ITO 16(3)(1), MUMBAI V. LUCID GEMS, MUMBAI

ITA 7305/MUM/2013

• Counselvise Citation: [2015] 140 COUNSELVISE.COM (IT) 92632 (ITAT-MUMBAI)
• Duration Of Justice: 1 year(s) 5 month(s) 1 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 13-05-2015
• Appeal Filed By: Department
• Order Result: Dismissed
• Bench Allotted: A
• Assessment Year: 2009-2010
• Appeal Filed On: 12-12-2013
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Assessee Lawyers: ASGHAR ZAIN

Judgement Text

, IN THE INCOME TAX APPELLATE TRIBUNAL A BENCH, MUMBAI . , , BEFORE SHRI D. MANMOHAN, VICE PRESIDENT AND SHRI N.K . BILLAIYA, A CCOUNTANT M EMBER / I .T.A. NO . 7305/MUM/2013 ( / ASSESSMENT YEAR : 2009 - 10 THE ITO - 16(3)(1), MATRU MANDIR, TARDEO ROAD, MUMBAI - 400 007 / VS. M/S. LUCID GEMS, 15, SHREEJI ARCADE, TATA ROAD NO. 1 & 2, OPERA HOUSE, MUMBAI - 400 004 ./ ./ PAN/GIR NO. : AABFL 0253H ( / APPELLANT ) .. ( / RESPONDENT ) / APPELLANT BY: NONE / RESPONDENT BY : SHRI ASGHAR ZAIN / DATE OF HEARING : 13 . 0 5 .2015 / DATE OF PRONOUNCEMENT : 13 .0 5 .2015 / O R D E R PER N.K. BILLAIYA, AM: THIS APPEAL BY THE REVENUE IS PREFERRED AGAINST THE ORDER OF THE LD. CIT(A) - 27 , MUMBAI DT. 16.9. 2013 PERTAINING TO ASSESSMENT YEAR 2009 - 10. ITA. NO. 7305/M/2013 2 2. THE SOLE GRIEVANCE OF THE REVENUE IS THAT THE LD. CIT(A) ERRED IN ALLOWING MARK TO MARKET LOSS OF RS. 33,35,706/ - ARISING ON VALUATION OF FORWARD EXCHANGE CONTRACTS ON THE CLOSING DATE OF ACCOUNTING YEAR. 3. BRIEFLY STATED THE FACTS OF THE CASE ARE THAT THE ASSESSEE FIRM IS CONSTITUTED OF THREE PARTNERS, ENGAGED IN THE BUSINESS OF MANUFACTURING IMPORTS AND EXPORTS, AGENTS IN DIAMONDS AND J EWELLERY. WHILE SCRUTINIZING THE RETURN OF INCOME, THE ASSESSING OFFICER NOTICED THAT THE ASSESSEE HAS DEBITED RS. 37,78,773/ - TO THE PROFIT AND LOSS ACCOUNT ON ACCOUNT OF FORWARD CONTRACT LOSS. THE ASSESSEE WAS ASKED TO EXPLAIN THE LOSS. THE ASSESSEE F ILED A DETAILED REPLY STATING THAT TO MINIMIZE THE RISK OF FLUCTUATION IN FOREIGN CURRENCY AND HEDGING THE EXCHANGE RISK, THE ASSESSEE ENTERED INTO A FORWARD CONTRACT IN FOREIGN CURRENCY WITH THE BANK. AT THE BALANCE SHEET DATE ALL THE ASSETS AND LIABILIT IES COVERED BY THE FORWARD CONTRACT ARE STATED AT FORWARD CONTRACT RATES. IT WAS FURTHER EXPLAINED THAT THE ASSESSEE IS FOLLOWING THE SAME ACCOUNTING POLICY IN RESPECT OF FORWARD CONTRACTS. TO SUBSTANTIATE ITS CLAIM, THE ASSESSEE RELIED UPON THE DECISIO N OF THE HONBLE JURISDICTIONAL HIGH COURT IN THE CASE OF CIT VS BADRIDAS GAURIDE (P) LTD. 256 ITR 261. RELIANCE WAS ALSO PLACED ON THE DECISION OF THE TRIBUNAL, SPECIAL BENCH, MUMBAI IN THE CASE OF BANK OF BAHRAIN & KUWAIT 41 SOT 290. 3.1. CONSIDERING THE FACTS AND THE SUBMISSIONS IN THE LIGHT OF THE DECISIONS RELIED UPON BY THE ASSESSEE, THE LD. CIT(A) WAS CONVINCED THAT THE LOSSES WHICH PERTAIN TO THE PERIOD FALLING WITHIN THE FINANCIAL YEAR RELEVANT TO THE ASSESSMENT YEAR UNDER CONSIDERATION ARE TO B E ALLOWED AS THESE LOSSES ARE NOT NOTIONAL LOSSES AND THE LIABILITY HAS CRYSTALLIZED AT THE BALANCE SHEET DATE. RELIANCE WAS PLACED ON THE DECISION OF THE HONBLE ITA. NO. 7305/M/2013 3 SUPREME COURT IN THE CASE OF CIT VS WOODWARD GOVERNOR INDIA (P) LTD 312 ITR 254. 4. AGGRIEVED BY THIS, THE REVENUE IS BEFORE US. 5. THE LD. DEPARTMENTAL REPRESENTATIVE COULD NOT BRING ANY DISTINGUISHING DECISION IN FAVOUR OF THE REVENUE. 6. WE FIND THAT THE LD. CIT(A) HAS VERY RIGHTLY FOLLOWED THE DECISION OF THE HONBLE JURISDICTIONAL HIGH COURT OF BOMBAY IN THE CASE OF BADRIDAS GAURIDE (P) LTD (SUPRA), TRIBUNAL SPECIAL BENCH IN THE CASE OF BANK OF BAHRAIN & KUWAIT (SUPRA) AND THE DECISION OF THE HONBLE SUPREME COU RT IN THE CASE OF WOODWARD GOVERNOR INDIA (P) LTD (SUPRA), WE THEREFORE DECLINE TO INTERFERE. 7. IN THE RESULT, THE APPEAL FILED BY THE REVENUE IS DISMISSED. OR DER PRONOUNCED IN THE OPEN COURT AT THE TIME OF HEARING ON 13 TH MAY , 2015 . SD/ - SD/ - ( D.MANMOHAN ) (N.K. BILLAIYA) /VICE PRESIDENT / ACCOUNTANT MEMBER MUMBAI ; DATED : 13 TH MAY , 2015 . . ./ RJ , SR. PS ITA. NO. 7305/M/2013 4 / 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