DCIT 16(3), MUMBAI V. VISHINDA DIAMONDS, MUMBAI

ITA 5341/MUM/2009

• Counselvise Citation: [2010] 136 COUNSELVISE.COM (IT) 2051 (ITAT-MUMBAI)
• Duration Of Justice: 8 month(s) 3 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 21-05-2010
• Appeal Filed By: Department
• Order Result: Dismissed
• Bench Allotted: F
• Assessment Year: 2004-2005
• Appeal Filed On: 17-09-2009
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: DEBASHISH CHANDA
• Assessee Lawyers: A V SONDE
• Keywords: Business income
• Section: 80HHC; 43(5)

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL F BENCH, MUMBAI. BEFORE SHRI R.V.EASWAR, SR.VP AND SHRI A.L. GEHLOT, AM I.T.A.NO.5341/MUM/2009 (ASSESSMENT YEAR: 2004-05) THE DEPUTY COMMISSIONER OF INCOME TAX, 16(3), MATRU MANDIR, 2 ND FLOOR, R.NO.206, TARDEO ROAD, MUMBAI-400 007. VS. M/S.VISHINDA DIAMONDS, 102, PRASAD CHAMBERS, OPERA HOUSE, MUMBAI-400 004. PAN:AACFV3647G (APPELLANT) (RESPONDENT) APPELLANT BY : MR. DEBASHISH CHANDA RESPONDENT BY : MR.A.V. SONDE O R D E R PER R.V.EASWAR, SENIOR VICE PRESIDENT: THE FOLLOWING GROUNDS HAVE BEEN TAKEN BY THE REVENUE IN THIS APPE AL WHICH RELATES TO THE ASSESSMENT YEAR 2004-05:- 1. THE CIT(A) ERRED IN ACCEPTING THE FACT THAT THE PROFIT/GAIN EARNED ON FOREIGN EXCHANGE CONTRACT IS A SPECULATIVE PROFIT IS NOT DIRECTLY RELATED TO EXPOR T OF GOODS OR MERCHANDISE AND THE ASSESSEE IS NOT DEALING IN THE BUSINESS OF FOREIGN EXCHANGE. 2. THE CIT(A) ERRED IN TREATING THAT THE GAIN FROM THE FOREIGN EXCHANGE CONTRACT AS BUSINESS RECEIPTS, 90% OF WHICH RECEIPTS IS TO BE REDUCED AS PER THE PROVISIONS OF EXPLANATION (BAA) OF SECTION 80HHC. 3. THE CIT(A) ERRED IN STATING THAT THE PROVISO (A) SECTION 43(5) IS APPLICABLE TO THIS CASE AS THE PRO VISO SAY THAT IF THE ASSESSEE ENTERS INTO CONTRACT IN RESPECT OF RAW MATERIAL OR MERCHANDISE TO GUARD AGAINST LOSS THROUGH PRICE FLUCTUATION IN RESPECT O F HIS CONTRACT FOR ACTUAL DELIVERY OF GOODS MANUFACTURED OR MERCHANDISE TO GUARD AGAINST LOSS THROUGH PRICE FLUCTUATION IN RESPECT OF HIS CONTRAC T FOR ACTUAL DELIVERY OF GOODS MANUFACTURED OR MERCHANDISE SOLD BY HIM WOULD NOT BE COVERED BY SPECULATIVE TRANSACTION. ITA NO.5341/M/09 2 4. THE CIT(A) ERRED IN FOLLOWING THE DECISION OF THE BOMBAY HIGH COURT IN THE CASE OF BADRIDAS GAURIDU 271 ITR 256 WHICH HAS NOT BEEN ACCEPTED BY THE DEPARTMENT AND A SLP HAS BEEN FILED AGAINST THE SAID ORDER. 2. AT THE TIME OF THE HEARING, THE LEARNED COUNSEL FOR THE ASSESSEE SUBMITTED THAT THE GROUNDS ARE COVERED IN FAVOUR OF THE ASSESSEE BY THE ORDER OF THE TRIBUNAL IN THE CA SE OF DCIT VS. SHRI DILIPKUMAR V. LAKHI IN ITA NO.624/MUM/2007 DAT ED 11.03.2008 WHICH HAS BEEN FOLLOWED BY THE CIT(A) IN DECIDING THE GROUNDS IN FAVOUR OF THE ASSESSEE. THE QUESTION IS WHETHER THE GAINS MADE BY THE ASSESSEE ON CANCELLATION OF C ERTAIN CONTRACTS WITH ITS FOREIGN CLIENTS CAN BE TREATED A S EXPORT PROFITS SO AS TO QUALIFY FOR THE DEDUCTION UNDER SECTION 80 HHC OF THE INCOME TAX ACT. THE ASSESSING OFFICER TOOK THE VIEW THAT THE GAINS WERE IN THE NATURE OF SPECULATIVE INCOME WHER EAS THE CIT(A) HAS TAKEN THE VIEW, REFERRING TO THE ORDER O F THE TRIBUNAL CITED SUPRA AND THE JUDGEMENT OF THE HONBLE BOMBAY HIGH COURT IN CIT VS. BADRIDAS GAURIDU (P) LTD., 261 ITR 256, THAT THE GAINS FROM THE FOREIGN EXCHANGE CONTRACTS SHOUL D BE TREATED AS BUSINESS INCOME QUALIFYING FOR THE DEDUCTION. HE HAS ALSO DIRECTED THAT 90% OF THE RECEIPTS ARE TO BE REDUCED AS PER EXPLANATION (BAA) OF SECTION 80HHC ABOUT WHICH THE RE IS NO DISPUTE. SINCE THE CIT(A) HAS FOLLOWED THE JUDGEMEN T OF THE HONBLE BOMBAY HIGH COURT WHICH HAS BEEN APPLIED AN D FOLLOWED BY THE MUMBAI BENCH OF THE TRIBUNAL IN THE ORDER CITED SUPRA, RESPECTFULLY FOLLOWING THEM, WE UPHOLD THE D ECISION OF THE CIT(A) AND DISMISS THE GROUNDS FILED BY THE REVENUE . ORDER PRONOUNCED ON THIS 21 ST DAY OF MAY, 2010. SD/- ( A.L. GEHLOT ) SD/- ( R.V.EASWAR ) ACCOUNTANT MEMBER SENIOR VICE PRESIDENT MUMBAI, DATED 21 ST MAY, 2010. SOMU ITA NO.5341/M/09 3 COPY TO : 1. THE APPELLANT 2. THE RESPONDENT 3. THE CIT-16,MUMBAI. 4. THE CIT(A)-XVII, MUMBAI 5. THE DR F BENCH /TRUE COPY/ BY ORDE R ASSTT. REGISTRAR, I.T.A.T, MUMBAI