DCIT. B.K.Circle, Palanpur V. M/s. Forever Gems Pvt. Ltd., Mumbai

ITA 1798/AHD/2017

• Counselvise Citation: [2019] 112 COUNSELVISE.COM (IT) 3070 (ITAT-AHMEDABAD)
• Duration Of Justice: 1 year(s) 10 month(s) 26 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 26-06-2019
• Appeal Filed By: Department
• Order Result: Dismissed
• Bench Allotted: C
• Assessment Year: 2013-2014
• Appeal Filed On: 31-07-2017
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: O P SHARMA
• Assessee Lawyers: S N SOPARKAR
• Section: 37(1); 201; 37

Judgement Text

PAGE 1 OF 4 , IN THE INCOME TAX APPELLATE TRIBUNAL , C BENCH, AHMEDABAD BEFORE , SHR I MAHAVIR PRASAD , JUDICIAL MEMBER AND SHRI WASEEM AHMED , ACCOUNTANT MEMBER ./ ITA NO .17 9 8 /AHD/2017 / ASSTT. YEAR : 2013 - 2014 D.C.I.T , B.K. CIRCLE , PALANPUR . VS . M/S FOREVER GEMS PVT. LTD. BHARAT DESAI COMPANY, PITRYU CHHAYA, SWASTIK SOCIETY, NS ROAD NO.2, VILE PARLE, MUMBAI - 400 056. PAN: AABCF1997K (APPLICANT) ( RESPON D ENT ) REVENUE BY : SHRI O.P. SHARMA, C . I.T. D.R ASSESSEE BY : SHRI S.N. SOPARKAR & MS . URVASHI SHODHAN , A. R S / DATE OF HEARING : 12 / 06 / 201 9 / DATE OF PRONOUNCEMENT: 26 /06 /2 01 9 / O R D E R PER WASEEM AHMED, ACCOUNTANT MEMBER: THE CAPTIONED APPEAL HAS BEEN FILED AT THE INSTANCE OF THE REVENUE AGAINST THE ORDER OF THE LEARNED COMMISS IONER OF INCOME TAX (APPEALS) - 4 , AHMEDABAD [ LD. CIT (A) IN SHORT] , DATED 18 / 05 / 2017 ARISING IN THE MATTER OF ASSESSMENT ORDER PASSED UNDER S. 143 (3) OF THE INCOME TAX ACT, 1961 ( HERE - IN - AFTER REFERRED TO AS 'THE ACT') DATED 23 / 03 / 201 6 RELEVANT TO ASSESSMENT YEAR (AY) 2013 - 14 . ITA NO .1798 / AHD/2017 ASSTT. YEAR 2013 - 14 PAGE 2 OF 4 THE REVENUE HAS FAILED THE FOLLOWING GROUND OF APPEAL: 1. THAT THE ''LD.CIT(APPEAL) ERRED IN LAW AND ON FACTS IN DELETING THE ADDITION OF RS.11,61,18,652/ - MADE BY THE AO ON ACCOUNT OF PROVISION OF EXCHANGE DIFFERENCE . 2. THAT THE APPLICANT CRAVES LEAVE TO RESERVE ITS RIGHTS TO ADD ALTER, DELETE OR AMEND ANY OF THE GROUNDS OR PRAYERS AS MAY BE NECESSARY TO IN FUTURE. THE ONLY EFFECTIVE ISSUE RAISED BY THE R EVENUE IS THAT THE LEARNED CIT (A) ERRED IN DELETING THE ADDITION MADE BY THE AO FOR 1 1 , 61 , 18 , 652 .00 ON ACCOUNT OF THE DEDUCTION CLAIMED BY THE ASSESSEE FOR THE PROVISION OF FOREIGN CURRENCY EXCHANGE. 2. BRIEFLY S TATED FACTS ARE THAT THE ASSESSEE IN THE PRESENT CASE IS A PRIVATE LIMITED COMPANY AND ENGAGE D IN THE BUSINESS OF IMPORT S , EXPORT S , AND MANUFACTURING OF DIAMONDS, PRECIOUS & SEMI PRECIOUS STONES. T HE ASSESSEE IN THE YEAR UNDER CONSIDERATION HAS CLAIMED PRO VISION FOR THE EXCHANGE DIFFERENCE IN RESPECT OF IMPO RT OF THE GOODS AMOUNTING TO 1 1 , 61 , 18 , 652.00 ONLY. HOWEVER, THE AO WAS OF THE VIEW THAT THE ASSESSEE IS NOT ELIGIBLE FOR DEDUCTION SUCH AMOUNT FOR THE TWO REASONS. FIRSTLY, THE DEDUCTION FOR THE PROVISI ONS RELATING TO THE IMPORT OF GOODS ON ACCOUNT OF EXCHANGE FLUCTUATION IS AVAILABLE ONLY ON THE ACTUAL PAYMENT AS PER THE PROVISIONS OF SECTION 43A OF THE ACT. SECONDLY, SUCH PROVISION ON ACCOUNT OF CURRENCY FLUCTUATION IS REPRESENTING THE UNASCERTAINED LI ABILITIES WHICH IS NOT ALLOWABLE AS A DEDUCTION UNDER SECTION 37 ( 1 ) OF THE ACT. ACCORDINGLY, THE AO DISALLOWED THE DEDUCTION OF 11 , 61 , 18 , 652 .00 AND ADDED TO THE TOTAL INCOME OF THE ASSESSEE. 