M/S. ARYA VOYAGERS PRIVATE LIMITED (NOW MERGED WITH M/S. ARYA TANKERS PVT. LTD.),MUMBAI V. DEPUTY COMMISSIONER OF INCOME TAX CIRCLE-5(1)(1), MUMBAI, MUMBAI

ITA 2368/MUM/2025

AI Insights

The case involves M/s. Arya Voyagers Private Limited, which appealed against the order of the CIT(A) confirming the AO's addition of Rs. 25,73,307 to the assessee's income, treating profits on trading in derivatives as an independent business activity. The assessee argued that these profits were part of their main business operations, specifically hedging forex risks on charter hire charges receivable from foreign parties. The Tribunal found that the AO had not adequately examined the nature of these transactions and directed a re-examination.

• Counselvise Citation: [2025] 140 COUNSELVISE.COM (IT) 705671 (ITAT-MUMBAI)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 02-07-2025
• Appeal Filed By: Assessee
• Order Result: Partly Allowed
• Assessment Year: 2014-2015
• Result in Favour of: Partly Allowed
• Court: TRIBUNAL
• Department Lawyers: ADITYA M. RAI; DR
• Assessee Lawyers: RAKESH JOSHI; AR
• Keywords: Opportunity of being heard

Judgement Text

"| आयकर अपील य अ धकरण यायपीठ, मुंबई | IN THE INCOME TAX APPELLATE TRIBUNAL “A” BENCH, MUMBAI BEFORE SHRI NARENDRA KUMAR BILLAIYA, HON’BLE ACCOUNTANT MEMBER & SHRI SANDEEP SINGH KARHAIL, HON’BLE JUDICIAL MEMBER I.T.A. No. 2368/Mum/2025 Assessment Year: 2014-15 M/s. Arya Voyagers Private Limited (Now merged with M/s. Arya Tankers Pvt. Ltd.) 15B, Chander Mukhi Backbay Reclamation Nariman Point Mumbai - 400021 [PAN: AALCA1699R] Vs Deputy Commissioner of Income Tax, Circle - 5(1)(1), Mumbai अपीलाथ\u0012/ (Appellant) \u0014\u0015 यथ\u0012/ (Respondent) Assessee by : Shri Rakesh Joshi, A/R Revenue by : Shri Aditya M. Rai, Sr. D/R सुनवाई क तार ख/Date of Hearing : 01/07/2025 घोषणा क तार ख /Date of Pronouncement: 02/07/2025 आदेश/O R D E R PER NARENDRA KUMAR BILLAIYA, AM: This appeal by the assessee is preferred against the order of the ld. Addl./JCIT(A) - 1, Chandigarh [hereinafter “the ld. CIT(A)”] dated 17/02/2025 pertaining to AY 2014-15. 2. The solitary grievance of the assessee reads as under :- “1. On the facts and circumstances of the case and as well as in law, the Learned CIT(A) has erred in confirming the actions of the Learned Assessing Officer in making an addition of Rs. 25,73,307/ - by treating the Profit on Trading in Derivatives as alleged independent business activity, not related to the operation of ships, without considering the facts and circumstances of the case. 2. The appellant craves leave to add, amend, alter or delete the said ground of appeal.” 3. Briefly stated the facts of the case are that the assessee filed its return of income on 21/11/2014 declaring total income at Rs. I.T.A. No. 2368/Mum/2025 2 35,01,680/-. The return was selected for scrutiny assessment and accordingly, notices were issued and served upon the assessee. The assessee is engaged in the business of running charter hires. 4. During the course of scrutiny assessment proceedings, the AO noticed that the assessee has offered income derived from operations of qualifying ships under the “Tonnage Scheme” at Rs. 24,10,460/- under the head profit and gains from business or profession and interest of Rs. 10,91,222/- under the head income from other sources. 5. On perusal of the audited statement of accounts and Note 16 to P&L Account, the AO noticed that the assessee has shown profits on trading in derivates at Rs. 25,73,307/-. The assessee claimed it to be part and parcel of business from operations of ships as it was gains on forex fluctuations. The assessee also explained the entire transactions of forex gains being earned on account of hedging of the forex risks on the charter hire charges receivable from foreign parties. 6. The AO dismissed the claim of the assessee simply on the nomenclature used in the accounts as “profit on trading in derivatives” without even examining the contract notes and the nature of forex gains. 7. We are of the considered view that when a business-man receives consideration in foreign exchange as a customary practice, he hedges the risk of forex fluctuations. There may be gains, there may be losses but in either situation the entire transactions is part and parcel of the business of the assessee. I.T.A. No. 2368/Mum/2025 3 8. We are of the considered view that since the documentary evidence/contract notes have not been examined at all by the AO, the AO should get a second opportunity to examine the same and decide the issue afresh in the light of the nature of business of the assessee and ignoring the heading given in the accounts in respect of the impugned transactions. 9. The issue is restored to the file of the AO for fresh verification after affording a reasonable and adequate opportunity of being heard to the assessee. 10. In the result, appeal of the assessee is allowed for statistical purposes. Order pronounced in the Court on 2nd July, 2025 at Mumbai. Sd/- Sd/- (SANDEEP SINGH KARHAIL) (NARENDRA KUMAR BILLAIYA) JUDICIAL MEMBER ACCOUNTANT MEMBER Mumbai, Dated 02/07/2025 *SC SrPs *SC SrPs *SC SrPs *SC SrPs आदेश क \u0016\u0017त\u0018ल\u001aप अ े\u001aषत /Copy of the Order forwarded to : 1. अपीलाथ! / The Appellant 2. \u0016\"यथ! / The Respondent 3. संबं&धत आयकर आयु(त / Concerned Pr. CIT 4. आयकर आयु(त ) अपील ( / The CIT(A)- 5. \u001aवभागीय \u0016\u0017त\u0017न&ध ,आयकर अपीलीय अिधकरण, मुंबई /DR,ITAT, Mumbai, 6. गाड. फाई/ Guard file. आदेशानुसार/ BY ORDER, TRUE COPY Assistant Registrar आयकर अपील य अ&धकरण ITAT, Mumbai "