DCIT 24(3), MUMBAI V. UNIQUE GEMS & JEWELLERY, MUMBAI

ITA 3907/MUM/2014

• Counselvise Citation: [2016] 132 COUNSELVISE.COM (IT) 4210 (ITAT-MUMBAI)
• Duration Of Justice: 1 year(s) 10 month(s) 7 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 06-04-2016
• Appeal Filed By: Department
• Order Result: Dismissed
• Bench Allotted: F
• Assessment Year: 2009-2010
• Appeal Filed On: 29-05-2014
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Assessee Lawyers: RAMKRISHNA R DINGSUR
• Section: 143(3)

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL F BENCH, MUM BAI BEFORE SHRI JASON P. BOAZ, AM AND SHRI SANDEEP GOSA IN, JM ./ I.T.A. NO. 3907/MUM/2014 ( / ASSESSMENT YEAR: 2009-10) DCIT-24(3), R. NO. 701 C-11, 7 TH FLOOR, B.K.C, BANDRA (E), MUMBAI-51. / VS. M/S UNIQUE GEMS & JEWELLERY, UNIT-A, E-2, BUSINESS PARK, GR. FLOOR, MODEL INDL. COLONY, OFF AAREY ROAD, GOREGAON EAST, MUMBAI-63. ./ ./PAN/GIR NO. AACFU 3067H ( /APPELLANT ) : ( / RESPONDENT ) / APPELLANT BY : SHRI JAVED AKHTAR / RESPONDENT BY : SHRI RAMKRISHNA R. DINGSUR / DATE OF HEARING : 22/02/2016 !'# / DATE OF PRONOUNCEMENT : 06/04/2016 $% / O R D E R PER SANDEEP GOSAIN, J. M.: THE PRESENT APPEAL HAS BEEN FILED BY THE REVENUE AG AINST THE ORDER OF COMMISSIONER OF INCOME TAX (APPEALS) - 34, DATED 12 .03.2014 FOR A.Y. 2009-10 WHEREBY CIT(A) HAS ALLOWED THE APPEAL FILED BY THE ASSESSEE AGAINST THE ORDER OF AO DATED 17.11.2011 ON THE GROUNDS OF APPEAL MENTIO NED HEREIN BELOW. 2 ITA NO. 3907/MUM/2014 (A.Y. 2009-10) DCIT VS. M/S UNIQUE GEMS & JEWELLERY 1. ON THE FACTS AND IN THE CIRCUMSTANCES OF THE CASE AND IN LAW, THE LD. CIT(A) ERRED IN DIRECTING THE ASSESSING OFFICER TO DELETE THE ADDITION MADE ON ACCOUNT OF FOREIGN EXCHANGE LOSS OF RS.64,86,044 /- BY RELYING ON THE DECISION OF HONBLE SUPREME COURT IN THE CASE OF WO ODWORD GOVERNOR INDIA LTD., IGNORING THE FACT THE DECISION WAS REND ERED IN THE MATTER OF VALUATION OF CLOSING STOCK AND IN THE ASSESSEES CA SE THE SAME WAS NOT AN ITEM OF CLOSING STOCK AND WAS NOT ALLOWABLE AS TRAD ING LOSS ON ACCOUNT OF REVENUE. 2. THE C.I.T.