JCIT 16(3), MUMBAI V. MUNJANI BROTHERS, MUMBAI

ITA 7628/MUM/2011

• Counselvise Citation: [2013] 120 COUNSELVISE.COM (IT) 5014 (ITAT-MUMBAI)
• Duration Of Justice: 1 year(s) 10 month(s) 7 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 19-09-2013
• Appeal Filed By: Department
• Order Result: Dismissed
• Bench Allotted: B
• Next Hearing Date: 30-12-2013
• Assessment Year: 2008-2009
• Appeal Filed On: 11-11-2011
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Assessee Lawyers: K A VAIDYALINGAN

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL B BENCH, MUMBAI BEFORE SRI H.L. KARWA, PRESIDENT, AND SHRI N.K.BILL AIYA, AM ./ I.T.A. NO. 7628/MUM/2011 ( / ASSESSMENT YEAR : 2008-09) ACIT, RANGE-16(3), MATRU MANDIR, 2 ND FLOOR, ROOM NO.206, TARDEO ROAD, MUMBAI-400007 / VS. M/S. MUNJANI BROTHERS 2403, PANCHRATNA OPERA HOUSE, MUMBAI-400004 !' $ ./ PAN :AAAFM0497K ( '% / APPELLANT ) .. ( &''% / RESPONDENT ) '% ( ) / APPELLANT BY : SHRI AARSI PRASAD &''% ( ) / RESPONDENT BY : SHRI K.A. VAIDYALINGAN ( *$ / DATE OF HEARING : 19-09-2013 +, ( *$ / DATE OF PRONOUNCEMENT : 19 -09-2013 -. / O R D E R PER N.K. BILLAIYA, AM: THIS APPEAL BY THE REVENUE IS PREFERRED AGAINST THE ORDER OF THE CIT(A)-27, MUMBAI, DATED 25/08/2011, PERTAINING TO A.Y.2008-09. 2. THE REVENUE HAS RAISED TWO SUBSTANTIVE GROUNDS O F APPEAL. THE SUM AND SUBSTANCE OF THE GRIEVANCE OF THE REVENUE IS TH AT THE CIT(A) ERRED IN DELETING THE ADDITIONS MADE BY THE AO ON ACCOUNT OF MARK TO MARKET LOSS OF RS.59.50 LAKHS CLAIMED BY THE ASSESSEE ON REVALU ATION OF THE PENDING FORWARD CONTRACTS FOR FOREIGN EXCHANGE. 2 ITA NO.7628/MUM/2011 MUNJANI BROTHERS 3. ASSESSEE IS IN THE BUSINESS OF MANUFACTURE, EXPO RT AND IMPORT OF DIAMOND AND GENERATION OF POWER. RETURN OF INCOME WAS FILED ON 21.09.2008 DECLARING TOTAL INCOME AT RS.6,52,20,447 /-. THE RETURN WAS SELECTED FOR SCRUTINY ASSESSMENT AND STATUTORY NOTI CES WERE ISSUED AND SERVED ON THE ASSESSEE ALONG WITH A QUESTIONNAIRE. THE AO OBSERVED THAT THE ASSESSEE HAS CLAIMED MARK TO MARKET LOSS ON FOR WARD EXCHANGE CONTRACTS TO THE TUNE OF RS.59.50 LAKHS. THE ASSES SEE WAS ASKED TO EXPLAIN WHY THIS LOSS BE NOT DISALLOWED BEING A NOT IONAL LOSS. 4. ASSESSEE FILED A DETAILED REPLY DATED 29.11.2010 AND EXPLAINED THAT IT IS ENGAGED IN THE BUSINESS OF EXPORT OF DIAMONDS GOODS ARE SOLD ON CREDIT AND THEREFORE, IT IS ALWAYS EXPOSED TO FOREI GN CURRENCY FLUCTUATION RISK. IN ORDER TO HEDGE THE RISK OF FLUCTUATION OF CURRENCY RATE, IT HAS ENTERED INTO FORWARD EXCHANGE CONTRACTS. IT WAS FU RTHER EXPLAINED THAT THE ASSESSEE IS REVALUING THE EXPORT RECEIVABLES FOLLOW ING AS-11 ISSUED BY THE ICAI RECOGNIZING PROFIT/LOSS DURING THE YEAR. SIMI LARLY, IT IS