DCIT 17(2), MUMBAI V. LARISSA INTERNATIONAL, MUMBAI

ITA 1849/MUM/2014

• Counselvise Citation: [2015] 140 COUNSELVISE.COM (IT) 100902 (ITAT-MUMBAI)
• Duration Of Justice: 1 year(s) 5 month(s) 19 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 07-09-2015
• Appeal Filed By: Department
• Order Result: Dismissed
• Bench Allotted: A
• Assessment Year: 2009-2010
• Appeal Filed On: 18-03-2014
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: RAGHUVEER MADNAPPA
• Assessee Lawyers: KUMAR JAISING PARTNER OF FIRM
• Keywords: Business expenditure; Cost of acquisition

Judgement Text

, , , , IN THE INCOME TAX APPELLATE TRIBUNAL, MUMBAI BENCH A, MUMBAI !, ' #$ %%, & #$ ' BEFORE SHRI RAJENDRA, ACCOUNTANT MEMBER AND SHRI SANJAY GARG, JUDICIAL MEMBER ./ ITA NO.1849/M/2014 ( &* + &* + &* + &* + / ASSESSMENT YEAR: 2009-10) DCIT 17(2), R.NO.217, 2 ND FLOOR, PIRAMAL CHAMBERS, MUMBAI 400 012 * * * * / VS. M/S. LARISSA INTERNATIONAL, 248/1, BOSCO MANSION, WADALA (W), MUMBAI 400 031 PAN: AAAFL 1654 ( ,- / APPELLANT) ( ./,- /RESPONDENT) PRESENT FOR: ASSESSEE BY : SHRI KUMAR JAISING, PARTNER OF ASSESSEE FIRM REVENUE BY : SHRI RAGHUVEER MADNAPPA, D.R. * 0 1' / DATE OF HEARING : 07.09.2015 23+ 0 1' / DATE OF PRONOUNCEMENT : 07.09.2015 # 4 / O R D E R PER SANJAY GARG, JUDICIAL MEMBER: THE PRESENT APPEAL HAS BEEN PREFERRED BY THE REVEN UE AGAINST THE ORDER DATED 20.12.2013 OF THE COMMISSIONER OF INCOME TAX (APPEALS) [HEREINAFTER REFERRED TO AS THE CIT(A)] RELEVANT TO ASSESSMENT Y EAR 2009-10. 2. THE REVENUE HAS TAKEN THE FOLLOWING GROUNDS OF A PPEAL: 1. (I) ON THE FACTS AND IN THE CIRCUMSTANCES OF TH E CASE AND IN LAW, THE LD. CIT(A) HAS ERRED IN DELETING THE DISALLOWANCE OF RS .92,22,966/- ON ACCOUNT OF LOSS ON FOREIGN EXCHANGE AND RS.20,38,813/- ON ACCO UNT OF DETENTION CHARGES. (II) THE ISSUE TO BE SET ASIDE TO THE FILE OF THE AO FOR FRESH EXAMINATION TO ASCERTAIN THAT ENTIRE LOSS HAS ARISEN ON ACTUA L PAYMENT OF PURCHASE VALUE ITA NO.1849/M/2014 M/S. LARISSA INTERNATIONAL 2 DURING THE PREVIOUS YEAR. IN CASE THE PAYMENT IS M ADE IN THE NEXT YEAR, IT IS PROVISIONAL LOSS WHICH CANNOT BE ALLOWED. 2. THE APPELLANT PRAYS THAT THE ORDER OF THE CIT(A) ON THE ABOVE GROUNDS BE REVERSED AND THAT OF THE ASSESSING OFFICER BE RESTO RED. 3. THE APPELLANT CRAVES LEAVE TO AMEND OR ALTER ANY GROUND OR ADD A NEW GROUND WHICH MAY BE NECESSARY. 