A.C.I.T.16(3), MUMBAI V. CHAITYA, MUMBAI

ITA 4483/MUM/2012

• Counselvise Citation: [2014] 120 COUNSELVISE.COM (IT) 6677 (ITAT-MUMBAI)
• Duration Of Justice: 1 year(s) 11 month(s) 10 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 12-06-2014
• Appeal Filed By: Department
• Order Result: Dismissed
• Bench Allotted: C
• Next Hearing Date: 18-02-2014
• Assessment Year: 2009-2010
• Appeal Filed On: 02-07-2012
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: SHRIKANT NAMDEO

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL C BENCH, MUMBAI BEFORE SHRI D. KARUNAKARA RAO, ACCOUNTANT MEMBER AND SHRI AMIT SHUKLA, JUDICIAL MEMBER ./I.T.A. NO. 4483/M/2012 ( AY: 200 9 - 20 10 ) ACIT - 16(3), R.NO.206, 2 ND FLOOR, MATRU MANDIR, TARDEO ROAD, MUMBAI 400 007. / VS. M/S. CHAITYA, 519, PRASAD CHAMBERS, OPERA HOUSE, MUMBAI - 400004. ./ PAN : AAAFC1045P ( / APPELLANT) .. ( / RESPONDENT ) / ASSESSEE BY : NONE / REVENUE BY : SHRI SHRIKANT NAMDEO, DR / DATE OF HEARING :12.6.2014 / DATE OF PRONOUNCEMENT :12.6.2014 / O R D E R PER D. KARUNAKARA RAO, AM: THIS APPEAL FILED BY THE REVENUE ON 2.7.2012 IS AGAINST THE ORDER OF THE CIT (A) - 27, MUMBAI DATED 27.4.2012 FOR THE ASSESSMENT YEAR 2009 - 2010. 2. IN THIS APPEAL, REVENUE RAISED THE ONLY EFFECTIVE GROUND WHICH READS AS UNDER: WHETHER ON THE FACTS AND IN THE CIRCUMSTANCES OF TH E CASE AND IN LAW, THE LD CIT (A) HAS ERRED IN HOLDING THAT MARK - TO - MARKET LOSS OF RS. 56,70,000/ - ARISING ON VALUATION OF FORWARD EXCHANGE CONTRACTS ON THE CLOSING DATE OF ACCOUNTING YEAR IS NOT A NOTIONAL LOSS AND THEREFORE, ALLOWABLE. 3. AT THE OUTSET, LD COUNSEL FOR THE ASSESSEE MENTIONED THAT THE ONLY ISSUE INVOLVED IN THIS APPEAL RELATES TO THE ALLOW ABILITY OF MARK - TO - MARKET (MT M) LOSS OF RS. 56,70,000/ - ARISING ON VALUATION OF FORWARD EXCHANGE CONTRACTS ON THE CLOSING DATE OF ACCOUNTING YEAR. IN TH IS REGARD, IT IS THE CLAIM OF THE ASSESSEE THAT ON PART WITH THE MARK - TO - MARKET PROFITS ARISING ON V ALUATION FORWARD EXCHANGE CONTRACTS ON THE CLOSING DATE OF THE ACCOUNTING YEAR, THE MARK - TO - MARKET LOSS SHOULD ALSO BE ALLOWED AS BUSINESS LOSS. IT IS THE CLAIM OF THE REVENUE THAT SUCH NOTIONAL LOSSES SHOULD 2 NOT BE ALLOWED AS BUSINESS LOSSES. MATTER TRAVELLED TO THE FIRST APPELLATE PROCEEDINGS. 