UNIQUE GEM & JEWELLERY, MUMBAI V. DCIT 24(3), MUMBAI

ITA 6540/MUM/2012

• Counselvise Citation: [2014] 140 COUNSELVISE.COM (IT) 75241 (ITAT-MUMBAI)
• Duration Of Justice: 1 year(s) 2 month(s) 9 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 08-01-2014
• Appeal Filed By: Assessee
• Order Result: Allowed
• Bench Allotted: F
• Assessment Year: 2009-2010
• Appeal Filed On: 30-10-2012
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Assessee Lawyers: RAMAKRISHNA R LINGSUR
• Keywords: Depreciation; Opportunity of being heard
• Section: 143(3)

Judgement Text

F IN THE INCOME TAX APPELLATE TRIBUNAL F BENCH, MUMBAI . . , . , BEFORE SHRI I.P. BANSAL, JM AND SHRI KARUNAKARA RAO, AM ./I.T.A. NO.6540/M/2012 ( / ASSESSMENT YEAR: 2009 - 2010) UNIQUE GEM & JEWE L L E RY, 271, BUSINESS PARK, VISHVESHWAR NAGAR, NEAR VIRVANI INDUSTRIAL ESTATE, MODEL INDUSTRIAL COLONY, GOREGAON EAST, MUMBAI 400 063. / VS. DEPUTY COMMISSIONER OF INCOME TAX - 24(3), BANDRA KURLA COMPLEX, MUMBAI 400 051. ./ PAN : AACFU 3067 H ( / APPELLANT) .. ( / RESPONDENT ) / APPELLANT BY : SHRI RAMAKRISHNA R. LINGSUR / RESPONDENT BY : SHRI RAVI PRAKASH, DR / DATE OF HEARING : 1.1.2014 / DATE OF PRONOUNCEMENT : 8 .1.2014 / O R D E R PER D. KARUNAKARA RAO, AM: THIS APPEAL FILED BY THE ASSESSEE ON 30.10.2012 IS AGAINST THE ORDER OF THE CIT (A) - 34, MUMBAI DATED 28.9.2012 FOR THE ASSESSMENT YEAR 2009 - 2010. 2. IN THIS APPEAL, ASSESSEE RAISED THE ONLY EFFECTIVE GROUND WHICH READS AS UNDER: 1. THE CIT (A) ERRED IN CONFIRMING THE ADDITION OF RS. 1,38,85,900/ - TOWARDS LOSS ON ACC OUNT OF FLUCTUATION IN FOREIGN EXCHANGE . 3. BRIEFLY STATED RELEVANT FACTS OF THE CASE ARE THAT THE ASSESSEE IS ENGAGED IN THE BUSINESS OF IMPORT AND EXPORT OF CUT & POLISHED DIAMONDS. ASSESSEE FILED THE RETURN DECLARING THE TOTAL INCOME OF RS. 22,54,270/ - . ASSESSMENT WAS COMPLETED U/S 143(3) OF THE ACT AND THE ASSESSED INCOME WAS DETERMINED AT RS. 1,61,40,170/ - . DURING THE ASSESSMENT, AO DISALLOWED THE EXCHANGE LO SS OF RS. 1,38,85,900/ - 2 INCURRED BY THE ASSESSEE ON ACCOUNT OF FOREIGN EXCHANGE ON TRADING ACCOUNT. FURTHER, IT WAS NOTICED BY THE AO THAT THE ASSESSEE RECEIVED ADVANCE PAYMENT FOR EXPORT OF DIAMONDS FROM 2 CONCERNS I.E., I) M/S. SUNRISING JEWELLERY PVT. LTD, SINGAPORE AND (II) M/S. SUNSHINE JEWELLERY TRADING PVT. LTD, FZE, DAE. ONE CONSIGNMENT WAS SENT DURING THE FINANCIAL YEAR ITSELF AND INVOICE WAS ALSO RAISED. REST OF THE EXPORTS WERE MADE IN THE SUBSEQUENT FINANCIAL YEAR WITH INVOICES BEING RAISED IN THE SUBSEQUENT YEAR. THE ASSESSEE CLAIMED THE DIFFERENCE BETWEEN THE RATE AT WHICH ADVANCE WAS RECEIVED AND THE RATE PREVAILING AS ON 31.3.2009 AS EXCHANGE LOSS. SINCE, THE TRANSACTION WAS NOT COMPLETED, THE AO TREATED THE EXCHANGE LOSS AS NOTIONA L AND CONTINGENT ONE AND DID NOT ALLOW THE SAME. THE AO RELIED ON THE DECISION OF THE APEX COURT IN THE CASE OF M/S. SATLEJ COTTON MILLS LIMITED 116 ITR 1 TO SUPPORT HIS VIEW WHILE DISALLOWING THE CLAIM OF THE ASSESSEE. AGGRIEVED WITH THE DECISION OF TH E AO, ASSESSEE CARRIED THE MATTER IN APPEAL BEFORE THE FIRST APPELLATE AUTHORITY. 