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Income Tax Appellate Tribunal, “A” BENCH, KOLKATA
Before: SHRI RAJPAL YADAV, HON’BLE & DR. MANISH BORAD, HON’BLE
O R D E R
PER DR. MANISH BORAD, ACCOUNTANT MEMBER :
The present appeal is directed at the instance of the assessee against the order of the National Faceless Appeal Centre, Delhi, [hereinafter the “ld. CIT(A)”] dt. 12/06/2023, passed u/s 250 of the Income Tax Act, 1961 (“the Act”) for the Assessment Year 2013-14.
Facts in brief are that the assessee is a limited company engaged in manufacturing and dealing of refractory goods. After the income being declared in the return for Assessment Year 2013-14 filed on 28/09/2013 at Rs.1,68,54,590/- which has been subsequently revised on 31/03/2014 declaring total income at Rs.1,64,33,030/-. Case picked up for scrutiny through CASS followed by issuance of notice u/s 143(2) and 142(1) of the Act which were duly served. The ld. Assessing Officer considering the submissions of the assessee made certain additions and disallowance amounting to Rs. 14,43,282/- and assessed Assessment Year: 2013-14 Maithan Ceramic Ltd. 2 income at Rs. 1,78,76,308/-. The assessee challenged the said additions/disallowances before the ld. CIT(A) but failed to succeed.
Aggrieved the assessee is now in appeal before this Tribunal challenging the following additions/disallowance confirmed by the ld. CIT(A):- (a) Foreign exchange losses – Rs.7,74,799/- (b) Disallowance u/s 14A of the Act – Rs. 4,00,000/- (c) Difference in income from house property – Rs.1,43,894/- (d) Interest received on IT Refunds – Rs. 1,43,894/- 4. The ld. Counsel for the assessee vehemently argued referring to the paper book dt. 18/09/2023 containing 94 pages and also made detailed submissions in support of its grounds of appeal
. On the other hand, the ld. D/R supported the order of the ld. CIT(A).
5. We have heard rival contentions and perused the material available on record.
6. The first issue for our consideration is disallowance of foreign exchange loss at Rs.7,74,799/-. We observe that the alleged loss is a marked to market loss and has basically arisen on account of assigning value to a position held in a financial instrument based on its market price on the closing day of the accounting or reporting record. By this way of showing the marked to market loss, the parties have to report the actual value on the reporting date and this is required from the point of view of transparent accounting practices. However, when the transaction is finally settled then such notional loss/profit is adjusted and finally the actual loss/profit is declared in the books. The alleged loss pertains to a transaction which has not been squared off during the year and only in order to make proper presentation of accounts of such notional loss has been booked.
Assessment Year: 2013-14 Maithan Ceramic Ltd. 3 7. Therefore, the alleged disallowance of foreign exchange loss is uncalled for and we find support from the decision of this Tribunal in the case of M/s Himadri Chemicals & Industries Ltd. -vs- Pr. CIT, Circle-1, Kolkata; Assessment Year : 2012-13; order dt. 05/09/2018 wherein this Tribunal after considering the ratio laid down by the Hon’ble Supreme Court in the case of CIT vs Woodward Governor of India Ltd reported in 312 ITR 254 (SC) had held that MTM loss is an actual and ascertained liability and only the payment of the same falls on a future date after the Balance Sheet date and the loss is real and accurately determined on such date. Thus, the finding of the ld. CIT(A) is set aside and the relevant ground challenging the said disallowance of foreign exchange loss is allowed.
The next issue for our consideration is disallowance u/s 14A of the Act. The uncontroverted fact is that the assessee has not earned any exempt income during the year and, therefore in view of the judgment of the Hon’ble Delhi High Court in the case of PCIT Vs. Era Infrastructure (India) Ltd. (ITA 204/2022) judgment dt. 20/07/2022, wherein the Hon’ble Court has held that the amendment made in Section 14A of the Act by Finance Act, 2022, will be applicable prospectively and also held that disallowance u/s 14A of the Act should not exceed the exempt income earned by the assessee during the year, set aside the finding of the ld. CIT(A) and delete the disallowance of Rs.4,00,000/- made u/s 14A of the Act in absence of any exempt income. Thus, the relevant ground raised
by the assessee is allowed.
9. The third issue for our consideration is addition of income from house property. As per the 26AS details, TDS deducted on rent is Rs. 1,61,796/- which corresponds to the rental income of Rs.16,17,984/- Assessment Year: 2013-14 Maithan Ceramic Ltd. 4 whereas the assessee has disclosed the income from rent at Rs.14,44,000/-. The difference has been added by the Assessing Officer as income from house property not disclosed in the return. Before us it has been claimed by the ld. Counsel for the assessee that the rent is Rs.1,20,000/- per month and TDS of Rs. 1,61,796/- has been rightly claimed in the return of income because the tenant/deductor has included the figure of service tax in the monthly rent and has deducted the TDS accordingly. We notice that copy of the rent agreement is placed on record at paper book page 38 to 48 and the monthly rent is stated to be Rs.1,20,000/- per month and, therefore, this contention of the assessee that the figure adopted in 26AS includes service tax has merit. 9.1. We accordingly considering the fact that the assessee has declared the correct income from rent in its books of accounts and the alleged difference is only on account of service tax which has been included by the deductor in the total amounts paid by him towards rent. We thus, set aside the finding of the ld. CIT(A) and delete the addition of Rs. 1,24,589/- and accordingly allow the relevant grounds raised by the assessee.
10. The fourth issue for our consideration is the addition of interest income of Rs.1,43,894/-. As per the details placed before us, we notice that the said addition is towards interest from Income-tax refund. It is stated by the assessee that for Assessment Year 2006-07, interest on income tax refund of Rs.4,39,655/- was granted vide assessment order dt. 143(3)/153A of the Act and the same was subsequently reduced to Assessment Year: 2013-14 Maithan Ceramic Ltd. 5 Rs. 2,93,106/- vide order u/s 154/153A/143(3) of the Act dt. 17/02/2012. 10.1. Since the assessee has disclosed the interest income from income tax refund during the financial year 2009-10, but finally when the interest on income tax refund was reduced, it claimed the set off during the year under appeal. As per the ld. Counsel for the assessee, the said addition is uncalled for, however, before us necessary details in support of the said claim has not been placed and the matter requires re-examination at the end of the Assessing Officer. Both the sides had no objection and we accordingly restore this issue of addition of interest income of Rs.1,43,894/- to Assessing Officer for afresh adjudication. Accordingly this ground/issue is allowed for statistical purposes.