ACIT, New Delhi V. M/s. Kadimi Tool Manufacaturing Co. Pvt. Ltd., Gurgaon

ITA 4615/DEL/2014

• Counselvise Citation: [2018] 126 COUNSELVISE.COM (IT) 3857 (ITAT-DELHI)
• Duration Of Justice: 3 year(s) 5 month(s) 8 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 30-01-2018
• Appeal Filed By: Department
• Order Result: Dismissed
• Bench Allotted: D
• Assessment Year: 2009-2010
• Appeal Filed On: 21-08-2014
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: PRADEEP DINODIA R K KAPUR

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL DELHI BENCH: D: NEW DELHI BEFORE SHRI B.P. JAIN, ACCOUNTANT MEMBER AND SHRI SUDHANSHU SRIVASTAVA, JUDICIAL MEMBER ITA NO. 4615/DEL /2014 ASSESSMENT YEAR: 2009-10 ACIT, CIRCLE-5(1), NEW DELHI. VS KADMIMI TOOL MANUFACTURING CO. PVT. LTD., 118, UDYOG VIHAR PHASE-I, DUNDAHERA, GURGAON-122016 (PAN: AAACK1016F) (APPELLANT) (RESPONDENT) APPELLANT BY : SHRI PRADEEP DINODIA, R.K. KAPUR, CA RESPONDENT BY : SHRI AMIT JA IN, SR. DR DATE OF HEARING: 23.01.2018 DATE OF PRONOUNCEMENT : 30.01.2018 ORDER PER SUDHANSHU SRIVASTAVA, J.M. THIS APPEAL HAS BEEN PREFERRED BY THE DEPARTMENT AGAINST THE ORDER DATED 30.06.2014 PASSED BY THE LD . CIT(A)-VIII, DELHI FOR ASSESSMENT YEAR 2009-10 WHER EIN VIDE THE IMPUGNED ORDER, THE LD. COMMISSIONER OF INCOME TAX(A) HAS DELETED THE DISALLOWANCE OF NOTIO NAL FOREIGN EXCHANGE LOSS OF RS. 56,16,520/-. THE GROU NDS RAISED BY THE DEPARTMENT ARE AS UNDER:- ITA NO. 4615/DEL/2014 ASSESSMENT YEAR 2009-10 2 1. WHETHER ON THE FACTS AND IN THE CIRCUMSTANCES OF THE CASE AND IN LAW, THE LD. CIT(A) ERRED IN DELETING THE ADDITION OF RS. 56,19,996/- MADE BY THE ASSESSING OFFICER BY DISALLOWING THE NOTIONAL LOSS ON ACCOUNT OF FOREIGN EXCHANGE FLUCTUATION CLAIMED BY THE ASSESSE. 2. THAT THE ORDER OF THE LD. CIT(A) IS ERRONEOUS AND IS NOT TENABLE ON FACT AND IN LAW. 3. THAT THE GROUNDS OF APPEAL ARE WITHOUT PREJUDICE TO EACH OTHER. 4. THAT THE APPELLANT CRAVES LEAVE TO ADD, ALTER, AMEND OR FORGO ANY GROUND(S) OF APPEAL EITHER BEFORE OR AT THE TIME OF HEARING OF THE APPEAL. 2. BRIEF FACTS OF THE CASE ARE THAT THE ASSESSEE IS ENGAGED IN THE BUSINESS OF MANUFACTURING OF THREAD ROLLING DIES, MILLED FLAT DIES AND MILLED GROUND DI ES AND SALE OF SCREWS. ASSESSEE FILED THE RETURN DECL ARING INCOME OF RS. 90,06,654/- AND SUBSEQUENTLY THE CASE WAS SELECTED FOR SCRUTINY. DURING THE COURSE OF SC RUTINY PROCEEDINGS, THE ASSESSING OFFICER OBSERVED THAT TH E ASSESSEE COMPANY HAD DEBITED AN AMOUNT OF RS. 2,18,67,706/- ON ACCOUNT OF LOSS ON FOREIGN EXCHANG E AND THE ASSESSEE WAS REQUIRED TO GIVE A BREAK-UP OF THE SAME. AS PER BREAK-UP SUBMITTED BY THE ASSESSEE, T HE TOTAL FOREIGN EXCHANGE LOSS INCLUDED NOTIONAL LOSS OF RS. ITA NO. 4615/DEL/2014 ASSESSMENT YEAR 2009-10 3 56,16,520/-. THE ASSESSING OFFICER WAS OF THE OPIN ION THAT LOSS ON ACCOUNT OF FOREIGN EXCHANGE FLUCTUATIO N COULD BE ALLOWED AS A DEDUCTION ONLY WHEN THE LOSS HAD ACTUALLY BEEN INCURRED FOR THE RELEVANT PREVIOUS YE AR. THE ASSESSING OFFICER WAS FURTHER OF THE OPINION THAT T HE ACTUAL LOSS WOULD ARISE ONLY AT THE TIME OF REMITTANCE/PAYMENT. THE ASSESSING OFFICER PROCEEDE D TO ADD BACK THE AMOUNT OF RS. 56,16,520/- TO THE INCOM E OF THE ASSESSEE ON ACCOUNT OF NOTIONAL FOREIGN EXCHANG E LOSS. ON APPEAL BY THE ASSESSEE, THIS DISALLOWANCE WAS DELETED BY THE LD. COMMISSIONER OF INCOME TAX (A). NOW, THE DEPARTMENT IS BEFORE THE ITAT CHALLENGING THE S AID DELETION. 