3. THE FIRST ISSUE IS RELATING TO THE ISSUE OF ALLO WABILITY OF LOSS INCURRED BY THE ASSESSEE ON ACCOUNT OF FLUCTUATION IN THE VALUE OF FOREIGN EXCHANGE. THE ASSESSING OFFICER (HEREINAFTER REFERRED TO AS THE A O) FOUND THAT THE ASSESSEE HAD DEBITED RS.92,22,966/- TO P & L ACCOUNT AS LOSS ON FOREIGN EXCHANGE. THE ASSESSEE HAD IMPORTED GOODS. THE INVOICE VALUE WAS IN DOLLARS (US DOLLAR). WHILE DEBITING THE SAID PURCHASE COST IN THE P & L ACCOUNT, THE ASSESSEE HAD CONVERTED THE DOLLAR VALUE INTO INDIAN CURRENCY. B UT THE ASSESSEE HAD PAID FOR THE IMPORTS IN US DOLLARS. ON THE DATE OF PAYMENT, THE ASSESSEE CONVERTED THE DOLLAR VALUE INTO THE RUPEES AND CLAIMED THE ADDITI ONAL AMOUNT PAID ON ACCOUNT OF INCREASE IN DOLLAR VALUE BETWEEN THE DAT E OF INVOICE AND DATE OF PAYMENT BECAUSE OF FOREIGN EXCHANGE FLUCTUATION AS FOREIGN EXCHANGE LOSS. THE AO DISALLOWED THE SAID LOSS OBSERVING THAT WHEN THE ASSESSEE HAD CONVERTED THE INVOICE VALUE INTO INDIAN CURRENCY AN D THE SAME HAD BEEN DEBITED INTO THE P & L ACCOUNT, THEREAFTER THE ASSE SSEE WAS NOT JUSTIFIED IN CLAIMING THE LOSS BY STATING THAT AS ON THE DATE OF PAYMENT THE VALUE OF THE DOLLAR INTO INDIAN CURRENCY HAD INCREASED. THE AO TERMED THE SAID LOSS AS ARTIFICIAL LOSS. IN APPEAL, THE LD. CIT(A), AFTER GOING THROUGH THE FACTS OF THE CASE, OBSERVED THAT THERE WAS NO DISPUTE THAT THERE WAS A CONSIDERABLE UPWARD MOVEMENT IN EXCHANGE VALUE OF THE DOLLAR. IT WAS A LSO NOT DISPUTED THAT THE ASSESSEE HAD TO PAY MORE AMOUNT IN INDIAN CURRENCY IN RELATION TO THE INVOICE RAISED ON ACCOUNT OF PURCHASES. HE OBSERVED THAT T HE LOSS INCURRED BY THE ASSESSEE WAS REAL LOSS AND NOT A NOTIONAL LOSS AND WAS REQUIRED TO BE ALLOWED ON ACCOUNT OF FOREIGN EXCHANGE FLUCTUATION. ITA NO.1849/M/2014 M/S. LARISSA INTERNATIONAL 3 4. BEFORE US, THE LD. D.R. COULD NOT POINT ANY DEFE CT IN THE WELL REASONED ORDER OF THE LD. CIT(A). THE LD. CIT(A) HAS RIGHTL Y HELD THAT THE LOSS INCURRED BY THE ASSESSEE ON ACCOUNT OF FOREIGN EXCHANGE RELA TING TO PURCHASE PRICE OF THE IMPORTED GOODS WAS A REAL LOSS WHICH WAS ACTUAL LY SUFFERED BY THE ASSESSEE. AT THIS STAGE, THE LD. D.R. HAS SUBMITTED THAT THE MATTER SHOULD BE RESTORED TO THE AO TO EXAMINE WHETHER THE MERITS WERE MADE DURI NG THE YEAR OR THE LOSS PERTAINED TO SOME ANOTHER YEAR. WE FIND THAT IT WA S NEVER THE CASE OF THE REVENUE THAT THE LOSS DID NOT PERTAIN TO THE YEAR U NDER CONSIDERATION. THE AO HAD EXAMINED THE INVOICE AND HAD DISALLOWED THE LOS S OBSERVING THAT THERE WAS DIFFERENCE OF THE CURRENCY AMOUNT DEBITED ON THE DA TE OF PURCHASE AND WHEN THE AMOUNT WAS ACTUALLY PAID. HE HAD NOT POINTED O UT THAT THE PURCHASES WERE OF ANY OTHER YEAR AND NOT OF THE YEAR UNDER CONSIDE RATION. SUCH TYPE OF PLEA AT SECOND APPELLATE STAGE IS A VAGUE PLEA WITHOUT ANY BASIS AND THE SAME CANNOT BE ENTERTAINED AT THIS STAGE. HENCE, THE FINDINGS OF THE LD. CIT(A) ON THE ISSUE OF ALLOWABILITY OF LOSS ON FOREIGN EXCHANGE ARE HER EBY UPHELD. 