DCIT, Circle-3(3), Hyderabad V. M/s. Vuppalamritha Magnatic Components Ltd, Secunderabad

ITA 1890/HYD/2011

• Counselvise Citation: [2012] 140 COUNSELVISE.COM (IT) 66582 (ITAT-HYDERABAD)
• Duration Of Justice: 1 year(s) 1 month(s) 19 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 28-12-2012
• Appeal Filed By: Department
• Order Result: Dismissed
• Bench Allotted: B
• Assessment Year: 2008-2009
• Appeal Filed On: 08-11-2011
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: VIDISHA KALRA
• Section: 37(1)

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL HYDERABAD BENCH B', HYDERABAD BEFORE SHRI CHANDRA POOJARI, ACCOUNTANT MEMBER AND SMT. AHSA VIJAYARAGHAVAN, JU DICIAL MEMBER ITA NO. 1890/HYD/11 ASST. YEAR 2008-09 DCIT, CIR-3(3), HYDERABAD. V/S. M/S. VUPPALAMRITHA MAGNATIC COMPONENTS LIMITED, HYDERABAD. PAN:AABCV4225A (APPELLANT) (RESPONDENT) APPELLANT BY : SMT. VIDISHA KALRA RESPONDENT BY : SHRI K.C. DEVDAS DATE OF HEARING 22 - 11 - 2012 DATE OF PRONOUNCEMENT 2 8 - 12 - 2012 O R D E R PER CHANDRA POOJARI, ACCOUNTANT MEMBER: THE DEPARTMENT HAS FILED THIS APPEAL BEING AGGRIEVE D BY THE ORDER DATED 26-8-2011 OF THE CIT (A)-IV, HYDERABAD P ASSED IN ITA NO.352/DCIT-3(3)/CIT(A)-IV/10-11 PERTAINING TO THE ASSESSMENT YEAR 2008-09. 2. THE ONLY ISSUE IN THIS APPEAL IS WITH REGARD TO TREA TMENT OF EXCHANGE RATE FLUCTUATION LOSS AS PER THE DATE OF BALA NCE-SHEET AS AN EXPENDITURE U/S 37(1) OF INCOME-TAX ACT. 3. BRIEF FACTS OF THE ISSUE ARE THAT AS PER THE ASSESSMENT O RDER, THE ASSESSEE HAD DEBITED AN AMOUNT OF RS.3,32,55,343/- TOWAR DS ITA NO.1890 OF 2011 VUPPLAMRITHA MAGNATIC COMP ONENTS, HYD. 2 EXCHANGE RATE FLUCTUATION LOSS TO THE PROFIT AND LOSS A CCOUNT. ON BEING REQUIRED TO EXPLAIN AS TO HOW THE SAME WAS ALLOW ABLE U/S 37(1) OF THE ACT, THE ASSESSEE SUBMITTED BEFORE THE AO THAT THE COMPANYS RAW MATERIAL IMPORTS ACCOUNT FOR ROUGHLY 80% OF THE PU RCHASES, AND THAT IT PROCURES MATERIAL FROM SINGAPORE, MALAYSIA, C HINA ETC.., AGAINST LETTERS OF CREDIT ISSUED BY ITS BANKERS. HE SUBMITTED THAT THE DIFFERENCE IN THE VALUE OF INVOICE AND PAYMENTS MADE TO THE SUPPL IERS AT THE END OF THE TENURE OF THE LETTER OF CREDIT IS DEBITED OR CREDITED TO EXCHANGE FLUCTUATION ACCOUNT. HE FURTHER STATED THAT DUE TO VOL ATILITY IN THE EXCHANGE RATE DURING THE YEAR, THERE WAS A FOREX LOSS OF RS.3,32,55,343/-, WHICH WAS DEBITED TO EXCHANGE RATE FL UCTUATION ACCOUNT AND GAIN OF RS.1,10,30,384/- WHICH HAD BEEN CRED ITED TO THE SAID ACCOUNT. 4. WE HAVE HEARD BOTH THE PARTIES ON THIS ISSUE. THE DEPARTMENT HAS RELIED ON THE JUDGMENT OF SUPREME COURT IN THE CA SE OF SOUTHERN TECHNOLOGIES LIMITED (320 ITR 577), ANDHRA PRADESH HIGH COURTS DECISION IN THE CASE OF M.S. RAJU (298 ITR 373) AND MAD RAS HIGH COURT IN THE CASE OF TAMIL NADU DAIRY DEVELOPMENT CORPORAT ION LIMITED (239 ITR 142) ON THE ABOVE ISSUE. IN OUR OPINION, RELIANCE PLACED BY THE DEPARTMENT IS MISCONCEIVED. THE SAME ISSUE WAS BEFORE THE HONBLE SUPREME COURT IN THE CASE OF CIT VS. WOODWARD GOVERNO R INDIA PVT. LTD. (312 ITR 254) WHEREIN THE HONBLE SUPREME COUR T CONFIRMED THE JUDGMENT OF DELHI HIGH COURT REPORTED IN 294 ITR 451 IN SIMILAR CASES AND HELD THAT LOSS OFFERED BY THE ASSESSEE IN RESPECT OF RE VENUE LIABILITY ON ACCOUNT OF EXCHANGE DIFFERENCE AS ON THE DATE OF BAL ANCE-SHEET IS AN ITEM OF EXPENDITURE ALLOWABLE U/S 37(1) OF THE ACT IN THE YEAR OF ACCRUAL. BEING SO, THE EXPENDITURE INCURRED BY THE ASSESSE E IS WITH REGARD TO THE PURCHASE OF RAW MATERIAL AND THE EXCHANG E RATE ITA NO.1890 OF 2011 VUPPLAMRITHA MAGNATIC COMP ONENTS, HYD. 3 FLUCTUATION ON THIS COUNT AS PER THE DATE OF BALANCE-SH EET IS TO BE CONSIDERED AS REVENUE LOSS AND THE SAME IS TO BE DECIDED IN FAVOUR OF THE ASSESSEE. HENCE, WE CONFIRM THE ORDER OF THE CIT (A) ON THIS ISSUE. 5. IN THE RESULT, THE APPEAL FILED BY THE REVENUE STA NDS DISMISSED. ORDER PRONOUNCED IN THE COURT ON 28 -12-2012. SD/- SD/- (ASHA VIJAYARAGHAVAN) (CHANDRA POOJARI) JUDICIAL MEMBER ACCOUNTANT MEMBER DT/- 28 TH DECEMBER, 2012 COPY FORWARDED TO: 1. M/S. VUPPALAMRITHA MAGNATIC COMPONENTS LIMITED, NO.701 3, EMERALD HOUSE, S.D. ROAD, SECUNDERABAD. 2. 3. 4. DCIT, CIR-3(3), 7 TH FLOOR, B-BLOCK, IT TOWERS, AC GUARDS, HYDERABAD. COMMISSIONER OF INCOME-TAX (APPEALS) IV, HYDERABAD. CIT CONCERNED, HYDERABAD. 5 DEPARTMENTAL REPRESENTATIVE, ITAT, HYDERABAD. JMR *