4. DURING THE PROCEEDINGS BEFORE THE FIRST APPELLATE AUTHORITY, THE CIT (A) EXAMINED THE FACTS OF THE CASE AN D ALLOWED THE CLAIM OF THE ASSESSEE VIDE PARA 6 OF HIS ORDER BY FOLLOWING VARIOUS JUDGMENTS NAMELY (I) HONBLE DELHI HIGH COURT JUDGMENT IN THE CASE OF CIT VS. WOODWARD GOVERNOR INDIA P LTD (294 ITR 451), WHICH IS SUBSEQUENTLY APPROVED BY THE HONBLE SUPRE ME COURT VIDE 312 ITR 254; (II) THE DECISION OF SPECIAL BENCH OF ITAT IN THE CASE OF DCIT VS. BANK OF BAHRAIN AND KUWAIT VIDE ITA NOS. 4404 & 1883/M/2004); (III) SUPREME COURT JUDGMENT IN THE CASE OF ONGC VS. CIT, 322 ITR 180 AND (IV) DECISION OF THE TRIBU NAL IN THE CASE OF M/S. BHAVANI GEMS VS. ACIT IN ITA NO.2855/M/2010 DATED 30.3.2011, WHICH IS RELEVANT FOR THE PROPOSITION THAT SUCH MTM LOSSES ARE ALLOWABLE AS BUSINESS LOSSES. RELEVANT PORTION OF THE SAID PARA 6 READS AS UNDER: 6AT PRESENT, IT IS NOT THE AOS CASE THAT THE IMPUGNED TRANSACTION IS SPECULATIVE IN NATURE. FURTHER, THE AFORESAID ISSUE OF ALLOWING THE LOSS ON ACCOUNT OF REVALUATION OF PENDING FORWARD CONTRACT WAS CONSIDERED BY THE HONBLE ITAT MUMBAI BENCH IN THE CASE OF M/S. BHAVANI GEMS VS. ACIT CC - 35 IN ITA NO.2855/MUM/2010 DATED 30/3/2011 FOR AY 2006 - 2007 AND THE SAID LOSS WAS ALLOWED AS BUSINESS LOSS AND THE ISSUE WAS HELD TO BE COVERED BY THE SPECIAL BENCH DECISION IN THE CASE OF DCIT VS. BANK BAHRAIN. THEREFORE, IN MY CONSIDERED OP INION, THE FACTS OF THE APPELLANTS CASE ARE FULLY COVERED BY THE ABOVE CITED DECISIONS OF THE HONBLE SUPREME COURT AND THE ITAT MUMBAI BENCH. ACCORDINGLY, I HOLD THAT THE LOSS INCURRED BY THE APPELLANT ON RESTATEMENT OF PENDING FORWARD CONTRACT AGREEMEN T AT THE YEAR - END IS AN ALLOWABLE BUSINESS LOSS. APPELLANT SUCCEEDS ON THIS GROUND. 5. AGGRIEVED WITH THE ABOVE DECISION OF THE CIT (A), THE REVENUE IS IN APPEAL BEFORE THE TRIBUNAL BY MENTIONING THAT THE CIT (A)S ORDER NEEDS TO BE AMENDED. 6. DURING TH E PROCEEDINGS BEFORE US, NONE APPEARED TO REPRESENT THE CASE OF THE ASSESSEE. HOWEVER, LD DR HAS EXPLAINED THE FACTS OF THE CASE AND IT IS AGREED THAT IN PRINCIPLE THE ISSUE STANDS COVERED IN FAOVUR OF THE ASSESSEE CONSIDERING THE ABOVE CITED JUDGMENTS. ON HEARING THE LD DR, WHO OTHERWISE RELIED ON THE ORDER OF THE AO DUTIFULLY, WE ARE O F THE OPINION THAT THE ISSUE OF TREATING THE MTM LOSSES EARNED ON FORWARD EXCHANGE CONTRACTS ON THE CLOSING DATE OF THE ACCOUNTING YEAR CONSTITUTES BUSINESS LOSS. ACCOR DINGLY, WE FIND NO 3 INFIRMITY IN THE ORDER OF THE CIT (A) AND IT DOES NOT CALL FOR ANY INTERFERENCE. ACCORDINGLY, GROUND RAISED BY THE REVENUE IS DISMISSED. 7. IN THE RESULT, APPEAL OF THE REVENUE IS DISMISSED. ORDER PRONOUNCED IN THE OPEN COURT ON 12 TH JUNE, 2014. S D / - S D / - (AMIT SHUKLA) (D. KARUNAKARA RAO) JUDICIAL MEMBER ACCOUNTANT MEMBER MUMBAI ; 12.6 .2014 . . ./ OKK , SR. PS / COPY OF THE ORDER FORWARDED TO : 1. / THE APPELLANT 2. / THE RESPONDENT. 3. ( ) / THE CIT(A) - 4. / CIT 5. , , / DR, ITAT, MUMBAI 6. / GUARD FILE . //TRUE COPY// / BY ORDER, / (DY./ASSTT. REGISTRAR) , / ITAT, MUMBAI