ITO, Jaipur V. VALENTINE SILVER INTERNATIONAL, Jaipur

ITA 931/JPR/2016

• Counselvise Citation: [2017] 130 COUNSELVISE.COM (IT) 5582 (ITAT-JAIPUR)
• Duration Of Justice: 3 month(s) 28 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 21-02-2017
• Appeal Filed By: Department
• Order Result: Dismissed
• Bench Allotted: B
• Assessment Year: 2012-2013
• Appeal Filed On: 24-10-2016
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: POONAM RAI
• Assessee Lawyers: S R SHARMA; RAJNI KANT BHATRA DH
• Section: 143(3); 10AA

Judgement Text

VK;DJ VIHYH; VF/KDJ.K] T;IQJ U;K;IHB] T;IQJ IN THE INCOME TAX APPELLATE TRIBUNAL, JAIPUR BENCHES (SMC), JAIPUR JH HKKXPUN] YS[KK LNL; DS LE{K BEFORE: SHRI BHAGCHAND, ACCOUNTANT MEMBER VK;DJ VIHY LA-@ ITA NO.931 & 927/JP/2016 FU/KZKJ.K O'K Z@ ASSESSMENT YEAR : 2012-13 THE ITO WARD- 7(2) JAIPUR CUKE VS. M/S. VALENTINE SILVER INTERNATIONAL B-1-12, SEZ-1, SITAPURA, JAIPUR LFKK;H YS[KK LA-@THVKBZVKJ LA-@ PAN/GIR NO .: AAFFV 7716 D VIHYKFKHZ@ APPELLANT IZR;FKHZ@ RESPONDENT JKTLO DH VKSJ LS@ REVENUE BY: SMT. POONAM RAI, DCIT- DR FU/KZKFJRH DH VKSJ LS@ ASSESSEE BY: SHRI S.R. SHARMA & SHRI RAJNI KANT BHATRA LQUOKBZ DH RKJH[K@ DATE OF HEARING : 15/02/2017 ?KKS'K .KK DH RKJH[K@ DATE OF PRONOUNCEMENT : 21/02/2017 VKNS'K@ ORDER PER BHAGCHAND, AM BOTH THESE APPEALS HAVE BEEN FILED BY THE REVENUE AGAINST SEPARATE ORDERS OF THE LD. CIT(A)-III , JAIPUR DATED 19-08 -2016 AND 22-08-2016 FOR THE ASSESSMENT YEAR 2012-13 RAISING FOLLOWING GROUND OF APPEAL. ITA NO. 931/JP/2016 REVENUE ON THE FACTS AND IN THE CIRCUMSTANCES OF THE CASE , THE LD. CIT(A) HAS ERRED IN DELETING DISALLOWANCE OF RS. 47 ,43,079/- OUT OF DEDUCTION CLAIMED U/S 10AA OF THE I.T. ACT H OLDING THAT EXCHANGE RATE FLUCTUATION ARE DIRECTLY PROFIT S DERIVED FROM EXPORTS OF GOODS AS PART OF EXPORT TURNOVER . ITA NO.931/JP/2016 ITO, WARD- 7(2), JAIPUR VS. M/S. VALENTINE SILVER INTERNATIONAL 2 ITA NO. 927/JP/2016 ON THE FACTS AND IN THE CIRCUMSTANCES OF THE CASE AND IN LAW THE LD. CIT(A) HAS ERRED IN DELETING PENALTY OF RS. 14,65610/- IMPOSED U/S 271(1)(C) ON EXCESS DEDUCTIO N CLAIMED U/S 10AA HOLDING THAT QUANTUM ADDITION MADE BY THE AO HAS BEEN DELETED BUT THE DEPARTMENT DID NOT ACCEPT THE DECISION OF THE LD. CIT(A) AND FURTHER APPEAL I S BEING FILED AGAINST THE QUANTUM ORDER. 2.1 APROPOS SOLITARY GROUND OF THE REVENUE IN ITA N O. 931/JP/2016, THE FACTS AS EMERGES FROM THE ORDER OF THE LD. CIT( A) IS AS UNDER:- 4.3 I HAVE CAREFULLY CONSIDERED THE FACTS OF THE CASE, FINDING OF THE AO AND SUBMISSIONS OF APPELLANT. ON PERUSAL OF THE ASSESSMENT ORDER, IT IS SEEN THAT THE AO IS OF THE VIEW THAT EXCHANGE RATE FLUCTUATION OF RS. 47,43,079/-CA NNOT BE TREATED AS DERIVED FROM THE EXPORT OF GOODS ARTICLE AND