ITO 8(1)(2), MUMBAI V. CRITICARE SYSTEMS INDIA, NEW DELHI

ITA 3267/MUM/2010

• Counselvise Citation: [2011] 140 COUNSELVISE.COM (IT) 56315 (ITAT-MUMBAI)
• Duration Of Justice: 1 year(s) 8 month(s) 3 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 30-12-2011
• Appeal Filed By: Assessee
• Order Result: Dismissed
• Bench Allotted: C
• Next Hearing Date: 26-12-2011
• Assessment Year: 2006-2007
• Appeal Filed On: 26-04-2010
• Result in Favour of: Revenue
• Court: TRIBUNAL
• Department Lawyers: RAJESH B GUPTE
• Assessee Lawyers: PARTHASARTY NAIK

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL MUMBAI BENCH C, MUMBAI BEFORE SHRI B. RAMAKOTAIAH, A.M. AND SHRI V. DURGA RAO, J.M. ITA NO. 3267/MUM/2010 ASSESSMENT YEAR: 2006-07 INCOME TAX OFFICER-8(1)(2), APPELLANT ROOM NO. 205, 2 ND FLOOR, AAYAKAR BHAVAN, M.K. ROAD, MUMBAI 400 020 VS. M/S CRITICARE SYSTEMS INDIA, RESPONDENT B-52, HIMALAYA HOUSE, 5 TH FLOOR, 23, K.G. MARG, NEW DELHI 110 001. (PAN AAACC9855A) APPELLANT BY : MR. PARTHASARTY NAIK RESPONDENT BY : MR. RAJESH B. GUPTE DATE OF HEARING : 26/12/2011 DATE OF PRONOUNCEMENT : 30/12/2011 ORDER PER V. DURGA RAO, J.M.: THIS APPEAL FILED BY THE REVENUE IS DIRECTED AGAIN ST THE ORDER OF CIT(A)-16, MUMBAI, PASSED ON 19/02/2010 FOR THE ASS ESSMENT YEAR 2006-07 WHEREIN THE REVENUE HAS RAISED THE FOLLOWIN G GROUNDS OF APPEAL:- 1. ON THE FACTS AND IN THE CIRCUMSTANCES OF THE CAS E AND IN LAW, THE LD. CIT(A) ERRED IN DELETING THE ADDITION OF RS. 27,64,114/- MADE BY THE AO ON ACCOUNT OF FOREIGN EX CHANGE LOSS CLAIMED BY THE ASSESSEE WITHOUT ANY SUPPORTING EVID ENCES. 2. ON THE FACTS AND IN THE CIRCUMSTANCES OF THE CAS E AND IN LAW, THE LD. CIT(A) ERRED IN DELETING THE ADDITION WITHOUT APPRECIATING THE FACTS THAT THE LOSS IS ONLY NOTION AL LOSS AND NOT ACTUALLY INCURRED BY THE ASSESSEE AS WELL AS IT IS NOT BACKED BY ANY ACTUAL TRANSACTION. ITA NO. 3267/MUM/10 M/S CRITICARE SYSTEMS INDIA 2 3. THE APPELLANT PRAYS THAT THE ORDER OF LD. CIT(A) ON THE ABOVE GROUNDS BE SET ASIDE AND THAT OF THE AO BE RE STORED. 