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Income Tax Appellate Tribunal, AHMEDABAD “B” BENCH
Before: Shri Mahavir Prasad & Shri Amarjit Singh
IN THE INCOME TAX APPELLATE TRIBUNAL AHMEDABAD “B” BENCH (Conducted Through Virtual Court) Before: Shri Mahavir Prasad, Judicial Member And Shri Amarjit Singh, Accountant Member
Sl. Appeal ITA A.Y. Appellant Respondent No.
1 2786/Ahd/2014 2011-12 The DCIT, Cir-8, Sintex Industries Ltd., A’bad A’bad 2 2702/Ahd/2014 2011-12 Sintex Industries The DCIT, Cir-8, Ltd., A’bad A’bad 3 1416/Ahd/2018 2013-14 The DCIT, Cir- Sintex Industries Ltd., 4(1)(1), A’bad A’bad 4 1417/Ahd/2018 2014-15 The DCIT, Cir- Sintex Industries Ltd., 4(1)(1), A’bad A’bad
PAN NO: AADCS0858E Revenue by: Shri Vinod Tanwani, CIT-D.R. Assessee by: Shri Bhavin Marfatia, A.R.
Date of hearing : 08-02-2021 Date of pronouncement : 08-04-2021 आदेश/ORDER PER : AMARJIT SINGH, ACCOUNTANT MEMBER:-
These four appeals filed by revenue except ITA No. 2702/Ahd/2014 filed by assessee, arise from order of the CIT(A), Ahmedabad, in proceedings under section 143(3) of the Income Tax Act, 1961; in short “the Act”.
All these three appeal filed by revenue and one appeal filed by assessee are interconnected based on similar issue and facts, therefore, for the sake of convenience, these appeals are adjudicated by this common
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order taking the facts of assessment year 2011-12 vide ITA No. 2786/Ahd/2014 and its findings will be applicable to the remaining three appeals.
ITA No. 2786/Ahd/2014 filed by revenue A.Y. 2011-12 3. The fact in brief is that return of income declaring income of Rs. 2,33,19,03,480/- was filed on 12th Sep, 2011. The case was subject to scrutiny assessment and notice u/s. 143(2) of the Act was issued on 3rd August, 2012. The assessee company is engaged in the business of manufacturing and dealing in cotton, synthetics plastic etc. The Assessing Officer completed the assessment u/s. 143(3) of the Act on 20th March, 2013 and total income was assessed at Rs. 2,79,13,06,590/- after making various additions and disallowances. The assessee filed appeal before the ld. CIT(A) against the order of Assessing Officer. The ld. CIT(A) has partly allowed the appeal of the assessee. The Revenue has filed the instant appeal against the decision of ld. CIT(A) in deleting the additions/disallowances made by the Assessing Officer. The various grounds of these issues filed by revenue are adjudicated as follows:-
Ground No. 1(Deleting the disallowance of deduction u/s. 80IC under the head interest and financial charges, common expenses of corporate expenses and common expenses of corporate and plastic division) 4. This ground relates to allocation of common interest and financial charges of Rs. 891.99 lacs to the Baddi Unit while calculating deduction u/s. 80IC of the Act. During the course of assessment, the Assessing Officer noticed that assessee company has allocated interest/financial changes of Rs.
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118.11 lacs in the accounts of the Baddi Unit. However, on perusal of the detail, the Assessing Officer observed that the assessee company was having common pools of funds as well as common bank accounts for its entire business being carried out from the head office. Therefore, the Assessing Officer was of the view that the interest expenditure required to be allocated proportionately in the ratio of sales for deduction u/s. 80IC of the Act for the industrial undertaking of the assessee. Accordingly, the Assessing Officer has allocated expenses of Rs. 891.99 lacs in the case of Baddi unit. The Assessing Officer also noticed that assessee company has debited common head expenses incurred by the company under various heads. The detail is given as under:- S. No. Particulars Amount (Rs. in lakhs) 1 Audit Fees 52-00 2 Computer maintenance expenses 11.98 3 Security charges 3.99 4 Director Fees 5.00 5 Provision for doubtful debts etc. 76.00 6 Charity & Donation 14.00 Total 162.97
The Assessing Officer further noticed that in respect of Baddi unit, the assessee has allocated expenses of Rs. 9.2 lacs and on the basis of turn over the Assessing Officer has made allocation of Rs. 20.14 lacs, therefore, the difference amount of Rs. 12.24 lacs was reduced from the claim of deduction u/s. 80IC of the Act. Further, the Assessing Officer noticed that there were certain expenses incurred by the plastic division and corporate division. The Assessing Officer was of the view that certain portion of these
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expenditure were also pertained to Baddi unit, therefore, on the basis of turnover, the Assessing Officer has allocated an amount of Rs. 475.75 lacs and the difference amount of Rs. 784.75 lacs was reduced from the claim of deduction u/s. 80IC of the Act in the case Baddi Unit.
