Gulshan Industries Ltd., New Delhi V. DCIT, New Delhi

ITA 1820/DEL/2012

• Counselvise Citation: [2016] 132 COUNSELVISE.COM (IT) 7280 (ITAT-DELHI)
• Duration Of Justice: 4 year(s) 1 month(s) 26 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 15-06-2016
• Appeal Filed By: Assessee
• Order Result: Allowed
• Bench Allotted: C
• Next Hearing Date: 13-06-2016
• Assessment Year: 2006-2007
• Appeal Filed On: 19-04-2012
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: SANJAY KR YADAV
• Assessee Lawyers: MOHD SHAHID

Judgement Text

1 ITA 1820/DEL/2012 IN THE INCOME TAX APPELLATE TRIBUNAL DELHI BENCH C NEW DELHI BEFORE SHRI S.V. MEHROTRA : ACCOUNTANT MEMBER AND SMT. BEENA A. PILLAI: JUDICIAL MEMBER ITA NO. 1820/DEL/2012 ASSTT. YR: 2006-07 GULSHAN INDUSTRIES LTD., VS. DCIT CIRCLE 12(1), G-81, PREET VIHAR, NEW DELHI. NEW DELHI. PAN: AAACG 4427 E ( APPELLANT ) (RESPONDENT) APPELLANT BY : MR. MOHD. SHAHID CA RESPONDENT BY : MR. SANJAY KR. YADAV SR. DR DATE OF HEARING : 13/06/2016. DATE OF ORDER : 15/06/20126. O R D E R PER S.V. MEHROTRA, A.M: THIS IS ASSESSEES APPEAL AGAINST THE ORDER DATE D 26.03.2010, PASSED BY THE LD. CIT(A)-VIII, NEW DELHI, RELATING TO AY 2 006-07. 2. SOLE EFFECTIVE GROUND RAISED IS AS UNDER: 1. THAT THE HONBLE DEPUTY COMMISSIONER OF INCOME T AX IS WRONG AND UNJUSTIFIED BOTH IN LAW AND FACTS IN DISA LLOWING RS. 6,66,060/- ON ACCOUNT OF FOREIGN EXCHANGE FLUCTUATI ON LOSS. 2 ITA 1820/DEL/2012 3. BRIEF FACTS OF THE CASE ARE THAT FOR AY 2006-07, THE ASSESSEE FILED ITS RETURN OF INCOME DECLARING INCOME OF RS. 12,84,690/ -. THE ASSESSEE COMPANY, IN THE YEAR UNDER ASSESSMENT, HAD TEMPORAR ILY ENTERED INTO A NEW VENTURE OF TRADING OF TELEPHONE EQUIPMENTS. AO NOTI CED, FROM THE DETAILS FILED BY THE ASSESSEE, THAT THE ASSESSEE HAD DECLA RED A NET LOSS FROM FOREIGN EXCHANGE FLUCTUATION OF RS. 6,66,060/-. IN RESPONSE TO AOS QUERY THE ASSESSEE STATED THAT COMPANY IMPORTED 12000 TELEPHO NE EQUIPMENTS (USD 68 PER EQUIPMENT) AMOUNTING USD 816000/-. AS PER B ILL OF ENTRY FOR THE SAID IMPORT DOLLAR PRIES WERE AT RS. 44.45 PER DOLL AR. HOWEVER, AT THE TIME OF ACTUAL PAYMENT I.E. ON 10 TH MAY 2006 AND 18 TH MAY 2006, COMPANY HAD PAID USD 408000 @ RS. 45,0325 AND USD 408000 @ RS. 45.50 . THE TRANSACTION CAUSED A TOTAL LOSS OF RS. 666060. THE AO DID NOT A CCEPT THE ASSESSEES CONTENTION, OBSERVING THAT THE LOSS MUST ACTUALLY B E SUFFERED IN THE RELEVANT PREVIOUS YEAR. ACTUAL SUFFERING WOULD ARISE ONLY AT THE TIME OF REMITTANCES AND NOT BEFORE. HE, THEREFORE, DISALLOWED THE ASSES SEES CLAIM TREATING THE SAME AS UNREALIZED LOSS ON ACCOUNT OF FOREIGN EXCHA NGE FLUCTUATION. 4. LD. CIT(A) CONFIRMED THE AOS ACTION, INTER ALIA , OBSERVING THAT THE LOSS IN QUESTION DID NOT PERTAIN TO THE ASSESSMENT YEAR UNDER CONSIDERATION. 