Income Tax Appellate Tribunal - Chandigarh
M/S Arisudana Industries Ltd, Ludhiana vs Assistant Commissioner Of Income Tax, ... on 4 June, 2019
आयकर अपील य अ धकरण,च डीगढ़ यायपीठ "ए", च डीगढ़
IN THE INCOME TAX APPELLATE TRIBUNAL,
CHANDIGARH BENCH "A" , CHANDIGARH
ी एन. के. सैनी, उपा य एवं ी संजय गग", याय#क सद%य
BEFORE SHRI N.K. SAINI, VICE PRESIDENT
AND SHRI SANJAY GARG, JUDICIAL MEMBER
आयकर अपील सं./ ITA No.10/Chd/2016
नधा रण वष / Assessment Year : 2012-13
M/s Arisudana Industries बनाम The A.C.I.T.,
Ltd., B-XXIX/143, Circle-V,
G.T. Road, Ludhiana. Ludhiana.
थायी लेखा सं./PAN NO.AABCA2449K
अपीलाथ /Appellant यथ /Respondent
नधा रती क ओर से/Assessee by : S/Shri Sunil K. Mukhi, Adv.
& D.S. Puri, Adv.
राज व क ओर से/ Revenue by : Smt.Meenakshi Vohra, Sr.DR
सन
ु वाई क तार$ख/Date of Hearing : 06.03.2019
उदघोषणा क तार$ख/Date of Pronouncement: 04.06.2019
आदे श/ORDER
Per Sanjay Garg, Judicial Member :
Th e p re se n t a pp e a l ha s bee n fi l e d b y the a sse ssee a ga i nst the or de r of the C ommi ssi on e r of I ncome Ta x (A pp e a ls )-2 , Lu d hi a n a [ he re i na f te r re fe r re d to as 'C I T( A )'] , da t e d 4 . 12 . 2 01 5 r e la t in g to a sse ssme nt ye a r 2 0 1 2-1 3 , 2 ITA No.10/Chd/2016 A.Y.2012-13 pa s se d u /s 2 5 0( 6 ) of t he I nc ome Ta x A ct , 1 9 6 1 ( h e r e i n a f t e r referred to as 'the Act').
2. Th e a s s e sse e i n t h i s a p pe a l h a s t a k e n f o ur g r o un d s o f a p p e a l . Vi d e g r ou n d N o . 1 , t he a s s e s se e h a s a g i ta t e d t he action of t he C I T( A ) in sustaining the d i s a l lo w a n ce of R s . 1 , 8 6 , 0 8 9 / - u / s 1 4 A o f t he A c t o n a c co u n t o f e x p e n d i t ur e i n c u r r e d f o r e a r ni n g o f ta x e xe mp t i n c o m e .
3. A t t he o u t se t , th e L d . C o u n se l f o r t he a s s se s se e h a s s u b m i t t e d t h a t t h e a s se s se e d u r in g t h e ye a r h a s e a rn e d t a x e xe m p t d i v i d e n d i n c o m e o f R s .2 8 , 1 3 3 / - o n l y . Th a t a s pe r t h e l a w l a i d d o w n b y t h e H o n ' b l e D e l h i H i g h C ou r t i n t he c a se o f C h e m i n v e s t L t d . V s . C I T ( 2 0 1 5 ) 3 7 8 I T R 3 3 ( D e l ) , the total disallowance u/s 14A of the Act cannot exceed the total tax e xe mpt in come earned b y the asses see. The reliance in this respect has been placed on the decisions o f v a r i o us H i g h C o u r t s including that of the Jurisdictional High Court of Punjab and Haryana in the case of 'CIT Vs. Winsome Textiles' (2009) 319 I TR 204 (P&H), and of the Hon'ble Gujarat High Court in the case of 'Corrtech Energy P. Ltd. (2014) 45 Taxman.com 116' and further of the Hon'ble Allahabad High Court in the case of 'CI T Vs. M/s Shiva m 3 ITA No.10/Chd/2016 A.Y.2012-13 Motors (P) Ltd' (2014) 272 C TR (All) 277 and various other case laws.
4. We find that the issue is squarely covered by the aforesaid decisions of the Hon'ble High Courts. The Hon'ble different High Courts of the country have held that the total d isallowa nce u /s 1 4A of the Act ca nnot exceed the total tax exempt income earned by the assessee and if no tax exempt income is earned by the assessee, no disallowance u/s 14A of the Act can be made. I n view of this, the disallowance on the issue is re stricted to the extent of the total tax exe mp t i ncome earned by the assessee which comes at Rs.28,133/-. Ground of appeal No.1 is accordingly, partly allowed.
