DCIT RG 8(1), MUMBAI V. GLOBAL JEWELLERY P.LTD, MUMBAI

ITA 6760/MUM/2013

• Counselvise Citation: [2015] 140 COUNSELVISE.COM (IT) 93142 (ITAT-MUMBAI)
• Duration Of Justice: 1 year(s) 7 month(s) 16 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 08-07-2015
• Appeal Filed By: Department
• Order Result: Dismissed
• Bench Allotted: G
• Next Hearing Date: 08-07-2015
• Assessment Year: 2009-2010
• Appeal Filed On: 22-11-2013
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: PAVAN KUMAR BEER LA
• Keywords: Speculation loss
• Section: 43(5)

Judgement Text

, IN THE INCOME TAX APPELLATE TRIBUNAL G BENCH, MUMBAI . . , , , BEFORE SHRI A.D. JAIN , JUDICIAL MEMBER AND SHRI N.K . BILLAIYA, A CCOUNTANT M EMBER / I .T.A. NO. 6760/MUM/2013 ( / ASSESSMENT YEAR : 2009 - 10 THE DY. CIT, RANGE - 8(1), AAYAKAR BHAVAN, MUMBAI - 400 020 / VS. M/S. GLOBAL JEWELLERY PVT. LTD., G - 49, GEM & JEWELLERY COMPLEX, SEEPZ, ANDHERI (E), MUMBAI - 400 096 C.O. NO. 72/MUM/2015 (ARISING OUT OF I .T.A. NO . 6760 /MUM/201 3 ) ( / ASSESSMENT YEAR : 2009 - 10 M/S. GLOBAL JEWELLERY PVT. LTD., G - 49, GEM & JEWELLERY COMPLEX, SEEPZ, ANDHERI (E), MUMBAI - 400 096 / VS. THE DY. CIT, RANGE - 8(1), AAYAKAR BHAVAN, MUMBAI - 400 020 ./ ./ PAN/GIR NO. : AABCG 5222E ( / APPELLANT ) .. ( / RESPONDENT ) / REVENUE BY: SHRI PAVAN KUMAR BEERLA / ASSESSEE BY : SHRI VIJAY MEHTA / DATE OF HEARING : 08 . 0 7 .2015 / DATE OF PRONOUNCEMENT : 08 .0 7 .2015 / O R D E R ITA. NO. 6760/M/13 & C.O. NO. 72/M/15 2 PER N.K. BILLAIYA, AM: T HIS IS AN APPEAL BY THE REVENUE AND THE CROSS OBJECTION BY THE ASSESSEE ARE DIRECTED AGAINST THE VERY SAME ORDER OF THE LD. CIT(A) - 16 , MUMBAI DT. 20.8.2013 PERTAINING TO ASSESSMENT YEAR 200 9 - 1 0. AS BOTH THESE APPEAL S AND THE CROSS OBJECTION WERE HEARD TOGETHER, THEY ARE DISP OSED OF BY THIS COMMON ORDER FOR THE SAKE OF CONVENIENCE. ITA NO. 6760/M/2013 - REVENUES APPEAL 2. THE SUM AND SUBSTANCE OF THE GRIEVANCE OF THE REVENUE IS THAT THE LD. CIT(A) ERRED IN ALLOWING THE MARKED TO MARKET LOSS OF RS. 1,03,10,500/ - ON OUTSTANDING FORWARD CONTRACTS AND FURTHER ERRED IN ALLOWING LOSS OF RS. 24,22,488/ - ON CANCELLATION OF FORWARD CONTRACTS. 3. AT THE VERY OUTSET, THE LD. COUNSEL FOR THE ASSESSEE STATED THAT THE ISSUES INVOLVED IN REVENUES APPEAL ARE SQUARELY COVERED IN FAVOUR OF THE ASSESSEE AND AGAINST THE REVENUE BY THE DECISION OF THE HONBLE SUPREME COURT IN THE CASE OF CIT VS WOODWARD GOVERNOR INDIA PVT. LTD. 312 ITR 254 AND ALSO BY THE DECISION OF THE HONBLE HIGH COURT OF BOMBAY IN THE CASE OF CIT VS BADRIDAS GAURIDU PVT. LTD. 261 ITR 256. 