3. THE LD. DEPARTMENTAL REPRESENTATIVE SUBMITTED TH AT EVEN AS PER THE ADMITTANCE OF THE ASSESSEE, THE SAI D LOSS WAS A NOTIONAL LOSS WHICH WAS BOOKED BY THE ASSESSE E ON THE RESTATEMENT OF LIABILITY. IT WAS SUBMITTED THA T THE SAME HAD BEEN RIGHTLY DISALLOWED BY THE ASSESSING OFFICER AS THE SAME DID NOT OCCUR DURING THE PERIOD UNDER CONSIDERATION. IT WAS SUBMITTED THAT TRUE PRO FIT OR LOSS COULD BE ARRIVED AT ONLY ON THE FINAL SETTLEME NT OF ITA NO. 4615/DEL/2014 ASSESSMENT YEAR 2009-10 4 THE CONTRACT AND NOT DURING THE PERIOD WHEN THE CON TRACT REMAINED UN-CONCLUDED. IT WAS ALSO SUBMITTED THAT T HE FINAL LIABILITY/LOSS WOULD ARISE ONLY AT THE TIME O F MAKING THE FINAL PAYMENT AND, THEREFORE, THE LD. COMMISSIO NER OF INCOME TAX (A) HAD ERRED IN DELETING THE ADDITIO N. 4. IN RESPONSE, THE LD. AR PLACED RELIANCE ON THE JUDGMENT OF THE HON'BLE DELHI HIGH COURT IN COMMISSIONER OF INCOME TAX VS WOODWARD GOVERNOR INDIA (P) LTD. REPORTED IN 294 ITR 451 (DEL) WHICH WAS UPHELD AND AFFIRMED BY THE HONBLE APEX COURT IN COMMISSIONER OF INCOME TAX (A) VS WOODWARD GOVERNOR INDIA (P) LTD. REPORTED IN 312 ITR 354 (SC). THE L D. AR SUBMITTED THAT THIS ISSUE WAS NO LONGER RES JUDICATA AND THE HON'BLE DELHI HIGH COURT HAD HELD IN THE CASE O F M/S WOODWARD GOVERNOR INDIA (P) LTD (SUPRA) THAT INCREA SE IN LIABILITY DUE TO FOREIGN EXCHANGE FLUCTUATION AS PE R THE EXCHANGE RATE PREVAILING ON THE LAST DATE OF FINANC IAL YEAR WAS ALLOWABLE AS A DEDUCTION AND WAS NOT NOTIONAL A ND CONTINGENT. 5. WE HAVE HEARD THE RIVAL SUBMISSIONS AND PERUSED THE MATERIAL AVAILABLE ON RECORD. WE FULLY AGREE WI TH THE ITA NO. 4615/DEL/2014 ASSESSMENT YEAR 2009-10 5 AVERMENT OF THE LD. AR THAT THE ISSUE UNDER APPEAL BY THE DEPARTMENT IS COVERED IN FAVOUR OF THE ASSESSEE BY THE JUDGMENT OF THE HON'BLE DELHI HIGH COURT IN THE CASE OF COMMISSIONER OF INCOME TAX VS WOODWARD GOVERNOR INDIA (P) LTD. (SUPRA). THE HON'BLE DELHI HIGH COU RT IN THE AFOREMENTIONED JUDGMENT HAS HELD AS UNDER:- THAT THE LIABILITY AROSE OUT OF CONTRACT ALREADY CONCLUDED. THE LIABILITY ALREADY STOOD ACCRUED THE MINUTE THE CONTRACT WAS ENTERED INTO. THE MERE POSTPONEMENT OF THE PAYMENT TO A DIFFERENT DATE COULD NOT EXTINGUISH THE LIABILITY AND RENDER IT NOTIONAL OR CONTINGENT. EVEN IF LIABILITY WAS DISCHARGED AT A FUTURE DATE, IT WOULD NEVERTHELESS BE A LIABILITY WHICH WAS CERTAIN AND NOT CONTINGENT. THE MAIN INGREDIENT OF A CONTINGENT LIABILITY WAS THAT IT DEPENDS UPON THE HAPPENING OF A CERTAIN EVENT. THE CHANGE IN THE VALUE OF FOREIGN CURRENCY IN RELATION TO INDIAN CURRENCY WAS A FAIT ACCOMPLI AND NOT A NOTIONAL ONE. THEREFORE THE INCREASE IN LIABILITY DUE TO FOREIGN EXCHANGE FLUCTUATION AS PER THE EXCHANGE RATE PREVAILING ON THE LAST DATE OF FINANCIAL YEAR WAS ALLOWABLE AS A DEDUCTION AND WAS NOT NOTIONAL OR CONTINGENT. 5.1 THEREFORE, RESPECTFULLY FOLLOWING THE RATIO OF THE JUDGMENT AS LAID DOWN BY THE HONBLE DELHI HIGH COU RT IN THE CASE OF COMMISSIONER OF INCOME TAX VS WOODWA RD GOVERNOR INDIA (P) LTD. (SUPRA), WE FIND NO REASON TO ITA NO. 4615/DEL/2014 ASSESSMENT YEAR 2009-10 6 DIVERGE FROM THE FINDINGS OF THE LD. CIT (A) ON THI S ISSUE AND WE DISMISS THE GROUNDS RAISED BY THE REVENUE. 7. IN THE RESULT, THE APPEAL OF THE DEPARTMENT STAN DS DISMISSED. THE ORDER IS PRONOUNCED IN THE OPEN COURT ON 30 TH JANUARY, 2018. SD/- SD/- (B.P. JAIN) (SUDHANSHU SRIVASTAVA) ACCOUNTANT MEMBER JUDICIAL MEMBER DATED: 30 TH JANUARY, 2018 GS COPY FORWARDED TO: 1. APPELLANT 2. RESPONDENT 3. CIT 4. CIT(A) 5. DR, ITAT TRUE COPY BY ORDER ASSISTANT REGISTRAR