The ITO,Vapi Ward-2, Vapi V. K.M. Enterprise, SILVASSA

ITA 2653/AHD/2011

• Counselvise Citation: 265320514 RSA 2011
• Duration Of Justice: 3 year(s) 6 month(s) 24 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 15-05-2015
• Appeal Filed By: Department
• Order Result: Dismissed
• Bench Allotted: D
• Assessment Year: 2008-2009
• Appeal Filed On: 21-10-2011

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL D BENCH AHMEDABAD BEFORE S/SHRI G. D. AGRAWAL, V.P. & SHRI RAJPAL YA DAV, J.M. ITA NO.2653/AHD/2011 ASST. YEAR 2008-09 INCOME-TAX OFFICER, VAPI WARD-2, VAPI. VS K. M. ENETERPRISE, PLOT NO.1/D NANJI INDL. ESTATE, KHARADPADA, SILVASA. (APPELLANT) (RESPONDENT) PA NO.AADFK 3790J APPELLANT BY SHRI B. L. YADAV, SR. DR RESPONDENT BY SHRI SUNIL TALATI, AR DATE OF HEARING: 12/5/2011 DATE OF PRONOUNCEMENT: 15/5/2015 O R D E R PER RAJPAL YADAV, JUDICIAL MEMBER. THE PRESENT APPEAL IS DIRECTED AT THE INSTANCE OF REVENUE AGAINST THE ORDER OF LD. CIT(A) DATED 26 TH AUGUST, 2011 FOR AY 2008- 09. THE GRIEVANCE OF REVENUE IS THAT LD. CIT(A) HAS ERRED IN ALLOWING DEDUCTION U/S 80IB OF THE INCOME-TAX ACT, 1961, ON FOREIGN EXCHANGE FLUCTUATION GAIN AMOUNTING TO RS.39,44,496/-. ITA NO.2653/AHD/2001 ASST. YEAR 2008-09 2 2. THE BRIEF FACTS OF THE CASE ARE THAT ASSESSEE HA S FILED ITS RETURN OF INCOME ELECTRONICALLY ON 30 TH SEPTEMBER, 2008 DECLARING TOTAL INCOME NIL. THE CASE OF THE ASSESSEE WAS SELECTED F OR SCRUTINY AND NOTICE UNDER SECTION 143(2) OF THE I.T. ACT, 1961 W AS ISSUED AND SERVED UPON THE ASSESSEE. THE ASSESSEE FIRM AT THE RELEVANT TIME WAS ENGAGED IN MANUFACTURING PRINTED FLEXIBLE PACKA GING. ON SCRUTINY OF ACCOUNTS IT REVEALED TO THE AO THAT THE PRESENT ASSESSMENT YEAR IS THE 9 TH YEAR OF MANUFACTURING ACTIVITIES AND THE ASSESSEE HAS BEEN CLAIMING DEDUCTION UNDER SECTION 80IB OF THE I.T. A CT,1961. THIS YEAR THE DEDUCTION HAS BEEN CLAIMED @ 25%OF ITS MANUFACT URING PROFIT. THE ASSESSEE HAD FOREIGN EXCHANGE FLUCTUATION GAIN AMOUNTING TO RS.39,44,496/-. ON THE STRENGTH OF HONBLE GUJARAR HIGH COURTS DECISION IN THE CASE OF CIT VS. AMBA IMPEX (2006) 282 ITR 144 (GUJ) THE ASSESSEE HAS CLAIMED DEDUCTION ON THE FOR EIGN EXCHANGE FLUCTUATION GAIN. THE LD. A.O. WAS NOT SATISFIED WI TH THE STAND OF THE ASSESSEE. HE OBSERVED THAT EXCHANGE GAIN DIFFERENCE IS ONE KIND OF SPECULATION PROFIT, BECAUSE THE SAME IS ON ACCOUNT OF FORWARD CONTRACT PURCHASED BY THE ASSESSEE. ACCORDING TO TH E AO THE ASSESSEE HAS PURCHASED HEDGE FUND, IT ENTERED INTO A FORWARD CONTRACT AND STANDS BENEFITTED BY THE FLUCTUATION I N FOREIGN EXCHANGE ITA NO.2653/AHD/2001 ASST. YEAR 2008-09 3 IRRESPECTIVE OF THE FACT WHETHER THE TRADE AGREEMEN T EXISTS OR NOT. HE FURTHER OBSERVED THAT EXCHANGE GAIN HAS NO CONNECTI ON WITH THE EXPORTS OF THE ASSESSEE COMPANY. IT HAS NOT BEEN DE RIVED FROM THE ELIGIBLE BUSINESS UNDER SECTION 80IB. IN THIS WAY T HE LD. AO HAS DISALLOWED THE CLAIM OF THE ASSESSEE. 