M/s. Surana Telecom and Power P. Ltd, Secunderabad V. DCIT,Cir-3(2), Hyderabad

MA 189/HYD/2011

• Counselvise Citation: [2012] 123 COUNSELVISE.COM (IT) 7542 (ITAT-HYDERABAD)
• Duration Of Justice: 7 month(s) 11 day(s)
• Appeal Type: Miscellaneous Application
• Pronouncement Date: 20-01-2012
• Appeal Filed By: Assessee
• Order Result: Allowed
• Bench Allotted: A
• Assessment Year: misc
• Appeal Filed On: 08-06-2011
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: NIVEDITA BISWAS
• Keywords: Rectification of order; Speculation loss
• Section: 43(5)

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL HYDERABAD BENCH A, HYDERABAD BEFORE SHRI CHANDRA POOJARI, A.M AND SMT. ASHA VIJAYARAGHAVAN, J.M M.A. NO.189/HYD/2011 ASST.YEAR 2005-06 (IN ITA NO.811/H/2010 , M/S.SURANA TELECOM AND POWER LTD. SECUNDERABAD. V- DCIT, CIR-16(2), (PAN:AADCS1823R) HYDERABAD. . (APPLICANT) ( RESPONDENT) APPLICANT BY : SHRI K.C. DEVDAS RESPONDENT BY : SMT. NIVEDITA BISWAS DATE OF HEARING: 16-12-2011 DATE OF PRONOUNCEMENT: 20 -01-2012 . O R D E R PER CHANDRA POOJARI, ACCOUNTANT MEMBER: BY THIS MISC. APPLICATION, THE ASSESSEE IS S EEKING RECALL OF THE RECTIFICATION ORDER OF THE TRIBUNAL DATED 30-9- 2009 AND IT PERTAINS TO THE ASSESSMENT YEAR 2005-06. 2. THE LEARNED AUTHORIZED REPRESENTATIVE OF THE ASS ESSEE SUBMITTED THAT THE ASSESSEE RAISED A GROUND BEFORE THE TRIBUNAL THAT THE LEARNED CIT (A) ERRED IN HOLDING THAT THE LOSS CLAIMED IN RESPECT OF EXPORT OF IRON ORE AT RS.3,01,00,299/- A S BUSINESS LOSS INSTEAD OF SPECULATION LOSS. THIS GROUND WAS ADJUD ICATED BY THE TRIBUNAL BY HOLDING AS FOLLOWS:- M.A.NO.189/HYD/2011 SURANA TELECOM.& POWER LTD., SECBAD. ============================ 2 WE HAVE HEARD BOTH THE PARTIES AND PERUSED THE MAT ERIAL ON RECORD. IN THE PRESENT CASE, THE ASSESSEE IS DUTY BOUND TO SUPPLY THE IRON ORE TO M/S NOBLE RESOURCES LTD., HO NG KONG BY 30-1-2004 AT 40,000 MT. AS PER RECORD, THE ASSESSE E PROCURED 22,526.25 MT FROM M/S SHASHI MINERALS AND MINES AT 821.93 MT OF IRON ORE FROM FREEGRADE AND CO. PVT. LTD. TH US, AS PER RECORD, TOTAL SHIPMENT PROCURED WORKS OUT TO 23,348 .855 MT. THE OBSERVATIONS OF THE CIT (A) ARE THAT THE ASSESS EE ACTUALLY PROCURED THE ENTIRE QUANTITY OF 40,000 MT OF IRON O RE AND AS SUCH THE PROVISIONS OF SECTION 43(5) DO NOT APPLY. IN OUR OPINION, A PORTION OF THE QUANTITY OF IRON ORE REMA INS UNSUPPLIED AND IT CANNOT BE SAID THAT CONTRACT WAS SETTLED BY