DCIT, Bangalore V. M/s Sami Labs Ltd., Bangalore

ITA 966/BANG/2015

• Counselvise Citation: [2019] 115 COUNSELVISE.COM (IT) 4360 (ITAT-BANGALORE)
• Duration Of Justice: 3 year(s) 9 month(s) 6 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 22-03-2019
• Appeal Filed By: Department
• Order Result: Allowed
• Bench Allotted: B
• Next Hearing Date: 14-02-2019
• Assessment Year: 2010-2011
• Appeal Filed On: 16-06-2015
• Result in Favour of: Revenue
• Court: TRIBUNAL
• Keywords: Set aside
• Section: 2

Judgement Text

IT(TP)A.966/BANG/2015 PAGE - 1 IN THE INCOME TAX APPELLATE TRIBUNAL BENGALURU BENCH 'C', BENGALURU BEFORE SHRI. A. K. GARODIA, ACCOUNTANT MEMBER AND SHRI. LALIET KUMAR, JUDICIAL MEMBER I.T(TP).A NO.966/BANG/2015 (ASSESSMENT YEAR : 2010-11) DEPUTY COMMISSIONER OF INCOME-TAX, CIRCLE 6(1)(1), BENGALURU .. APPELLANT V. SAMI LABS LTD, NO.19/1 & 19/2, 1 ST MAIN, 2 ND PHASE, PEENYA INDUSTRIAL AREA, BENGALURU 560058 PAN : AADCS2549E .. RESPONDENT ASSESSEE BY : SHRI. CHERIAN K BABY, CA REVENUE BY : SMT. NEERA MALHOTHRA, JCIT HEARD ON : 18.03.2019 PRONOUNCED ON : 22.03.2019 O R D E R PER LALIET KUMAR, JUDICIAL MEMBER : THIS IS AN APPEAL FILED BY THE REVENUE AGAINST THE ORDER OF THE DCIT, CIRCLE -6(1)(1), BENGALURU, DT.07.01.2015, PA SSED U/S.143(3) R.W.S.144C OF THE ACT, IN PURSUANCE TO THE DIRECTIO NS OF THE DRP, FOR THE ASSESSMENT YEAR 2010-11. 02. THE REVENUE HAS RAISED THE FOLLOWING EFFECTIVE GROUND : IT(TP)A.966/BANG/2015 PAGE - 2 3. ON THE FACTS AND IN THE CIRCUMSTANCES OF THE CAS E THE DISPUTE RESOLUTION PANEL ERRED IN DIRECTING TO INCLUDE FORE X GAIN / LOSS AS OPERATING IN NATURE WITHOUT ASCERTAINING THE NEXUS WITH THE BUSINESS ACTIVITY OF THE ASSESSEE. 03. IN THIS REGARD, THE LD. AR SUBMITTED THAT THE I SSUE WAS DECIDED BY THE CIT (A) BASED ON THE ORDER PASSED BY THE TRIBUNAL FOR THE ASSESSMENT YEAR 2009-10, AND OUR ATTENTION WAS DRAWN TO PARA 3 OF CIT (A) ORDER. RELYING ON PREVIOUS YEAR CIT (A) ALLOWED THE GROUND OF THE ASSESSEE. 04. PER CONTRA, THE LD. DR SUBMITTED THAT THE TRIBU NAL IN THE MATTER OF MERCEDEZ BENZ [(2018) 90 TAXMANN.COM 300 (BANGALORE TRIB.) HAD RECENTLY DECIDED THE ISSUE OF FOREX GAIN AND HELD THAT IF THE FOREX GAIN / LOSS ARE ARISING OUT OF THE FLUCTU ATIONS IN THE ASSESSMENT YEAR UNDER CONSIDERATION ON ACCOUNT OF I NTERNATIONAL TRANSACTIONS FOR THE SAME ASSESSMENT YEAR, THEN THE ASSESSEE IS ENTITLED TO TREAT IT AS OPERATING IN NATURE. 