ACIT 16(3), MUMBAI V. BHARGOVI, MUMBAI

ITA 6067/MUM/2012

• Counselvise Citation: [2014] 140 COUNSELVISE.COM (IT) 84317 (ITAT-MUMBAI)
• Duration Of Justice: 2 year(s) 1 month(s) 28 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 02-12-2014
• Appeal Filed By: Department
• Order Result: Dismissed
• Bench Allotted: B
• Next Hearing Date: 01-12-2014
• Assessment Year: 2009-2010
• Appeal Filed On: 04-10-2012
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: VIVEKANAND PERMPURNA

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL 'B' BENCH, MUM BAI . , , BEFORE SHRI D. KARUNAKARA RAO, AM & SHRI AMIT SHUKL A, JM ./ ITA NO. 6067/MUM/2012 ( / ASSESSMENT YEAR: 2009-10) A C I T 16(3) / VS. M/S. BHARGOVI MATRU MANDIR, TARDEO ROAD MUMBAI 400007 912-A, PRASAD CHAMBERS OPERA HOUSE, MUMBAI 400004 ./ PAN AAAFS3192F / APPELLANT !' / RESPONDENT # $ / APPELLANT BY: SHRI VIVEKANAND PERMPURNA !' # $ / RESPONDENT BY: NONE %& # ' / DATE OF HEARING: 02.12.2014 ()* # ' / DATE OF PRONOUNCEMENT: 02.12.2014 / O R D E R PER D. KARUNAKARA RAO, AM THIS APPEAL BY THE REVENUE IS DIRECTED AGAINST THE ORDER DATED 25.07.2012 PASSED BY THE CIT(A)-27, MUMBAI AND IT PERTAINS TO AY 2009-10. 2. REVENUE IS AGGRIEVED AGAINST THE DECISION OF THE CI T(A) IN ALLOWING THE LOSS ON ACCOUNT OF MARK-TO-MARKET LOSS ON VALUATION OF FORWARD EXCHANGE CONTRACTS ON THE CLOSING DATE OF THE ACCOUNTING YEA R. 3. NONE APPEARED ON BEHALF OF THE ASSESSEE DESPITE POS TING OF THE CASE FOR THREE TIMES. CONSIDERING THE COVERED NATURE OF THE ISSUE WE PROCEED TO ADJUDICATE THE SAME WITH THE HELP OF THE LEARNED D. R. 4. BEFORE US THE LEARNED D.R. SUBMITTED THAT THE ASSES SEE HAD ENTERED INTO FORWARD CONTRACTS. AT THE END OF THE FINANCIAL YEAR THE ASSESSEE VALUED THE SAME AND CLAIMED LOSS OF ` 1,75,67,375/- AS BUSINESS LOSS. THE AO DID NOT ALLOW THE SAME DESPITE THE ASSESSEE RELYING UPO N THE BINDING JUDGEMENTS OF WOODWARD GOVERNOR INDIA (P) LTD. AND BANK OF BAHRAIN AND ITA NO. 6067/MUM/2012 M/S. BHARGOVI 2 KUWAIT [ITA NO. 4404 & 1883/MUM/2004 (SB)]. HOWEVER THE CIT(A) GRANTED RELIEF. THE CONTENTIONS OF PARA 6 OF HIS ORDER ARE RELEVANT. 5. THE LEARNED D.R., ON THE OTHER HAND, RELIED ON THE ORDER OF THE AO TO DEFEND HIS CASE. 6. AFTER HEARING THE LEARNED D.R. AND PERUSING THE ORD ERS OF THE REVENUE WE FIND THAT THE CIT(A) HAS RIGHTLY RELIED UPON THE SPECIAL BENCH DECISION IN THE CASE OF BANK OF BAHRAIN AND KUWAIT (SUPRA) AS W ELL AS THE HON'BLE SUPREME COURT JUDGEMENT IN THE CASE OF WOODWARD GOV ERNOR INDIA (P) LTD. (SUPRA). FOR THE SAKE OF COMPLETENESS OF THE ORDER WE REPRODUCE THE SAID PARA 6: - 6. THUS THE JUDICIAL DECISIONS OF THE HON'BLE SUPR EME COURT AND VARIOUS OTHER AUTHORITIES ARE CLEARLY IN FAVOUR OF THE APPELLANT ON THIS ISSUE. THAT APART, AS DISCUSSED EARLIER, THE TRANSA CTIONS IN FOREIGN EXCHANGE WERE CARRIED OUT DURING THE NORMAL COURSE OF THE APPELLANTS BUSINESS AND THE RESTATEMENT OF THE FORWARD CONTRAC T OBLIGATIONS WAS DONE