Aggrieved assessee has filed appeal before the ld. CIT(A). The ld. CIT(A) has partly allowed the appeal of the assessee after making reference to the decision of his predecessor for assessment year 2009-10, assessment year 2010-11 in respect of interest and financial charges following the ratio of decision of earlier assessment year as referred above, the ld. CIT(A) has directed the Assessing Officer to allocate common interest & finance charges on the basis of investment in the Baddi units at the place of sale/turnover. In respect of addition on account of allocation common head expenses, the ld. CIT(A) has allowed the appeal of the assessee after following the order of his predecessor for assessment year 2009-10 and 2010-11 holding that when allocation of common head expenses are made on actual basis then there is no need for further allocation of such expenses on the basis of sales ratio. Similarly in respect of addition on account of expenses pertaining to plastic and corporate division, the ld. CIT(A) has also allowed the appeal of the assessee after following the decision of his predecessor of assessment year 2009-10 and 2010-11 holding that the Assessing Officer failed to put any reasoning to allocate such expenses on the basis of sales/turnover ratio.
During the course of appellate proceedings before us, the ld. counsel has submitted that aforesaid issue of allocation of expenses has been
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adjudicated by Co-ordinate Bench of the ITAT in favour of the assessee itself vide ITA No. 1548/Ahd/2012. The ld. Departmental Representative was fair enough not to controvert these undisputed fact that issue is covered in favour of the assessee by the order of the ITAT.
With the assistance of representatives, we have gone though the decision of Co-ordinate Bench of the ITAT vide ITA No. 1548/Ahd/2012 in the case of the assessee itself on identical facts/similar issue and noticed that allocation of common interest financial charges, common head expenses and allocation of plastic and corporate division expenses were adjudicated in favour of the assessee vide order of the ITAT for assessment year 2010-11 vide ITA No. 1548/Ahd/2012. The relevant part of the decision of the ITAT is discussed as under:- In respect of allocation of common interest and financial charges:- “17. We have duly considered rival contentions and gone through the record carefully. The case of the assessee is that financial charges cannot be allocated in the ratio of sales, because, the sales have no direct influence on the interest expenditure. The financial charges are relevant to the investment made by an assessee. In other words, suppose an assessee has made investment after borrowing funds due to some reason or market conditions he could not effect the sales, then, if we go by the logic of the AO, there would be a lesser allocation. The assessee has allocated the expenditure on account of financial charges, keeping in view the investment in Bhaddi units. In other words, these are direct expenditure relatable to Bhaddi units. Therefore, the Id.CIT(A) has rightly deleted the allocation of interest/financial charges in the Bhaddi made on the basis of sales ratio. We do not find any infirmity in the order of the Id.CIT(A) on this issue.” Allocation of common head expenses:- “25. With the assistance of the ld. representatives, we have gone through the record carefully. There is no dispute with regard to the proposition that if any unit, which is entitled for deduction under Chapter-VI of the Income Tax Act viz. 80IA or 80IC in the present case, if avails the benefit of certain facilities for which the expenses are incurred under common pool, then a proportionate allocation, according to the scientific method, ought to be made, While dealing with the issue for the purpose of allocation under section 80IA is concerned, we have upheld the allocation in the ratio of turnover. Similarly, we have not uphold the allocation of financial charges in the ratio of sales made from the products of 80IC units vis-a-vis the total sales made by the company, because, we have observed that such expenditure is to be worked out on the basis of actual investment made in 80IC units. With this analogy, when we examine the details, for the purpose of allocation under the present head, then it would reveal that the assessee has been maintaining separate accounts for these units. It has debited expenditure on actual basis. The AO did not find
