The ACIT, Circle-9, Surat V. M/s. Davariya Brothers, Surat

ITA 2009/AHD/2012

• Counselvise Citation: [2016] 133 COUNSELVISE.COM (IT) 1829 (ITAT-AHMEDABAD)
• Duration Of Justice: 3 year(s) 6 month(s) 29 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 06-04-2016
• Appeal Filed By: Department
• Order Result: Dismissed
• Bench Allotted: D
• Next Hearing Date: 28-03-2016
• Assessment Year: 2004-2005
• Appeal Filed On: 07-09-2012
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: SONIA KUMAR
• Assessee Lawyers: M K PATEL
• Keywords: Business income; Revised return
• Section: 80HHC; 154; 2

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL D BENCH, AHM EDABAD , (BEFORE SHRI ANIL CHATURVEDI, A.M. & SHRI KUL BHARA T, J.M.) ( , !'# $ , ! %& ) ITA NO. 2009/AHD/2012 (ASSESSMENT YEAR: 2004-05) THE ASSISTANT COMMISSIONER OF INCOME-TAX, CIRCLE - 9, SURAT VS. M/S. DAVARIYA BROTHERS 15-D, H.NO. 175, 4 TH FLOOR, PATEL FALIYA, GOTALAWADI, KATARGRAM, SURAT - 395008 PAN NO. AAACE5227E (APPELLANT) (RESPONDENT) APPELLANT BY : SMT. SONIA KUMAR, SR. D.R. RESPONDENT BY : SHRI M. K. PATEL, A.R. DATE OF HEARING : 28 -03-2 016 DATE OF PRONOUNCEMENT : 06 -04-2016 ( )/ ORDER PER ANIL CHATURVEDI, ACCOUNTANT MEMBER THIS APPEAL FILED BY THE REVENUE IS AGAINST THE ORD ER OF CIT(A)-V, SURAT, DATED 13.06.2012 FOR A.Y. 2004-05 2. THE RELEVANT FACTS AS CULLED OUT FROM THE MATERI ALS ON RECORD ARE AS UNDER: ITA NO.2009/AHD/12 (ACIT VS. M/. DAVARIYA BROTHER S) A.Y. 04-05 2 3. ASSESSEE IS A PARTNERSHIP FIRM STATED TO BE ENGA GED IN THE BUSINESS OF PROCESSING OF DIAMONDS AND ITS EXPORT. ASSESSEE F ILED ITS RETURN OF INCOME FOR A.Y. 2004-05 ON 17.09.2004 DECLARING TOTAL INCOME O F RS.3,31,93,114/-. THE CASE WAS SELECTED FOR SCRUTINY AND THEREAFTER, ASSE SSMENT WAS FRAMED U/S.143(3) OF THE ACT VIDE ORDER DATED 29.12.2006 AND THE TOTAL I NCOME WAS DETERMINED AT RS. 4,36,05,350/- AFTER GRANTING DEDUCTION OF RS.1,87,1 6,503/- U/S.80HHC OF THE ACT. ASSESSEE, THEREAFTER, FILED REVISED RETURN OF INCOM E ON 31.03.2006 DECLARING TOTAL INCOME AT RS.4,62,91,959/-. THEREAFTER, RECTIFICAT ION ORDER U/S. 154 OF THE ACT WAS PASSED ON 28.04.2011 DETERMINING TOTAL INCOME AT RS .4,30,74,980/- AS ADDITION OF RS.63,14,936/- WAS MADE ON SUBSTANTIVE BASIS IN THE YEAR OF A.Y. 2005-06. SUBSEQUENTLY, THE ASSESSMENT WAS RE-OPENED BY ISSUI NG NOTICE U/S.148 OF THE ACT ON 30.03.2011 AND THEREAFTER, ASSESSMENT WAS FRAMED U/S.143(3) R.W.S. 147 OF THE ACT VIDE ORDER DATED 30.12.2011 AND THE REVISED TOT AL INCOME WAS DETERMINED AT RS. 4,77,39,404/-. AGGRIEVED BY THE ORDER OF A.O., ASSESSEE CARRIED THE MATTER BEFORE THE LD. CIT(A) WHO VIDE ORDER DATED 13.06.20 12 (IN APPEAL NO. CAS/V/209/2011-12) ALLOWED THE APPEAL OF THE ASSESS EE. AGGRIEVED BY THE ORDER OF LD. CIT(A), REVENUE IS NOW IN APPEAL BEFORE US AND HAS RAISED FOLLOWING GROUNDS: I) ON THE FACTS AND IN THE CIRCUMSTANCE OF THE CAS E AND IN LAW THE LD. CIT (A) HAS ERRED IN DELETING THE ADDITION RS.46,64,424/- MADE BY THE A.O. ON ACCOUNT OF DISALLOWANCE OF DEDUCTION U/S 80HHC BY HOLDING THAT THE PROFIT ON ACCOUNT OF EXCHANGE RATE FLUCTUATION IS VERY MUCH A PART OF PR OFIT DERIVED FROM EXPORT AND THUS IS ELIGIBLE FOR DEDUCTION U/S 80HHC. II) ON THE FACTS AND IN THE CIRCUMSTANCE OF THE CAS E AND IN LAW THE LD. CIT (A) OUGHT TO HAVE TO