(A) OUGHT TO HAVE NOTICED THAT THE ADVANC ES RECEIVED FROM SUN SHINE JEWELLERY TRADING FTZ SINGAPORE AND SUN RISIN G JEWELLERY SINGAPORE WERE ONLY USED FOR GIVING INTEREST FREE A DVANCES FOR THE ASSESSEES SISTER CONCERNS AND NOT FOR ASSESSEES BUSINESS PUR POSES AND HENCE THE LOSS IS NOT ALLOWABLE U/S37(1) OF THE I.T. ACT. 3. ON THE FACTS AND IN THE CIRCUMSTANCES OF THE CASE A ND IN LAW, THE LD. CIT(A) ERRED IN DIRECTING THE ASSESSING OFFICER TO DELETE THE ADDITION IGNORING THE FACT THAT THE FLUCTUATION OF FOREIGN EXCHANGE WAS N OT AN ITEM OF BALANCE SHEET AND HENCE NOT AN ITEM OF EXPENDITURE U/S37(1) OF TH E I.T. ACT. 4. ON THE FACTS AND IN THE CIRCUMSTANCES OF THE CASE A ND IN LAW, THE LD. CIT(A) ERRED IN DIRECTING THE ASSESSING OFFICER TO DELETE THE ADDITION IGNORING THE FACT THAT THE ASSESSEE WAS NOT HOLDING THE FOREIGN CURRENCY NOR UTILIZING THE 3 ITA NO. 3907/MUM/2014 (A.Y. 2009-10) DCIT VS. M/S UNIQUE GEMS & JEWELLERY SAME IN THE BUSINESS ON ACCOUNT OF TRADING AND NEVE R INTENDED TO BE UTILIZED FOR THE BUSINESS. 5. THE APPELLANT CRAVES LEAVES TO AMEND OR ALTER ANY G ROUND OR ADD A NEW GROUND. 2. THE BRIEF FACTS OF THE CASE ARE THAT THE ASSESSE E FIRM IS ENGAGED IN THE BUSINESS OF IMPORT AND EXPORT OF CUT AND POLISHED D IAMONDS. THIS IS THE FIRST YEAR OF ITS OPERATION. THE RETURN OF INCOME DECLARING TO TAL INCOME OF RS.22,54,270/- WAS E-FILED ON 12.09.2009. THE SAME WAS PROCESSED U/S 1 43(1) OF THE ACT AND THEREAFTER THE CASE WAS SELECTED UNDER CASS AND NOT ICE U/S 143(2) OF THE ACT WAS ISSUED ON 19.08.2010 WHICH WAS DULY SERVED UPON THE ASSESSEE. AFTER CONSIDERING REPLY SUBMITTED BY THE ASSESSEE, ASSESSMENT ORDER D ATED 17.11.2011 WAS PASSED U/S 143(3) OF THE INCOME TAX ACT AND TOTAL INCOME OF TH E ASSESSEE WAS COMPUTED. 3. AGGRIEVED BY THE ORDER OF THE AO AND THE ADDITIO NS MADE BY THE AO, THE ASSESSEE FILED AN APPEAL BEFORE THE CIT(A) AND THE CIT(A) DISMISSED THE APPEAL OF THE ASSESSEE VIDE ORDER DATED 28.09.2013. THEREAFTE R APPEAL BEFORE ITAT WAS FILED. ITAT VIDE ORDER IN ITA NO. 6540/MUM/2012 DATED 08.0 1.2014 SET ASIDE THE MATTER BACK TO CIT(A) FOR ADJUDICATING THE ISSUE AGAIN. TH E CIT(A) VIDE ORDER DATED 12.03.2014 ALLOWED THE APPEAL. 4 ITA NO. 3907/MUM/2014 (A.Y. 2009-10) DCIT VS. M/S UNIQUE GEMS & JEWELLERY 3.1 AGGRIEVED BY THE ORDER OF THE CIT(A), THE REVEN UE FILED THE PRESENT APPEAL BEFORE US ON THE GROUNDS MENTIONED HEREIN ABOVE. GROUND NOS. 1-4: 4. ALL THE GROUNDS RAISED BY THE ASSESSEE ARE INTER -CONNECTED AND INTER-RELATED THEREFORE WE THOUGHT IT FIT TO DISPOSE OFF THE SAME BY THE CONSOLIDATED ORDER. 