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any error in that attribution. He simply jumped to make allocation on the basis of sales made by these units vis-a-vis the total sales. That is not a scientific 'criteria for making disallowance. The Id.CIT(A) has accepted the contention of the assessee, it has considered all these expenditure, and where there is a direct nexus with the activity of 80IC units, vis-a-vis this expenditure, it has already made disallowance. Let us take an example. As far as security charges are concerned, the assessee already accounted the security charges relevant for the purpose of 80IC units. Why allocation out of the expenditure incurred at head office ought to be made to this unit. Similarly, it has allocated out of computer maintenance. This expenditure would relate to the computers which are directly involved in 80IC units. After considering the orders of the Id.CIT(A) on this issue, we do not find any error in the orders, and accordingly, the orders of the-CIT(A) in both the years are upheld on this issue. The Id.CIT(A) has rightly deleted the disallowance made by the AO, out of common head expenses of corporate division.”
In respect of plastic and corporate division:- “28. We have examined the details with the assistance of the representatives. In our reasoning given while upholding the deletion ut of certain common head expenses, we do not find any error in deleting the disallowance under these head. The basic reason is that the assessee has debited expenditure which has direct nexus with 80IC units. Such expenditure cannot be amplified by considering the sales ratio. The AO has nowhere highlighted, as to which particular facility was used by the assessee, generated out of common head expenses. He simply adopted the figure of sales and then proceeded to disallow the expenditure. In our opinion, the Id.AO ought to have examined this aspect, and find out that a particular item of expenditure incurred by e assessee at head office, which has given benefit to 80IC unit, only out of that expenditure, if he made an allocation, then his stand could be justified. Therefore, following our finding in earlier grounds, we do not find any merit in this ground of appeal of the Revenue, the orders of the CIT(A) on this issue are upheld.”
Following the decision of the Co-ordinate Bench of the ITAT as supra, we do not find any error in the decision of ld. CIT(A) for allocating common interest & financial charges on the basis of investment. Similar in respect of deleting addition of common head expenses and plastic/corporate division expenses made on sales basis, we do not find any infirmity in the decision of ld. CIT(A) after following the decision of the Co-ordinate Bench as cited above in this order. Taking into consider the finding of the Co- ordinate Bench in the case of assessee itself on the aforesaid issues, we do not find any reason to interfere in the decision of ld. CIT(A), therefore, this ground of appeal of the revenue is dismissed.
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Ground No. 2(restricting disallowance u/s. 14A of Rs. 1.766 lacs as against Rs. 23.305 crores made by the Assessing Officer & ground no. 4 of assessee vide ITA No. 2702/Ahd/2017 confirming disallowance of Rs. 1.766 crore u/s. 14A of the act)
During the course of assessment, the Assessing Officer noticed that assessee company has received dividend income of Rs. 85,49,180/-. However, the assessee had disallowed only Rs. 1,42,083/- in respect of expenditure incurred for earning exempt income. On query, the assessee explained that investment was made out of surplus and internal accrual available with the company and no borrowed fund was used. The Assessing Officer has not accepted the contention of the assessee that no expenditure has been incurred in relation to exempt income and computed the disallowance to the amount of Rs. 23,31,86,985/- after applying the rule 8D of the I.T. Rule, 1961.
The assessee has filed appeal before the ld. CIT(A) . The ld. CIT(A) has partly allowed the appeal of the assessee and restricted disallowance to the amount of Rs. 1.78 crores.
During the course of appellate proceedings before us, the ld. counsel submitted that on similar issue disallowance made for assessment year 2010- 11 was deleted by the ITAT vide ITA No. 1598/Ahd/2012 and the Hon’ble High Court has also decided this issue in favour of the assessee vide IT Appeal No. 268 of 2017. The ld. counsel has further submitted that Hon’ble Supreme Court has also dismissed the Special Leave Petition filed by the Revenue against the order of Hon’ble Gujarat High Court. The ld. counsel is
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fair enough not to controvert these undisputed facts that assesse’s is covered by the decision of Co-ordinate Bench of the ITAT for assessment year 2010- 11 as cited above.