3. ON APPEAL, THE LD. FIRST APPELLATE AUTHORITY HAS OBSERVED THAT THE ISSUE IS SQUARELY COVERED IN FAVOUR OF THE ASSESSEE BY THE DECISION OF HONBLE JURISDICTIONAL HIGH COURT IN THE CASE OF CI T VS. AMBA IMPEX (SUPRA). 4. WITH THE ASSISTANCE OF LD. REPRESENTATIVES WE HA VE GONE THROUGH THE CASE RECORD CAREFULLY. THE HONBLE GUJA RAT HIGH COURT IN THE CASE OF AMBA IMPEX (SUPRA) HAS OBSERVED THAT EX CHANGE GAIN FORMS AN INTEGRAL PART OF EXPORT PROCEEDINGS. THE A SSESSEE HAD RECORDED THE EXPORT SALES @ EXCHANGE PREVALENT AT T HE TIME OF BOOKING, HOWEVER, WHEN THE PROCEEDS ARE RECEIVED TH E EXCHANGE RATE MAY BE DIFFERENT I.E. IT MAY EITHER BE ADVERSE OR FAVOURABLE. THE DIFFERENCE ON SAME ACCOUNT IS TRANSFERRED TO EXCHAN GE RATE FLUCTUATION. IT SUGGESTS THAT THE EXCHANGE RATE GAI N AS RECEIVED BY THE ASSESSEE HAS A DIRECT LINK WITH THE SALE OF MANUFAC TURING GOODS. ITA NO.2653/AHD/2001 ASST. YEAR 2008-09 4 APART FROM THE ABOVE DECISION, THE LD. COUNSEL HAS PLACED ON RECORD, A LARGE NUMBER OF ITAT ORDERS, WHERE DEDUCTION U/S 80IB ON EXCHANGE GAIN HAVE BEEN ALLOWED. A REFERENCE IS BEI NG MADE TO ITA NO.841AHD/2006 IN THE CASE OF M/S JAY CHEM VS. ACIT . THE LD. FIRST APPELLATE AUTHORITY HAS RIGHTLY PLACED ITS RELIANCE ON THE DECISION OF HONBLE JURISDICTIONAL HIGH COURT AND HAS RIGHTLY C ONSTRUED THE PROVISIONS. IN VIEW OF THE ABOVE, WE DO NOT FIND AN Y MERIT IN THIS APPEAL. IT IS DISMISSED. ORDER PRONOUNCED IN THE OPEN COURT ON 15/5/2015 SD/- SD/- (G. D. AGRAWAL) VICE PRESIDENT (RAJPAL YADAV) JUDICIAL MEMBER MAHATA/- COPY OF THE ORDER FORWARDED TO: 1. THE APPELLANT 2. THE RESPONDENT 3. THE CIT CONCERNED 4. THE CIT(A) CONCERNED 5. THE DR, ITAT, AHMEDABAD 6. GUARD FILE BY ORDER DY. REGISTRAR, ITAT, AHMEDABAD ITA NO.2653/AHD/2001 ASST. YEAR 2008-09 5 1. DATE OF DICTATION: 12/5/2011 2. DATE ON WHICH THE TYPED DRAFT IS PLACED BEFORE T HE DICTATING MEMBER: 13/5/2011 OTHER MEMBER: 3. DATE ON WHICH APPROVED DRAFT COMES TO THE SR. P. S./P.S.: 4. DATE ON WHICH THE FAIR ORDER IS PLACED BEFORE TH E DICTATING MEMBER FOR PRONOUNCEMENT: __________ 5. DATE ON WHICH THE FAIR ORDER COMES BACK TO THE S R. P.S./P.S.: 6. DATE ON WHICH THE FILE GOES TO THE BENCH CLERK: 7. DATE ON WHICH THE FILE GOES TO THE HEAD CLERK: 8. THE DATE ON WHICH THE FILE GOES TO THE ASSISTANT REGISTRAR FOR SIGNATURE ON THE ORDER: 9. DATE OF DESPATCH OF THE ORDER: