ITO 10(3)(4), MUMBAI V. ZENTECH INDIA OFFSHORE & MARINE ENGG P.LTD, NAVI MUMBAI

ITA 5586/MUM/2014

• Counselvise Citation: 558619914 RSA 2014
• Duration Of Justice: 10 month(s) 25 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 29-07-2015
• Appeal Filed By: Department
• Bench Allotted: SMC
• Assessment Year: 2010-2011
• Appeal Filed On: 04-09-2014
• Court: TRIBUNAL
• Department Lawyers: JAVED AKHTAR
• Assessee Lawyers: RAHUL K HAKANI
• Keywords: Business income

Judgement Text

, . . , IN THE INCOME TAX APPELLATE TRIBUNAL SMC , BENCH MUMBAI . . , BEFORE SHRI R.C.SHARMA , ACCOUNTANT MEMBER ./ ITA NO. 5586 / MUM/20 1 4 ( / ASSESSMENT YEAR : 2010 - 11 ) ITO 10(3)(4), MUMBAI VS. ZENTECH INDIA OFFSHORE & MARINE ENGG. PVT. LT.D, 502, 103/104, BUILDING 5, SECTOR - 2, MILLENNIUM BUSINESS PARK, MAHAPE, NAVI MUMBAI - 400710 ./ ./ PAN/GIR NO. : A A A CZ 0331 N ( / APPELLANT ) .. ( / RESPONDENT ) /REVENUE BY : SHRI JAVED AKHTAR /ASSESSEE BY : SHRI RAHUL K. HAKANI / DATE OF HEARING : 29 /0 7 / 2015 / DATE OF PRONOUNCEMENT 29 /0 7 /2015 / O R D E R TH IS IS AN APPEAL FILED BY THE REVENUE AGAINST THE ORDER OF CIT(A) FOR THE A.Y. 2010 - 11 IN THE MATTER OF ORDER PASSED U/S.143(3) OF THE I.T.ACT, 1961. 2. IN THIS APPEAL, REVENUE IS AGGRIEVED FOR DISALLOWING DEDUCTION U/S.1 0A OF RS. 13.77 LAKHS. 3. AT THE OUTSET, LD. AR PLACED ON RECORD ORDER OF TRIBUNAL IN ASSESSEES OWN CASE FOR THE IMMEDIATELY PRECEDING ASSESSMENT YEAR 2009 - 2010, WHEREIN CLAIM OF DEDUCTION U/S.10A WAS ALLOWED IN FAVOUR OF THE ASSESSEE. ITA NO. 5586 /1 4 2 4. I HAVE CONSIDERED RIVAL CONTENTIONS AND PERUSED THE RECORD. THE AO HAD DISCUSSED THE ISSUE IN PARA 5 AND 6 OF THE ASSESSMENT ORDER. HE WAS OF THE VIEW THAT THE INCOME EARNED ON ACCOUNT OF EXCHANGE FLUCTUATION WAS NOT A DERIVED INCOME FROM THE BUSINESS ACTIVITY AND, HENCE, TREATED IT AS INCOME FROM OTHER SOURCES. HE HAD ALSO MENTIONED THAT A SIMILAR ADDITION MADE DURING A.Y.2009 - 10 GOT CONFIRMED BY THE CIT(A). 5 . BY THE IMPUGNED ORDER, THE CIT(A) ALLOWED ASSESSEES CLAIM BY FOLLOWING THE DECISION OF ITA T FOR A.Y.2009 - 2010 . THE PRECISE OBSERVATION OF THE CIT(A) WAS AS UNDER : - 3.4 I HAVE CAREFULLY CONSIDERED THE IMPUGNED ASSESSMENT ORDER, THE SUBMISSION OF THE APPELLANT AND THE DECISION OF THE HON'BLE ITAT MUMBAI IN ITA NO.2161/MUM/2012 DATED 30.04.2013. THE HON'BLE BENCH HAD ADJUDICATED THE SOLITARY ISSUE OF TREATMENT GIVEN TO GAIN ON FOREIGN EXCHANGE AS TO WHETHER IT IS INCOME FROM BUSINESS OR INCOME FROM OTHER SOURCES AND ALSO WHETHER IT IS LINKED DIRECTLY TO THE EXPORTS OF THE ASSESSEE. THE FINDING OF THE HON'BLE BENCH IS IN PARA 12 AND 13 OF ITS ORDER AND FOR THE SAKE OF CONVENIENCE, THE SAME IS REPRODUCED HEREUNDER : - '12. WE HAVE HEARD THE ARGUMENTS OF BOTH THE SIDES AND ARE OF THE VIEW THAT THE REVENUE AUTHORITIES DID NOT LOOK INTO THE ACCOUNT OF THE