Joint Commissioner of Income Tax, Special Range, Panaji V. Goa Carbon Ltd., Panaji

ITA 177/PAN/2019

AI Insights

The case involves appeals by the Revenue against the decisions of the Commissioner of Income Tax (Appeals)-1, Panaji, which pertained to the deletion of disallowances made on account of forward contracts and forward premium expenses for the assessment years 2013-14 and 2016-17. The Tribunal noted that similar issues had been previously addressed in the assessee's case for A.Y. 2011-12, where it was decided that the matters should be remanded to the AO for further verification and proper adjudication. The Tribunal followed this precedent, remanding the current appeals to the AO with specific directions to verify the claims and documents related to hedging transactions of foreign exchange.

• Counselvise Citation: [2023] 140 COUNSELVISE.COM (IT) 136874 (ITAT-PANAJI)
• Duration Of Justice: 4 year(s) 4 month(s) 6 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 19-09-2023
• Appeal Filed By: Department
• Order Result: Allowed
• Bench Allotted: WT(D)
• Next Hearing Date: 03-09-2023
• Assessment Year: 2013-2014
• Appeal Filed On: 13-05-2019
• Other Referred Cases: CIT Vs. Woodward Governor India P. Ltd., 312 ITR 254, CIT Vs. Badridas Gauridu (P) Ltd., 261 ITR 256, Majestic Exports Vs. JCIT in I.T.A.Nos. 1336 & 3072/MDS/2014
• Laws Referred To: Income Tax Act
• Result in Favour of: Revenue
• Court: TRIBUNAL
• Section: 37(1)

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL PANAJI BENCH :: PANAJI BEFORE SHRI INTURI RAMA RAO, ACCOUNTANT MEMBER & SHRI PARTHA SARATHI CHAUDHURY, JUDICIAL MEMBER (Through virtual hearing) ITA Nos.177 & 178/PAN/2019 (A.Y. 2013-14 & 2016-17) JCIT, SPL Range, Panaji, Goa vs Goa Carbon Limited, Dempo House, D.B. Road, Campal, Panaji, Goa. PAN: AAACG 6842 K Appellant Respondent Assessee by : Shri Mihir Naniwadekar Revenue by : Shri Prabhakar Anand DJ, DR Date of hearing : 04/09/2023 Date of pronouncement : 20/09/2023 O R D E R Per PARTHA SARATHI CHAUDHURY, JM: These appeals preferred by the Revenue emanate from the separate orders of Commissioner of Income Tax (Appeals)-1, Panaji (for short, ‘CIT(A)’) both dated 29.03.2019 for A.Y.2013-14 & 2016-17 as per the grounds of appeal on record. 2. As apparent from the grounds of appeals common facts and circumstances and issues emerges therein that the Revenue is aggrieved by the decision of the ld. CIT(A) in deleting the disallowance made on account of forward contracts and forward premium expenses of different amounts as appearing for the respective assessment years. 3. At the outset, ld. counsel for the assessee submitted that in assessee’s own case for A.Y. 2011-12 in ITA No.405/PNJ/2014 vide ITA Nos.177 & 178/PAN/2019 Goa Carbon Limited 2 order dated 07/09/2015, this Tribunal on the same identical facts and circumstances, has remanded both the present issues to the file of the Assessing Officer (AO). The relevant observation of the Tribunal is as follows:- “10. We find that in the paper book filed, the assessee has not certified whether the documents filed at page Nos. 1 to 11 were filed before the Assessing Officer or before the Commissioner of Income Tax (Appeals). We find that the Commissioner of Income Tax (Appeals) while allowing the claim for the assessee as hedging loss in foreign exchange has held that the exchange loan was taken for purchase of raw materials. However, from the order of the Commissioner of Income Tax (Appeals) it is not evident on the basis of which evidence and documents he has arrived at such a finding and conclusion. It is settled position of law that loss suffered on account of fluctuation in rates of foreign exchange is allowable as a business expenditure under sec. 37(1) of the Act as held by the Hon’ble Supreme Court in the case of CIT Vs. Woodward Governor India P. Ltd., 312 ITR 254. Further, the Hon’ble Bombay High Court in the case of CIT Vs. Badridas Gauridu (P) Ltd., 261 ITR 256 has held that loss due to fluctuation in foreign exchange while implementing the export contracts was expenditure incurred towards the business of the assessee and allowable deduction under sec. 37(1) of the Act. Recently, the Chennai Bench of the Tribunal in the case of Majestic Exports Vs. JCIT in I.T.A.Nos. 1336 & 3072/MDS/2014 order dated 24/07/2015 has held that the total transaction considered for determining the exchange fluctuation loss from the hedging contract cannot be more than the total export turnover of the assessee for the assessment year under consideration and if it is in excess then the loss suffered in respect of that operation of the excess transactions is to be considered as speculative loss only as it has no proximity with the export turnover and directed the Assessing Officer to re-compute accordingly. In the instant case, we also find that the documents placed before us in the paper book at page Nos. 1 to 11 are not verified by either of the lower authorities. Therefore, we feel that in order to adjudicate the issue completely, the matter has to be restored back to the file of the Assessing Officer for verifying the same with the documents filed before us by the assessee and to allow the loss incurred by the assessee in hedging transactions of foreign exchange to the extent of imports made by the assessee. If the total of the hedging transactions are more than the total of the imports made by the assessee, then the excess amount is to be considered as speculative loss and disallowed by the Assessing Officer while computing the income of the assessee. Needless to mention that the Assessing Officer shall allow reasonable and proper opportunity to the assessee before adjudicating the issue afresh. Thus, the appeal of the Revenue is allowed for statistical purpose.” ITA Nos.177 & 178/PAN/2019 Goa Carbon Limited 3 4. Ld.DR fairly conceded that the present issues, following the Tribunal’s order (supra), may be remanded to the file of the Assessing Officer (AO). 5. Having heard the submissions of both the parties, on the same parity of reasoning, both these matters are also remanded to the file of the AO as per the directions as have been given in assessee’s own case for A.Y. 2011-12 by this Tribunal (supra). Resultantly, the grounds of appeal for both the appeals of the Revenue stands allowed for statistical purposes. 6. In the result, both the appeals of the Revenue are allowed for statistical purposes. Order pronounced in open Court on 20 th September, 2023. Sd/- Sd/- (INTURI RAMA RAO) (PARTHA SARATHI CHAUDHURY) ACCOUNTANT MEMBER JUDICIAL MEMBER Dated : 20 th September, 2023 vr/- Copy to : 1. The Appellant. 2. The Respondent. 3. The Pr. CIT concerned. 5. The DR, ITAT, Panaji Bench, Panaji. 6. Guard File. By Order // TRUE COPY // Senior Private Secretary ITAT, Pune.