Ninestars Information Technologies P Ltd., CHENNAI V. DCIT Corporate Circle 4(2), CHENNAI

ITA 2503/CHNY/2018

• Counselvise Citation: [2020] 111 COUNSELVISE.COM (IT) 3238 (ITAT-CHENNAI)
• Duration Of Justice: 1 year(s) 5 month(s) 27 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 25-02-2020
• Appeal Filed By: Assessee
• Order Result: Allowed
• Bench Allotted: A
• Assessment Year: 2015-2016
• Appeal Filed On: 29-08-2018
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: VIJAYAPRABHA
• Section: 143(3)

Judgement Text

, , IN THE INCOME TAX APPELLATE TRIBUNAL C BENCH: CHENNAI , ! ' # , $ %& BEFORE SHRI MAHAVIR SINGH , VICE PRESIDENT AND SHRI M. BALAGANESH, ACCOUNTANT MEMBE R ./ ITA NO.2503/CHNY/2018 ' ( )( /ASSESSMENT YEAR: 2015-16 M/S. NINESTARS INFORMATION TECHNOLOGIES PVT. LTD., NO.72, GREAMS ROAD, THOUSAND LIGHTS, CHENNAI 600 006. VS. THE DY. COMMISSIONER OF INCOME TAX, CORPORATE CIRCLE-4(2), CHENNAI. [PAN : AABCN 0949B ] ( *+ /APPELLANT) ( ,-*+ /RESPONDENT) *+ . / / APPELLANT BY : SHRI R. VISWANATHAN, C.A ,-*+ . / /RESPONDENT BY : MRS. VIJAYAPRABHA, JCIT 0 . 1$ /DATE OF HEARING : 25.02.2020 23) . 1$ / DATE OF PRONOUNCEMENT : 28.02.2020 %# / O R D E R PER M. BALAGANESH, ACCOUNTANT MEMBER : THIS APPEAL OF THE ASSESSEE ARISE OUT OF THE ORDER OF THE LD. COMMISSIONER OF INCOME TAX (APPEALS)-8, CHENNAI VID E PROCEEDINGS IN ITA NO.70/17-18, DATED 28.06.2018 AGAINST THE OR DER PASSED BY THE DCIT, CORPORATE CIRCLE-4(2), CHENNAI (AO) U/S. 143(3) OF THE INCOME TAX ACT, 1961 (HEREAFTER THE ACT) DATED 27 .12.2017 FOR THE ASSESSMENT YEAR (A.Y) 2015-16. ITA NO.2503/CHNY/2018 (A.Y 2015-16) M/S.NINESTARS INFORMATION TECHNOLOGIES PVT. LTD. :- 2 -: 2. THOUGH THE ASSESSEE HAS RAISED THE SEVERAL GROUN DS OF APPEAL, WE FIND THAT ONLY EFFECTIVE GROUND TO BE DECIDED IS AS TO WHETHER THE EXCHANGE DIFFERENCE ARISING ON THE LOAN TRANSACTION WITH FOREIGN SUBSIDIARY COMPANY COULD BE CONSIDERED AS A NOTIONA L LOSS IN THE FACTS AND CIRCUMSTANCES OF THE CASE. 3. WE HAVE HEARD THE RIVAL SUBMISSIONS AND PERUSED THE MATERIAL AVAILABLE ON RECORD. THE UNDISPUTED FACTS ARE THAT THE ASSESSEE HAD GIVEN LOAN TO ITS FOREIGN SUBSIDIARY COMPANY IN THE YEAR 2013 AND THE SAID LOAN WAS RECEIVED BACK DURING THE YEAR UNDER C ONSIDERATION. PURSUING TO THE SAME, THE ASSESSEE INCURRED FOREIGN EXCHANGE FLUCTUATION LOSS. THE ASSESSEE IN A.Y 2014-15 EARNE D EXCHANGE GAIN IN RESPECT OF THE SAME TRANSACTION AND HAD OFFERED THE SAME TO TAX. THE LD. A.O IN THE SCRUTINY ASSESSMENT PROCEEDINGS COMPLETED U/S. 143(3) DATED 29.12.2016 HAD ALSO ASSESSED THE SAID EXCHANGE GAIN AS A TAXABLE RECEIPT. DURING THE YEAR UNDER CONSID ERATION ON RECEIPT OF THE LOAN FROM THE FOREIGN SUBSIDIARY, PURSUANT T O THE CONVERSION OF THE AMOUNTS