2. THE FACTS IN, BRIEF, ARE THAT THE AO WAS PASSED ASSESSMENT ORDER EXPARTE DISALLOWING MISCELLANEOUS EXPENSES OF RS. 1 ,08,31,922/- ON THE GROUND THAT NO EVIDENCE WAS PRODUCED BEFORE HIM , ALONG WITH OTHER DISALLOWANCES. OUT OF THE ABOVE MISCELLANEOUS EXPENSES OF RS. 1,08,31,922/-, FOREIGN EXCHANGE FLUCTUATION LOSS OF RS. 27,64,11/- WAS INCLUDED. THE ASSESSEE HAD SUBMITTED THE DETAIL S OF FOREIGN EXCHANGE EXPENSES INCURRED IN THE YEAR OF RS. 1,12, 99,092/- AND HAD ALSO PRODUCED THE DETAILS OF SUPPORTING DOCUMENTARY EVIDENCES BY WAY OF COPY OF BANK ACCOUNT STATEMENT REFLECTING THE DE BIT ENTRIES IN ITS BANK ACCOUNT STATEMENT. THE AO NOTED THAT IN RESPEC T OF EXCHANGE FLUCTUATION LOSS OF RS. 27,64,114/-, THE ASSESSEE H AD NEITHER SUPPORTED ITS CLAIM WITH ANY DOCUMENTARY EVIDENCE N OR IT HAD PRODUCED ANY TRANSACTION WITNESSING THE LOSS AND TH E ASESSSEE HAD MERELY CALCULATED THE LOSS ON THE BASIS OF CLOSING OUTSTANDING LIABILITY TO BE PAID IN SUBSEQUENT PERIOD TO ITS SISTER CONCE RN WHICH HAPPENS TO BE MAJOR CREDITOR. THE AO FURTHER NOTED THAT THE AS SESSEE HAD NOT PRODUCED ANY EVIDENCE REFLECTING THE PAYMENT OF THE LIABILITY IN RESPECT OF WHICH IT HAD CLAIMED THE EXCHANGE FLUCTU ATION LOSS. HE, THEREFORE, DISALLOWED THE CLAIM OF EXCHANGE FLUCTUA TION LOSS OF RS. 27,64,114/- ON THE GROUND THAT THE SAME WAS NOT BAC KED BY ANY ACTUAL TRANSACTION. AGGRIEVED, THE ASSESSEE CARRIED THE MATTER IN APPEAL BEFORE THE CIT(A). BEFORE THE CIT(A), THE AS SESSEE RELIED UPON THE DECISION OF HONBLE SUPREME COURT IN THE CASE O F CIT VS. WOODWORD GOVERNER INDIA PVT. LTD., 312 ITR 254 (SC) . AFTER CONSIDERING THE SUBMISSIONS OF THE ASSESSEE AND REM AND REPORT SUBMITTED BY THE AO, WHEN IT WAS CALLED FOR, AS THE NEW EVIDENCES WERE SUBMITTED BY THE ASSESSEE BEFORE THE CIT(A), W HICH WERE ADMITTED AS PER RULE 46A OF THE ACT, THE CIT(A) DEL ETED THE ITA NO. 3267/MUM/10 M/S CRITICARE SYSTEMS INDIA 3 DISALLOWANCE OF RS. 27,64,114/- ON ACCOUNT OF EXCHA NGE FLUCTUATION LOSS, BY OBSERVING AS UNDER:- 2.5 I HAVE CONSIDERED THE CONTENTS OF THE REPORT AN D FACTS OF THE CASE THAT THE MISCELLANEOUS EXPENSES OF RS. 1,08,31 ,922/- WHICH INCLUDES THE EXCHANGE FLUCTUATION LOSS OF RS. 227,6 4,114/- WERE VERIFIED BY THE AO AND FOUND TO BE AN ORDER EXCEPT THE REJECTION OF THE AO THAT THE EXCHANGE FLUCTUATION LOSS OF RS. 27,64,114/- IS NOT BACKED BY ANY ACTUAL TRANSACTION. ON THIS ISSUE , THE APPELLANT HAS RELIED UPON THE DECISION OF HONBLE S UPREME COURT IN THE CASE OF CIT VS. WOODWORD GOVERNER INDIA PVT. LTD, 312 ITR 254(SC) WHERE IS IT IS HELD AS UNDER:- WHERE IT HAS BEEN HELD THAT LOSS SUFFERED BY THE A SSESSEE IN RESPECT OF REVENUE LIABILITY ON ACCOUNT OF EXCHA NGE