JCIT 16(3), MUMBAI V. CHHAYA GEMS, MUMBAI

ITA 6664/MUM/2012

• Counselvise Citation: [2014] 140 COUNSELVISE.COM (IT) 75219 (ITAT-MUMBAI)
• Duration Of Justice: 1 year(s) 2 month(s) 5 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 07-01-2014
• Appeal Filed By: Department
• Order Result: Allowed
• Bench Allotted: C
• Assessment Year: 2008-2009
• Appeal Filed On: 02-11-2012
• Result in Favour of: Revenue
• Court: TRIBUNAL

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL C BENCH, MUMBAI BEFORE SHRI VIJAY PAL RAO, JUDICIAL MEMBER AND SHRI D. KARUNAKARA RAO, ACCOUNTANT MEMBER ./I.T.A. NO.6664/M/2012 ( / ASSESSMENT YEAR: 2008 - 2009 ) ACIT - 16(3), MATRU MANDIR, 2 ND FLOOR, R.NO.206, TARDEO ROAD, MUMBAI 400 007. / VS. M/S. CHHAYA GEMS, 902, PRASAD CHAMBERS, TATA ROAD NO.1, OPERA HOUSE, MUMBAI 400 004. ./ PAN : AAAFC 2322 D ( / APPELLANT) .. ( / RESPONDENT ) / APPELLANT BY : SHRI RAVI PRAKASH, DR / RESPONDENT BY : NONE / DATE OF HEARING : 7.1.2014 / DATE OF PRONOUNCEMENT : 7.1.2014 / O R D E R PER D. KARUNAKARA RAO, AM: THIS APPEAL FILED BY THE REVENUE ON 2.11.2012 IS AGAINST THE ORDER OF THE CIT (A) - 27, MUMBAI DATED 24.8.2012 FOR THE ASSESSMENT YEAR 2008 - 2009. 2. IN THIS APPEAL, REVENUE RAISED THE FOLLOWING EFFECTIVE GROUND WHICH READS AS UNDER: WHETHER ON THE FACTS AND CIRCUMSTANCES OF THE CASE AND IN LAW, THE LD CIT (A) HAS ERRED IN HOLDING THAT MARK TO MARKET LOSS OF RS. 30,92,347/ - ARISING ON VALUATION OF FORWARD EXCHANGE CONTRACTS ON THE CLOSING DATE OF ACCOUNTING YEAR IS NOT A NOTIONAL LOS S AND THEREFORE, ALLOWABLE. 3. A T THE TIME OF HEARING, WE NOTICED FROM THE RECORD A LETTER DATED 2.1.2014, WHICH WAS FILED BY THE ASSESSEE SEEKING FOR ADJOURNMENT OF THE CASE ON THE GROUND THAT THE LD COUNSEL, WHO IS REPRESENTING THE CASE, IS OUT OF STATI ON AND WILL NOT BE IN A POSITION TO APPEAR BEFORE THE TRIBUNAL. ON THE OTHER HAND, LD DR FOR THE REVENUE FAIRLY MENTIONED THAT THE ISSUE STANDS COVERED BY THE DECISION OF THE SPECIAL BENCH AND VARIOUS OTHER JUDGMENTS THEREFORE, THE REQUEST FOR ADJOURNMENT SHOULD BE 2 REJECTED. ON PERUSAL OF THE ORDERS OF THE LOWER AUTHORITIES, WE ARE OF THE CONSIDERED OPINION THAT THE ADJOURNMENT REQUEST SHOULD NOT BE ALLOWED AND PROCEED WITH THE HEARING OF THE CASE. 4. BRIEFLY STATED, THE ONLY ISSUE INVOLVED IN THE PRESENT CASE RELATES TO THE ALLOWABILITY OF MARK TO MARKET LOSS ARISING ON VALUATION OF FORWARD CONTRACTS AT THE END OF THE PREVIOUS YEAR AS AN ALLOWABLE BUSINESS LOSS. THE SAID LOSS WAS ALLOWED BY THE CIT (A ) FOLLOWING THE JUDGMENT OF THE HONBLE SUPREME COURT IN THE CASE OF ONGC VS. CIT (322 ITR 180) AND ANOTHER JUDGMENT OF THE APEX COURT IN THE CASE OF CIT VS. WOODWARD GOVERNOR INDIA P. LTD (312 ITR 254) AS WELL AS THE DECISION OF THE SPECIAL BENCH IN THE C ASE OF DCIT VS. BANK OF BAHRAIN AND KUWAIT (ITA NOS. 4404 & 1883/MUM/2004) AND ALSO THE ORDER OF THE COORDINATE BENCH OF ITAT, MUMBAI IN THE CASE OF M/S. BHAVANI GEMS VS. ACIT VIDE ITA NO.2855/MUM/2010 DATED 30.3.2011. ALL THESE DECISIONS ARE RELEVANT FO R THE PROPOSITION THAT MARK TO MARKET LOSS DEBITED TO THE P & L ACCOUNT IS AN ALLOWABLE ONE. 5. WE HAVE HEARD THE LD DR IN THIS REGARD AND PERUSED THE ORDERS OF THE REVENUE AUTHORITIES IN GENERAL, THE CONTENTS OF PARA 6 OF THE CIT (A)S ORDER IN PARTICU LAR. ON PERUSAL OF THE SAID PARA FROM THE IMPUGNED ORDER, WE FIND THE FOLLOWING LINES ARE RELEVANT HERE AND THEREFORE, THEY ARE EXTRACTED AND REPRODUCED HERE UNDER: 6FURTHER, THE AFORESAID ISSUE OF ALLOWING THE LOSS ON ACCOUNT OF REVALUATION OF PENDI NG FORWARD CONTRACTS WAS CONSIDERED BY THE HONBLE ITAT MUMBAI BENCH IN THE CASE OF M/S. BHAVANI GEMS VS. ACIT CC - 35 IN ITA NO.2855/M/2010 DATED 30.3.2011 FOR AY 2006 - 2007 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 . THEREFORE, IN MY CONSIDERED OPINION THE FACTS OF THE APPELLANTS CASE ARE FULLY COVERED BY THE ABOVE CITED DECISIONS OF THE HONBLE SUPREME COURT AND THE ITAT , MUMBAI BENCH. ACCORDINGLY, I HOLD THAT THE LOSS INCURRED BY THE APPELLANT ON RESTATEMENT OF PENDING FORWARD CONTRACT AGREEMENTS AT THE YEAR END IS ALLOWABLE BUSINESS LOSS . APPELLANT SUCCEEDS ON THIS GROUND. 6. CONSIDERING THE ABOVE SETTLED NATURE OF THE ISSUE, WE ARE OF THE OPIN ION THAT THE CIT (A) HAS RIGHTLY ALLOWED THE CLAIM OF LOSS WITH REGARD TO MARK TO MARKET OF RS. 30,92,347/ - . THEREFORE, WE FIND THAT THE ORDER OF THE CIT (A) IS FAIR AND IT DOES NOT CALL FOR ANY INTERFERENCE. ACCORDINGLY, GROUNDS RAISED BY THE REVENUE ARE ALLOWED. 7. IN THE RESULT, APPEAL OF THE REVENUE IS ALLOWED. 3 ORDER PRONOUNCED IN THE OPEN COURT ON 7 TH JANUARY, 2014. SD / - S D / - (VIJAY PAL RAO) (D. KARUNAKARA RAO) JUDICIAL MEMBER ACCOUNTANT MEMBER MUMBAI ; 07 . 1 .201 4 . . ./ 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