DELIVERY OF ENTIRE QUANTITY OF GOODS BY THE ASSESSEE TO M/S NOB LE RESOURCES LIMITED, HONG KONG. IT IS AN ADMITTED FA CT THAT THE ASSESSEE IS R3QUIRED TO SUPPLY THE ENTIRE QUANTITY OF 40,000 MT OF IRON ORE CONTRACT FOR IN A SINGLE SHIPMENT. IN OUR OPINION, WHEN THERE IS A PART PERFORMANCE OF THE CONTRACT BY ACTUAL DELIVERY, THEN IT COULD BE SAID THAT CONTRACT IS SE TTLED TO THAT EXTENT BY ACTUAL DELIVERY, IT DOES NOT FALL UNDER T HE PURVIEW OF SECTION 43(5) OF THE ACT. IN OTHER WORDS, TO THE E XTENT THE SUPPLY IS MADE, THAT PART OF THE CONTRACT WOULD BE OUTSIDE THE PURVIEW OF SECTION 43(5) OF THE ACT. BUT, WHERE THE CONTRA CT HAS NOT BEEN EXECUTED IN RESPECT OF REMAINING PART AND IF ULTIMA TELY SETTLED WITHOUT ACTUAL DELIVERY OF THE GOODS, THE PROVISION S OF SECTION 43(5) WOULD BE ATTRACTED. THE WORDS IN SECTION 43( 5) PERIODICALLY OR ULTIMATELY MAKE IT CLEAR THAT T HE PROVISIONS OF SECTION 43(5) ARE APPLICABLE WHERE A PART OF THE CO NTRACT OR THE ENTIRE CONTRACT HAS BEEN SETTLED, OTHERWISE THAN BY ACTUAL DELIVERY OF THE GOODS. ACCORDINGLY, IN OUR OPINION , IN THIS CASE, THE ASSESSING OFFICER HAS TO BRING THAT LOSS RELATI NG TO THE M.A.NO.189/HYD/2011 SURANA TELECOM.& POWER LTD., SECBAD. ============================ 3 PORTION OF CONTRACT WHICH HAS NOT BEEN PERFORMED BY ACTUAL DELIVERY OF IRON ORE, TO BE TREATED AS SPECULATIVE TRANSACTION IN TERMS OF SECTION 43(5). ACCORDINGLY, THIS GROUND O F THE REVENUE IS PARTLY ALLOWED FOR STATISTICAL PURPOSES. 3. ACCORDING TO THE LEARNED AUTHORIZED REPRESENTAT IVE, THERE IS A MISTAKE APPARENT FROM RECORD WHICH HAS CREPT INADVE RTENTLY AND BY SHEER OVERSIGHT TO STATE THAT THE CIT (A) HELD THAT THE ASSESSEE HAD ACTUALLY PROCURED 40,000 MT., IT IS NOT SO. THE CI T (A) ONLY HELD THAT THERE WAS CONTRACT TO SUPPLY 40,000 MT AND NO PART SUPPLY COULD BE MADE. THE APPELLANT COULD NOT SUPPLY 40,0 00 MT AND THEREFORE NO SUPPLY WAS MADE TO M/S NOBLE RESOURCES LIMITED. THE ASSESSEE PROCURED ONLY 23000 MT OF IRON ORE WHICH W AS SUPPLIED TO M/S D & G ENTERPRISES AND THE LOSS AROSE BECAUSE O F FALL IN PRICES OF IRON ORE AND IN THE INTEREST OF ITS BUSINESS AND TO PREVENT FURTHER LOSSES THE SUPPLY OF 23000 MT WAS ACTUALLY MADE. I T IS SUBMITTED THAT THERE IS A MISTAKE APPARENT FROM RECORD WHICH NEEDS RECTIFICATION TO PROVE ONLY 23000 MT OF IRON ORE WA S SUPPLIED AND THE LOSS ARISING FROM THE SAME WAS A TRADING LOSS A ND NOT A SPECULATIVE LOSS AND HENCE PRAYED TO RECTIFY THE OR DER OF THE TRIBUNAL IN THE INSTANT CASE ACCORDINGLY. 