SUTARIYA GEMS P.LTD, MUMBAI V. ACIT 5(3), MUMBAI

ITA 3361/MUM/2013

• Counselvise Citation: [2014] 140 COUNSELVISE.COM (IT) 83487 (ITAT-MUMBAI)
• Duration Of Justice: 1 year(s) 3 month(s) 5 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 06-08-2014
• Appeal Filed By: Assessee
• Order Result: Allowed
• Bench Allotted: E
• Assessment Year: 2009-2010
• Appeal Filed On: 01-05-2013
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: SHRI
• Assessee Lawyers: K A VAIDUALINGAN
• Keywords: Assessment record

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL E BENCH, MUMBAI BEFORE SHRI N.K.BILLAIYA, AM, AND SHRI SANJAY GARG, JM ./ I.T.A. NO. 3361/MUM/2013 ( / ASSESSMENT YEAR: 2009-10) M /S SUTARIYA GEMS PRIVATE LIMITED, 208, THE JEWEL, MAMA PARMANAND MARG, OPERA HOUSE, MUMBAI-400004 / VS. ASST. COMMISSIONER OF INCOME TAX,5(3), AAYKAR BHAVAN, MUMBAI-400020 ./ PAN : AAMCS7457G ( / APPELLANT) .. ( / RESPONDENT ) / ASSESSEE BY: SHRI K.A. VAIDUALINGAN / RESPONDENT BY : SHRI PANKAJ KUMAR / DATE OF HEARING : 06/08/2014 / DATE OF PRONOUNCEMENT : 06/08/2014 !' / O R D E R PER N.K.BILLAIYA, AM: THIS APPEAL BY THE ASSESSEE IS AGAINST THE OR DER OF THE CIT(A)-9, MUMBAI DATED 22/02/2013 PERTAINING TO ASSESSMENT YE AR 2009-10. 2. THE SOLE GRIEVANCE OF THE ASSESSEE IS THAT THE L D. CIT(A) ERRED IN UPHOLDING THE DISALLOWANCE OF RS.32,95,500/- ON THE GROUND THAT MARK TO MARKET LOSS ARE NOTIONAL LOSSES AND THE PROVISION M ADE IS A CONTINGENT LIABILITY AND THEREFORE CANNOT BE ALLOWED AS EXPEND ITURE. 3. THE ASSESSEE IS IN THE BUSINESS OF MANUFACTURING , IMPORTING AND EXPORTING OF DIAMONDS. THE RETURN WAS FILED ON 01/ 09/2009 DECLARING LOSS OF RS.1.30 CRORES. THE RETURN WAS SELECTED FOR SCR UTINY ASSESSMENT; THE STATUTORY NOTICES WERE ISSUED AND SERVED UPON THE A SSESSEE. DURING THE ITA NO.3361/MUM/2013 M/S SUTARIA GEMS PVT. LTD. 2 COURSE OF SCRUTINY ASSESSMENT PROCEEDINGS, THE AO N OTICED THAT THE ASSESSEE HAS CLAIMED MARK TO MARKET LOSSES AMOUNTIN G TO RS.32,95,500/-. THE ASSESSEE WAS ASKED TO JUSTIFY ITS CLAIM. AFTER CONSIDERING THE REPLY FILED BY THE ASSESSEE, THE AO OBSERVED THAT THE REV ALUATION OF DEBTORS AND CREDITORS IS A NOTIONAL LOSS WHICH IS CONTINGENT IN NATURE AND CANNOT BE ALLOWED TO BE SET OFF AGAINST TAXABLE INCOME. THE AO COMPLETED THE ASSESSMENT BY DISALLOWING THE MARK TO MARKET LOSSES OF RS.32,95,500/-. 4. AGGRIEVED BY THIS THE ASSESSEE CARRIED THE MATTE R BEFORE THE CIT(A) BUT WITHOUT ANY SUCCESS. 