TRIGENT SOFTWARE LTD, BANGALORE V. ASST CIT 5(3)(2), MUMBAI

ITA 3762/MUM/2016

• Counselvise Citation: [2018] 126 COUNSELVISE.COM (IT) 0393 (ITAT-MUMBAI)
• Duration Of Justice: 1 year(s) 8 month(s) 23 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 23-02-2018
• Appeal Filed By: Assessee
• Order Result: Allowed
• Bench Allotted: Not Allotted
• Assessment Year: 2010-2011
• Appeal Filed On: 31-05-2016
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: SAURABH KUMAR RAI LD
• Assessee Lawyers: D V LAKHANI LD
• Keywords: Speculation loss
• Section: 14A; 115JB; 154

Judgement Text

ITA.NO.3762MUM/2016 TRIGENT SOFTWARE LIMITED ASSESSMENT YEAR 2010-11 IN THE INCOME TAX APPELLATE TRIBUNAL H BENCH, MUMBAI , , BEFORE SHRI MAHAVIR SINGH, JM AND SHRI MANOJ KUMAR AGGARWAL, AM ./I.T.A. NO. 3762/MUM/2016 ( / ASSESSMENT YEAR: 2010-11) TRIGENT SOFTWARE LIMITED KHANIJA BHAVAN, 1 ST FLOOR 49, RACE COURSE ROAD BANGLORE-560 001 / VS. ASSISTANT COMMISSIONER OF INCOME-TAX 5(3)(2) [ERSTWHILE DEPUTY COMMISSIONER OF INCOME-TAX 5(3)] 519, AAYAKAR BHAVAN, M.K. ROAD MUMBAI-400 020 ./ ./PAN/GIR NO. AABCT-2852-P ( /APPELLANT ) : ( / RESPONDENT ) ASSESSEE BY : D.V.LAKHANI, LD. AR REVENUE BY : SAURABH KUMAR RAI , LD. DR / DATE OF HEARING : 20/02/2018 / DATE OF PRONOUNCEMENT : 23 /02/2018 / O R D E R PER MANOJ KUMAR AGGARWAL (ACCOUNTANT MEMBER) 1. THE CAPTIONED APPEAL BY ASSESSEE FOR ASSESSMENT YEAR [AY] 2010-11 CONTEST THE ORDER OF LD. COMMISSIONER OF IN COME-TAX (APPEALS)-10 [CIT(A)], MUMBAI, APPEAL NO.CIT(A)-10/DCIT- ITA.NO.3762MUM/2016 TRIGENT SOFTWARE LIMITED ASSESSMENT YEAR 2010-11 2 5(3)/26/2014-15 DATED 18/03/2016 BY RAISING THE FOLLOWING GROUNDS O F APPEAL: - 1. ON THE FACTS AND CIRCUMSTANCES OF THE CASE THE L EARNED COMMISSIONER OF INCOME TAX (A) HAS ERRED IN CONFIRMING THE DISALLOW ANCE OF THE FOREIGN EXCHANGE FLUCTUATION LOSS AMOUNTING TO RS.2,38,40,9 20/- TREATING THE SAME AS SPECULATION LOSS. THE APPELLANT PRAYS THAT THE CONC LUSION REACHED BY THE LEARNED COMMISSIONER OF INCOME TAX (A) IS ERRONEOUS AND IS WITHOUT CONSIDERING THE CORRECT FACTS PLACED ON RECORD BEFO RE HIM. THE APPELLANT PRAYS THAT THE APPELLANT IS ENTITLED TO CLAIM THE D EDUCTION OF FOREIGN EXCHANGE FLUCTUATION LOSS AMOUNTING TO RS.2,38,40,920/-. 