ASSESSEE, WHIC H WERE PLACED BEFORE THEM. IT IS NOTED THAT IN THE YEAR UNDER CONSIDERATION ONLY TWO ITEMS HAVE BEEN SHOWN AS INCOME IN THE PROFIT & LOSS ACCOUNT (BESIDES NOMINAL AMOUNT OF RS.283/ - AS INTEREST), WHICH ARE EXPORT PROCEEDS OF RS.4,82, 13,669/ - AND EXCHANGE DIFFERENCE OF RS.4,67,849/ - (IMPUGNED AMOUNT). IT IS NOT THE CASE OF THE REVENUE AUTHORITIES THAT THE CONCEPTION OF EXCHANGE DIFFERENCE IS NOT FROM EXPORT PROCEEDS, BUT FROM SOME OTHER SOURCE. IT COULD ALSO NOT BE INFERRED FROM THE BALANCE SHEET AND PROFIT & LOSS ACCOUNT OF THE ASSESSEE, THAT EXCHANGE GAIN EMANATED FROM ANY OTHER SOURCE OR ANY OTHER FUNDS PARKED ELSE WHERE. WE, THEREFORE, ARE NOT INCLINED TO RELY ON THE DECISION OF COVERGYS (SUPRA) WHICH IN OUR OPINION IS DISTINGUISHABLE ON FACTS, AS POINTE D OUT BY THE AR. ON THE OTHER HAND, THE OR, ALSO, COULD NOT APPRISE US AS TO HOW THE EXCHANGE GAIN WAS DETACHED FROM EXPORT PROCEEDS OR HOW THE DECISION OF COORDINATE BENCH AT CHENNAI COULD NOT BE RELIED 'UPON. IT HAS ALSO NOT BEEN SHOWN BY THE REVENUE A UTHORITIES THAT THE EXPORT PROCEEDS WERE NOT RECEIVED WITHIN THE STIPULATED PERIOD I.E. THE LAST DAY OF THE PREVIOUS YEAR. ITA NO. 5586 /1 4 3 13. IN THE CIRCUMSTANCES, WE ARE OF THE VIEW THAT THE GAIN RECORDED BY THE ASSESSEE ON RECEIPTS OF FOREIGN EXCHANGE AS EXPORT PROCE EDS ARE EXTRICABLY LINKED AND ARE, THEREFORE, ELIGIBLE FOR EXEMPTION UNDER SECTION 10A OF THE INCOME TAX ACT. 3.5 DURING THE YEAR IN QUESTION, I FIND THE GAIN ON EXCHANGE FLUCTUATION AROSE ONLY ON ACCOUNT OF THE EXPORT AND IT WAS NOT FROM ANY OTHER SOUR CE AND HENCE, THE GAIN HAD EMANATED FROM THE BUSINESS ACTIVITY OF THE APPELLANT, THEREFORE, DEDUCTION NEEDS TO BE ALLOWED. SINCE THE ISSUE IS SQUARELY COVERED BY THE DECISION OF HONBLE ITAT, RESPECTFULLY FOLLOWING THE SAME, I DIRECT THE AO TO TREAT THE GA IN ON EXCHANGE FLUCTUATION AS BUSINESS INCOME AND CONSEQUENTLY ALLOW THE CLAIM OF DEDUCTION U/S.10A. 6 . IT IS CLEAR FROM THE ORDER OF THE CIT(A) THAT HE ALLOWED ASSESSEES CLAIM BY RELYING ON THE ORDER OF ITAT, WHICH IS EXACTLY ON THE VERY SAME ISSUE. THE CIT(A) RECORDED A CATEGORICAL FINDING TO THE EFFECT THAT THAT GAIN ON EXCHANGE FLUCTUATION AROSE ONLY ON ACCOUNT OF THE EXPORT AND IT WAS NOT FROM ANY OTHER SOURCE, THEREFORE, ELIGIBLE FOR CLAIM OF DEDUCTION U/S.10A . RESPECTFULLY FOLLOWING THE ORDER OF TH E TRIBUNAL, I DO NOT FIND ANY INFIRMITY IN THE ORDER OF CIT(A) . 7 . IN THE RESULT, APPEAL OF THE REVENUE IS DISMISSED. O RDER PRONOUNCED IN THE OPEN COURT ON THIS 29 /07 / 201 5 . SD/ - ( . . ) ( R.C.SHARMA ) / ACCOUNTANT MEMBER MUMBAI ; DATED 29 /07 /201 5 . . /PKM , . / PS / COPY OF THE ORDER FORWARDED TO : / BY ORDER, / ( ASSTT. REGISTRAR) , / ITAT, MUMBAI 1. / THE APPELLANT 2. / THE RESPONDENT. 3. ( ) / THE CIT(A), MUMBAI. 4. / CIT 5. , , / DR, ITAT, MUMBAI 6. / GUARD FILE. //TRUE COPY/