ACIT 16(3), MUMBAI V. S.C. STAR, MUMBAI

ITA 2614/MUM/2013

• Counselvise Citation: 261419914 RSA 2013
• Duration Of Justice: 1 year(s) 3 month(s) 3 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 09-07-2014
• Appeal Filed By: Department
• Order Result: Dismissed
• Bench Allotted: E
• Assessment Year: 2009-2010
• Appeal Filed On: 05-04-2013
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: PRAKASH L PATHADE

Judgement Text

, IN THE INCOME TAX APPELLATE TRIBUNAL E BENCH, MUMBAI BEFORE HONBLE S/SHRI H.L. KARWA, PRESIDENT AND B. R.BASKARAN (AM) . . , . . , ./I.T.A. NO.2614/MUM/2013 ( / ASSESSMENT YEAR :2009-10) ASSISTANT COMMISSIONER OF INCOME TAX, 16(3), ROOM NO.206, 2 ND FLOOR, MATRU MANDIR, TARDEO ROAD, MUMBAI-400007 / VS. M/S S.C.STAR 110, THE JEWEL (ROXY), OPERA HOUSE, MUMBAI-400004, ( / APPELLANT) .. ( !' / RESPONDENT) ./ #$ ./PAN/GIR NO. :AAPFS1576G % / APPELLANT BY : SHRI PRAKASH L PATHADE !' & % /RESPONDENT BY : NONE ' & ( ) / DATE OF HEARING : 9.7.2014 *+ & ( ) /DATE OF PRONOUNCEMENT : 9.7.2004 / O R D E R PER B.R.BASKARAN, ACCOUNTANT MEMBER: THE APPEAL FILED BY THE REVENUE IS DIRECTED AGAINST THE ORDER DATED 31.1.2013 PASSED BY LD. CIT(A)-27, MUMBAI AND IT RE LATES TO THE ASSESSMENT YEAR 2009-10. 2. THE REVENUE IS AGGRIEVED BY THE DECISION OF THE LD. CIT(A) IN HOLDING THAT MARK-TO-MARKET LOSS OF RS.6,93,696/- ARISING ON REVALUATION OF FORWARD CONTRACT AGREEMENT ON THE CLOSING DATE OF ACCOUNTING YEAR IS NOT NOTIONAL LOSS. 3. NONE APPEARED ON BEHALF OF THE ASSESSEE. HENCE, WE PROCEED TO DISPOSE OF THE APPEAL EX-PARTE, WITHOUT THE PRESENCE OF THE ASSESSEE. 2 4. THE FACTS RELATING TO THE ABOVE SAID ISSUE HAVE BEEN STATED AS UNDER BY LD CIT(A) : 3. AS AT 31.3.2009, APPELLANT HAS OUTSTANDING RECE IVABLE IN FOREIGN CURRENCY OF US $ 16,55,986/- WHICH WAS RESTATED AT CLOSING RATE AND GAIN OF RS.1.8 CRORES WAS RECOGNIZED AS INCOME. SIMILARL Y, IN ORDER TO HEDGE RISK ARISING OUT OF VARIATION IN EXCHANGE RATE, AP PELLANT HAD ENTERED INTO FORWARD CONTRACTS FOR SALE OF US$ 3,38,398 WHICH W AS PENDING MATURITY AS AT YEAR END I.E.31.3.2009 . IN RESPECT OF THESE CONTRACTS, IT HAS RECOGNIZED LOSS OF RS.6,93,696/- BY REVALUING THE S AME AT THE RATE PREVALENT ON YEAR END DATE HOWEVER, THE AO DISALLOWED THE LOSS OF RS.6,93,693/ - CLAIMED BY THE ASSESSEE BY HOLDING THAT IT WAS A NOTIONAL LOSS. THE ASSES SEE CHALLENGED THE MATTER BEFORE THE LD. CIT(A) AND THE FIRST APPELLATE AUTH ORITY ALLOWED THE SAME BY FOLLOWING THE DECISION RENDERED BY CO-ORDINATE BEN CH OF TRIBUNAL IN THE CASE OF M/S BHAVANI GEMS V/S ACIT CC-35 IN ITA NO.2855/MUM/ 2010 (AY-2006-07) DATED 30.3.2011. AGGRIEVED BY THE ORDER OF LD. CI T(A), THE REVENUE HAS FILED THIS APPEAL BEFORE US. 5. WE HAVE HEARD THE LD. DR AND PERUSED THE RECORD. WE NOTICE THAT THE LD. CIT(A) HAS CONSIDERED THE PRINCIPLE LAID DOWN IN T HE FOLLOWING CASE LAWS : (A) WOODWARD GOVERNOR V/S CIT 294 ITR 451 (DEL); (B) CIT V/S WOODWARD GOVERNOR INDIA P LTD (312 ITR 254)(SC) (C ) DCIT V/S BANK OF BAHARIN AND KUWAIT IN ITA N O.4404 & 1883/MUM/2004) (SB) ITAT, MUMBAI ; AND (D) ONGC V/S CIT (322 ITR 180) (SC) FINALLY, THE LD. CIT(A) VIDE PARA 6 OF HIS ORDER H AS HELD AS UNDER : 6. THUS THE JUDICIAL DECISIONS OF THE HON . SUPREME COURT AND VARIOUS OTHER AUTHORITIES ARE CLEARLY IN FAVOUR OF THE