3. ON THE OTHER HAND, THE LEARNED DEPARTMENTAL REPR ESENTATIVE WHILE OPPOSING THE SUBMISSIONS OF THE LEARNED COUNS EL FOR THE ASSESSEE NOT AGREED WITH THE RECALLING/REVIEWING OF THE TRIBUNAL AND RELIED ON THE ORDER OF THE TRIBUNAL IN THE INSTANT CASE. 4. WE HAVE CONSIDERED THE RIVAL SUBMISSIONS OF THE PARTIES AND PERUSED THE MATERIAL AVAILABLE ON RECORD. WE HAVE ALSO GONE THROUGH THE EARLIER ORDER OF THE TRIBUNAL DATED 30. 9.2009 IN THE M.A.NO.189/HYD/2011 SURANA TELECOM.& POWER LTD., SECBAD. ============================ 4 INSTANT CASE. WE HAVE ALSO GONE THROUGH THE IMPUGN ED ORDER OF THE CIT (A). THE MISTAKE POINTED OUT BY THE ASSESSEE I S CORRECT. THERE WAS INADVERTENT ERROR CREPT IN THE ORDER OF THE TRI BUNAL BY MENTIONING IN THE 7 TH LINE OF PARA 4 OF THE SAID ORDER WHICH IS REPRODUCED AS UNDER: THE OBSERVATIONS OF THE CIT(A) ARE THAT THE ASSESS EE ACTUALLY PROCURED THE ENTIRE QUANTITY OF 40,000 MT OF IRON O RE AND AS SUCH, THE PROVISIONS OF SECTION 43(5) DO NOT APPLY . 5. ADMITTEDLY, THERE ARE NO SUCH FINDINGS BY THE CIT (A) IN HIS ORDER. BEING SO, WE ARE INCLINED TO EXPUNGE THESE LINES FROM PARA 4 OF THE TRIBUNAL ORDER CITED SUPRA. FURTHER, WE MAK E IT CLEAR THAT THE ASSESSEE IS NOT ENTITLED TO SET OFF THE LOSS IN CAS E OF PAYMENT OF PRICE DIFFERENCE IF ANY PAID TO M/S. NOBLE RESOURCES LTD. , IN RESPECT OF UNFULFILLED CONTRACT OF SALE AGAINST THE PROFIT FRO M ITS BUSINESS. RELIANCE IS PLACED IN THIS BEHALF ON THE DECISION O F JURISDICTIONAL HIGH COURT IN THE CASE OF CIT VS. PUTTAIAH SESHAIAH AND CO. (146 ITR 168) WHEREIN IT WAS HELD THAT THE INCOME BY WAY OF PAYMENT OF PRICE DIFFERENCE FOR NON FULFILLMENT OF CONTRACT IS SPECULATIVE LOSS AND CANNOT BE SET OFF AGAINST PROFIT FROM BUSINESS. 6. IN THE RESULT, THE MISCELLANEOUS APPLICATION F ILED BY THE ASSESSEE IS ALLOWED. ORDER WAS PRONOUNCED IN THE COURT ON 20 .01.2012 SD/- SD/- (SMT ASHA VIJAYARAGHAVAN) (CHANDRA POOJARI) JUDICIAL MEMBER ACCOUNTANT MEMBER. DATED: 20 TH JANUARY, 2012 M.A.NO.189/HYD/2011 SURANA TELECOM.& POWER LTD., SECBAD. ============================ 5 COPY FORWARDED TO: 1. M/S SURANA TELECOM & POWER LTD., 5 TH FLOOR, SURYA TOWERS, SP ROAD, SECUNDERABAD. 2. DCIT, CIR-3((2),HYDERABAD. 3 4. 5 JMR* CIT (A)-IV, HYDERABAD. CIT, HYDERABAD. DR, ITAT, HYDERABAD. M.A.NO.189/HYD/2011 SURANA TELECOM.& POWER LTD., SECBAD. ============================ 6