8D IS NOT APPLICA BLE TO THE ASSESSMENT YEAR UNDER CONSIDERATION AND, THEREFORE, I SET ASIDE THE ORDERS OF THE LOWER AUTHORITIES ON THIS I SSUE AND REMAND THE MATTER TO THE FILE OF THE ASSESSING OFFI CER TO DECIDE THE ISSUE AFRESH IN ACCORDANCE WITH LAW AFTE R AFFORDING DUE AND REASONABLE OPPORTUNITY OF BEING HEARD TO TH E ASSESSEE. 7. FOR STATISTICAL PURPOSES, THIS GROUND OF APPEAL IS ALLOWED. 8. GROUND NO.3 READS AS UNDER : 3. THAT THE LEARNED C.I.T.(A) HAS ERRED IN SUSTAINING THE DISALLOWANCE OF REBATE U/S 80IC 4 RS.8,22,196/- ON ACCOUNT OF EXCHANGE RATE FLUCTUATIONS. 9. THE ASSESSEE HAS CLAIMED INCOME OF RS.8,00,196/ - ON ACCOUNT OF FOREIGN EXCHANGE FLUCTUATION. THE A SSESSING OFFICER DID NOT ALLOW DEDUCTION UNDER SECTION 80IC OF THE INCOME TAX ACT, 1961 (IN SHORT THE ACT) ON THE IN COME ON ACCOUNT OF FOREIGN EXCHANGE FLUCTUATION AND THE SAM E WAS ADDED TO THE TAXABLE INCOME OF THE ASSESSEE. 10. ON APPEAL, THE LEARNED CIT (APPEALS) UPHELD TH E ORDER OF THE ASSESSING OFFICER AND HENCE, THE ASSES SEE IS IN APPEAL BEFORE THE TRIBUNAL. 11. I HAVE HEARD THE RIVAL SUBMISSIONS. THE ISSU E IN HAND IS SQUARELY COVERED IN FAVOUR OF THE ASSESSEE AND AGAINST THE REVENUE BY THE DECISION OF THE HON'BLE BOMBAY H IGH COURT IN THE CASE OF CIT VS. RACHNA UDYOG (2010) 230 CTR (BOM) 72 WHEREIN THE HON'BLE HIGH COURT HELD AS UNDER : 5. HAVING HEARD THE LEARNED COUNSEL APPEARING ON BEHALF OF THE APPELLANT AND LEARNED COUNSEL APPEARING FOR THE ASSESSEE, WE ARE OF THE VIEW THAT THE DIFFERENCE ON ACCOUNT OF EXCHANGE RATE FLUCTUATION IS LIABLE TO BE ALLOWED UNDER S. 80- IB. THE EXCHANGE RATE FLUCTUATION ARISES OUT OF AND IS DIRECTLY RELATED TO THE SALE TRANSACTION INVOLVING THE EXPORT OF GOODS OF THE INDUSTRIAL UNDERTAKING. THE EXCHANGE RATE FLUCTUATION BETWEEN THE RUPEE EQUIVALENT OF THE VALUE OF THE GOODS EXPORTED AND THE ACTUAL RECEIPTS WHICH ARE REALIZED ARISES ON ACCOUNT OF THE SALE TRANSACTION. THE DIFFERENCE ARISES PURELY AS A 5 RESULT OF A FLUCTUATION IN THE RATE OF EXCHANGE BETWEEN THE DATE OF EXPORT AND THE DATE OF RECEIPT OF PROCEEDS, SINCE THERE IS NO VARIATION IN THE SALE PRICE UNDER THE CONTRACT. THE VIEW WHICH WE HAVE TAKEN IS ALSO CONSISTENT WITH THE VIEW TAKEN BY A DIVISION BENCH OF THIS COURT ON 15 TH DEC., 2009 IN THE CASE OF SYNTEL LTD. (IT APPEAL NOS.1974, 1976 AND 1978 OF 2009). IN THE CIRCUMSTANCES, WE WOULD AFFIRM THE JUDGMENT OF THE TRIBUNAL INSOFAR AS THE QUESTION OF EXCHANGE RATE FLUCTUATION IS CONCERNED. 12. FROM THE ABOVE, IT IS CLEAR THAT THE HON'BLE H IGH COURT HAS CATEGORICALLY HELD THAT THE EXCHANGE RATE FLUCTUATION ARISES OUT OF AND IS DIRECTLY RELATED T O THE SALE TRANSACTION INVOLVING THE EXPORT OF GOODS OF THE IN DUSTRIAL UNDERTAKING AND, THEREFORE, DIFFERENCE ON ACCOUNT O F EXCHANGE RATE FLUCTUATION IS ENTITLED TO DEDUCTION UNDER SEC TION 80IB OF THE ACT. NO CONTRARY DECISION WAS BROUGHT TO MY NO TICE. RESPECTFULLY FOLLOWING THE JUDGMENT OF THE HON'BLE BOMBAY HIGH COURT IN THE CASE OF CIT VS. RACHNA UDYOG (SU PRA), I HOLD THAT THE DIFFERENCE ON ACCOUNT OF EXCHANGE RAT E FLUCTUATION IS ENTITLED TO DEDUCTION UNDER SECTION 80IC OF THE ACT. THIS GROUND OF APPEAL IS ALLOWED. 