2. ON THE FACTS AND CIRCUMSTANCES OF THE CASE THE L EARNED COMMISSIONER OF INCOME TAX (A) HAS ERRED IN CONFIRMING THE DISALLOW ANCE OF THE FOREIGN EXCHANGE FLUCTUATION LOSS AMOUNTING TO RS.1,34,26,5 91/- IN THE EXPORT BUSINESS AS SPECULATION LOSS. THE APPELLANT PRAYS T HAT THE APPELLANT IS ENTITLED TO CLAIM THE DEDUCTION OF FOREIGN EXCHANGE FLUCTUATION LOSS OF RS.1,34,26,591/-. THE LEARNED COMMISSIONER OF INCOM E TAX (A) HAS WRONGLY CONCLUDED THAT THE LOSS SUFFERED BY THE APPELLANT I S A SPECULATION LOSS. 3. ON THE FACTS AND CIRCUMSTANCES OF THE CASE THE L EARNED COMMISSIONER OF INCOME TAX (A) HAS ERRED IN CONFIRMING THE DISALLOW ANCE OF THE FOREIGN EXCHANGE FLUCTUATION LOSS AMOUNTING TO RS.1,04,14,3 28/- IN THE DOMESTIC BUSINESS AS SPECULATION LOSS. THE APPELLANT PRAYS T HAT THE APPELLANT IS ENTITLED TO CLAIM THE DEDUCTION OF FOREIGN EXCHANGE FLUCTUATION LOSS OF RS.1,04,14,328/- THE LEARNED COMMISSIONER OF INCOME TAX (A) WRONGLY CONCLUDED THAT THE LOSS SUFFERED BY THE APPELLANT I S A SPECULATION LOSS. 4. ON THE FACTS AND CIRCUMSTANCES OF THE CASE THE A PPELLANT PRAYS THAT DURING THE COURSE OF APPELLATE PROCEEDINGS THE COMPLETE DE TAILS, INFORMATION AND PROOF WAS SUBMITTED TO THE LEARNED COMMISSIONER OF INCOME TAX (A) IN SUPPORT OF THE CLAIM OF THE FOREIGN EXCHANGE FLUCTU ATION LOSS SUFFERED BY THE APPELLANT. THE SAID LOSS IS INCURRED IN RESPECT OF EXECUTED BUSINESS TRANSACTIONS AND THE SAID LOSS CANNOT BE TREATED AS SPECULATION LOSS. 5. ON THE FACTS AND CIRCUMSTANCES OF THE CASE THE A PPELLANT PRAYS THAT THE FOREIGN EXCHANGE FLUCTUATION LOSS BE ALLOWED AT RS. 2,38,40,920/- WHILE COMPUTING THE TOTAL INCOME. 6. ON THE FACTS AND CIRCUMSTANCES OF THE CASE THE L EARNED COMMISSIONER OF INCOME TAX (A) HAS ERRED IN CONFIRMING THE DISALLOW ANCE OF RS.5,34,198- U/S 14A OF INCOME TAX ACT,1961. THE APPELLANT PRAYS THA T NO DISALLOWANCE BE MADE U/S.14A AND THE ADDITION MADE BY THE LEARNED A SSESSING OFFICER AND CONFIRMED BY LEARNED COMMISSIONER OF INCOME TAX (A) MAY BE DELETED. 7. ON THE FACTS AND CIRCUMSTANCES OF THE CASE THE L EARNED COMMISSIONER OF INCOME TAX (A) HAS ERRED IN CONFIRMING THE ADDITION OF RS.5,34,198/- U/S 14A OF INCOME TAX ACT,1961, WHILE COMPUTING THE BOOK PR OFIT U/S 115JB OF INCOME TAX ACT,1961. THE APPELLANT PRAYS THAT THE A DDITION, CONFIRMED BY THE LEARNED COMMISSIONER OF INCOME TAX (A), MAY BE DELE TED WHILE COMPUTING THE BOOK PROFIT U/S.115JB OF INCOME TAX ACT,1961. THE ASSESSMENT FOR IMPUGNED AY WAS FRAMED BY LD. DEPUTY COMMISSIONER OF INCOME-TAX-5(3), MUMBAI [AO] U/S 14 3(3) OF THE INCOME TAX ACT, 1961 ON 20/03/2014. ITA.NO.3762MUM/2016 TRIGENT SOFTWARE LIMITED ASSESSMENT YEAR 2010-11 3 2.1 BRIEFLY STATED, THE ASSESSEE BEING RESIDENT CORPORATE ASSESSEE ENGAGED IN SOFTWARE ENGINEERING AND DEVELOPMENT HAS BEEN ASSESSED AT RS.225.6 LACS UNDER NORMAL PROVISIONS AS AGAINST RETURNED LOSS OF RS.18.14 LACS E-FILED BY THE ASSESSEE ON 08/10/2010. 