RECOGNIZING MARK TO MARKET GAIN OR LOSS IN RESPECT OF OUTSTANDI NG FORWARD EXCHANGE CONTRACTS AS UNDERLYING RECEIVABLE ARE ALSO REVALUE D FOLLOWING AS-11. TO SUBSTANTIATE, ASSESSEE RELIED UPON THE DECISION OF THE SPECIAL BENCH OF MUMBAI ITAT IN THE CASE OF DCIT VS BANK OF BAHRAIN & KUWAIT IN ITA NO.4404 &1883/MUM/2004. THE SUBMISSIONS OF THE ASSESSEE DID NOT FIND ANY FAVOUR FROM THE AO WHO WENT ON TO DISALLOW RS. 59.50 LAKHS. 5. ASSESSEE CARRIED THE MATTER BEFORE THE CIT(A). THE CIT(A) WAS CONVINCED WITH THE CLAIM OF MARK TO MARKET LOSS IN THE LIGHT OF THE DECISION OF THE SPECIAL BENCH OF THE TRIBUNAL IN THE CASE OF BANK OF BAHRAIN & KUWAIT (SUPRA). THE CIT(A) HAS ALSO CONSIDERED THE DECISION OF THE HONBLE SUPREME COURT IN THE CASE OF CIT V/S WOODWARD GOVERNOR INDIA PVT. LTD. 312 ITR 254, ONGC V/S CIT, 322 ITR 180, FOLLOWING THESE DECISIONS, THE CIT(A) DELETED THE ADDITIONS. 3 ITA NO.7628/MUM/2011 MUNJANI BROTHERS 6. AGGRIEVED BY THIS REVENUE IS BEFORE US. 6. THE DR STRONGLY RELIED UPON THE FINDINGS OF THE AO. PER CONTRA THE COUNSEL FOR THE ASSESSEE IN ADDITION TO THE DECISIO NS RELIED UPON BY THE CIT(A) DREW OUR ATTENTION TO THE DECISIONS OF THE T RIBUNAL IN THE CASE OF D. CHETAN & COMPANY IN ITA NO.4456/MUM/2012 AND SUBMI TTED THAT ON IDENTICAL FACTS , THE TRIBUNAL HAS ALLOWED MARK TO MARKET LOSS. 7. WE HAVE CONSIDERED THE RIVAL SUBMISSIONS AND CAR EFULLY PERUSED THE ORDERS OF THE LOWER AUTHORITIES. WE HAVE ALSO GONE THROUGH VARIOUS DECISIONS RELIED UPON BY THE CIT(A) AND DECISION OF THE TRIBUNAL RELIED BY THE COUNSEL BEFORE US, WE FIND THAT ON IDENTICAL FA CTS, THE TRIBUNAL HAS FOLLOWED THE DECISION OF THE SPECIAL BENCH OF THE T RIBUNAL AND ALSO THE DECISIONS OF THE HONBLE SUPREME COURT AT PARA 7 ON PAGE 3 AND 4 OF ITS ORDER . AS NO DISTINGUISHING DECISION HAS BEEN BROU GHT BEFORE US BY THE DR , RESPECTFULLY FOLLOWING THE DECISION OF THE HO NBLE SUPREME COURT AND OUR COORDINATE BENCHES NO INTERFERENCE IS CALLED FO R IN THE FINDINGS OF THE CIT(A). APPEAL FILED BY THE REVENUE IS DISMISSED. 8. IN THE RESULT, APPEAL OF THE REVENUE IS DISMISSE D. ORDER PRONOUNCED IN THE OPEN COURT ON 19/09/2013 -. ( +, $ /- 19/09/2013 , , ( 0 SD/- (H.L.KARWA) SD/- (N.K.BILLAIYA) HONBLE PRESIDENT ACCOUNTANT MEMBER MUMBAI; /- /DATED : 19 TH SEPTEMBER, 2013. SHEKHAR. P.S. -. -. -. -. ( (( ( &*12 &*12 &*12 &*12 32 * 32 * 32 * 32 * / COPY OF THE ORDER FORWARDED TO : 1. '% / THE APPELLANT 2. &''% / THE RESPONDENT. 4 ITA NO.7628/MUM/2011 MUNJANI BROTHERS 3. 4 ( ) / THE CIT- , MUMBAI. 4. 4 / CIT(A)- , MUMBAI 5. 250 &* , , / DR, ITAT, MUMBAI 6. 06 7 / GUARD FILE. -. -. -. -. / BY ORDER, '2* &* //TRUE COPY// 8 88 8 / 9 9 9 9 : : : : (DY./ASSTT. REGISTRAR) , / ITAT, MUMBAI