THINGS AND THUS DOES NOT QUALITY AS ELIGIBLE PROFITS FOR D EDUCTION U/S 10AA WHILE THE ASSESSEE SUBMITS THAT EXCHANGE RATE FLUCTUATION IS RESULTED FORM REALIZATION OF EXPORT SALE PROCEEDS AS PER INVOICE OF EXPORT SALE AND ALSO REF ERRED TO THE DEFINITION OF EXPORT TURNOVER MEANS THE CONSIDERAT ION RECEIVED IN CONVERTIBLE FOREIGN EXCHANGE WITH RESPE CT TO EXPORT I.E. TOTAL AMOUNT REALIZED FOR SALE INVOICE AND THUS FORMED PART OF EXPORT TURNOVER , TOTAL TURNOVER IN DENOMINATOR WOULD ALSO INCLUDE EFFECT OF FOREIGN EX CHANGE FLUCTUATION DIFFERENCE AND WILL RESULT IN ITS INCLU SION IN ELIGIBLE PROFITS FOR DEDUCTION U/S 10AA. I HAVE ALS O GONE THROUGH THE JUDGEMENTS OF VARIOUS HIGH COURTS AND I TAT REFERRED TO BY ASSESSEE AS ABOVE WHICH FULLY SUPPOR TS THE CONTENTION OF THE ASSESSEE. I THEREFORE, HOLD THAT EXCHANGE RATE FLUCTUATION ARE DIRECTLY PROFITS DERIVED FROM EXPORT OF GOODS AS PART OF EXPORT OF TURNOVER AND CANNOT BE HELD AS PROFITS ATTRIBUTABLE TO EXPORT. AS THE TOTAL TURNOV ER OF ASSESSEE IS TOTAL EXPORT TURNOVER AND EXCHANGE RAT E FLUCTUATION PROFITS ARE DERIVED FORM EXPORT OF GOOD S ARTICLE OR ITA NO.931/JP/2016 ITO, WARD- 7(2), JAIPUR VS. M/S. VALENTINE SILVER INTERNATIONAL 3 THINGS AND SO THE ASSESSEE RIGHTLY IN LAW IS ENTITL ED TO DEDUCTION U/S 10AA OF I.T. ACT, 1961.. THE DISALLOWANCE OF DEDUCTION U/S 10AA IN RESPECT O F EXCHANGE RATE FLUCTUATION DIFFERENCE MADE BY THE AO IS THUS DELETED. 2.2 DURING THE COURSE OF HEARING, THE LD. DR RELIED ON THE ORDER OF THE AO WITH THE PRAYER THAT THE LD. CIT(A) HAS ERRED IN DELETING THE DISALLOWANCE OF RS. 47,43,079/- OUT OF DEDUCTION CL AIMED U/S 10AA O THE I.T. ACT HOLDING THAT EXCHANGE RATE FLUCTUATION ARE DIRECTLY PROFITS DERIVED FROM EXPORT OF GOODS AS PART OF EXPORT TURNOVER. 2.3 ON THE OTHER HAND, THE LD. AR OF THE ASSESSEE S UPPORTED THE ORDER OF THE LD. CIT(A) ON THE ISSUE IN QUESTION. 2.4 I HAVE HEARD THE RIVAL CONTENTIONS AND PERUSED THE MATERIALS AVAILABLE ON RECORD. BRIEF FACTS OF THE CASE ARE TH AT ASSESSEE FIRM IS ENGAGED IN MANUFACTURING AN EXPORT OF SILVER JEWELL ERY AND PRECIOUS & SEMI PRECIOUS STONES. DURING THE YEAR UNDER CONSIDE RATION, THE ASSESSEE HAD SHOWN EXPORT OF RS. 1,86,64,261 AND NET PROFIT OF RS. 3,42,20,297/-. IN THE COMPUTATION OF INCOME, THE ASSESSEE HAD CLAI MED DEDUCTION OF RS. 3,42,20,297/- U/S 10AA OF THE I.T. ACT. IT IS FURTH ER NOTED THAT THE AO DURING THE COURSE OF ASSESSMENT PROCEEDINGS OBSERVE D THAT IN THE PROFIT AND LOSS ACCOUNT THE ASSESSEE HAD SHOWN INCOME FRO M EXCHANGE ITA NO.931/JP/2016 ITO, WARD- 7(2), JAIPUR VS. M/S. VALENTINE SILVER INTERNATIONAL 4 DIFFERENCE OF RS. 47,43,079/-. THE PROFIT EARNED FO RM EXCHANGE DIFFERENCE WAS ALSO CLAIMED BY THE ASSESSEE AS ELIGIBLE PROFIT FOR THE