2.2 DURING ASSESSMENT PROCEEDINGS, IT WAS NOTED THA T THE ASSESSEE CLAIMED CERTAIN FOREIGN EXCHANGE LOSS OF RS.238.40 LACS AGAINST OUTSTANDING DEBTORS. THE SAID LOSS COMPRISED-OFF OF RS.134.26 LACS ON ACCOUNT OF EXPORT TRANSACTION AND BALANCE RS.104.14 LACS ON ACCOUNT OF LOCAL BUSINESS. IT WAS FURTHER NOTED THAT THE SAME WAS MARKED-TO-MARKET LOSSES ON ACCOUNT OF THE TRANSACTION FOR EXPORT OF SOFTWARE AS WELL AS IN RESPECT OF THE DOMESTIC BUSINESS WITH AN ENTITY NAM ELY HONEYWELL TECHNOLOGY SOLUTIONS PRIVATE LTD. THE SAID LOSS, IN THE OPINION OF LD. AO WAS A NOTIONAL LOSS AND MERELY A CONTINGENT LIABILI TY WHICH DID NOT CRYSTALLIZED TILL THE DATE OF PAYMENT AND THEREFORE , WAS NOT ALLOWABLE TO THE ASSESSEE. 2.3 THE SECOND ADDITION UNDER DISPUTE IS ADJUSTMENT OF SECTION 14A DISALLOWANCE WHILE COMPUTING BOOK PROFITS U/S 115JB . IT WAS NOTED THAT THE ASSESSEE EARNED EXEMPT DIVIDEND INCOME OF RS.25 ,521/- AND MADE SUO-MOTO DISALLOWANCE U/S 14A FOR RS.5,59,719/- IN HIS COMP UTATION OF INCOME. HOWEVER, WHILE COMPUTING BOOK PROFITS U/S 115JB, THE SAID ADJUSTMENT WAS RESTRICTED TO THE EXTENT OF EXEMPT I NCOME I.E. RS.25,521/-. RESULTANTLY, LD. AO MADE FURTHER ADJUS TMENT FOR THE DIFFERENTIAL AMOUNT OF RS.5,34,198/- WHILE COMPUTIN G BOOK PROFITS U/S 115JB. 3. AGGRIEVED, THE ASSESSEE CONTESTED THE SAME BEFOR E LD.CIT(A) WITHOUT ANY SUCCESS VIDE IMPUGNED ORDER DATED 18/03 /2016 WHERE THE ITA.NO.3762MUM/2016 TRIGENT SOFTWARE LIMITED ASSESSMENT YEAR 2010-11 4 LD. CIT(A) CONFIRMED THE ADDITION QUA FOREIGN EXCHANGE LOSS VIDE PARAS- 4.2 & 4.2.1 OF THE APPELLATE ORDER. A PARTIAL RELIE F WAS GRANTED QUA DISALLOWANCE U/S 14A TO THE EXTENT OF RS.5,34,198/- SINCE LD. AO HAD ADDED BACK THE SAME WHILE COMPUTING INCOME UNDER NO RMAL PROVISIONS WHEREAS THE ASSESSEE HAD ALREADY MADE SUO-MOTO DISALLOWANCE OF RS.5,59,719/- IN HIS COMPUTATION OF INCOME AND THER EFORE, THE SAID ADJUSTMENT RESULTED INTO DOUBLE ADDITION. HOWEVER, LD. CIT(A) CONFIRMED THE STAND OF LD. AO QUA FURTHER ADJUSTMENT FOR DIFFERENTIAL AMOUNT U/S 115JB. AGGRIEVED, THE ASSESSEE IS IN FURTHER