13. GROUND NO.4 READS AS UNDER : 4. THAT THE LEARNED C.I.T.(A) HAS ERRED IN SUSTAINING THE DISALLOWANCE OF RS.9,74,237/- ON ACCOUNT OF INTEREST EXPENSE UNDER SECTION 36(1)(III). 6 9. THE ASSESSING OFFICER OBSERVED THAT THE DETAILS OF THE OTHER ADVANCES GIVEN BY THE ASSESSEE WERE EXAMI NED. THE ASSESSING OFFICER NOTICED THAT THE ASSESSEE HAD MAD E ADVANCES OF RS.3,20,94,000/- TO M/S SPR STATE & BUI LDERS LTD. FOR PURCHASE OF ASSETS. ACCORDING TO THE ASS ESSING OFFICER, THE ASSETS WERE NOT PUT TO USE DURING THE FINANCIAL YEAR RELEVANT TO ASSESSMENT YEAR UNDER CONSIDERATIO N. HE, THEREFORE, DISALLOWED THE PROPORTIONATE INTEREST @ 12% ON THE AMOUNT ADVANCED FOR PURCHASE OF ASSETS AND ADDED TH E SAME TO THE INCOME OF THE ASSESSEE. ON APPEAL, THE LEAR NED CIT (APPEALS) CONFIRMED THE DISALLOWANCE MADE BY THE AS SESSING OFFICER. 10. AT THE TIME OF HEARING, MS.MEHA KANSAL, LEARNE D A.R. FOR THE ASSESSEE SUBMITTED THAT THE PROVISIONS OF SECTION 36(1)(III) OF THE ACT ARE APPLICABLE IN THIS CASE. HOWEVER, SHE STATED THAT THE DISALLOWANCE OF INTEREST @ 12% IS N OT CORRECT AND THE SAME SHOULD BE WORKED OUT ON PRO-RATA BASIS . I FULLY AGREE WITH THE ABOVE SUBMISSIONS OF THE LEARNED A.R . FOR THE ASSESSEE AND DIRECT THE ASSESSING OFFICER TO RE-WOR K THE DISALLOWANCE ON PRO-RATA BASIS. THIS GROUND OF AP PEAL IS DISPOSED OFF ACCORDINGLY. 11. GROUND NO.5 OF THE APPEAL READS AS UNDER : 5. THAT THE LEARNED C.I.T.(A) HAS ERRED IN SUSTAINING THE DISALLOWANCE OF TOTAL INTEREST EXPENSES CLAIMED DURING THE YEAR OF RS.12,84,121/- U/S 14A AND 36(1)(III). 7 12. AT THE TIME OF HEARING OF THE APPEAL MS. MEHA KANSAL, LEARNED COUNSEL FOR ASSESSEE DID INTO PRESS FOR THIS GROUND OF APPEAL AND ACCORDINGLY, THE SAME IS DISMI SSED AS NOT PRESSED. 13. GROUND NO.6 OF THE APPEAL READS AS UNDER : 5. THAT THE LEARNED C.I.T.(A) HAS ERRED IN NOT ALLOWING DEDUCTIONS U/S 80IC FOR THE ADDITIONS MADE DUE TO CERTAIN DISALLOWANCES. 14. AFTER HEARING THE LEARNED REPRESENTATIVES OF B OTH THE PARTIES, I DIRECT THE ASSESSING OFFICER TO RE-COMPU TE THE DEDUCTION ALLOWABLE UNDER SECTION 80IC OF THE ACT K EEPING IN VIEW THE ABOVE OBSERVATIONS AND IN ACCORDANCE WITH LAW AFTER AFFORDING REASONABLE OPPORTUNITY OF BEING HEARD TO THE ASSESSEE. 15. IN THE RESULT, THE APPEAL OF THE ASSESSEE IS A LLOWED PARTLY AND PARTLY FOR STATISTICAL PURPOSES. ORDER PRONOUNCED IN THE OPEN COURT ON THIS 15 TH DAY OF JUNE, 2015. (H.L.KARWA) VICE PRESIDENT DATED : 15 TH JUNE, 2015 *RATI* COPY TO: THE APPELLANT/THE RESPONDENT/THE CIT(A)/TH E CIT/THE DR. ASSISTANT REGISTRAR, ITAT, CHANDIGARH 8