APPELLANT ON THIS ISSUE . THAT APART , AS DISCUSSED EARLIER , THE LIABILITIES IN FOREIGN E X CHANGE WERE INCURRED DURING THE NORMAL COURSE OF THE APPELLANT ' S BUSINESS AND THE RESTATEMENT OF THE FORWARD CONTRACT OBLIGATIONS WAS DONE AS PER AS- 11 IN A CONSISTENT MANNER OVER THE YEARS . IN FACT THE GAIN EARNED ON SUCH REVALUATION WAS ACCEPTED AND BROUGHT TO TAX IN THE RESPECTIVE YEARS AND THERE IS NO REASON TO ARRIVE AT A DIFFERENT CONCLUS ION AT PRESENT MERELY BECAUSE THERE IS A LOSS DURING THE YEAR. APPARENTLY , THE AO WAS OF THE VIEW THAT THE APPELLANT IS NOT A DEALER I N FOREIGN EXCHANGE UNLIKE THE BANK 3 OF BAHRA I N , AND THEREFORE THE SAID DECIS I ON IS NOT APPLICABLE TO THE FACTS OF THE CASE . IT I S NOT OUT OF PLACE TO MENT I ON THAT THE HON . SUPREME COURT , IN THE CASE OF ONGC CITED ABOVE , UPHELD THE SAME PR I NCIPLES THAT WERE LA I D DOWN IN THE CASE O F WOODWORD GOVERNOR , AN D THE LOSS WAS HELD ALLOWAB L E IN SIMILAR CIRCUMSTANCES , WHERE THE BUS I NESS OF ONGC IS NO T THAT OF A FO R EIGN E XC HANGE DEALER . FURTHER , IT IS NOT THE NATURE OF BUS I NESS OR THE STOC K DEALT WITH I . E . , CU R RENCY OR COMMODITIES OR GOODS L I KE D I AMOND S IN THE PRESENT CASE THAT MATTERS . WHAT MATTERS IS WHETHER THE FORWARD CONTRACT TRANSACTIO N WAS ENTERED DUR I NG THE COURSE OF APPELLANT ' S REGULAR BUSINESS O R W H ETH ER I T I S TAINTED WITH A COLOUR OF SPECULATIVE TRANSACTION . AT PRESENT , THE AO DOES NOT DISPUTE THAT THE IMPUGNED TRANSACT I ON IS SPECULATIVE I N NATU R E . FU R THE R , THE AFO R ESAID ISSUE OF ALLOW I NG THE LOSS ON ACCOUNT OF REVALUATIO N OF PENDING FORWARD CONTRACTS WAS CONSIDERED BY THE HONBLE. ITAT MUMBAI BENCH IN THE CASE OF M/S BH AVANI GEMS VS ACIT CC-35 IN ITA NO.2855/MUM/2010 DATED 30/3/2011 FOR A Y 2006-07 AND THE SAID LOSS WAS ALLOWED AS BUSINESS LOSS AND THE ISSU E WAS HELD TO BE COVERED BY SPECIAL BENCH DECISION IN THE CASE OF DC IT VS BANK OF BAHRAIN. THEREFORE, IN MY CONSIDERED OPINION THE FACTS OF TH E APPELLANT'S CASE ARE FULLY COVERED BY THE ABOVE CITED DECISIONS OF THE H ON. SUPREME COURT AND THE ITAT MUMBAI BENCH. ACCORDINGLY I HOLD THAT THE LOSS INCURRED BY THE APPELLANT ON RESTATEMENT OF PENDING FORWARD CONTRAC T AGREEMENTS AT THE YEAR-END IS AN ALLOWABLE BUSINESS LOSS. APPELLANT S UCCEEDS ON THIS GROUND.) WE NOTICE THAT THE LD. CIT(A) HAS FOLLOWED THE PRIN CIPLE LAID DOWN IN VARIOUS DECISIONS OF HONBLE SUPREME COURT /HIGH COURTS AN D HAS FOLLOWED THE DECISION RENDERED BY THE CO-ORDINATE BENCH OF THE TRIBUNA L IN THE CASE OF BANK OF BAHRAIN (SUPRA). UNDER THESE FACTS AND CIRCUMSTANC ES OF THE CASE, WE DO NOT FIND ANY REASON TO INTERFERE WITH THE ORDER PASSED BY LD. CIT(A) ON THIS ISSUE. 6 . IN THE RESULT, THE APPEAL FILED BY THE REVENUE I S DISMISSED. THE ABOVE ORDER WAS PRONOUNCED IN THE OPEN COURT O N 9TH JULY, 2014 . *+ ' , -. / 0 9TH JULY, 2014 + & 2 3 SD SD ( . . / H.L. KARWA) ( . . , / B.R. BASKARAN ) / PRESIDENT / ACCOUNTANT MEMBER - ' MUMBAI: 9TH JULY,2014. 4 . . ./ SRL , SR. PS ! ' / COPY OF THE ORDER FORWARDED TO : 1. / THE APPELLANT 2. !' / THE RESPONDENT. 3. ' 8( ( ) / THE CIT(A)- CONCERNED 4. ' 8( / CIT CONCERNED 5. 9: 2 !(; , ) ; , - ' / DR, ITAT, MUMBAI CONCERNED 6. 2 < = / GUARD FILE. > ' / BY ORDER, TRUE COPY ? # (ASSTT. REGISTRAR) ) ; , - ' /ITAT, MUMBAI