5. THE SECOND ISSUE RAISED BY THE REVENUE IS RELATI NG TO THE ACTION OF THE LD. CIT(A) IN ALLOWING THE CLAIM OF RS.20,38,813/- ON ACCOUNT OF DETENTION CHARGES. THE AO OBSERVED THAT THE ASSESSEE HAD DEL AYED THE LIFTING OF CERTAIN GOODS BEYOND THE PERIOD ALLOWED. THESE GOODS STAYE D ON THE SHIP AND THE ASSESSEE HAD TO PAY DETENTION CHARGES OF RS.20,38,8 13/-. HE OBSERVED THAT SUCH CHARGES WERE IN THE NATURE OF A FIND AND PENAL TY. HE THEREFORE DISALLOWED THE SAME. THE ASSESSEE, BEFORE THE LD. CIT(A), SUBMITTED THA T THE SAID DETENTION CHARGES WERE NOT IN THE SHAPE OF ANY STATUTORY LIAB ILITY OR PENALTY. THE SAID CHARGES ARE CHARGED BY THE PORT AUTHORITIES IN CASE OF INABILITY OF ANY PARTY TO LIFT THE GOODS ON BOARD OF ANY SHIP. THE SAID SUCH TYPE OF EXPENDITURE IS ROUTINE FEATURE OF ANY IMPORT BUSINESS. THE LD. CI T(A), AFTER CONSIDERING THE ITA NO.1849/M/2014 M/S. LARISSA INTERNATIONAL 4 SUBMISSIONS OF THE ASSESSEE, OBSERVED THAT THE AO H AD CONFUSED THESE DETENTION CHARGES WITH STATUTORY PENALTIES. HE OBS ERVED THAT FROM THE VERY NATURE OF THESE CHARGES IT APPEARED THAT THEY WERE ROUTINE BUSINESS EXPENSES AND WERE INCURRED BY THE ASSESSEE WHOLLY AND EXCLUS IVELY FOR THE PURPOSE OF BUSINESS. HE THEREFORE ALLOWED THE SAID EXPENDITUR E. WE DO NOT FIND ANY INFIRMITY IN THE ORDER OF THE LD. CIT(A) ON THIS IS SUE ALSO. 6. IN THE RESULT, THE APPEAL OF THE REVENUE IS HERE BY DISMISSED. ORDER PRONOUNCED IN THE OPEN COURT ON 07.09.2015. # 4 0 23+ ' 5 6#*7 07.09.2015 3 0 % SD/- SD /- ( ! / RAJENDRA) ( %% / SANJAY GARG) ' #$ / ACCOUNTANT MEMBER & #$ / JUDICIAL MEMBER /MUMBAI ; 6#* / DATED 07. 09. 2015 * KISHORE # 4 0 .&1IJ # 4 0 .&1IJ # 4 0 .&1IJ # 4 0 .&1IJ K J+1 K J+1 K J+1 K J+1/COPY OF THE ORDER FORWARDED COPY OF THE ORDER FORWARDED COPY OF THE ORDER FORWARDED COPY OF THE ORDER FORWARDED TO TOTO TO : :: : 1. ,- / THE APPELLANT 2. ./,- / THE RESPONDENT. 3. ]1 () / THE CIT(A)- 4. ]1 / CIT 5. JC% .&1&* , , / THE DR CONCERNED BENCH, 6. %G H / GUARD FILE. # 4* # 4* # 4* # 4* / // / BY ORDER, /J1 .&1 //TRUE COPY// L LL L/ // /M M M M ( DY./ASSTT. REGISTRAR) , , , , / ITAT, MUMBAI / ITAT, MUMBAI / ITAT, MUMBAI / ITAT, MUMBAI