DIFFERENCE AS ON THE DATE OF THE BALANCE SHEET IS A N ITEM OF EXPENDITURE ALLOWABLE UNDER SECTION 37(1). AS PER A S 11, EXCHANGE DIFFERENCE ARISING ON FOREIGN CURRENCY TRANSACTIONS HAVE TO BE RECOGNIZED AS INCOME OR EXP ENSE IN THE PERIOD IN WHICH THEY ARISE. AN ENTERPRISE HAS T O REPORT THE OUTSTANDING LIABILITY RELATING TO IMPORT OF RAW -MATERIAL USING CLOSING RATE OR EXCHANGE AND THE SAME HAS TO BE RECOGNIZED IN THE PROFIT & LOSS ACCOUNT FOR THE REP ORTING PERIOD. HENCE, THE SAME MAY BE ALLOWED. 3. AGGRIEVED BY THE ORDER OF THE CIT(A), THE REVENU E IS IN APPEAL BEFORE US. 4. THE LEARNED DR, BESIDES RELYING UPON THE ORDER O F THE AO, CONTENDED THAT THE CIT(A) WITHOUT APPRECIATING THE FACTS THAT THE LOSS IS ONLY NOTIONAL LOSS AND NOT ACTUALLY INCURRED BY THE ASSESSEE AS WELL AS IT IS NOT BACKED BY ANY ACTUAL TRANSACTION, DELE TED THE ADDITION OF RS. 27,64,114/- MADE BY THE AO ON ACCOUNT OF FOREIG N EXCHANGE LOSS CLAIMED BY THE ASSESSEE WITHOUT ANY SUPPORTING EVID ENCES. THEREFORE, HE SUBMITTED THAT THE ORDER OF THE CIT(A) MAY BE SE T ASIDE AND THAT OF THE AOS ORDER RESTORED. ON THE OTHER HAND, THE LEA RNED COUNSEL FOR THE ASSESSEE HAS STRONGLY PLACED RELIANCE ON THE OR DER OF THE CIT(A). ITA NO. 3267/MUM/10 M/S CRITICARE SYSTEMS INDIA 4 5. WE HAVE HEARD BOTH THE PARTIES, PERUSED THE RECO RD AND GONE THROUGH THE ORDERS OF THE AUTHORITIES BELOW. SINCE THE ISSUE UNDER CONSIDERATION IS SQUARELY COVERED BY THE DECISION O F THE HONBLE SUPREME COURT IN THE CASE OF CIT VS. WOODWORD GOVER NER INDIA PVT. LTD. (SUPRA), ON WHICH RELIANCE PLACED BY THE ASSES SEE, THE CIT(A) DELETED THE ADDITION OF RS. 27,64,114/- MADE BY THE AO ON ACCOUNT OF EXCHANGE FLUCTUATION LOSS CLAIMED BY THE ASSESSEE F OLLOWING THE SAID HONBLE SUPREME COURT JUDGMENT. THEREFORE, WE FIND NO INFIRMITY IN THE ORDER OF THE CIT(A) AND THE SAME IS HEREBY UPHE LD DISMISSING THE GROUND RAISED BY THE REVENUE ON THIS COUNT. 6. IN THE RESULT, APPEAL OF THE REVENUE IS DISMISSE D. PRONOUNCED IN THE OPEN COURT ON THIS 30 TH DAY OF DECEMBER, 2011. SD/- SD/- (B. RAMAKOTAIAH) (V. DURGA RAO ) ACCOUNTANT MEMBER JUDICIAL MEMBER MUMBAI, DATED: 30 TH DECEMBER, 2011. KV COPY TO:- 1) THE APPELLANT. 2) THE RESPONDENT. 3) THE CIT (A) CONCERNED. 4) THE CIT CONCERNED. 5) THE DEPARTMENTAL REPRESENTATIVE, C BENCH, I.T .A.T., MUMBAI. BY ORDER //TRUE COPY// ASST. REGISTRAR, I.T.A.T., MUMBAI.