CALCULATION OF DEDUCTION U/S 10AA OF THE I.T. ACT. THE AO VIDE QUE RY LETTER DATED 12- 03-2015 REQUIRED THE ASSESSEE TO EXPLAIN AS TO WHY EXCHANGE DIFFERENCE MAY NOT BE SEPARATED FROM THE ELIGIBLE PROFIT FOR T HE CALCULATION OF DEDUCTION U/S 10AA OF THE I.T. ACT. IN RESPONSE TO QUERY, THE ASSESSEE VIDE ITS REPLY DATED 17-03-2015 SUBMITTED THAT THE FOREIGN EXCHANGE DIFFERENCE IS A PART OF SALE AS SUCH THE DEDUCTION IS FULLY ALLOWABLE AS SAID RECEIPTS. THE AO CONSIDERED THE REPLY OF THE ASSESS EE AND TOOK INTO CONSIDERATION THE PROVISIONS OF SECTION 10AA OF THE ACT ON THE ISSUE IN QUESTION. IT IS NOTED THAT THE AO CONCLUSIVELY ACCE PTED THE CLAIM OF THE ASSESSEE THAT ASSESSEE FIRM IS ELIGIBLE FOR DEDUCT ION U/S 10AA OF THE ACT. HOWEVER, THE AO HELD THAT EXCHANGE RATE DIFFERENCE CREDITED IN TRADING AND PROFIT AND LOSS ACCOUNT OF FIRMS ARE NOT PROFI TS DERIVED FROM EXPORT OF ARTICLE AND THINGS. THEREFORE, ASSESSEE FIRM DOES N OT QUALIFY AS ELIGIBLE EXPORT FOR CLAIM U/S 10AA AND ACCORDINGLY A SUM OF RS. 47,43,079.37 BEING NET AMOUNT OF EXCHANGE RATE DIFFERENCE WAS DI SALLOWED FROM CLAIMED DEDUCTION U/S 10AA AND SUBJECTED THE SAME T O TAX. IN FIRST ITA NO.931/JP/2016 ITO, WARD- 7(2), JAIPUR VS. M/S. VALENTINE SILVER INTERNATIONAL 5 APPEAL, THE LD. CIT(A) HAS ALLOWED THE CLAIM OF DED UCTION U/S 10AA OF THE ACT TO THE ASSESSEE WITH FOLLOWING OBSERVATIONS . I HAVE ALSO GONE THROUGH THE JUDGEMENTS OF VARIOU S HIGH COURTS AND ITAT REFERRED TO BY ASSESSEE AS ABO VE WHICH FULLY SUPPORTS THE CONTENTION OF THE ASSESSEE . I THEREFORE, HOLD THAT EXCHANGE RATE FLUCTUATION ARE DIRECTLY PROFITS DERIVED FROM EXPORT OF GOODS AS PART OF EXP ORT OF TURNOVER AND CANNOT BE HELD AS PROFITS ATTRIBUTABL E TO EXPORT. AS THE TOTAL TURNOVER OF ASSESSEE IS TOTAL EXPORT TURNOVER AND EXCHANGE RATE FLUCTUATION PROFITS ARE DERIVED FORM EXPORT OF GOODS ARTICLE OR THINGS AND SO THE ASSESSEE RIGHTLY IN LAW IS ENTITLED TO DEDUCTION U/S 10AA OF I.T. ACT, 1961.. THE DISALLOWANCE OF DEDUCTION U/S 10AA IN RESPECT O F EXCHANGE RATE FLUCTUATION DIFFERENCE MADE BY THE AO IS THUS DELETED. DURING THE COURSE OF HEARING, THE LD. AR OF THE ASS ESSEE RELIED ON THE DECISION OF HON'BLE DELHI HIGH COURT IN THE CASE O F PR. CIT VS. UNIVERSAL PRECISION SCREWS (2015) 94 CCH 046 DELHI WHEREIN TH E HON'BLE COURT OBSERVED AS UNDER:- IT WAS HELD THAT FOREIGN EXCHANGE FLUCTUATION REA LIZED WITHN THE STIPULATED PERIOD FORMS PART OF THE SALE PROCEE DS AND WAS DIRECTLY RELATED TO THE EXPORT ACTIVITIES AND THUS IT SHOULD BE TREATED AS INCOME DERIVED FROM EXPORT ACTIVITIES. IN VIEW OF THE ABOVE DELIBERATIONS AND DECISION OF HON'BLE DELHI HIGH COURT IN THE CASE OF PR. CIT VS. UNIVERSAL PRECISIO N SCREWS (SUPRA), I ITA NO.931/JP/2016 ITO, WARD- 7(2), JAIPUR VS. M/S. VALENTINE SILVER INTERNATIONAL 6 CONCUR WITH THE FINDINGS OF THE LD. CIT(A) ON THIS ISSUE. THUS THE APPEAL OF THE REVENUE IS DISMISSED. 