ACIT, New Delhi V. M/s Hanung Toys (India) Ltd., New Delhi

ITA 464/DEL/2013

• Counselvise Citation: [2013] 140 COUNSELVISE.COM (IT) 69609 (ITAT-DELHI)
• Duration Of Justice: 9 month(s) 29 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 22-11-2013
• Appeal Filed By: Department
• Order Result: Dismissed
• Bench Allotted: C
• Next Hearing Date: 20-11-2013
• Assessment Year: 2006-2007
• Appeal Filed On: 24-01-2013
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: SATPAL SINGH
• Assessee Lawyers: AMIT GOEL

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL (DELHI BENCH C: NEW DELHI) BEFORE SHRI G. D. AGRAWAL, VICE PRESIDENT AND SHRI C. M. GARG, JUDICIAL MEMBER ITA NO.464 /DEL/ 2013 (ASSESSMENT YEAR:2006-07) ACIT VS. HANUNG TOYS (INDIA) LTD. CIRCLE -12(1), E-93, GREATER KAILASH-1, NEW DELHI NEW DELHI. PAN: AAACH0496A (APPELLANT) (RESPONDENT) ASSESSEE BY : SHRI AMIT GOEL, ADV. REVENUE BY : SHRI SATPAL SINGH, SR. DR ORDER PER C. M. GARG, J M: THIS APPEAL HAS BEEN PREFERRED BY THE REVENUE AGAI NST THE ORDER OF THE COMMISSIONER OF INCOME TAX (APPEALS)-XXVII, NEW DELHI VIDE DATED 23.10.2012 IN APPEAL NO- 654/08-09 FOR THE ASSESSM ENT YEAR 2006-07.THE SOLE GROUND RAISED BY THE REVENUE REDS AS UNDER: ON THE FACTS AND IN THE CIRCUMSTANCES OF THE CASE AND IN LAW, THE LD. COMMISSIONER OF INCOME TAX (APPEALS) HAS ER RED IN DELETING THE DISALLOWANCE OF RS.18,36,351/- MADE BY ASSESSING OFFICER ON ACCOUNT OF FOREIGN EXCHANGE FLUCTUATION. AS PER INSTRUCTION NO.3/2010 DATED 23.03.2010 OF CBDT, MA RKED TO MARKED LOSSES ON REINSTATEMENT OF ACCOUNTS ARE NOT ALLOWABLE AS THE SAME IS NOTIONAL. ITA NO.464/DEL/2013 2 2. BRIEFLY STATED THE FACTS GIVING RISE TO THIS APP EAL ARE THAT, THE CASE WAS SELECTED FOR SCRUTINY AND NOTICES U/S 143(2) AND 14 2(1) OF THE INCOME TAX ACT, 1961 (FOR SHORT THE ACT) ALONG WITH DETAIL QUE STIONNAIRE WAS SERVED ON THE ASSESSEE. THE ASSESSING OFFICER MADE CERTAIN AD DITIONS INCLUDING IMPUGNED DELETED ADDITION OF RS.18,36,351/- ON ACCO UNT OF DISALLOWANCE OF FOREIGN EXCHANGE FLUCTUATION. 3. THE AGGRIEVED ASSESSEE PREFERRED AN APPEAL BEFOR E CIT (A) WHICH WAS PARTLY ALLOWED AND GROUND NO.3 BEFORE CIT (A) PERTA INING TO THE IMPUGNED DISALLOWANCE ON ACCOUNT OF FOREIGN EXCHANGE FLUCTUA TION WAS ALLOWED FOR THE ASSESSEE WITH FOLLOWING DETERMINATION: I HAVE CAREFULLY CONSIDERED THE SUBMISSIONS OF THE APPELLANT, THE OBSERVATIONS MADE BY THE ASSESSING OFFICER IN T HE ASSESSMENT ORDER AND THE FACTS OF THE CASE. THE ASS ESSING OFFICER HAS DISALLOWED LOSS ON FOREIGN EXCHANGE FLU CTUATION ON THE GROUND THAT THE SAME IS A NOTIONAL LOSS AND WOU LD RESULT IN REAL LOSS ON THE DATE OF REMITTANCE. IN THE APPELLA NTS CASE, THE LOSS ON FOREIGN EXCHANGE FLUCTUATION HAS RESULTED O N ACCOUNT OF RE-STATEMENT OF EXPORT DEBTORS AND CREDITORS FOR EX PENSES PAYABLE. IN VIEW OF THE DECISION OF THE HONBLE SU PREME COURT REFERRED TO ABOVE, THIS LOSS WAS ALLOWABLE TO THE A PPELLANT AND THEREFORE, ADDITION OF RS.18,36,351/- MADE BY THE A SSESSING OFFICER IS DELETED. 