5. AGGRIEVED, THE ASSESSEE IS BEFORE US. THE LD. C OUNSEL FOR THE ASSESSEE FILED A LIST OF JUDGMENTS /ORDERS BEFORE U S CLAIMING THAT THE ISSUE IN HAND IS SQUARELY COVERED BY THESE JUDICIAL DECIS IONS IN FAVOUR THE ASSESSEE. THE LD. DR COULD NOT BRING ANY DISTINGUI SHING DECISION IN THE FAVOUR OF THE REVENUE. 6. WE HAVE CAREFULLY PERUSED THE ORDER OF THE AUTHO RITIES BELOW. FACTS EMERGING OUT OF THE ASSESSMENT RECORD SHOW THAT ASS ESSEE IS IN THE BUSINESS OF IMPORT AND EXPORT OF DIAMONDS SUBSTANTI AL PORTION OF ITS TRANSACTION ARE DENOMINATED IN US DOLLARS AND ACCOR DINGLY CURRENT ASSETS AND LIABILITIES ARE ALSO DENOMINATED IN US DOLLARS TO HEDGE ITSELF AGAINST RISK OUT OF FLUCTUATION IN FOREIGN EXCHANGE. THE A SSESSEE WAS ENTERING INTO FORWARD CONTRACT TO HEDGE ITSELF. FORWARD CONTRACT IN FOREIGN EXCHANGE ARE BOOKED IN THE ASSESSEES REGULAR COURSE OF BUSINESS , WHICH ARE ALWAYS DENOMINATED IN FOREIGN CURRENCY. WHENEVER THERE IS A GAIN THE ASSESSEE IS RECOGNIZING THE SAME IN ITS P & L ACCOUNT. HEDGING IS A COMMERCIAL NECESSITY BEING FOLLOWED BY ALL ENGAGED IN IMPORT & EXPORT LINE BECAUSE OF THE HIGHLY VOLATILE CURRENCY FLUCTUATION. WE FIND THAT THE BENCHES OF THE TRIBUNAL ARE CONSISTENTLY ALLOWING SUCH MARK TO MAR KET LOSSES IN ITA NOS. 7628/MUM/2011, 2855/MUM/2010, 7629/MUM/2011, 4456/M UM/ 2012, 6600/MUM/2012. THE ISSUE IS ALSO COVERED IN FAVOUR OF THE ITA NO.3361/MUM/2013 M/S SUTARIA GEMS PVT. LTD. 3 ASSESSEE BY THE DECISION OF THE HONBLE SUPREME COU RT IN THE CASE OF CIT VS. WOODWARD GOVERNOR INDIA P. LTD. 294 ITR 451 AND IS SQUARELY COVERED IN FAVOUR OF THE ASSESSEE BY THE DECISION OF SPECIA L BENCH OF THE TRIBUNAL IN THE CASE OF BANK OF BEHRAIN AND KUWAIT [2010] 5 ITR (TRIB.) 301 (MUMBAI)(SB). CONSIDERING ALL THESE JUDICIAL DECIS IONS AND FACTS OF THE CASE, WE SET ASIDE THE FINDINGS OF THE LD. CIT(A) A ND DIRECT THE AO TO ALLOW THE LOSS OF RS.32,99,550/- AS BUSINESS LOSS. APPEA L FILED BY THE ASSESSEE IS ACCORDINGLY ALLOWED. 6. IN THE RESULT, APPEAL FILED BY THE ASSESSEE IS A LLOWED. ORDER PRONOUNCED IN THE OPEN COURT ON 06/08/2014 !' # $ % &! 06/08/2014 , ' ( SD/- (SANJAY GARG) SD/- (N.K.BILLAIYA) JUDICIAL MEMBER ACCOUNTANT MEMBER $ ) MUMBAI; &! /DATED : 6 TH AUGUST, 2014. F{X~{TA F{X~{TA F{X~{TA F{X~{TA P.S. P.S. P.S. P.S. ' # $%&' ('% / COPY OF THE ORDER FORWARDED TO : 1. / THE APPELLANT 2. / THE RESPONDENT. 3. * ( ) / THE CIT- , MUMBAI. 4. * / CIT(A)- , MUMBAI 5. +,' --./ , ./ , $ ) / DR, ITAT, MUMBAI 6. '01 2 / GUARD FILE. ' ) / BY ORDER, + - //TRUE COPY// * / )+ , (DY./ASSTT. REGISTRAR) , $ ) / ITAT, MUMBAI