With the assistance of ld. representatives, we have gone through the decision of Co-ordinate Bench of the ITAT for assessment year 2010-11 and noticed that at para 36 and 37 of the order the issue has been adjudicated in favour of the assessee. The relevant part of the decision of the Co-ordinate Bench is reproduced as under:- “36. We have duly considered rival contentions. As far as the proposition of the ld.CIT-DR that even in the absence of any mechanism for disallowance, the expenditure, which is attributable to earning of exempt income can be worked out on estimate basis or reasonableness basis after looking into the facts and circumstances of a particular case is concerned, we do not have any dispute. The amounts can be disallowed on estimate basis. In the present appeals, the assesses itself has made disallowance of Rs.5.10 lakhs in the Asstt.Year 2009-10 and Rs.52,000/- in the Asstt.Year 2010-11. In the Asstt.Year 2009-10, the exempt income is of Rs.2.02 crores whereas in the Asstt.Year 2010-11 it is Rs.22.50 lakhs. Before embarking upon the facts of the present case, we deem it pertinent to take note of the observations of the Delhi High Court recorded in para-29 of the judgment in the case of Maxopp Investment Ltd. (supra). It reads as under: "Scope of sub-sections (2) and (3) of Section 14A 29. Sub-section (2) of Section 14A of the said Act provides the manner in which the Assessing Officer is to determine the amount of expenditure incurred in relation to income which does not form part of the total income. However, if we examine the provision carefully, we would find that the Assessing Officer is required to determine the amount of such expenditure only if the Assessing Officer, having regard to the accounts of the assessee, is not satisfied with the correctness of the claim of the assessee in respect of such expenditure in relation to income which does not form part of the total income under the said Act. In other words, the requirement of the Assessing Officer embarking upon a determination of the amount of expenditure incurred in relation to .exempt income would be triggered only if the Assessing Officer returns a finding that he is not satisfied with the correctness of the claim of the assessee in respect of such expenditure. Therefore, the condition 'precedent for the Assessing Officer entering upon a determination of the amount of the expenditure incurred in relation to exempt income is that the Assessing Officer must record that he is not satisfied with the correctness of the claim of the assessee in respect of such expenditure. Sub-sect/on (3) is nothing but an offshoot of sub-section (2) of Section 14A. Sub-section (3) applies to cases where the assessee claims that no expenditure has been incurred in relation to income which does not form part of the total income under the said Act. In other words, sub-section (2) deals with cases where the assessee specifies a positive amount of expenditure in relation to income which does not form part of the total income under the said Act and sub-section (3) applies to cases where the assessee asserts that no expenditure had been incurred in relation to exempt income. In both cases, the Assessing Officer, if satisfied with the correctness of the claim of the assessee in respect of such expenditure or no expenditure, as the case may be, cannot embark upon a determination of the amount of expenditure in
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accordance with any prescribed method, as mentioned in subsection (2) of Section 14A of the said Act. It is only if the Assessing Officer is not satisfied with the correctness of the claim of the assessee, in both cases, that the Assessing Officer gets jurisdiction to determine the amount of expenditure incurred in relation to such income which does not form part of the total income under the said Act in accordance with the prescribed method. The prescribed method being the method stipulated in Rule 8D of the said Rules. While rejecting the claim of the assessee with regard to the expenditure or no expenditure, as the case may be, in relation to exempt income, the Assessing Officer would have to indicate cogent reasons for the same." 37. According to the Hon'ble Delhi High Court, when an assessee demonstrate actual incurrence of the expenditure, then Rule 8D would not be automatically applied without looking into the explanations. In other words, when an assessee has