5. Vide Ground Nos.2 & 3 the assessee has agitated the action of the lower authorities in making/confirming the disallowance of Rs.8 3,9 0, 68 6 /- u/s 43(5) of the Act holding the currency forward contracts as speculative transactions. The Ld.Counsel for the asssessee has explained before us that the assessee company is engaged in the manufacturing of yarns and trading of knitted 4 ITA No.10/Chd/2016 A.Y.2012-13 c l o t h s & y a r n s . Th e y a r n s m a n u f a c t u r e d b y t h e a s s e s s e e company are sold in the dome stic market as well as in the international market. For the year under consideration, the assessee company received export orders for around US dollars 49,85,000/- for supply of yarns to different buyers in different countries. To hedge the loss, if any, against any foreign exchange fluctuations, the assessee entered in the forex contract and, therefore, incurred loss/e xpen di ture of Rs .8 3, 90 ,68 6/-. The Ld.Cou nse l f or the asssessee further submitted that hedging of the loss cannot be said to be a speculative rather it was to secure t h e e x p e c t e d p r o f i t s . Th e h e d g i n g t r a n s a c t i o n a g a i n s t t h e apprehended foreign exchange fluctuation losses is permitted and cannot be said to be a speculative tran saction. The Ld .Cou nse l for the asssessee has also invited our attention to the order dated 30.8.2017 of the CI T(A) i n the own case of the assesse e for sub se quent a s s e s s m e n t y e a r i . e . 2 0 1 3 - 1 4 , w h e r e i n t h e L d . C I T( A ) h a s accepted the contention raised by the assessee and has held that the foreign exchange fluctuation profits earned by the assessee of Rs.14,29,603/- through he dging contracts to save the company from future losses, cannot be said to be speculative gain. In view of this, we do not 5 ITA No.10/Chd/2016 A.Y.2012-13 find any justification of the C I T( A ) in holding the transaction as speculative for the year under consideration, whereas in the subsequent year, the gain earned by the assessee on identical transaction has been treated as gain earned in normal course of business and not speculative. In view of this ground No.2 & 3 raised by the assessee are accordingly, allowed.
6. Vide ground No.4, the assessee has agitated the disallowance of interest of Rs.10,86,012/- u/s 36(1)(iii) of the Act in relation to running debit balance maintained with Master Capital Services. Th e contention of the Ld.Counsel for the asssessee in this respect is that the running debit balance maintained by the assessee with M/s Master Capital Services Pvt. Ltd. is margin money to comply with legal and statutory requirements stipulated b y S E B I a n d i s a b u s i n e s s a d v a n c e . Th a t i t c a n n o t b e s a i d to be an investment not related to business activity of the assessee. It has been further submitted that even otherwise, the own funds of the assessee for the year under consider ation were suf fi cie nt to me et the aforesaid ad vance. Th e Ld. Counsel for the asssessee i n thi s respect has also invi ted ou r attention to the orde r of the CI T( A) 6 ITA No.10/Chd/2016 A.Y.2012-13 dated 30.2.2017 passed for subsequent assessment year 2 0 1 3 - 1 4 , w h e r e i n o n i d e n t i c a l c i r c u m s t a n c e s , t h e C I T( A ) considering the submissions of the assessee held that since the assessee was having sufficient own intere st free funds to cover the interest free advances, hence, no disallowance was attracted.
7. We have considered the rival submissions of both the parties. Admittedly, the assessee was maintaining an account with M/s Master Capital Services Pvt. Ltd. as the assessee was obtaining their services for hedging losses a g a i n s t f o r e i g n e x c h a n g e f l u c t u a t i o n . Th e a s s e s s e e h a d t o keep a margin money with M/s Master Capital Services Pvt. Ltd. for the purpose of forward contracts entere d into to hedge the losses against foreign exchange fluctuation in respect of the amount receivable from exports. In respect of this e ssentially was related to the business activity of the assessee. Even otherwise, it has not been rebutted or denied by the revenue authorities that the assessee was having sufficient funds to meet the aforesaid debit balance with M/s Master Capital Services Pvt. Ltd. Hence, we do not find any justification on the part of the lower authorities in making the aforesaid disallowance 7 ITA No.10/Chd/2016 A.Y.2012-13 u/s 36(1)(iii) of the Act and the same is accordingly, ordered to be deleted.
8. No other ground is raised or pressed.
9. I n t he r e s u l t, t h e a p pe a l o f t h e a s se s se e i s he r e b y t r e a te d a s p a r tl y a l l o w e d .
O r de r p r o n o u n ce d i n t he O p e n C ou r t o n 0 4 . 0 6 . 2 0 1 9 .
Sd/- Sd/-
एन. के. सैनी संजय गग"
(N.K. SAINI (SANJAY GARG )
उपा य / Vice President याय#क सद%य/ Judicial Member
'दनांक /Dated: 4th June, 2019
*रती*
आदे श क त*ल+प अ,े+षत/ Copy of the order forwarded to :
1. अपीलाथ / The Appellant
2. यथ / The Respondent
3. आयकर आयु-त/ CIT
4. आयकर आयु-त (अपील)/ The CIT(A)
5. +वभागीय त न0ध, आयकर अपील$य आ0धकरण, च2डीगढ़/ DR, ITAT, CHANDIGARH
6. गाड फाईल/ Guard File आदे शानस ु ार/ By order, सहायक पंजीकार/ Assistant Registrar