4.1 LD. DR RELIED UPON THE ORDER PASSED BY THE AO A S WELL AS INITIAL ORDERS OF THE CIT(A) DATED 28.09.2012 AND SUBMITTED THAT THE ADDITIONS WERE RIGHTLY MADE BY THE AO. LD. DR FURTHER SUBMITTED THAT THE LOSS O N ACCOUNT OF EXCHANGE RATE BOOKED BY THE ASSESSEE IN BOOKS OF ACCOUNTS AND CLA IMED AGAINST THE INCOME OF CURRENT YEAR IS A NOTIONAL LOSS AND THE TRANSACTION FOR WHICH THE LOSS HAS BEEN BOOKED HAS NOT YET BEEN COMPLETED IN AS MUCH AS TH AT THE ASSESSEE HAS ONLY RECEIVED THE ADVANCE DURING THE YEAR AND NO INCOME RELATING TO SUCH TRANSACTION HAS BEEN CREDITED TO THE P&L A/C. LD. DR ALSO RELIE D UPON THE EARLIER ORDER DATED 28.09.2012 PASSED BY CIT(A) AND SUBMITTED THAT THE ORDERS PASSED BY THE CIT(A) DISMISSING THE APPEAL AND UPHOLDING THE ADDITIONS M ADE BY THE AO WAS CORRECT. IT WAS ALSO ARGUED BY LD. DR THAT SINCE THE ASSESSEE W AS NOT HOLDING FOREIGN CURRENCY AND IT WAS NOT AT ALL UTILIZED IN THE BUSINESS THER EFORE THE LOSS ON ACCOUNT OF EXCHANGE FLUCTUATION IS NOT ON REVENUE ACCOUNT. 5 ITA NO. 3907/MUM/2014 (A.Y. 2009-10) DCIT VS. M/S UNIQUE GEMS & JEWELLERY 4.2 ON THE CONTRARY LD. AR REPRESENTING THE ASSESSE E RELIED UPON THE ORDER DATED 12.03.2014 AND REQUESTED TO DISMISS REVENUES APPEA L. 5. WE HAVE HEARD COUNSELS FOR BOTH THE PARTIES AND WE HAVE ALSO PERUSED THE MATERIAL PLACED ON RECORD AND THE ORDERS PASSED BY LOWER AUTHORITIES. WE HAVE NOTICED THAT LD. CIT(A) WHILE GIVING EFFECT TO THE DIRECTIONS GIVEN BY ITAT HAS CONSIDERED THE CASE AND DECIDED THESE ISSUES. THE O PERATIVE PARA OF CIT(A) WHILE DEALING WITH CONTENTIOUS ISSUE IS AS UNDER: DURING THE COURSE OF APPELLATE PROCEEDINGS, THE AUT HORIZED REPRESENTATIVE OF THE APPELLANT HAS MADE THE FOLLOW ING SUBMISSIONS:- 'THIS HAS WITH REFERENCE TO THE ORDER PASSED BY THE HON. TRIBUNAL 'F' BENCH MUMBAI DATED 8.1.2014 IN THE MATTER OF ABOVE REFERRED ASSESSEE. THE HON'BLE TRIBUNAL HAS SET ASIDE THE GROUND FOR F RESH ADJUDICATION TO YOUR HONOUR WITH A DIRECTION TO ANALYSE IF LOSS ON ACCOUNT OF FOREIGN EXCHANGE FLUCTUATION IS RELATABLE TO REVENUE ACCOUN T OR CAPITAL ACCOUNT. IF THE LOSS IS ON ACCOUNT OF REVENUE THEN APPELLANT IS ENTITLED TO THE RELIEF IN VIEW OF THE JUDGEMENT OF THE HON.SUPREME COURT I N CIT VS. WOODWORD INDIA PVT. LTD. 312 ITR 254. IN THIS CONNECTION WE ARE ENCLOSING FOLLOWING DOCUM ENTS:- A) COPY OF THE ORDER OF THE. HON. TRIBUNAL DATED 8. 