The Assistant Commissioner of Income Tax, Circle-1 (1), Panaji., Panaji V. M/s Goa Carbon Ltd., Panaji

MA 8/PAN/2016

• Counselvise Citation: [2016] 124 COUNSELVISE.COM (IT) 4368 (ITAT-PANAJI)
• Duration Of Justice: 1 month(s) 6 day(s)
• Appeal Type: Miscellaneous Application
• Pronouncement Date: 27-04-2016
• Appeal Filed By: Department
• Order Result: Dismissed
• Bench Allotted: DB
• Assessment Year: 2009-2010
• Appeal Filed On: 21-03-2016
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: K MEHBOOB ALI KHAN
• Assessee Lawyers: MIHIR NANIVDEKAR
• Section: 43(5)

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL PANAJI BENCH, PANAJI BEFORE SHRI N.S. SAINI , HONBLE ACCOUNTANT MEMBER AND SHRI GEORGE MATHAN, HONBLE JUDICIAL MEMBER M.A.NO.08/PAN/2016 ( ITA NO. 325 /P A N/201 6 ) (ASST. YEAR : 200 9 - 1 0 ) ACIT, CIRCLE - 1(1), PANAJI GOA. VS. M/S. GOA CARBON LTD., DEMPO HOUSE, CAMPAL, PANAJI GOA. PAN NO. AAACG 6842 K (APPELLANT) (RESPONDENT) ASSESSEE BY : SHRI MIHIR NANIVDEKAR ADV. DEPARTMENT BY : SHRI K. MEHBOOB ALI KHAN - D R DATE OF HEARING : 27 / 0 4 /201 6 . DATE OF PRONOUNCEMENT : 2 7 / 0 4 /201 6 . O R D E R PER N.S.SAINI , ACCOUNTANT MEMBER THIS IS A MISC. PETITION FILED BY THE REVENUE AGAINST THE ORDER OF THE TRIBUNAL , DATED 24/11/2015 PASSED IN ITA NO. 325 & 326/PNJ/2015 . 2. IN THIS MISC. PETITION, THE GRIEVANCE OF THE REVENUE IS THAT THE TRIBUNAL FAILED TO ADJUDICATE THE GROUND NO.1 TAKEN BY THE REVENUE RELATING TO DISALLOWANCE OF NOTIONAL LOSS ON FOREIGN EXCHANGE , AND BY MISTAKE , IT HAS STATED THAT BOTH GROUNDS TAKEN BY THE REVENUE ARE SQUARELY COVERED BY THE DEC I SI O N OF THE COORDINATE BENCH OF THE TRIBUNAL IN ASSESSEES OWN CASE IN ITA NO. 192/PNJ/2015 FOR THE ASSESSMENT YEAR 2012 - 13 , DATED 12/085/2015 , WHICH IS ACTUALLY RELATED WITH DISALLOWANCE OF FORWARD PREMIUM EXPENSES ONLY. 2 M A NO. 08 /P A N/201 6 3 . BRIEF FACTS OF THE CASE ARE THAT THE ASSESSING OFFICER OBSERVED THAT NOTIONAL LOSS/CONTINGENT LOSS WORKED OUT , BASED ON MARKET PRICE ON THE CLOSING DAY OF THE ACCOUNTING YEAR , ARE NOT ALLOWABLE LOSS AND THEREFORE, DISALLOWED 13,08,10,604/ - . HE ALSO DISALLOWED ACTUAL LOSS ON FORWARD CONTRACT IN FOREIGN EXCHANGE FOR 12,13,40,601/ - ON THE GROUND THAT THE FORWARD CONTRACTS ARE NOT ENT E RED BY THE ASSESSEE THROUGH ANY RECOGNIZED S TOCK E XCHANGE AND, THEREFORE, THESE ARE NOT ELIGIBLE TRANSACTION S AS PER SECTION 43(5) OF THE ACT. 4 . ON APPEAL, COMMISSIONER OF INCOME TAX (APPEALS) ALLOWED THE APPEAL OF THE ASSESSEE BY OBSERVING THAT AT THE YEAR END , TO HAVE A FAIR PICTURE OF ITS RECEIVABLES/ PAYABLES , THE ASSESSEE HAS TO APPLY THE YEAR END RATE AS PER THE ACCEPTED ACCOUNTING STANDARDS. THEREFORE, THE ASSESSEE CORRECTLY CLAIMED LOSS ON ACCOUNT OF ITS FOREIGN EXCHANGE RECEIVABLES/PAYABLES AND THE SAME IS AN ALLOWABLE EXPENDITURE. ACCORDINGLY, HE DELETED THE DISALLOWANCE OF 13,08,10,604/ - . FURTHER, COMMISSIONER OF INCOME TAX (APPEALS) ALSO OBSERVED THAT FOR DISALLOWANCE HEDGING LOSS AMOUNTING TO 12,13,40,601/ - HOLDING IT AS SPECULATIVE IN NATURE BY THE ASSESSING OFFICER , PLACING RELIANCE ON CBDT INSTRUCTION , WAS MISPLACED. THE COMMISSIONER OF INCOME TAX (APPEALS) OBSERVED THAT THE FACTS OF THE ASSESSEES CASE ARE SIMILAR TO PANCHMAHAL STEEL , WHEREIN IT WAS HELD THAT FOR A FORWARD CONTRACT IN FOREIGN EXCHANGE TO COVER ITS EXPORT BILL PAYMENTS AND CLAIMED THE LOSS ARISING DUE TO CANCELLATION OF FORWARD CONTRACT AS A BUSINESS LOSS , WHICH VIEW OF THE TRIBUNAL WAS CONFIRMED BY THE HONBLE GUJARAT HIGH COURT . THEREFORE, HE DELETED THE DISALLOWANCE OF 12,13,40,601/ - . 