4. PER CONTRA, THE LD. DEPARTMENTAL REPRESENTATIVE COULD NOT BRING ANY DISTINGU ISHING DECISION IN FAVOUR OF THE REVENUE. 5. WE HAVE GIVEN A THOUGHTFUL CONSIDERATION TO THE ORDERS OF THE AUTHORITIES BELOW IN THE LIGHT OF THE JUDICIAL DECISIONS RELIED UPON BY THE ASSESSEE. THE UNDISPUTED FACT IS THAT THE ASSESSEE HAS CLAIMED A SUM O F RS. 1,27,32,988/ - BEING LOSS ON FORWARD CONTRACTS. THE BREAK - UP OF WHICH IS RS. 1,03,10,500/ - BEING MONTHLY LOSS ON HEDGING AND RS. ITA. NO. 6760/M/13 & C.O. NO. 72/M/15 3 24,22,488/ - BEING LOSS ON CANCELLATION OF FORWARD CONTRACTS. THE AO WAS OF THE FIRM BELIEF THAT THE CLAIM OF THE ASSES SEE IS HIT BY THE PROVISIONS OF SEC. 43(5) OF THE ACT. THE AO ACCORDINGLY TREATED THE LOSS OF RS. 1,03,10,500/ - AS SPECULATIVE LOSS AND ALSO RS. 24,22,488/ - PURPORTED TO HAVE BEEN SUFFERED ON CANCELLATION OF FORWARD CONTRACTS WAS ALSO TREATED AS SPECULA TIVE LOSS WHICH WAS DELETED BY THE LD. CIT(A) . 6. AGGRIEVED BY THIS, THE REVENUE IS BEFORE US. 7. THE ASSESSEE IS ENGAGED IN THE BUSINESS OF MANUFACTURING AND EXPORT OF PLAIN AND STUDDED JEWELLERY. IN THIS LINE OF BUSINESS, THE PERSON IS EXPOSED TO THE RISK OF FLUCTUATION IN THE EXCHANGE RATE OF CURRENCY, THEREFORE IN ORDER TO MINIMIZE THE RISK, HE MAY ENTER INTO SUCH CONTRACTS WITH BANKS. AS SUCH THE FORWARD EXCHANGE CONTRACTS ARE IN THE NATURE OF HEDGING TRANSACTIONS AND THEREFORE, THE SAME CANNOT BE TREATED AS DONE WITH SPECULATIVE INTENT. AS THE CONTRACTS ARE ENTERED IN THE NORMAL COURSE OF BUSINESS AND IS IN THE NATURE OF HEDGING TRANSACTION, THEREFORE THE LOSS ARISING ON SUCH TRANSACTION HAS TO BE TREATED AS BUSINESS LOSS AS HELD BY THE HONB LE HIGH COURT OF BOMBAY IN THE CASE OF BADRIDAS GAURIDU PVT. LTD (SUPRA). A SIMILAR VIEW HAS BEEN ENDORSED BY THE HONBLE SUPREME COURT IN THE CASE OF WOODWARD GOVERNOR INDIA PVT. LTD (SUPRA) IN FAVOUR OF THE ASSESSEE AND AGAINST THE REVENUE. WE, THEREFO RE, DO NOT FIND ANY REASON TO INTERFERE WITH THE FINDINGS OF THE LD. CIT(A). APPEAL OF THE REVENUE IS DISMISSED. C.O. NO. 72/M/2015 - ASSESSEES APPEAL ITA. NO. 6760/M/13 & C.O. NO. 72/M/15 4 8. THE CROSS OBJECTION OF THE ASSESSEE IS LATE BY 100 DAYS. HOWEVER, SINCE WE HAVE DISMISSED THE REVENUES APPEAL, THIS CROSS OBJECTION OF THE ASSESSEE BECOME S OTIOSE. OR DER PRONOUNCED IN THE OPEN COURT AT THE TIME OF HEARING ON 8 TH JU LY , 2015 SD/ - SD/ - ( A.D. JAIN ) (N.K. BILLAIYA) /JUDICIAL MEMBER / ACCOUNTANT MEMBER MUMBAI ; DATED : 8 TH JU LY , 2015 . . ./ RJ , 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 . / BY ORDER, //TRUE COPY// / (DY./ASSTT. REGISTRAR) , / ITAT, MUMBAI