AS PER AS-11 IN A CONSISTENT MANNER OVER THE Y EARS. IN FACT THE GAIN EARNED ON SUCH REVALUATION WAS OFFERED TO TAX AND ACCEPTED BY THE AO IN THE RESPECTIVE YEARS AND THERE IS NO REASON T O ARRIVE AT A DIFFERENT CONCLUSION AT PRESENT MERELY BECAUSE THERE IS A LOS S DURING THE YEAR. APPARENTLY, THE AO WAS OF THE VIEW THAT THE APPELLA NT IS NOT A DEALER IN FOREIGN EXCHANGE UNLIKE THE BANK OF BAHRAIN, AND TH EREFORE THE SAID DECISION IS NOT APPLICABLE TO THE FACTS OF THE CASE . IT IS NOT OUT OF PLACE TO MENTION THAT THE HON'BLE SUPREME COURT, IN THE CASE OF ONGC CITED ABOVE, UPHELD THE SAME PRINCIPLES THAT WERE LAID DO WN IN THE CASE OF WOODWARD GOVERNOR, AND THE LOSS WAS HELD ALLOWABLE IN SIMILAR CIRCUMSTANCES, WHERE THE BUSINESS OF ONGC IS NOT TH AT OF A FOREIGN EXCHANGE DEALER. FURTHER, IT IS NOT THE NATURE OF B USINESS OR THE STOCK DEALT WITH I.E., CURRENCY OR COMMODITIES OR GOODS L IKE DIAMONDS IN THE PRESENT CASE THAT MATTERS. WHAT MATTERS IS WHETHER THE FORWARD CONTRACT TRANSACTION WAS ENTERED DURING THE COURSE OF APPELLANTS REGULAR BUSINESS OR WHETHER IT IS TAINTED WITH A CO LOUR OF SPECULATIVE TRANSACTION. AT PRESENT, IT IS NOT THE AOS CASE TH AT THE IMPUGNED TRANSACTION IS SPECULATIVE IN NATURE. FURTHER, THE AFORESAID ISSUE OF ALLOWING THE LOSS ON ACCOUNT OF REVALUATION OF PEND ING FORWARD CONTRACTS WAS CONSIDERED BY THE HON'BLE ITAT MUMBAI BENCH IN THE CASE OF M/S BHAVANI GEMS VS ACIT CC-35 IN ITA NO. 2 855/MUM/2010 DATED 30/3/2011 IN AY 2006-07 AND THE SAID LOSS WAS ALLOWED AS BUSINESS LOSS AND THE ISSUE WAS HELD TO BE COVERED BY SPECIAL BENCH DECISION IN THE CASE OF DCIT VS. BANK OF BAHRAIN. T HEREFORE, IN MY CONSIDERED OPINION THE FACTS OF THE APPELLANTS CAS E ARE FULLY COVERED BY THE ABOVE CITED DECISIONS OF THE HON'BLE SUPREME CO URT AND THE ITAT MUMBAI BENCH. ACCORDINGLY, I HOLD THAT THE LOSS INC URRED BY THE APPELLANT ON RESTATEMENT OF PENDING FORWARD CONTRAC T AGREEMENTS AT THE ITA NO. 6067/MUM/2012 M/S. BHARGOVI 3 YEAR-END IS AN ALLOWABLE BUSINESS LOSS. APPELLANT S UCCEEDS ON THIS GROUND. FROM THE ABOVE IT IS EVIDENT THAT MARK-TO-MARKET LO SS OF THE FORWARD CONTRACT IN ASSESSEES CASE IS AN ALLOWABLE BUSINES S LOSS. THE LEARNED D.R. HAS NOT BROUGHT ANY CONTRARY JUDGEMENT IN SUPPORT O F THE GROUND RAISED BY THE REVENUE. CONSIDERING THE SETTLED NATURE OF THE ISSUE, THE GROUND RAISED BY THE REVENUE STANDS DISMISSED. 7. IN THE RESULT, THE APPEAL FILED BY REVENUE IS DISMI SSED. +, - # . +- # - /0 ORDER PRONOUNCED IN THE OPEN COURT ON 2 ND DECEMBER, 2014. # ()* . 2%, 02.12.2914 ) # 3& SD/- SD/- (AMIT SHUKLA) (D. KARUNAKARA RAO ) / JUDICIAL MEMBER / ACCOUNTANT MEMBER 4& MUMBAI, 2% DATED: 2 ND DECEMBER, 2014 COPY TO: 1. / THE APPELLANT 2. !' / THE RESPONDENT 3. ( )/ THE CIT(A) 27, MUMBAI 4. / THE CIT 16, MUMBAI CITY 5. 563 !%78 , ' 78 , 4& THE DR, B BENCH, ITAT, MUMBAI 6. 39 :& / GUARD FILE. % / BY ORDER '5 ! //TRUE COPY// ASSISTANT REGISTRAR , 4& ITAT, MUMBAI BENCHES, MUMBAI N.P.