1.2014 B) COPY OF THE ORDER OF CIT(A) DATED 28.9.2012 C) COPY OF THE ASSESSMENT ORDER DATED 17.11.2011 D) PAPER BOOK FIELD BEFORE CIT(A) AND HON. TRIBUNAL IT CAN BE SEEN FROM THESE RECORDS THAT THE APPELLAN T HAD RECEIVED ADVANCE FROM OVERSEAS CUSTOMERS AND EXCHANGE FLUCTU ATION ARISING AS ON 31.3.2009 WAS RECOGNIZED AS REVENUE LOSS. THE TR ANSACTION OF ADVANCE RECEIVED IS VERY MUCH ON REVENUE ITEM. YOU ARE REQUESTED TO TAKE THE ABOVE SUBMISSIONS ON RECORD AND PASS THE ORDER IN ACCORDANCE WITH THE DIRECTION GIVEN BY THE HON. TRIBUNAL.' 6 ITA NO. 3907/MUM/2014 (A.Y. 2009-10) DCIT VS. M/S UNIQUE GEMS & JEWELLERY I HAVE CAREFULLY CONSIDERED THE SUBMISSIONS MADE BY THE APPELLANT, ORDER OF THE HON. TRIBUNAL DATED. 8.1.2014 AND PAPER BOOK FILED BEFORE THE CIT(A) & HON. TRIBUNAL. AFTER PERUSAL OF THE RECORD S, IT IS FOUND THAT THE EXCHANGE DIFFERENCE WAS ARISEN ON ACCOUNT OF ADVANC ES RECEIVED FROM THE CUSTOMERS AND AGAINST THE SALE .REALIZATION AND HENCE THE TRANSACTIONS MADE BY THE APPELLANT IN FOREIGN CURRE NCY HAVE BEEN ACCOUNTED IN ACCORDANCE WITH AS-11 ISSUED BY ICAI A ND THEREFORE THE LOSS ON ACCOUNT OF FOREIGN EXCHANGE FLUCTUATIONS IS RELATABLE TO REVENUE ACCOUNT ONLY. THE HON. ITAT HAS HELD IN THE ORDER T HAT IF THE LOSS IS ON ACCOUNT OF REVENUE THEN APPELLANT IS ENTITLED TO TH E RELIEF IN VIEW OF THE JUDGEMENT OF THE HON.SUPREME COURT IN CIT VS. WOODW ORD INDIA PVT. LTD.312 ITR 254. IN VIEW OF THE ABOVE DECISION, THE ASSESSING OFFICER IS DIRECTED TO DELETE THE ADDITION OF RS.1,38,85,900/- TOWARDS LOSS ON ACCOUNT OF FLUCTUATION OF FOREIGN EXCHANGE. ACCORDI NGLY THIS GROUND OF APPEAL IS ALLOWED. 6. IN ADDITION TO THE ABOVE, WE HAVE ALSO ANALYSED THE INITIAL ORDERS PASSED BY THE CIT(A) DATED 28.09.2012 AND AFTER CONSIDERING T HE FACTS OF THE CASE AND CONSIDERING THE JUDGEMENTS PASSED BY THE CIT(A), W E FIND THAT THE HONBLE ITAT WHILE DEALING WITH THE INITIAL ORDER PASSED BY CIT( A) HAD OBSERVED THAT THE ISSUE IN QUESTION WAS WHETHER LOSSES ARISING OUT OF DEPRECIA TION OF FOREIGN CURRENCY IS UTILIZED OR INTENDED TO BE UTILIZED FOR THE BUSINES S WHICH FORM PART OF THE CAPITAL AND DIRECTED THE CIT(A) TO ANALYSE AFRESH IF THE L OSS ON ACCOUNT OF FOREIGN EXCHANGE FLUCTUATIONS WHICH IS RELATABLE TO THE REV ENUE ACCOUNT OR CAPITAL ACCOUNT AND IF THE LOSS IS RELATABLE TO THE REVENUE ACCOUNT THEN THE ASSESSEE WOULD BE ENTITLED TO THE RELIEF IN VIEW OF THE