DCIT, Jaipur V. VISHAL GEMS INTERNATIONAL, Jaipur

ITA 949/JPR/2016

• Counselvise Citation: [2017] 128 COUNSELVISE.COM (IT) 9728 (ITAT-JAIPUR)
• Duration Of Justice: 4 month(s) 5 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 09-03-2017
• Appeal Filed By: Department
• Order Result: Dismissed
• Bench Allotted: A
• Next Hearing Date: 20-02-2017
• Assessment Year: 2012-2013
• Appeal Filed On: 03-11-2016
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: R A VERMA
• Assessee Lawyers: VIVEK CHATTER DHK
• Section: 10AA

Judgement Text

VK;DJ VIHYH; VF/KDJ.K] T;IQJ U;K;IHB] T;IQJ IN THE INCOME TAX APPELLATE TRIBUNAL, JAIPUR BENCHES, JAIPUR JH HKKXPAN] YS[KK LNL; ,OA JH DQY HKKJR ] U;KF;D LNL; DS LE{K BEFORE: SHRI BHAGCHAND, AM & SHRI KUL BHARAT, JM VK;DJ VIHY LA- @ ITA NO. 949/JP/2016 FU/KZKJ.K O'K Z @ ASSESSMENT YEAR : 2012-13 D.C.I.T., CIRCLE-7, JAIPUR. CUKE VS. M/S VISHAL GEMS INTERNATIONAL, G-1/20, SEZ PEH-I, SITAPURA INDUSTRIAL AREA, SANGANER, JAIPUR. LFKK;H YS[KK LA-@THVKBZVKJ LA-@ PAN/GIR NO.: AAEFV 6821 E VIHYKFKHZ@ APPELLANT IZR;FKHZ@ RESPONDENT IZR;K{KSI.K @ C.O. NO. 45/JP/2016 (ARISING OUT OF VK;DJ VIHY LA-@ ITA NO. 949/JP/2016) FU/KZKJ.K O'K Z @ ASSESSMENT YEAR 2012-13 M/S VISHAL GEMS INTERNATIONAL, G- 1/20, SEZ PEH-I, SITAPURA INDUSTRIAL AREA, SANGANER, JAIPUR. CUKE VS. D.C.I.T., CIRCLE-7, JAIPUR. LFKK;H YS[KK LA-@THVKBZVKJ LA- @ PAN/GIR NO.: AAEFV 6821 E IZR;K{KSID @ OBJECTOR IZR;FKHZ @ RESPONDENT JKTLO DH VKSJ LS @ REVENUE BY : SHRI R.A. VERMA (ADDL.CIT) FU/KZKFJRH DH VKSJ L S@ ASSESSEE BY : SHRI VIVEK CHATTER. LQUOKBZ DH RKJH[K @ DATE OF HEARING : 20/02/2017 MN?KKS'K .KK DH RKJH[K @ DATE OF PRONOUNCEMENT : 09/03/2017 ITA 949/JP/2016 & CO 45/JP/2016_ DCIT VS VISHAL GEMS INTERNATIONAL 2 VKNS'K@ ORDER PER: BHAGCHAND, A.M. THE APPEAL BY REVENUE AND CROSS OBJECTION BY ASSESS EE ARISE FROM THE ORDER DATED 18/08/2016 OF LD. CIT (A)-III, JAIP UR PERTAINING TO THE ASSESSMENT YEAR 2012-13. EFFECTIVE GROUNDS OF APPEA L AS WELL AS C.O. ARE AS UNDER:- GROUND IN REVENUE APPEAL. (I) ON THE FACTS AND IN THE CIRCUMSTANCES OF THE CASE AND IN LAW, THE LD. CIT(A) HAS ERRED IN DELETING DISALLOWANCE OF RS. 52,16,273/- OUT OF DEDUCTION CLAIMED U/S 10AA O F THE IT ACT, HOLDING THAT EXCHANGE RATE FLUCTUATION P ROFIT IS PROFIT DERIVED FROM EXPORT SALE PROCEEDS. GROUND IN CROSS OBJECTION (I) FOR THAT THE LD. DCIT GROSSLY ERRED UNDER THE FACTS AND CIRCUMSTANCES OF THE CASE IN MAKING ADDITIONS OF RS . 1,04,736/- BY EXCLUDING FREIGHT CHARGES FROM THE TURNOVER AND THE DEDUCTION CLAIMED U/S 10AA WAS REDUCED. 2. IN THE REVENUES APPEAL, THE ONLY ISSUE INVOLVED IS AGAINST DELETING THE ADDITION OF RS. 52,16,273/- OUT OF THE DISALLOWA NCES FROM CLAIM MADE U/S 10AA OF THE INCOME TAX ACT, 1961 (IN SHORT THE A CT) BY HOLDING THAT THE EXCHANGE RATE FLUCTUATION PROFIT IS PROFIT DERI VED FROM THE EXPORT SALE PROCEEDS. 