worked out the expenditure relatable to earning of exempt income on actual, basis and demonstrated to the AO the incurrence of such expenditure, then AO has to record a finding that he was not satisfied with the correctness of the expenditure shown by the assessee. In other words, he has to verify the account of the assessee, and if he was not satisfied with the correctness of the claim made by the assessee, then, after assigning reasons, he would proceed to compute the expenses on the basis of the method brought in the Rule 8D. In the light of the above proposition, let us examine the facts in both the years and finding recorded by the AO. The main contention of the assessee in both the years is that it has made investment in the mutual fund with "growth option". In the case of growth option, no dividends are declared by the mutual fund, and only income declared by an investor is in the form of capital gains. The capital gains derived by the assessee on mutual fund are taxable and not an exempt income derived from such investment. In the Asstt.Year 2009-10, the assessee has offered a sum of Rs.19.22 crores on sale of such investment for taxation as short/long term capital gain. Similarly, in the Asstt.year 2010-11, a sum of Rs.8.23 crores has been offered. The investment made by the assessee was not out of interest bearing fund. It has its own surplus fund out of which investment has been made. The assessee has demonstrated that it had own funds of Rs.1981.55 crores in the Asstt.Year 2009-10 and investment in the mutual fund was only Rs.144.51 crores. The assessee has also submitted that its investment in earning exempt income has been reduced during the year from 78.45 crores to Rs.18.09 crores. The assessee has submitted these details in its submissions reproduced by the AO. Similarly, in the Asstt.Year 2010-11, it has reserve fund of Rs.2319.17 crores and made investment of Rs.111.09 crores. The Id.AO has not given any heed to these submissions or figures submitted by the assessee. The assessee has further made disallowance of Rs.5.12 lacs in the Asstt.Year 2009-10. This was mainly for management of investment. He simply discussed the background for bringing section 14A as well Rule 8D on the statute book. He has specifically not worked out the amounts even on the basis of Rule 8D. He called for a working from the assessee and made a lumpsum addition in both the years. The Id.AO has not recorded any finding that amounts added back by the assessee are not commensurate with the administrative expenses which might be attributable to earning exempt income. Because, on interest expenses account, there cannot be any disallowance as the assessee has far more interest free fund than investment. We are of the view that the Id.CIT(A) has looked into all these aspects in the Asstt.Year 2009-10 before deleting the disallowance. We do not find any error in the order of the Id.CIT(A) on this issue in Asstt.Year 2009-10. Consequently, we allow the ground of appeal raised by the assessee in the Asstt.Year 2010-11 and delete the disallowance made by the AO.” Respectfully following the decision of Co-ordinate Bench of the ITAT in the case of the assessee itself for A.Y. 2009-10 and A.Y. 2010-11 the appeal of the Revenue is dismissed. Regarding the appeal of the assessee, we direct the Assessing Officer to decide the issue afresh after examination/verification of the details filed by the assessee as per the
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direction laid down in the decision of the Co-ordinate Bench of the ITAT in the case of the assessee itself as supra vide ITA No. 1598/Ahd/2012 and decision of Hon’ble Gujarat High Court vide IT Appeal No. 268 of 2017. Therefore, appeal fo the assessee is allowed for statistical purposes.
Ground No. 3 (Deleting addition of Rs. 5,28,10,870/- on account of foreign exchange fluctuation gain)
During the course of assessment, the Assessing Officer noticed that the amount of Rs. 5,28,10,870/- was accounted for as exchange gain based on exchange rate prevailing on March, 31, 2011. The assessee has relied upon the provision of section 43A of the Act. However, the Assessing Officer has not agreed with the contention of the assessee and stated that gain on foreign exchange fluctuation has to be taxed in the year under consideration and accordingly added the foreign exchange fluctuation gain of Rs. 5,28,10,870/- to the total income of the assessee.