3. THE A GGRIEVED ASSESSEE PREFERRED AN APPEAL TO THE LEARNED C IT (A) WHO DELETED THE ADDITION MADE BY THE AO. ITA NO .1798 / AHD/2017 ASSTT. YEAR 2013 - 14 PAGE 3 OF 4 BEING AGGRIEVED, BY THE ORDER OF THE LEARNED CIT (A), THE REVENUE IS IN APPEAL BEFORE. 4. BOTH THE LEARNED DR AND THE AR BEFORE US RELIED ON THE ORDER OF THE AUTHORITIES BELOW AS FAVORABLE TO THEM. 5. WE HAVE HEARD THE RIVAL CONTENTIONS OF BOTH THE PARTIES AND PERUSED THE MATERIALS AVAILABLE ON RECORD. FROM THE PRECEDING DISCUSSION, WE NOTE THAT THE ASSESSEE CREATED THE PROVISION IN RESPECT OF THE REVENUE TRANSACTIONS. THIS FACT CAN BE VERIFIED FROM THE A NNUAL ACCOUNTS OF THE ASSESSEE WHICH IS AVAILABLE ON PAGES 31 - 69 OF THE PAPER BOOK. THERE WAS NO LONG - TERM LOAN LIABILITY , AND THE FIXED ASSETS WERE OF NEGLIGIBLE VALUE. THEREFORE, THE PROVISIONS OF SECTION 43A OF THE ACT CANNOT BE APPLIED IN THE PRESENT F ACTS AND CIRCUMSTANCES AS IT DEALS WITH THE CAPITAL ACCOUNT TRANSACTION. ACCORDINGLY, WE HOLD THAT THE AO ERRED IN APPLYING THE PROVISIONS OF SECTION 43A OF THE ACT. 5.1 THE NEXT CONTROVERSY ARISES WHETHER THE IMPUGNED TRANSACTION IS REPRESENTING THE UNAS CERTAINED LIABILITIES. THE ASSESSEE CREATED SUCH PROVISION IN RESPECT OF THE CURRENT LIABILITIES REPRESENTED IN FOREIGN CURRENCY AT THE END OF THE FINANCIAL , I.E. 31 ST MARCH 2013 BASED ON THE RATE OF CURRENCY PREVAILING AT THE RELEVANT TIME. THEREFORE, WE ARE OF THE CONSIDERED OPINION THAT SUCH LIABILITIES CANNOT BE TREATED AS UNASCERTAINED LIABILITIES. 5.2 WE ALSO NOTE THAT THE H ON BLE A PEX COURT INVOLVING IDENTICAL FACTS AND CIRCUMSTAN CES IN THE CASE OF CIT VERSUS W OODWARD GOVERNOR INDIA P RIVATE LTD. R EPORTED IN 312 ITR 254 H AS HELD AS UNDER: 15. FOR THE REASONS GIVEN HEREINABOVE, WE HOLD THAT, IN THE PRESENT CASE, THE 'LOSS' SUFFERED BY THE ASSESSEE ON ACCOUNT OF THE EXCHANGE DIFFERE NCE AS ON THE DATE OF THE BALANCE SHEET IS AN ITEM OF EXPENDITURE UNDER SECTION 37(1) OF THE 1961 ACT. ITA NO .1798 / AHD/2017 ASSTT. YEAR 2013 - 14 PAGE 4 OF 4 FROM THE ABOVE, IT IS CLEAR THAT THE TRADING LIABILITY ARISING ON ACCOUNT OF CURRENCY FLUCTUATION IS ASCERTAINED LIABILITY , AND THEREFORE , IT IS ELIGIBLE FOR DEDUCTION. 5.3 WE ALSO NOTE THAT THE ASSESSEE HAS BEEN ADJUSTING THE BOOKS OF ACCOUNTS CONSISTENTLY ON ACCOUNT OF CURRENCY FLUCTUATION , WHICH HAS BEEN ACCEPTED BY THE R EVENUE IN THE EARLIER YEARS. THEREFORE, WE ARE OF THE VIEW THAT TH E ASSESSEE IS ALSO ENTITLED TO THE DEDUCTION OF SUCH PROVISION AS PER THE PRINCIPLES OF CONSISTENCY. IN VIEW OF THE ABOVE, WE DO NOT FIND ANY REASON TO INTERFERE IN THE FINDING OF THE LEARNED CIT (A). HENCE, THE GROUND OF APPEAL OF THE REVENUE IS DISMISSED. 6. IN THE RESULT, THE APPE AL OF THE REVENUE IS DISMISSED. O RDER PRONOUNCED IN THE COURT ON 26 /06 / 2019 AT AHMEDABAD. - SD - - SD - (MAHAVIR PRASAD ) (WASEEM AHMED) JUDICIAL MEMBER ACCOUNTANT MEMBER (TRUE COPY) A HMEDABAD; DATED 26 / 06 /2019 M ANISH