Jcbl India Pvt. Ltd., Chandigarh vs Assessee

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, D R

Date of hearing : 11.06.2015 Date of Pronouncement : 15.06.2015

PER H.L.KARWA, VP :

This appeal filed by the assessee is directed against

the order of the learned Commissioner of Income Tax

(Appeals), Chandigarh dated 16.1.2012 relating to assessment

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 s u s t a i n i n g t h e d i s a l l o wa n c e o f r e b a t e u / s 8 0 I C R s . 5 , 5 0 , 8 6 6 / - a s p e r R u l e 8 D r e a d wi t h s e c t i o n 14A."

4. Briefly stated, the facts of the case are that the

assessee had earned dividend income, which is exempt 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 filed 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 Assessing

Officer as under :

"The assessee has c l a i me d total interest of Rs.13,74,875/-. T h e d i s a l l o wa n c e c o m p u t e d a s p e r t h e f o r mu l a g i v e n i n R u l e 8 D ( 2 ) ( i i ) c o m e s t o R s . 4 , 0 0 , 6 3 8 / - .

Rule 8D(2)(iii)

"An amount equal to one half percent of the a v e r a g e o f t h e v a l u e o f i n v e s t me n t , i n c o me f r o m wh i c h d o e s n o t o r s h a l l n o t f o r m p a r t o f t h e t o t a l i n c o me , a s a p p e a r i n g i n t h e b a l a n c e s h e e t o f t h e assessee, on the f irst day and the last day of the previous year.

Accordingly, the amount calculated under this sub r u l e c o me s t o R s . 1 , 5 0 , 2 2 8 / - . "

5. The learned CIT (Appeals) directed the Assessing

Officer to verify the computation submitted by the assessee, 3

reproduced in the impugned order. He further directed the

Assessing Officer to allow relief, if any.

6. I have heard the rival submissions. It is relevant to

observe that the Hon'ble Bombay High Court in the case of

Godrej & Boyce Mfg. Co. Ltd. Vs. DCI T (2010) 328 I TR 81

(Bom) has held that Rule 8D is applicable from assessment

year 2008-09. It has no application prior to assessment 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 Godrej &

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 Godrej &

Boyce Mfg. Co. Ltd. (supra), Rule 8D is not applicable to the

assessment year under consideration and, therefore, I set

aside the orders of the lower authorities on this issue and

remand the matter to the file of the Assessing Officer to

decide the issue afresh in accordance with law after affording

due and reasonable opportunity of being heard to the

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 s u s t a i n i n g t h e d i s a l l o wa n c e o f r e b a t e u / s 8 0 I C 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 Assessing

Officer did not allow deduction under section 80IC of the

Income Tax Act, 1961 (in short 'the Act') on the income on

account of foreign exchange fluctuation and the same was

added to the taxable income of the assessee.

10. On appeal, the learned CIT (Appeals) upheld the

order of the Assessing Officer and hence, the assessee is in

appeal before the Tribunal.

11. I have heard the rival submissions. The issue in

hand is squarely covered in favour of the assessee and against

the Revenue by the decision of the Hon'ble Bombay High 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 a p p e a r i n g f o r t h e a s s e s s e e , we a r e o f t h e v i e w th at the d iff erence on account of exchange rate f l u c t u a t i o n i s l i a b l e t o b e a l l o we d u n d e r s . 8 0 - IB. T he exchange rate f luctuation arises out of and is directly related to the sale transaction involving the export of goods of the industrial undertaking. The exchange rate f luctuation b e t we e n t h e r u p e e e q u i v a l e n t o f t h e v a l u e o f t h e g o o d s e x p o r t e d a n d t h e a c t u a l r e c e i p t s wh i c h are realized arises on account of the sale transaction. T he diff erence arises purely as a 5

result of a f luctuation in the rate of exchange b e t we e n the date of export and the date of receipt of proceeds, since there is no variation in the sale price under the contract. T he vie w wh i c h we h a v e t a k e n i s a l s o c o n s i s t e n t wi t h t h e vie w taken by a Division Bench of this Court on 15th Dec., 2009 in the case of Syntel Ltd. (IT Appeal Nos.1974, 1976 and 1978 of 2009). In the c i r c u ms t a n c e s , we wo u l d af f i r m the j u d g me n t o f t h e T r i b u n a l i n s o f a r a s t h e q u e s t i o n of exchange rate f luctuation is concerned."

12. From the above, it is clear that the Hon'ble High

Court has categorically held that the exchange rate

fluctuation arises out of and is directly related to the sale

transaction involving the export of goods of the industrial

undertaking and, therefore, difference on account of exchange

rate fluctuation is entitled to deduction under section 80IB of

the Act. No contrary decision was brought to my notice.

Respectfully following the judgment of the Hon'ble Bombay

High Court in the case of CIT Vs. Rachna Udyog (supra), I

hold that the difference on account of exchange rate

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 d i s a l l o wa n c e 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 examined. The

Assessing Officer noticed that the assessee had made

advances of Rs.3,20,94,000/- to M/s SPR State & Builders

Ltd. for purchase of assets. According to the Assessing

Officer, the assets were not put to use during the financial

year relevant to assessment year under consideration. He,

therefore, disallowed the proportionate interest @ 12% on the

amount advanced for purchase of assets and added the same

to the income of the assessee. On appeal, the learned CIT

(Appeals) confirmed the disallowance made by the Assessing

Officer.

10. At the time of hearing, Ms.Meha Kansal, learned

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 not 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-work the

disallowance on pro-rata basis. This ground of appeal 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 d i s a l l o wa n c e 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 dismissed 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 a l l o wi n g d e d u c t i o n s u / s 80IC for the additions m a d e d u e t o c e r t a i n d i s a l l o wa n c e s . "

14. After hearing the learned representatives of both the

parties, I direct the Assessing Officer to re-compute the

deduction allowable under section 80IC of the Act keeping 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 allowed

partly and partly for statistical purposes.

Order pronounced in the open court on this 15th day

of June, 2015.

(H.L.KARWA) VICE PRESIDENT

Dated : 15 t h June, 2015

*Rati*

Copy to: The Appellant/The Respondent/The CIT(A)/The CIT/The DR.

Assistant Registrar, ITAT, Chandigarh 8