The assessee has filed appeal before the ld. CIT(A) . The ld. CIT(A) has allowed the appeal of the assessee after following the decision of his predecessor for assessment year 2010-11. The relevant part of the decision of the ld. CIT(A) is reproduced as under:- “I am inclined with appellant that merely on account of gain in foreign exchange fluctuation related to liability towards FCCB, the A.O. treated them as taxable u/s 28 of the Act though the foreign exchange loss in earlier years on the same issue were not dealt accordingly. I am also inclined with the contention that in view of provisions of section 43A of the Act and clear instruction / explanation / clarification from the CBDT in various circulars as well as legal proposition, the nature of such foreign exchange gain will remain capital in nature and required to be adjusted towards cost of shares of subsidiary at the time of payment of FCCB. There is no dispute as far as amount of foreign exchange gain related to liability of FCCB loan related to its utilization for shares of subsidiary company. It is therefore considering the facts, provisions of section 43A of the Act, CBDT circulars, ratio of various case laws relied on by appellant and ratio of my predecessor in the case of appellant in appeal order for A.Y. 10-11, the A.O. is not justified in treating Rs. 5,28,10,870/- as taxable gain. The A.O. is directed to treat the same as notional
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gain of capital nature and delete the addition so made. The appellant gets relief accordingly. This ground is treated as allowed.”
During the course of appellate proceedings before us, the ld. counsel has contended that similar issue has been adjudicated by the Co-ordinate Bench of the ITAT in the case of the assessee for assessment year 2010-11 vide ITA No. 1548/Ahd/2012. The ld. counsel also submitted that Hon’ble Gujarat High Court has also confirmed the order of the ITAT for assessment year 2010-11. The ld. Departmental Representative is fair enough not to controvert these undisputed facts that issue is covered by the decision of the ITAT as referred above.
With the assistance of ld. representatives, we have gone through the decision of ITAT on the similar issue and identical facts and noticed that vide ITA No. 1548/Ahd/2012 the issue was decided in favour of the assessee. The relevant part of the decision is given at para no. 51 & 52 of the ITAT is reproduced as under: - “51. We have considered rival contentions and gone through the record carefully, In the case of ACIT Vs. Elecon Engineering (supra), the Hon'ble Supreme Court has considered the scope of section 43A and observed that where the assessee has acquired asset outside India for the purpose of his business, and that asset was acquired by borrowed funds, the amount by which the liability stood increased or reduced on account of foreign exchange rate during the previous year, they be added to or deducted from the actual cost of the asset as defined in section 43(1) of the Income Tax Act. The observation of the Hon'ble Supreme Court has been noticed by the Id.CIT(A) while taking note of assessee's submissions on page no.49 of the impugned order. The observation of the Hon'ble Supreme Court reads as under: "9. Section 43 A, before its substitution by a new section 43 A vide Finance Act, 2002, was inserted by Finance Act, 1967 with effect from 1-4-1967, after the devaluation of the rupee on 6-6-1966. It applied where as a result of change in the rate of exchange there was an increase or reduction in the liability of the assessee in terms of the Indian rupee to pay the price of any asset payable in foreign exchange or to repay moneys borrowed in foreign currency specifically for the purpose of acquiring an asset. The section has no application unless an asset was acquired and the liability existed, before change in the rate of exchange. When the assessee buys an asset at a price, its liability to pay the same arises simultaneously. This liability can increase on account of fluctuation in the rate of exchange. An assessee who becomes the owner of an asset (machinery) and starts using the same, it becomes entitled to depreciation allowance. To work out the amount of depreciation, one has to look to the cost of the asset in respect of which depreciation is
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claimed. Section 43A was introduced to mitigate hardships which were likely to be caused as a result of fluctuation in the rate of exchange. Section 43A lays down, firstly, that the increase or decrease in liability should be taken into account to modify the figure of actual cost and, secondly, such adjustment should be made in the year in which the increase or decrease in liability arises on account of fluctuation in the rate of exchange. It is for this reason that though section 43A begins with a non obstante clause, it makes section 43(1) its integral part. This is because section 43A requires the cost to be recomputed in terms of section 43Afor the purposes of depreciation [Sections 32 and 43(1)]. A perusal of section 43A makes it clear that insofar as the depreciation is concerned, it has to be a/lowed on the actual cost of the asset, less depreciation that was actually a/lowed in respect of earlier years. However, where the cost of the asset subsequently increased on account of devaluation, the written down value of the asset has to be taken on the basis of the increased cost minus the depreciation earlier allowed on the basis of the old cost. One more aspect needs to be highlighted. Under section 43A, as it stood at the relevant time, it was inter alia provided that where an assessee had acquired an asset from a country outside India for the purposes of his business, and in consequence of a change in the rate of exchange at any time after such acquisition, there is an increase or reduction in the liability of the assessee as expressed in Indian currency for making payment towards the whole or part of the cost of the asset or for repayment of the whole or part of the moneys borrowed by him for the purpose of acquiring the asset, the amount by which the liability stood increased or reduced during the previous year shall be added to or deducted from the actual cost of the asset as defined in section 43(1)." 52. The issue in dispute before us squarely covered by the above preposition. In view of the above decision, we do not find any merit in this ground of appeal. It is rejected.”