3. THE LD. CIT(A) HAS DELETED THE ADDITION BY HOLDING AS UNDER:- ITA 949/JP/2016 & CO 45/JP/2016_ DCIT VS VISHAL GEMS INTERNATIONAL 3 4.3 I HAVE CAREFULLY CONSIDERED THE FACTS OF THE C ASE, FINDINGS OF THE A.O. AND SUBMISSION OF APPELLANT ON PERUSAL OF ASSESSMENT ORDER, IT IS SEEN THAT THE A.O. IS OF TH E VIEW THAT EXCHANGE RATE FLUCTUATION OF RS. 52,16,273/- C ANNOT BE TREATED AS DERIVED FROM THE EXPORT OF GOODS ARTICLE S AND THINGS AND THUS DOES NOT QUALIFY AS ELIGIBLE PROFIT S FOR DEDUCTION U/S 10AA WHILE THE ASSESSEE SUBMITS THAT EXCHANGE RATE FLUCTUATION PROFIT IS RESULTED FROM R EALIZATION OF EXPORT SALE PROCEEDS AS PER INVOICE OF EXPORT SA LE AND ALSO REFERRED TO THE DEFINITION OF EXPORT TURNOVER MEANS THE CONSIDERATION RECEIVED IN RESPECT TO EXPORT I.E. TO TAL AMOUNT REALIZED FOR SALE INVOICE AND THUS FORMED PA RT OF EXPORT TURNOVER, TOTAL TURNOVER IN DENOMINATOR WOULD ALSO INCLUDE EFFECT OF FOREIGN EXCHANGE FLUCTUATION DIFF ERENCE AND WILL RESULT IN ITS INCLUSION IN ELIGIBLE PROFITS FOR DEDUCTION U/S 10AA. I HAVE ALSO GONE THROUGH THE JUDGEMENTS OF BOMBAY HIGH COURT ETC REFERRED TO BY ASSESSEE AS ABOVE WHICH FULLY SUPPORTS THE CONTENTIO N OF ASSESSEE. I THEREFORE HOLD THAT EXCHANGE RATE FLUCT UATION ARE DIRECTLY PROFITS DERIVED FROM EXPORTS OF GOODS AS PART OF EXPORT TURNOVER AND CANNOT BE HELD AS PROFITS ATTRI BUTABLE TO EXPORT. AS THE TOTAL TURNOVER OF ASSESSEE IS TOT AL EXPORT TURNOVER AND EXCHANGE RATE FLUCTUATION PROFITS ARE DERIVED FROM EXPORT OF GOODS ARTICLES OR THINGS AND THEREFO RE IT IS INCOME FROM BUSINESSES AND ACCORDINGLY THE ASSESSEE IS ENTITLED TO ITS DEDUCTION U/S 10AA OF I. T. ACT, 196 1. THE ITA 949/JP/2016 & CO 45/JP/2016_ DCIT VS VISHAL GEMS INTERNATIONAL 4 DISALLOWANCE OF DEDUCTION U/S 10AA IN RESPECT OF EXC HANGE RATE FLUCTUATION DIFFERENCE MADE BY A.O. IS THUS DE LETED. 4. NOW THE REVENUE IS IN APPEAL BEFORE US. THE LD SR. DR HAS RELIED ON THE ORDER OF THE ASSESSING OFFICER. ON THE OTHER HA ND, THE LD. AR OF THE ASSESSEE HAS VEHEMENTLY SUPPORTED THE ORDER OF THE LD. CIT(A). 5. WE HAVE HEARD THE RIVAL CONTENTIONS OF BOTH THE PARTIES, PERUSED THE MATERIAL AVAILABLE ON THE RECORD AND ALSO GONE THRO UGH THE ORDERS OF THE AUTHORITIES BELOW ON THIS ISSUE. IN OUR CONSIDERED V IEW THAT EXCHANGE RATE FLUCTUATION FOR CLAIMING DEDUCTION U/S 10AA OF THE ACT, AS THE EXCHANGE RATE FLUCTUATION ARE RESULTANT FROM REALIZATION OF EXPORT SALE PROCEEDS AS PER THE EXPORT INVOICES AND AS PER THE DEFINITION O F EXPORT TURNOVER, THE CONSIDERATION RECEIVED IN RESPECT OF THE EXPORTS, F OR EXAMPLE, TOTAL AMOUNT REALIZED FOR SALE INVOICES SHALL FORM PART OF EXPOR T TURNOVER. THEREFORE, THE TOTAL TURNOVER IS DENOMINATOR, WHICH SALE ALSO INCLU DES THE EFFECT OF FOREIGN EXCHANGE FLUCTUATION. THEREFORE, SUCH INCLUSION OF F OREIGN EXCHANGE FLUCTUATION IN THE PROFITS SHALL QUALIFY FOR DEDUCT ION U/S 10AA OF THE ACT. SUCH VIEW HAS BEEN AFFIRMED BY THE HONBLE BOMBAY HI GH COURT. ACCORDINGLY, THE APPEAL OF THE REVENUE IS HEREBY DI SMISSED. 