ASST CIT 16(3), MUMBAI V. RIKIN EXPORTS, MUMBAI

ITA 3757/MUM/2013

• Counselvise Citation: [2015] 140 COUNSELVISE.COM (IT) 92998 (ITAT-MUMBAI)
• Duration Of Justice: 2 year(s) 1 month(s) 14 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 24-06-2015
• Appeal Filed By: Department
• Order Result: Dismissed
• Bench Allotted: D
• Next Hearing Date: 10-03-2015
• Assessment Year: 2009-2010
• Appeal Filed On: 10-05-2013
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: PRAKASH PATHADE
• Assessee Lawyers: K A VAIDYALINGAN

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL ' D ' BENCH, MUMBAI BEFORE SHRI D. MANMOHAN, VICE PRESIDENT AND SHRI SANJAY ARORA , ACCOUNTANT MEMBER ITA NO. 3757/MUM/2013 (ASSESSMENT YEAR: 2009 ) A C I T - 16(3) VS. M/S. RIKIN EXPORTS ROOM NO. 206, 2ND FLOOR TARDEO ROAD, MUMBAI 400007 408/409, PAREKH MARKET OPERA HOUSE, MUMBAI 400004 PAN - AAAFR0969D APPELLANT RESPONDENT APPELLANT BY: SHRI PRAKASH PATHADE RESPONDENT BY: SHRI K.A. VAIDYALINGAN DATE OF HEARING: 24.06. 2015 DATE OF PRONOUNCEMENT: 24.06.2015 O R D E R PER SANJAY ARORA, A.M. THIS APPEAL BY THE REVENUE IS DIRECTED AGAINST THE ORDER PASSED BY CIT(A) - 27, MUMBAI AND IT PERTAINS TO A.Y. 2009 - 10. 2. THE ONLY GROUND URGED BEFORE US READS AS UNDER: - 1. WHETHER ON THE FACTS AND CIRCUMSTANCES AND IN LAW, THE LD. CIT(A) HAS ERRED IN HOLDING THAT MARK - TO - MARKET LOSS OF RS.7,05,11,295/ - ARISING ON RE - VALUATION OF FORWARD CONTRACT AGREEMENTS ON THE CLOSING DATE OF ACCOUNTING YEAR IS NOT A NOTIONAL LOSS AND, THEREFORE, ALLOWABLE. 3. FACTS NECESSARY FOR DISPOSAL OF THE APPEAL ARE STATED IN BRIEF. ASSESSEE IS ENGAGED IN THE BUSINESS OF IMPORTING ROUGH DIAMONDS, CUTTING AND POLISHING THE SAME AND EXPORT ING SUCH DIAMONDS. IN THE COURSE OF BUSINESS IT ENJOYS WORKING CAPITAL FACILITY FROM BANKS , SOME OF WHICH ARE ALSO DENOMINATED IN FOREIGN CURRENCY. IT ALSO CARRIES CURRENCY RISK IN RESPECT OF STOCK. SO FORWARD CONTRACTS ARE ENTERED INTO TO HEDGE THIS CURRENCY RISK. THESE DERIVATIVE CONTRACTS ARE ENTERED INTO WITHIN THE FRAMEWORK OF RBI GUIDELINES. THESE CONTRACTS GENERALLY HAVE A MATURITY PROFILE WHICH COINCIDES WITH EXPECTED DATES OF FOREIGN CURRENCY RECEIVABLES OR PAYABLES. ASSESSEE CONSISTENTLY FOLLOWED THE ACCOUNTING METHOD WHEREIN MARK - TO - MARKET GAIN OR LIABILIT Y DOMINATED IN FOREIGN CURRENCY IS BEING RECOGNISED AS GAIN OR LOSS ITA NO. 3757/MUM/2013 A C I T - 16(3) 2 IN THE PROFIT & LOSS ACCOUNT. IN THE ORDINARY COURSE OF BUSINESS ASSESSEE HAD REVALUED THE OUTSTANDING FORWARD CONTRACT AS ON 31.03.2009 AND DEBITED A LOSS OF ` 7.05 CRORES, WHICH WAS DISAL LOWED BY THE AO. THE LEARNED CIT(A) FOLLOWED THE DECISION OF THE ITAT SPECIAL BENCH, MUMBAI IN THE CASE OF DCIT VS. BANK OF BAHRAIN AND KUWAIT (ITA NOS. 4404 & 1883/MUM/2004) AND ALSO THE DECISION OF THE APEX COURT IN THE CASE OF CIT VS. WOODWARD GOVERNOR INDIA PVT. LTD. 312 ITR 254 TO HOLD THAT THE LIABILITIES FOR FOREIGN EXCHANGE WAS INCURRED DURING THE NORMAL COURSE OF ASSESSEES BUSINESS AND IN FACT THE GAIN EARNED ON SUCH REVALUATION HAVING BEEN ACCEPTED AND BROUGHT TO TAX IN THE RESPECTIVE YEARS, THER E IS NO REASON TO ARRIVE AT A DIFFERENT CONCLUSION IN THIS YEAR MERELY BECAUSE THERE IS A LOSS. HE ACCORDINGLY DIRECTED THE AO TO ALLOW THE IMPUGNED CLAIM OF THE ASSESSEE. 4. AGGRIEVED, REVENUE IS IN APPEAL BEFORE US. AT THE TIME OF HEARING THE LEARNED COUNSE L FOR THE ASSESSEE SUBMITTED THAT THE FACTUAL MATRIX OF THE CASE BEING NOT IN DISPUTE THE RATIO LAID DOWN BY THE APEX COURT SQUARELY APPLIES; THE LEARNED CIT(A) HAVING FOLLOWED THE DECISION OF THE ITAT SPECIAL BENCH, MUMBAI AS WELL AS THE DECISION OF THE H ON'BLE SUPREME COURT, THERE IS NO INFIRMITY IN THE ORDER PASSED BY THE CIT(A). HE ALSO RELIED UPON THE LATEST ORDER OF THE ITAT D BENCH, MUMBAI IN THE CASE OF M/S. RAJ GEMS (ORDER DATED 19.05.2015 WHEREIN BOTH OF US ARE PARTY) TO SUBMIT THAT THE VIEW TAK EN BY THE CIT(A) IS CONSISTENT WITH THE VIEW TAKEN IN THE AFORECITED DECISION AND HENCE THE APPEAL FILED BY THE REVENUE DESERVES TO DISMISSED. 5. THE LEARNED D.R. FAIRLY ADMITTED THAT THE ISSUE STANDS COVERED AGAINST THE REVENUE. 6. HAVING REGARD TO THE CIRCUMSTAN CES OF THE CASE AND IN THE LIGHT OF THE DECISION CITED (SUPRA), WE UPHOLD THE ORDER PASSED BY CIT(A) AND DISMISS THE APPEAL FILED BY REVENUE. ORDER PRONOUNCED IN THE OPEN COURT ON 24 TH JUNE, 2015. SD/ - SD/ - ( D. MANMOHAN ) (SANJAY ARORA) VICE PRESIDENT ACCOUNTANT MEMBER MUMBAI, DATED: 24 TH JUNE, 2015 ITA NO. 3757/MUM/2013 A C I T - 16(3) 3 COPY TO: 1. THE APPELLANT 2. THE RESPONDENT 3. THE CIT(A) 27 , MUMBAI 4. THE CIT 16 , MUMBAI CITY 5. THE DR, D BENCH, ITAT, MUMBAI BY ORDER //TRUE COPY// ASSISTANT REGISTRAR ITAT, MUMBAI BENCHES, MUMBAI N.P.