05. WE HAVE HEARD THE RIVAL CONTENTIONS AND PERUSED THE RECORD. FOR READY REFERENCE, WE ARE REPRODUCING HEREIN BELO W PARA 6.1 AND 6.2.1 OF THE DECISION OF THE TRIBUNAL IN MERCEDEZ B ENZ (SUPRA) : 6.1 IN THESE GROUNDS, THE REVENUE CONTENDS THAT THE DR P HAS ERRONEOUSLY CONSIDERED FOREIGN EXCHANGE GAIN / LOSS AS PART OF OPERATING INCOME WHEN THE TPO HAS EXCLUDED THIS ITE M WHILE COMPUTING THE OPERATING MARGINS OF THE ASSESSEE. ON THE CONTRARY, THE ASSESSEE CONTENDS THAT THE FOREIGN EX CHANGE LOSS / GAIN ARE CLOSELY LINKED TO ITS BUSINESS OPERATION S AND THEREFORE SHOULD BE CONSIDERED AS OPERATIONAL IN NA TURE AS HAS BEEN HELD BY THE DRP. IT(TP)A.966/BANG/2015 PAGE - 3 6.2.1 WE HAVE HEARD THE RIVAL CONTENTIONS, PERUSED AND CAREFULLY CONSIDERED THE MATERIAL ON RECORD. IN THE CASE ON HAND, THE DRP HAS ACCEPTED THE ASSESSEE'S CONTENTIO N THAT FOREIGN EXCHANGE LOSS / GAIN IS OPERATIONAL IN NATU RE, BY FOLLOWING THE DECISION OF THE CO-ORDINATE BENCH OF THIS TRIBUNAL IN THE CASE OF SAP LABS LTD. V. ASSTT. CIT [2012] 134 ITD 253/17 TAXMANN.COM 16 (BANG.) AND OF ANOTHER CO- ORDINATE BENCH OF THIS TRIBUNAL IN THE ASSESSEE'S O WN CASE FOR ASSESSMENT YEAR 2007-08. WE FIND THAT ANOTHER CO-OR DINATE BENCH OF THIS TRIBUNAL IN THE ASSESSEE'S OWN CASE F OR ASSESSMENT YEAR 2010-11 IN ITS ORDER IN IT(TP)A NOS .291 & 427/BANG/2015 DT.24.6.2016 HAS HELD THAT IF FOREIGN EXCHANGE GAIN / LOSS IS OPERATIONAL IN NATURE IF IT IS LINKE D TO THE EXPORTS / IMPORTS RELATED TO THE PARTICULAR YEAR. TO THIS EXT ENT, WE FIND NO INFIRMITY IN THE ORDER OF THE DRP. HOWEVER, THE FACTS RELATED TO THE FOREIGN EXCHANGE GAIN IN THIS YEAR, I.E. AS TO WHETHER IT IS RELATED TO THE BUSINESS OPERATIONS AN D WHETHER THEY ARE IN THE CAPITAL OR REVENUE FIELD IS NOT CLE AR FROM THE ORDERS OF THE AUTHORITIES BELOW. THE TPO HAS ALSO N OT RENDERED ANY FINDING IN THIS REGARD. IN THIS FACTUA L MATRIX OF THE CASE, THE FINDING OF THE DRP IS BEING SET ASIDE AND THE MATTER IS REMANDED TO THE FILE OF THE TPO FOR THE L IMITED EXTENT OF FACTUAL VERIFICATION IN THIS REGARD AS OBSERVED ABOVE, BEFORE ALLOWING IT AS OPERATIONAL IN NATURE IN KEEPING WIT H THE ORDERS OF THE CO-ORDINATE BENCH IN THE ASSESSEE'S OWN CASE FOR ASSESSMENT YEAR 2010-11 (SUPRA). CONSEQUENTLY, REVE NUE'S GROUNDS AT S.NOS.2 & 3 ARE PARTLY ALLOWED FOR STATI STICAL PURPOSES. IN VIEW OF THE ABOVE, WE REMAND THE MATTER TO THE F ILE OF THE TPO / AO WITH A DIRECTION TO COMPUTE THE FOREX GAIN / LOS S FOLLOWING THE DECISION OF THE TRIBUNAL IN MERCEDEZ BENZ (SUPRA) A ND DECIDE THE MATTER AFRESH. IT(TP)A.966/BANG/2015 PAGE - 4 06. IN THE RESULT, APPEAL OF THE REVENUE IS ALLOWED FOR STATISTICAL PURPOSE. ORDER PRONOUNCED IN THE OPEN COURT ON 22 ND DAY OF MARCH, 2019. SD/- SD/- (A. K. GARODIA) (LALIET KUMAR) ACCOUNTANT MEMBER JUDICIAL MEMBER BENGALURU DATED : 22.03.2019 MCN* COPY TO: 1. THE ASSESSEE 2. THE ASSESSING OFFICER 3. THE COMMISSIONER OF INCOME-TAX 4. COMMISSIONER OF INCOME-TAX(A) 5. DR 6. GF, ITAT, BANGALORE BY ORDER ASSISTANT REGISTRAR, INCOME TAX APPELLATE TRIBUNAL, BANGALORE