5. ON APPEAL AGAINST THE SAID ORDER OF THE COMMISSIONER OF INCOME TAX (APPEALS), THE TRIBUNAL HELD AS UNDER: - 2. AT THE TIME OF THE HEARING IT WAS FAIRLY AGREED BY BOTH THE SIDES THAT GROUND NOS. 1 & 2 IN A.Y 2009 - 10 IN ITA NO. 325/PNJ/2015 AND GROUND NO.2 IN A.Y 2010 - 11 IN ITA NO. 326/PNJ/2015 ARE 3 M A NO. 08 /P A N/201 6 SQUARELY COVERED BY THE DECISION OF THE CO - ORDINATE BENCH OF THIS TRIBUNAL IN THE ASSESSEES OWN CASE IN ITA NO. 192/PNJ/2015 FOR THE A.Y 2012 - 13 DT. 12.8 .2015 WHEREIN THE COORDINATE BENCH OF THIS TRIBUNAL HAS HELD AS FOLLOWS : 5. WE HAVE CONSIDERED THE RIVAL SUBMISSIONS. THOUGH THE ASSESSEE HAS BEEN SPECIFICALLY DIRECTED TO SHOW THAT THE CONTRACTS WERE TAKEN EXCLUSIVELY FOR THE PURCHASE OF RAW MATERIALS , THE ASSESSEE HAS NOT BEEN ABLE TO PROVE SO. IF THE ASSESSEE HAS ENTERED INTO FORWARD CONTRACT EXCLUSIVELY FOR THE PURCHASE OF THE RAW MATERIALS, THEN, TO THE EXTENT OF SAID PURCHASES OF RAW MATERIALS THE LOSS INCURRED BY THE ASSESSEE IN RESPECT OF THE FO RWARD CONTRACT WOULD BE AN ALLOWABLE EXPENDITURE IN VIEW OF THE DECISION OF THE HON'BLE SUPREM E COURT IN THE CASE OF WOODWARD GOVERNOR INDIA PVT. LTD. REFERRED TO SUPRA. HOWEVER, IF THE FORWARD CONTRACT HAS BEEN ENTERED INTO BY THE ASSESSEE AND THE SAME IS IN EXCESS OF THE COST OF PURCHASES OF RAW MATERIALS, THEN, THE EXCESS OF THE FORWARD CONTRACT IN FOREIGN EXCHANGE WOULD BE TREATED AS SPECULATIVE. THIS EVIDENCE NEEDS TO BE VERIFIED AND EXCLUSIVELY FOR THIS PURPOSE, THE ISSUE IS RESTORED TO THE FILE OF TH E AO FOR RE - ADJUDICATION. CONSEQUENTLY, CONSIDERING THE SUBMISSIONS OF BOTH THE SIDES, THE ISSUE OF LOSS IN RESPECT OF FORWARD CONTRACT IS RESTORED TO THE FILE OF THE AO FOR READJUDICATION IN LINE WITH THE DECISION OF THE CO - ORDINATE BENCH OF THIS TRIBUNAL IN THE ASSESSEES OWN CASE IN ITA NO. 192/PNJ/2015 FOR THE A.Y 2012 - 13 DT. 12.8.2015 . 6 . AT THE TIME OF HEARING, IT WAS POINTED TO THE DEPARTMENTAL REPRESENTATIVE THAT THE ENTIRE ISSUE OF FORWARD CONTRACT LOSS IN FOREIGN EXCHANGE A ND MARKED TO MARK E T LOSS ON FOREIGN EXCHANGE RECEIVABLES/ PAYABLES WERE RESTORED TO THE FILE OF THE ASSESSING OFFICER BY THE TRIBUNAL FOR EXAMINATION OF THE ISSUES AFRESH , IN THE LIGHT OF THE OBSERVATIONS MADE BY THE TRIBUNAL , T HAT BEING SO, WHAT WAS THE GRIE VANCE OF THE REVENUE . THE DEPARTMENTAL REPRESENTATIVE VERY FAIRLY CONCEDED THAT AS THE ISSUE HAS BEEN RESTORED TO THE FILE OF THE ASSESSING OFFICER FOR EXAMINATION AFRESH IN ACCORDANCE WITH DIRECTIONS OF THE TRIBUNAL CONTAINED IN THE ORDER DATED 24/11/2015, THERE WAS NO MISTAKE IN THE ORDER OF THE TRIBUNAL. IN VIEW OF THE ABOVE, THE MISC. PETITION FILED BY THE REVENUE IS DISMISSED. 4 M A NO. 08 /P A N/201 6 7 . IN THE RESULT, MISC. PETITION FILED BY THE REVENUE IS DISMISSED. ORDER PRONOUNCED IN THE COURT AT THE CLOSE OF THE HEARING ON WEDNESDAY , THE 2 7 TH DAY OF APRIL , 201 6 AT GOA . S D / - S D / - (GEORGE MATHAN) (N.S.SAINI) JUDICIAL MEMBER ACCOUNTANT MEMBER DATED : 2 7 TH APRIL, 201 6 . VR/ - COPY TO: 1 . THE ASSESSEE. 2 . THE REVENUE. 3 . THE CIT 4 . THE CIT(A) 5 . THE D.R . 6 . GUARD FILE. BY ORDER ASSISTANT REGISTRAR I.T.A.T., PANAJI .