6. IN THE ASSESSEES C.O., THE ONLY ISSUE INVOLVED, IS AGAINST CONFIRMING THE ADDITION OF RS. 1,04,736/- BY EXCLUDING FREIGHT CHARGES FROM THE TURNOVER AND NOT ALLOWING DEDUCTION CLAIMED U/S 10AA OF THE ACT. ITA 949/JP/2016 & CO 45/JP/2016_ DCIT VS VISHAL GEMS INTERNATIONAL 5 7. THE LD. CIT(A) HAS UPHELD THE ADDITION BY OBSERVIN G AS UNDER:- 5.3 I HAVE CAREFULLY CONSIDERED THE FACTS OF THE C ASE, FINDINGS OF THE A.O. AND SUBMISSION OF APPELLANT. REGARDING DIS ALLOWANCE OF FREIGHT CHARGES THE CONTENTION OF THE APPELLANT IS THAT FREIGHT AND INSURANCE ALL ARE PART OF EXPORT TURNOV ER ELIGIBLE FOR DEDUCTION UNDER SECTION 10AA. THIS COULD NOT BE ACCEPTED FOR THE REASON THAT ASSESSEE RECEIVED RS. 104736/- AS AGAINST THE PAYMENT OF RS 68040/- AND THUS HAD NET GAIN OF RS 36,696/-. ASSESSEE CONTENDED THAT IF IT IS NOT A PA RT OF EXPORT TURNOVER, IT CANNOT BE INCLUDED IN TOTAL TURNOVER F OR WHICH HE PLACED RELIANCE ON A DECISION OF HONBLE MUMBAI HIG H COURT. HOWEVER HONBLE HIGH COURT IN SAME JUDGEMENT HELD TH AT IF FREIGHT AND INSURANCE DOES NOT HAVE ELEMENT OF PRO FIT THEN IT CANNOT BE INCLUDED IN TOTAL TURNOVER. IN THIS CASE ASSESSEE ITSELF ADMITTED TO HAVE EARNED PROFIT OUT OF FREIGH T AND INSURANCE. THEREFORE, THIS DISALLOWANCE IS UPHELD. THE ASSESSEE IS NOT ELIGIBLE FOR DEDUCTION U/S 10AA ON FREIGHT. 8. NOW THE ASSESSEE IS IN C.O. BEFORE US. THE LD. AR OF THE ASSESSEE HAS REITERATED THE ARGUMENTS AS MADE BEFORE THE AUT HORITIES BELOW AND PRAYED TO ALLOW THE C.O. ON THE OTHER HAND, LD SR. D R HAS RELIED ON THE ORDER OF THE AUTHORITIES BELOW. 9. WE HAVE HEARD THE RIVAL CONTENTIONS OF BOTH THE PARTIES, PERUSED THE MATERIAL AVAILABLE ON THE RECORD AND ALSO GONE THRO UGH THE ORDERS OF THE AUTHORITIES BELOW ON THIS ISSUE. THE HONBLE BOMBAY H IGH COURT IN THE ITA 949/JP/2016 & CO 45/JP/2016_ DCIT VS VISHAL GEMS INTERNATIONAL 6 CASE OF CIT VS. GEM PLUS JEWELLERY INDIA LIMITED (201 0) 194 TAXMANN 192 (BOM) HAS HELD THAT RECEIPT SUCH AS FREIGHT AND INS URANCE CANNOT BE INCLUDED IN THE TOTAL TURNOVER. THEREFORE, THE LD. CIT(A) HAS RIGHTLY DECIDE THE ISSUE AGAINST THE ASSESSEE. ACCORDINGLY, WE UPHO LD THE ORDER OF THE LD. CIT(A) ON THIS ISSUE. 10. IN THE RESULT, THE APPEAL OF THE REVENUE AS WELL AS THE C.O. OF THE ASSESSEE ARE DISMISSED. ORDER PRONOUNCED IN THE OPEN COURT ON 09/03/2017. SD/- SD/- DQY HKKJR HKKXPAN (KUL BHARAT) (BHAGCHAND) U;KF;D LNL;@ U;KF;D LNL;@ U;KF;D LNL;@ U;KF;D LNL;@ JUDICIAL MEMBER YS[KK LNL;@ YS[KK LNL;@ YS[KK LNL;@ YS[KK LNL;@ ACCOUNTANT MEMBER TK;IQJ TK;IQJ TK;IQJ TK;IQJ@ @@ @ JAIPUR FNUKAD@ DATED:- 09 TH MARCH, 2017 *RANJAN VKNS'K DH IZFRFYFI VXZSFKR @ COPY OF THE ORDER FORWARDED TO: 1. VIHYKFKHZ @ THE APPELLANT- THE D.C.I.T., CIRCLE-7, JAIPUR. 2. IZR;FKHZ @ THE RESPONDENT- M/S VISHAL GEMS INTERNATIONAL, JAIPU R. 3. VK;DJ VK;QDR @ CIT 4. VK;DJ VK;QDRVIHY @ THE CIT(A) 5. FOHKKXH; IZFRFUF/K] VK;DJ VIHYH; VF/KDJ.K] T;IQJ @ DR, ITAT, JAIPUR 6. XKMZ QKBZY @ GUARD FILE (ITA NO. 949/JP/2016 & CO 45/JP/2016) VKNS'KKUQLKJ @ BY ORDER, LGK;D IATHDKJ @ ASST. REGISTRAR