HAVE CONFIRMED THE ADDITION MADE B Y THE AO ON ACCOUNT OF DISALLOWANCE OF DEDUCTION U/S 80HHC OF GAIN ON EXCH ANGE RATE FLUCTUATION ON FOREIGN CURRENCY LOAN CONSIDERING THE FACT THAT THE ABOVE INCOME IS NOT DERIVED FROM THE EXPORT OF GOODS OR MERCHANDISE AS PROVIDED IN SUB-SECTION 1 OF SECTION 80HHC. ITA NO.2009/AHD/12 (ACIT VS. M/. DAVARIYA BROTHER S) A.Y. 04-05 3 III) ON THE FACTS AND IN THE CIRCUMSTANCE OF THE CA SE AND IN LAW THE LD. CIT (A) OUGHT TO HAVE CONFIRMED THE ADDITION MADE BY THE AO CONSIDERING THE FACT THAT THE EXCHANGE RATE GAIN FALLS UNDER THE HEAD OF INCO ME FROM OTHER SOURCES AND HENCE DO NOT FORM PART OF BUSINESS INCOME. . IV) ON THE FACTS AND IN THE CIRCUMSTANCE OF THE CAS E AND IN LAW THE LD. CIT (A) OUGHT TO HAVE CONFIRMED THE ADDITION MADE BY THE AO CONSIDERING THE FACT THAT AS PER EXPLANATION 2 OF SECTION 80HHC (1) THE ASSES SEE WAS ENTITLED TO DEDUCTION ONLY WITH REFERENCE TO THE SALE PROCEEDS AS MENTION ED IN THE SHIPPING BILLS PREPARED ON A PARTICULAR DATE AND IF IT WAS INTENT OF THE LEGISLATURE TO ALLOW DEDUCTION ON ENTIRE PROCEEDS IN RESPECT OF EXPORT S ALES, THEN THERE WAS NO NEED FOR EXPLANATION 2 TO BE INSERTED ON STATUTE. 4. BEFORE US, AT THE OUTSET, LD. D.R. SUBMITTED THA T THOUGH THE REVENUE HAS RAISED VARIOUS GROUNDS BUT THE SOLITARY ISSUE IS WI TH RESPECT TO DEDUCTION U/S.80HHC OF THE ACT. 4.1 LD. D.R. SUBMITTED THAT ASSESSEE WHILE WORKING OUT THE PROFIT OF BUSINESS U/S.80HHC HAD INCLUDED THE AMOUNT OF RS.1,21,45,510 /- BEING EXCHANGE RATE FLUCTUATION ON FOREIGN CURRENCY LOAN. SHE SUBMITTE D THAT THE AFORESAID EXCHANGE FLUCTUATION GAIN CANNOT BE CONSIDERED AS PROFIT DE RIVED FROM BUSINESS AND THEREFORE, A.O. HAD RIGHTLY DISREGARDED THE SAME WH ILE COMPUTING DEDUCTION U/S.80HHC OF THE ACT. SHE, THUS, SUPPORTED THE ORD ER OF A.O. LD. A.R. ON THE ORDER HAND REITERATED THE SUBMISSIONS MADE BEFORE T HE A.O. AND LD. CIT(A) AND SUPPORTED THE ORDER OF LD. CIT(A). 5. WE HAVE HEARD THE RIVAL SUBMISSIONS AND PERUSED THE MATERIAL ON RECORD. THE ISSUE IN THE PRESENT CASE IS WHETHER THE GAINS EARNED ON FOREIGN EXCHANGE FLUCTUATION IS TO BE CONSIDERED FOR DEDUCTION U/S.8 0HHC OF THE ACT. WE FIND THAT LD. CIT(A) WHILE DECIDING THE ISSUE IN FAVOUR OF AS SESSEE HAS GIVEN A FINDING THAT THE EXCHANGE RATE FLUCTUATION RELATED TO THE PURCHA SE OF DIAMONDS AND IT DIRECTLY RELATED TO THE TRADING/BUSINESS OF THE ASSESSEE AND WAS THEREFORE THE PART OF PROFIT DERIVED FROM EXPORT AND THE ASSESSEE WAS THEREFORE ELIGIBLE FOR DEDUCTION ITA NO.2009/AHD/12 (ACIT VS. M/. DAVARIYA BROTHER S) A.Y. 04-05 4 U/S.80HHC OF THE ACT. BEFORE US, REVENUE HAS NOT B ROUGHT ANY MATERIAL ON RECORD TO CONTROVERT THE FINDING OF LD. CIT(A) AND NOR HAS PLACED ANY CONTRARY BINDING DECISION IN ITS SUPPORT. WE, THEREFORE, FI ND NO REASON TO INTERFERE WITH THE ORDER OF LD. CIT(A). THUS, THE GROUND OF REVENUE I S DISMISSED. 6. IN THE RESULT, THE APPEAL OF THE REVENUE IS DI SMISSED. ORDER PRONOUNCED IN OPEN COURT ON 06 - 04 - 2016. SD/- SD/- (KUL BHARAT) (ANIL CHATURVEDI) JUDICIAL MEMBER ACCOUNTANT MEMBER AHMEDABAD: DATED 06/04/2016 TRUE COPY S K SINHA COPY OF THE ORDER FORWARDED TO:- 1. THE APPELLANT. 2. THE RESPONDENT. 3. THE CIT (APPEALS) 4. THE CIT CONCERNED. 5. THE DR., ITAT, AHMEDABAD. 6. GUARD FILE. BY ORDER DEPUTY/ASSTT.REGISTRAR ITAT, AHMEDABAD