4. NOW THE REVENUE IS BEFORE THIS TRIBUNAL IN THE S ECOND APPEAL WITH THE SOLE GROUND AS MENTIONED HEREINABOVE. 5. WE HAVE HEARD RIVAL ARGUMENTS OF BOTH THE PARTIE S AND CAREFULLY PERUSED THE RECORD. THE LD. DEPARTMENTAL REPRESENTA TIVE (DR) SUBMITTED ITA NO.464/DEL/2013 3 THAT THE ASSESSING OFFICER RIGHTLY MADE DISALLOWANC E PERTAINING TO FOREIGN EXCHANGE FLUCTUATION BECAUSE THE LOSS BOOKED WOULD BE NOTIONAL AND COULD NOT BE ALLOWED AND THE UNREALIZED LOSS ON ACCOUNT O F FOREIGN EXCHANGE FLUCTUATION IS NOT ALLOWABLE TO THE ASSESSEE. 6. REPLYING TO THE ABOVE, THE LD. AR PLACED RELIANC E ON THE JUDGMENT OF THE HONBLE SUPREME COURT IN THE CASE OF CIT VS. WO ODWARD GOVERNOR INDIA PVT. LTD.(2009), 312 ITR 254 (SC) AND SUBMITTED THAT THE CIT (A) RIGHTLY GRANTED RELIEF TO THE ASSESSEE BECAUSE THE ISSUES SQUARELY COVERED IN FAVOUR OF THE ASSESSEE BY THE ABOVE JUDGMENT OF THE APEX COURT. 7. ON CAREFUL CONSIDERATION OF RIVAL ARGUMENTS AND CAREFUL PERUSAL OF THE RECORD PLACED BEFORE US INCLUDING CITATIONS AND LEG AL PROPOSITIONS RELIED BY BOTH THE PARTIES, WE ARE OF THE VIEW THAT THE ASSES SING OFFICER DISALLOWED THE CLAIM OF THE ASSESSEE BY OBSERVING THAT THE UNREALI ZED LOSS ON ACCOUNT OF FOREIGN EXCHANGE FLUCTUATION IS NOT ALLOWABLE TO TH E ASSESSEE AND IN SUCH CASES THE LOSS BOOKED WOULD BE NOTIONAL AND COULD N OT BE ALLOWED. 8. PER CONTRA THE CIT (A) GRANTED RELIEF TO THE ASS ESSEE BY FOLLOWING DECISION OF HONBLE SUPREME COURT IN THE CASE OF CI T VS. WOODWARD GOVERNOR INDIA PVT. LTD. (SUPRA). THE CIT (A) OBSERVED THAT THE CLAIMED LOSS ON FOREIGN EXCHANGE FLUCTUATION HAS RESULTED O N ACCOUNT OF RESTATEMENT OF EXPORT DEBTORS AND CREDITORS I.E. RESTATEMENT OF TRADING ASSETS AND ITA NO.464/DEL/2013 4 LIABILITIES. HONBLE SUPREME COURT IN THE CASE OF C IT VS. WOODWARD GOVERNOR INDIA PVT. LTD. (SUPRA) HAS HELD THAT WHEN THE ASSESSEE FOLLOWING MERCANTILE SYSTEM OF ACCOUNTING THEN ADDITIONAL LIA BILITY ARISING OUT OF FLUCTUATION IN THE FOREIGN EXCHANGE RATE IS ALLOWAB LE IN THE YEAR OF INCREASE IN THE RATE OF FOREIGN EXCHANGE. 9. IN VIEW OF THE ABOVE, WE HOLD THE CIT (A) RIGHT LY GRANTED RELIEF TO THE ASSESSEE AND THE ISSUE IS SQUARELY COVERED IN FAVOU R OF ASSESSEE BY THE ABOVE DECISION OF HONBLE APEX COURT. THEREFORE, WE HAVE NO REASON TO TAKE A DIFFERENT VIEW AND TO INTERFERE WITH THE IMPUGNED O RDER IN THIS REGARD. ACCORDINGLY, SOLE GROUND OF THE REVENUE BEING DEVOI D OF MERITS BEING DISMISSED. IN THE RESULT THE APPEAL OF THE REVENUE IS DISMISS ED. ORDER PRONOUNCED IN OPEN COURT ON 22 ND /11/ 2013. SD/- SD/- (G. D. AGRAWAL) (C. M. GARG) ACCOUNTANT MEMBER JUDICIAL MEMBER DATED THE 22 ND DAY OF NOVEMBER, 2013 S.SINHA COPY FORWARDED TO 1. APPELLANT ITA NO.464/DEL/2013 5 2. RESPONDENT 3. CIT 4. CIT (A) 5. CIT(ITAT), NEW DELHI. AR,ITAT NEW DELHI.