5. AGGRIEVED, THE ASSESSEE IS IN APPEAL BEFORE THE TRIBUNAL. 6. LD. COUNSEL FOR THE ASSESSEE POINTED OUT THAT IM PORT OF EQUIPMENT HAD BEEN MADE DURING THE FY 2005-06, BUT PAYMENT WAS MA DE ON 10.5.2006 AND 18.5.2006, SUBSEQUENT TO THE CLOSING OF THE FINANCI AL YEAR ON 31.3.2006. HE POINTED OUT THAT THE ACCOUNTS WERE APPROVED BY THE BOARD ON 5.7.2006 AND, 3 ITA 1820/DEL/2012 THEREFORE, PROVISION WAS MADE AS ON 31.3.2006 AS PE R ACCOUNTING STANDARD- 4, ISSUED BY THE INSTITUTE OF CHARTERED ACCOUNTANT S OF INDIA IN REGARD TO EVENTS OCCURRING AFTER BALANCE-SHEET DATE. 7. WE HAVE CONSIDERED THE SUBMISSIONS OF BOTH THE P ARTIES. ADMITTEDLY THE LOSS ON ACCOUNT OF FOREIGN EXCHANGE FLUCTUATION RELATED TO THE IMPORTS MADE DURING FY 2005-06. THIS LOSS GOT QUANTIFIED O NLY ON THE DATE OF PAYMENT VIZ. 10.5.2006 WHEN THE PAYMENT WAS MADE BY ASSESSEE, AS PER ACCOUNTING STANDARD-4, ISSUED BY THE INSTITUTE OF CHARTERED ACCOUNTANTS OF INDIA, AS PER PARAS 8.1 AND 8.2, WHICH ARE REPRODUC ED HEREUNDER: 8.1. EVENTS WHICH OCCUR BETWEEN THE BALANCE SHEET D ATE AND THE DATE ON WHICH THE FINANCIAL STATEMENTS ARE APPROVED , MAY INDICATE THE NEED FOR ADJUSTMENTS TO ASSETS AND LIA BILITIES AS AT THE BALANCE SHEET DATE OR MAY REQUIRE DISCLOSURE. 8.2. ADJUSTMENTS TO ASSETS AND LIABILITIES ARE REQU IRED FOR EVENTS OCCURRING AFTER THE BALANCE SHEET DATE THAT PROVIDE ADDITIONAL INFORMATION MATERIALLY AFFECTING THE DET ERMINATION OF THE AMOUNTS RELATING TO CONDITIONS EXISTING AT THE BALANCE SHEET DATE. FOR EXAMPLE, AN ADJUSTMENT MAY BE MADE FOR A LOSS ON A TRADE RECEIVABLE ACCOUNT WHICH IS CONFIRMED BY THE INSOLVENCY OF A CUSTOMER WHICH OCCURS AFTER THE BALANCE SHEET DATE. 8. IT IS PERTINENT TO NOTE THAT IN THE SAME ACCOUNT ING STANDARD IT IS SPECIFICALLY MENTIONED IN PARA 8.3 THAT NO ADJUSTME NT IS REQUIRED TO BE MADE AND LIABILITIES FOR EVENTS OCCURRING AFTER THE BALA NCE-SHEET DATE, IF SUCH EVENTS DO NOT RELATE TO CONDITIONS EXISTING AT THE BALANCE-SHEET DATE. THEREFORE, IT IS CLEAR THAT IF THE EVENT HAS OCCURR ED BEFORE THE BALANCE-SHEET DATE AND A SUBSEQUENT EVENT MATERIALLY AFFECTS THE PROFITS, THEN THE SAME HAS TO BE PROVIDED IN THE BALANCE-SHEET WHICH IS FINALI ZED AFTER THE CLOSING OF THE 4 ITA 1820/DEL/2012 YEAR. WE, THEREFORE, DIRECT THE AO TO ALLOW THE LOS S CLAIMED BY ASSESSEE, PARTICULARLY BECAUSE IT IS NOT DISPUTED THAT THE IM PORTS WERE MADE DURING FY 2005-06. 9. IN THE RESULT, THE ASSESSEES APPEAL IS ALLOWED . ORDER PRONOUNCEMENT IN OPEN COURT ON 15/06/2016. SD/- SD/- (BEENA A. PILLAI) (S.V. MEHROTRA) JUDICIAL MEMBER ACCOUNTANT MEMBER DATED:____/06/2016. *MP* COPY OF ORDER TO: 1. ASSESSEE 2. AO 3. CIT 4. CIT(A) 5. DR, ITAT, NEW DELHI.