We have also gone through the decision of the Hon’ble Jurisdictional High Court of Gujarat in the case of the assessee itself on the identical issue. The relevant part of the decision vide Tax Appeal No. 268 of 2017 is discussed as under:- “10. Now so far as impugned order passed by the learned Tribunal in deleting the disallowance of Rs. 39,48,81,350/- = incurred towards foreign exchange gain is concerned, at the outset, it is required to be noted that the money was borrowed by the assessee in foreign exchange for the purpose of expanding its business and making investment. Therefore, as rightly observed by the learned CIT(A) as well as the learned Tribunal, the purpose was, on capital account and any exchange fluctuation resulting into profit or loss should be treated on capital account and adjusted from the cost of the asset, but it cannot have any impact on the revenue account. At this stage, it is required to be noted that in the case of the very assessee, the assessee had incurred loss in the same account in the earlier assessment years as well as subsequent assessment year and the treatment given by the assessee has been accepted. Therefore, the leaned CIT(A) as well as the Tribunal has rightly deleted the disallowance of Rs. 39,48,81,350/- = made on account of foreign gain. Even otherwise, the issue involved in the present Tax Appeal is squarely answered in favour of the assessee by the decision of the Hon’ble Supreme Court in the case of ACIT v. Elecon Engineering Company Limited, reported in 189 Taxmann 83 [2010] 10.1 At this stage, decision of Division Bench of this Court in the case of Principal Commissioner of Income-tax v. India Gelatine & Chemicals Limited, [2015] 376 ITR 553 [Guj] needs a reference where the Division Bench has held and observed that when the assessee had sufficient interest free funds out of which concerned investments had been made, disallowance under Section 14A of the Act is not justified.
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Considering the aforesaid facts and circumstances, it cannot be said that the learned Tribunal has committed any error in deleting the disallowance of expenditure of Rs. 39,48,81,350/- incurred towards foreign exchange gain. We concur with the findings recorded by the learned CIT(A) as well as Tribunal. No substantial question of law arises.”
Following the decision of the Co-ordinate Bench of the ITAT and the findings of Hon’ble Jurisdictional Gujarat High Court in the cases of the assessee itself as supra on the identical issue on same facts we do not find any merit in the appeal of the Revenue therefore same stands dismissed.
ITA No. 2702/Ahd/2014 A.Y. 2011-12 filed by assessee 16. The ground nos. 1 to 3 are not pressed, therefore, the same stands dismissed as not pressed.
Ground No. 5 (Addition of Rs. 4,29,414/- for late contribution to ESIC) 17. During the course of assessment , the Assessing Officer noticed that assessee has made delay in depositing employees’ contribution towards PF and ESIC, therefore, an amount of Rs. 5,79,319/- was disallowed in view of the provisions of section 36(i)(va) and section 2(22)(x) of the act.
The ld. CIT(A) has sustained the addition after following the decision Hon’ble Jurisdictional Gujarat High Court in the case of Gujarat State Road Transport Corporation.
Heard both the sides. In view of the decision of Hon’ble Gujarat High Court in the case of Gujarat State Road Transport Corporation (2014) 41 taxman.com 100, we do not find any merit in the appeal of the assessee and the same stands dismissed.