APPEAL BEFORE US. 4. THE LD. AUTHORIZED REPRESENTATIVE FOR ASSESSEE [ AR], AT THE OUTSET, DREW OUR ATTENTION TO THE FACT THAT CERTAIN FACTUAL SUBMISSIONS / DOCUMENTARY EVIDENCES FILED BY THE ASSESSEE ON 16/0 3/2016 BEFORE LD. CIT(A) HAS NOT BEEN FULLY APPRECIATED BY LD. CIT(A) SINCE THE IMPUGNED ORDER WAS DATED 18/03/2016. OUR ATTENTION IS FURTHE R DRAWN TO RECTIFICATION LETTER FILED BY THE ASSESSEE U/S 154 SUBSEQUENTLY ON 19/05/2016 WHERE, INTER-ALIA, VIDE POINT NO. 13, THE AFORESAID FACT WAS BROUGHT TO THE NOTICE OF LD. CIT(A) WHICH IS STILL PENDING FOR DISPOSAL. IN THE ABOVE BACKDROP, LD. AR PLEADED FOR ANOTHER OPPO RTUNITY BEFORE LOWER AUTHORITIES TO SUBSTANTIATE HIS CONTENTIONS. PER CONTRA, LD. DR POINTED OUT THAT THE ASSESSEE WAS SEEKING ALTERNATI VE REMEDY SINCE ITS RECTIFICATION APPLICATION WAS ALREADY PENDING WITH THE LOWER AUTHORITY. 5. WE HAVE CAREFULLY CONSIDERED THE SAME AND FIND S OME STRENGTH IN THE ARGUMENTS OF LD. AR SINCE IT IS EVIDENT THAT TH E ASSESSEE HAS MADE CERTAIN SUBMISSIONS WITH SUPPORTING DOCUMENTS BY WA Y OF TWO VOLUMINOUS PAPER-BOOKS VIDE LETTER DATED 10/03/2016 STATED TO BE FILED ON 16/03/2016. THE IMPUGNED ORDER IS DATED 18/03/20 16. THE ASSESSEE, ITA.NO.3762MUM/2016 TRIGENT SOFTWARE LIMITED ASSESSMENT YEAR 2010-11 5 AGGRIEVED BY NON-CONSIDERATION OF THE DOCUMENTS, HA S FILED RECTIFICATION APPLICATION U/S 154 DRAWING ATTENTION TO THE AFORES AID FACT. THEREFORE, ON THE FACTS AND CIRCUMSTANCES, WE ARE OF THE OPINION THAT THE ASSESSEE DESERVES ANOTHER OPPORTUNITY TO SUBSTANTIATE HIS CA SE BEFORE LD. CIT(A) SINCE RECTIFICATION APPLICATION IS ALREADY PENDING BEFORE LD. FIRST APPELLATE AUTHORITY. THEREFORE, BOTH THE ADDITIONS / ADJUSTME NT STANDS REMITTED TO LD. CIT(A) WITH A DIRECTION TO THE ASSESSEE TO SUBS TANTIATE HIS CLAIM FORTHWITH FAILING WHICH LD. CIT(A) SHALL BE AT LIBE RTY TO DISPOSE-OFF THE SAME ON THE BASIS OF MATERIAL AVAILABLE ON RECORD. 6. RESULTANTLY, THE ASSESSEES APPEAL STANDS ALLOWE D FOR STATISTICAL PURPOSES. ORDER PRONOUNCED IN THE OPEN COURT ON 23 RD FEBRUARY, 2018 SD/- SD/- (MAHAVIR SINGH) ( MANOJ KUMAR AGGARWAL) / JUDICIAL MEMBER / ACCOUNTANT MEMBER MUMBAI; DATED :23. 02.2018 SR.PS:- THIRUMALESH / COPY OF THE ORDER FORWARDED TO : 1. / THE APPELLANT 2. / THE RESPONDENT 3. ( ( ) / THE CIT(A) 4. ( / CIT CONCERNED 5. '+ , + , / DR, ITAT, MUMBAI 6. / GUARD FILE / BY ORDER, / (DY./ASSTT. REGISTRAR) , / ITAT, MUMBAI