JUDGEMENT OF THE HONBLE SUPREME COURT IN THE CASE OF CIT VS. WOODWORD GOVERNOR INDIA PRIVATE LT D. WE HAVE APPRECIATED THE 7 ITA NO. 3907/MUM/2014 (A.Y. 2009-10) DCIT VS. M/S UNIQUE GEMS & JEWELLERY IMPUGNED ORDERS PASSED BY CIT(A) DATED 12.03.14 WHE REBY THE HONBLE ITAT HAD CONSIDERED THE SUBMISSIONS MADE BY THE ASSESSEE AN D HAVE ALSO NOTICED THAT THE CIT(A) NOW BY VIRTUE OF IMPUGNED ORDER DATED 12.03. 2014 HAD CONSIDERED THE ENTIRE FACTS OF THE CASE AND EXAMINED THE DOCUMENTS FILED BY ASSESSEE AND FOUND THAT THE EXCHANGE DIFFERENCE HAD ARISEN ON ACCOUNT OF ADVANCES RECEIVED FROM THE CUSTOMERS AGAINST THE SALE REALIZATION. HE, HENCE H ELD THAT THE TRANSACTIONS MADE BY THE ASSESSEE IN FOREIGN CURRENCY HAVE BEEN ACCOUNTE D FOR IN ACCORDANCE WITH AS-11 ISSUED BY ICAI AND THEREFORE THE LOSS ON ACCOUNT OF FOREIGN EXCHANGE FLUCTUATIONS IS RELATABLE TO REVENUE ACCOUNT ONLY. THE LD. CIT(A ) WHILE DEALING WITH THE ISSUE AND WHILE PASSING THE IMPUGNED ORDER HAS KEPT IN MI ND THE PRINCIPLES LAID DOWN BY THE SUPREME COURT IN THE CASE OF WOODWORD INDIA PVT . LTD. 312 ITR 254 AND HAS RIGHTLY DIRECTED THE AO TO DELETE THE ADDITION OF R S.1,38,85,900/- TOWARDS LOSS ON ACCOUNT OF FLUCTUATION OF FOREIGN EXCHANGE. 7. WE, THEREFORE, SEE NO REASON TO INTERFERE WITH T HE IMPUGNED ORDER PASSED BY THE CIT(A) AS HE HAS RIGHTLY HELD THAT LOSS ON ACCO UNT OF FLUCTUATION IN FOREIGN EXCHANGE RATE ON ACCOUNT OF ADVANCES RECEIVED FROM CUSTOMERS ON ACCOUNT OF SALE REALIZATION IS RELATED TO THE REVENUE ACCOUNT ONLY. IN THIS VIEW OF THE MATTER, WE 8 ITA NO. 3907/MUM/2014 (A.Y. 2009-10) DCIT VS. M/S UNIQUE GEMS & JEWELLERY FIND NO REASON TO INTERFERE IN THE ORDERS PASSED BY THE CIT(A) AND THEREFORE DISMISS THESE GROUNDS OF APPEAL RAISED BY REVENUE. 8. GROUND NO. 5 IS GENERAL IN NATURE AND NEEDS NO S EPARATE ADJUDICATION IN VIEW OF THE DECISION ON ABOVE GROUNDS. 9. IN THE RESULT, THE REVENUES APPEAL IS DISMISSED . ORDER PRONOUNCED IN THE OPEN COURT ON 6 TH APRIL, 2016 SD/- SD/- (JASON P. BOAZ) (SANDEEP GOSAIN) $ / ACCOUNTANT MEMBER &' $ / JUDICIAL MEMBER ( ) MUMBAI; *$ DATED :06.04.2016 PS. ASHWINI / COPY OF THE ORDER FORWARDED TO : 1. / THE APPELLANT 2. / THE RESPONDENT 3. + ( ) / THE CIT(A) 4. + / CIT - CONCERNED 5. ./0 ''12 , 12# , ( ) / DR, ITAT, MUMBAI 6. 045 6 / GUARD FILE / BY ORDER, / !'# (DY./ASSTT. REGISTRAR) #$ %, ( ) / ITAT, MUMBAI