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ITA No. 1416/Ahd/2018 A.Y. 2013-14 filed by revenue
Ground No. 1 (Allowing the deduction u/s. 80IC of the act of Rs. 11,37,41,397/- ) 20. As the facts and issue involved in ground of appeal no. 1 vide ITA No. 2786/Ahd/2014 Assessment Year 2011-12 are similar as in ITA No. 1416/Ahd/2015 Assessment Year 2013-14 therefore after applying the decision adjudicated vide ITA No. 2786/Ahd/2014 as supra in this order, this ground of appeal of the revenue stands dismissed.
Ground No. 2 (Deleting the disallowance of Rs. 22,61,28,325/-u/s. 14A and restricting the same to the extent of exempt income) 21. As the facts and issue involved in ground of appeal no. 2 vide ITA No. 2786/Ahd/2014 Assessment Year 2011-12 are similar as in ITA No. 1416/Ahd/2015 Assessment Year 2013-14 therefore after applying the decision adjudicated vide ITA No. 2786/Ahd/2014 as supra in this order, this ground of appeal of the revenue stands dismissed.
Ground No. 3 (Deleting the addition of Rs. 65,77,113/- on account of forex gain u/s. 43A of the act) 22. As the facts and issue involved in ground of appeal no. 3 vide ITA No. 2786/Ahd/2014 Assessment Year 2011-12 are similar as in ITA No. 1416/Ahd/2015 Assessment Year 2013-14 therefore after applying the decision adjudicated vide ITA No.
I.T.A Nos. 2786, 2702/Ahd/2014 & 1416, 1417/Ahd/2018 Page No 15 DCIT vs. Sintex Industries Ltd.
2786/Ahd/2014 as supra in this order, this ground of appeal of the revenue stands dismissed.
ITA No. 1417/Ahd/2018 A.Y. 2014-15 filed by revenue
Ground No. 1 (Allowing the deduction u/s. 80IC of the act of Rs. 2,33,56,462/- )
As the facts and issue involved in ground of appeal no. 1 vide ITA No. 2786/Ahd/2014 Assessment Year 2011-12 are similar as in ITA No. 1417/Ahd/2015 Assessment Year 2013-14 therefore after applying the decision adjudicated vide ITA No. 2786/Ahd/2014 as supra in this order, this ground of appeal of the revenue stands dismissed.
Ground No. 2 (Deleting the disallowance of Rs. 38,91,06,367/-u/s. 14A and restricting the same to the extent of exempt income)
As the facts and issue involved in ground of appeal no. 2 vide ITA No. 2786/Ahd/2014 Assessment Year 2011-12 are similar as in ITA No. 1417/Ahd/2015 Assessment Year 2013-14 therefore after applying the decision adjudicated vide ITA No. 2786/Ahd/2014 as supra in this order, this ground of appeal of the revenue stands dismissed.
Ground No. 3 (Deleting the addition of Rs. 38,91,06,367/- u/s. 14A)
I.T.A Nos. 2786, 2702/Ahd/2014 & 1416, 1417/Ahd/2018 Page No 16 DCIT vs. Sintex Industries Ltd.
As the facts and issue involved in ground of appeal no. .... vide ITA No. 2786/Ahd/2014 Assessment Year 2011-12 are similar as in ITA No. 1416/Ahd/2015 Assessment Year 2013-14 therefore after applying the decision adjudicated vide ITA No. 2786/Ahd/2014 as supra in this order, this ground of appeal of the revenue stands dismissed.
In the result, appeal ITAs 2786/Ahd/2014, 1416/Ahd/2018, and 1417/Ahd/2018 filed by revenue are dismissed and appeal ITA No. 2702/Ahd/2014 filed by assessee is partly allowed.
Order pronounced in the open court on 08-04-2021
Sd/- Sd/- (MAHAVIR PRASAD) (AMARJIT SINGH) JUDICIAL MEMBER ACCOUNTANT MEMBER Ahmedabad : Dated 08/04/2021 आदेश क� ��त�ल�प अ�े�षत / Copy of Order Forwarded to:- 1. Assessee 2. Revenue 3. Concerned CIT 4. CIT (A) 5. DR, ITAT, Ahmedabad 6. Guard file. By order/आदेश से,
उप/सहायक पंजीकार आयकर अपील�य अ�धकरण, अहमदाबाद