3.1 APROPOS SOLITARY GROUND OF THE REVENUE IN ITA N O. 927/JP/2016, THE FACTS AS EMERGES FROM THE ORDER OF THE LD. CIT( A) IS AS UNDER:- 4.3 I HAVE CAREFULLY CONSIDERED THE FACTS OF THE CASE, FINDINGS OF THE AO AND SUBMISSION OF APPELLANT. AO LEVIED THE PENALTY BY STATING THAT THE APPEAL WAS FILED LA TE ON 01-06- 2016 AGAINST THE ORDER DISPATCHED ON 31-03-2015. IN THIS REGARD A/R STATED THAT THE COMPANY HAD CHANGED ITS ADDRESS AND ALSO CHANGED ADDRESS IN PAN DATA PRIOR TO COMPL ETION OF ASSESSMENT. HOWEVER, ASSESSMENT ORDER WAS DISPATCHE D ON OLD ADDRESS. THEREFORE, SINCE THERE WAS NO FAULT OF APPELLANT, THE APPEAL FILED AGAINST ASSESSMENT ORDER WAS ADMIT TED BY ME. IN THIS CASE, THE AO HAS LEVIED PENALTY ON THE ADDITION OF RS. 47,43,079/- BEING THE EXCHANGE RATE DIFFERENCE STOOD CREDITED IN PROFIT LOSS ACCOUNT ON WHICH WAS DEDUCT ION WAS WRONGLY CLAIMED U/S 10AA. SINCE THE QUANTUM ADDITIO N MADE BY THE AO IN THE ORDER PASSED U/S 143(3) HAS B EEN DELETED BY THE UNDERSIGNED ON MERITS IN APPEAL NO 3 30/15-16 VIDE ORDER DATED 19-08-2016, THE PENALTY IMPOSED U/ S 271(1) ON THE SAME ADDITION CANNOT STAND. THE PENA LTY IMPOSED BY THE AO IS DELETED. 3.2 AFTER HEARING BOTH THE PARTIES AND PERUSING THE MATERIAL AVAILABLE ON RECORD, IT IS OBSERVED THAT WHEN THE QUANTUM ADD ITION HAS BEEN DELETED BY THE LD. CIT(A) ON MERITS VIDE HER ORDER DATED 1 9-08-2016 IN APPEAL NO. 330/15-16 THEN THERE IS NO REASON TO IMPOSE THE PENALTY ON THE ASSESSEE U/S 271(1)(C) OF THE ACT. IT MAY BE NOTED THAT THE QUANTUM APPEAL ITA NO.931/JP/2016 ITO, WARD- 7(2), JAIPUR VS. M/S. VALENTINE SILVER INTERNATIONAL 7 OF THE REVENUE IN ITA NO. 931/JP/2016 HAS BEEN DISM ISSED BY THIS BENCH (SUPRA) THEN THE APPEAL OF THE REVENUE IN ITA NO. 9 27/JP/2016 RELATING TO IMPOSITION OF PENALTY U/S 271(1)(C) OF THE ACT IS I NFRUCTUOUS. THUS THE APPEAL OF THE REVENUE RELATING TO IMPOSITION OF PE NALTY U/S 271(1)(C) ON THE ASSESSEE IS DISMISSED. 4.0 IN THE RESULT, THE APPEALS OF THE REVENUE ARE DISMISSED. ORDER PRONOUNCED IN THE OPEN COURT ON 21/02/201 7. SD/- HKKXPUN ( BHAGCHAND) YS[KK LNL;@ ACCOUNTANT MEMBER TK;IQJ@ JAIPUR FNUKAD@ DATED:- 21/02/ 2017 *MISHRA VKNS'K DH IZFRFYFI VXZSF'KR@ COPY OF THE ORDER FORWARDED TO: 1. VIHYKFKHZ@ THE APPELLANT- THE ITO, WARD- 7(2), JAIPUR 2. IZR;FKHZ@ THE RESPONDENT- M/S. VALENTINE SILVER INTERNATIONA L, JAIPUR 3. VK;DJ VK;QDRVIHY@ CIT(A). 4. VK;DJ VK;QDR@ CIT, 5. FOHKKXH; IZFRFUF/K] VK;DJ VIHYH; VF/KDJ.K] T;IQJ@ DR, ITAT, JAIPUR 6. XKMZ QKBZY@ GUARD FILE (ITA NO. 931/JP/2016) VKNS'KKUQLKJ@ BY ORDER, LGK;D IATHDKJ @ ASSISTANT. REGISTRAR