RECEIVED IN FOREIGN CURRENCY INTO INDIA N CURRENCY, THE ASSESSEE INCURRED EXCHANGE FLUCTUATION LOSS AND CLA IMED THE SAME AS A REVENUE LOSS U/S.37(1) OF THE ACT IN THE RETUR N OF INCOME. THIS LOSS WAS CONSIDERED TO BE NOTIONAL IN NATURE AND CA PITAL EXPENDITURE BY THE LD. A.O AND ACCORDINGLY, THE SAME WAS DISALL OWED IN THE ITA NO.2503/CHNY/2018 (A.Y 2015-16) M/S.NINESTARS INFORMATION TECHNOLOGIES PVT. LTD. :- 3 -: ASSESSMENT. WE FIND THAT THE LD. CIT(A) HAD CONSIDE RED THIS EXCHANGE FLUCTUATION LOSS AS 'MARK TO MARKET' LOSS FOR TREATING THE SAME AS EXCHANGE LOSS INCURRED ON SOME FOREX-DERIVA TIVES AND ACCORDINGLY BY PLACING RELIANCE ON THE CBDT CIRCULA R INSTRUCTION NO.3 TO 2010 DATED 23.03.2010 HELD THAT THE SAID EXCHANG E FLUCTUATION LOSS IS CAPITAL IN NATURE AND ALSO CONTINGENT EXPENDITUR E. WITH THIS OBSERVATION, HE UPHELD THE ACTION OF THE LD. AO. W E FIND THAT THE REVENUE HAD NOT UNDERSTOOD THE TRANSACTION CARRIED OUT BY THE ASSESSEE IN THE INSTANT CASE. THIS IS A SIMPLE CA SE OF LOAN GIVEN BY THE ASSESSEE TO ITS FOREIGN SUBSIDIARY IN THE EARLI ER YEARS AND AT THE TIME OF RE-STATEMENT OF THE SAID LOANS IN EARLIER Y EARS AT THE EXCHANGE RATE PREVAILING AT THE END OF THE YEAR, IT HAD RESU LTED IN EXCHANGE GAIN WHICH HAS BEEN DULY OFFERED TO TAX BY THE ASSESSEE VOLUNTARILY AND ASSESSED AS SUCH BY THE REVENUE IN THE SCRUTINY ASS ESSMENT PROCEEDINGS COMPLETED U/S. 143(3) OF THE ACT. DURIN G THE YEAR UNDER CONSIDERATION, WHEN THE SAID LOANS WERE RECEIVED BA CK BY THE ASSESSEE AND THE ASSESSEE HAD ACTUALLY INCURRED EXC HANGE LOSS, THE REVENUE HAD CONSIDERED THE SAME AS TRANSACTION CARR IED OUT IN FOREX- DERIVATIVES AND TREATING THE SAME AS 'MARK TO MARKE T' LOSS, WHICH IN OUR CONSIDERED OPINION, IS AGAINST THE FACTS OF THE ASSESSEE AND MATERIAL AVAILABLE ON RECORD. WE FIND THAT THE ISSU E IS SQUARELY COVERED BY THE DECISION OF HON'BLE SUPREME COURT IN THE CASE OF CIT ITA NO.2503/CHNY/2018 (A.Y 2015-16) M/S.NINESTARS INFORMATION TECHNOLOGIES PVT. LTD. :- 4 -: VS. WOODWARD GOVERNOR INDIA (P.) LTD. REPORTED IN [ 2009] 312 ITR 254(SC) AND RESPECTFULLY FOLLOWING THE SAME, WE HOL D THAT THE EXCHANGE FLUCTUATION LOSS INCURRED BY THE ASSESSEE DURING THE YEAR UNDER CONSIDERATION IS A REGULAR REVENUE LOSS AND I S SQUARELY ALLOWABLE AS DEDUCTION. ACCORDINGLY, THE GROUNDS RA ISED BY THE ASSESSEE ARE ALLOWED. 4. IN THE RESULT, THE APPEAL OF THE ASSESSEE IS ALL OWED. ORDER PRONOUNCED ON 28 TH DAY OF FEBRUARY, 2020 IN CHENNAI. SD/- SD/- ( ) (MAHAVIR SINGH) /VICE PRESIDENT ( ) (M. BALAGANESH) /ACCOUNTANT MEMBER /CHENNAI, 4% /DATED: 28 TH FEBRUARY, 2020 . EDN, SR. P.S %# . ,'15 65)1 /COPY TO: 1. *+ /APPELLANT 2. ,-*+ /RESPONDENT 3. 0 71 ( )/CIT(A) 4. 0 71 /CIT 5. 58' ,'1' /DR 6. '9( : /GF