4. DURING THE PROCEEDINGS BEFORE THE FIRST APPELLATE AUTHORITY, CIT (A) CONSIDERED THE SUBMISSIONS MADE BY THE ASSESSEE AND DISMISSED THE APPEAL OF THE ASSESSEE BY HOLDING TH AT THE ASSESSEE IS NOT HOLDING THE FOREIGN CURRENCY NOR UTILIZING THE SAME IN THE BUSINESS ON ACCOUNT OF TRADING, IT IS NOT AN ITEM OF CLOSING STOCK AND HENCE, THE LOSS ARISING OUT OF EXCHANGE FLUCTUATION IS NOT ALLOWABLE AS TRADING LOSS OR LOSS ON ACCOUNT OF REVENUE . AGGRIEVED WITH THE DECISION OF THE CIT (A), ASSESSEE FILED THE PRESENT APPEAL BY RAISING THE ABOVE MENTIONED GROUND. 5. DURING THE PROCEEDINGS BEFORE US, SHRI RAMAKRISHNA R. LINGSUR, LD COUNSEL FOR THE ASSESSEE BROUGHT OUR NOTICE TO THE DIVER GENT FINDINGS OF THE CIT (A) ON THE CAPITAL OR REVENUE NATURE OF THE LOSS IN QUESTION. IT IS THE ARGUMENT OF THE L D COUNSEL THAT THE LOSS RELATES TO THE TRADING OF RAW MATERIAL PURCHASES. THIS ASPECT WAS WRONGLY CONSIDERED AS A CAPITAL RELATED ACTIVITY, BY THE CIT (A) . FURTHER, IT IS SUBMITTED THAT THE EXCHANGE DIFFERENCE WAS ARISEN ON ACCOUNT OF ADVANCES RECEIVED FROM THE CUSTOMERS AND AGAINST THE SALE REALI ZATION. LD COUNSEL ALSO SUBMITTED THAT THE TRANSACTIONS MADE BY THE ASSESSEE IN FOREIGN CURRENCY HAVE BEEN ACCOUNTED IN ACCORDANCE WITH AS - 11 ISSUED BY THE ICAI AND THEREFORE THE SAME IS ON REVENUE ACCOUNT. 6. ON THE OTHER HAND, LD DR RELIED ON THE ORDERS OF THE AO AND THE CIT (A). 3 7. WE HAVE HEARD BOTH THE PARTIES AND PERUSED THE ORDERS OF THE REVENUE AUTHORITIES AS WELL AS THE RELEVANT MATERIAL PLACED BEFORE US. ON HEARING BOTH THE SIDES, WE ARE OF THE OPINION THAT IT IS A FIT CASE FOR SETTING ASIDE TO T HE FILES OF THE CIT (A) FOR ADJUDICATING THE ISSUE AGAIN ON IF THE LOSSES ARISING OUT OF DEPRECIATION OF FOREIGN CURRENCY IS UTILIZED OR INTENDED TO BE UTILIZED FOR THE BUSINESS WHICH FORM PART OF CAPITAL . CIT (A) SHALL ANALYSE AFRESH IF THE LOSS ON ACCOU NT OF FOREIGN EXCHANGE FLUCTUATIONS WHICH IS RELATABLE TO THE REVENUE ACCOUNT OR CAPITAL ACCOUNT. IF THE LOSS IS RELATABLE TO THE REVENUE ACCOUNT, ASSESSEE SHOULD BE ENTITLED TO THE RELIEF IN VIEW OF THE JUDGMENT OF THE HONBLE SUPREME COURT IN THE CASE OF CIT VS. WOODWORD INDIA PVT. LTD (312 ITR 254). ACCORDINGLY, WE SET ASIDE THE ISSUE TO THE FILES OF THE CIT (A) TO ADJUDICATE THE ISSUE AFRESH AFTER AFFORDING A REASONABLE OPPORTUNITY OF BEING HEARD TO THE ASSESSEE. ACCORDINGLY, THE GROUNDS RAISED BY T HE ASSESSEE ARE ALLOWED FOR STATISTICAL PURPOSES. 8. IN THE RESULT, APPEAL OF THE ASSESSEE IS ALLOWED FOR STATISTICAL PURPOSES . ORDER PRONOUN CED IN THE OPEN COURT ON 8 T H DAY OF JANUARY, 2014. S D / - S D / - (I.P. BANSAL) (D. KARUNAKARA RAO ) / JUDICIAL MEMBER / ACCOUNTANT MEMBER MUMBAI ; 8 /01/2014 . . ./ OKK , SR. PS / COPY OF THE ORDER FORWARDED TO : 1. / THE APPELLANT 2. / THE RESPONDENT. 3. ( ) / THE CIT(A) - 4. / CIT 5. , , / DR, ITAT, MUMBAI 6. / GUARD FILE . //TRUE COPY// / BY ORDER, / (DY./ASSTT. REGISTRAR) , / ITAT, MUMBAI