DCIT, Tiruppur v. S P Apparels Limited, Avanashi

ITA 1465/CHNY/2016 | 2010-2011
Pronouncement Date: 30-09-2016 | Result: Dismissed

Appeal Details

RSA Number 146521714 RSA 2016
Assessee PAN AAJCS4031P
Bench Chennai
Appeal Number ITA 1465/CHNY/2016
Duration Of Justice 4 month(s) 6 day(s)
Appellant DCIT, Tiruppur
Respondent S P Apparels Limited, Avanashi
Appeal Type Income Tax Appeal
Pronouncement Date 30-09-2016
Appeal Filed By Department
Order Result Dismissed
Bench Allotted B
Tribunal Order Date 30-09-2016
Date Of Final Hearing 17-08-2016
Next Hearing Date 17-08-2016
Assessment Year 2010-2011
Appeal Filed On 24-05-2016
Judgment Text
IN THE INCOME TAX APPELLATE TRIBUNAL B BENCH CHENNAI . . . . !'# ! % !& BEFORE SHRI N.R.S. GANESAN JUDICIAL MEMBER AND SHRI A. MOHAN ALANKAMONY ACCOUNTANT MEMBER ./ ITA NO.1465/MDS/2016 ( )( / ASSESSMENT YEAR :2010-11 THE DEPUTY COMMISSIONER OF INCOME TAX CIRCLE 1 TIRUPUR. V. M/S S P APPARELS LIMITED NO.39-A VOC EXTENSION STREET KAIKATTIPUDUR AVINASHI 641 654. PAN : AAJCS 4031 P (+ / APPELLANT) (-.+ / RESPONDENT) + / 0 / APPELLANT BY : SHRI V. NANDA KUMAR JCIT -.+ / 0 / RESPONDENT BY : SH. T. BANUSEKAR CA 1 / 2% / DATE OF HEARING : 17.08.2016 3') / 2% / DATE OF PRONOUNCEMENT : 30.09.2016 / O R D E R PER N.R.S. GANESAN JUDICIAL MEMBER: THIS APPEAL OF THE REVENUE IS DIRECTED AGAINST T HE ORDER OF THE COMMISSIONER OF INCOME TAX (APPEALS) 3 COIMB ATORE DATED 30.12.2015 AND PERTAINS TO ASSESSMENT YEAR 2010-11. 2. THERE WAS A DELAY OF 59 DAYS IN FILING THIS APPE AL BY THE REVENUE. THE REVENUE HAS FILED A PETITION FOR COND ONATION OF 2 I.T.A. NO.1465/MDS/16 DELAY. WE HAVE HEARD THE LD. DEPARTMENTAL REPRESEN TATIVE AND THE LD. REPRESENTATIVE FOR THE ASSESSEE. WE FIND T HAT THERE WAS SUFFICIENT CAUSE FOR NOT FILING THE APPEAL BEFORE T HE STIPULATED TIME. THEREFORE WE CONDONE THE DELAY AND ADMIT THE APPEA L. 3. SHRI V. NANDA KUMAR THE LD. DEPARTMENTAL REPRES ENTATIVE SUBMITTED THAT THE ASSESSEE SUFFERED LOSS IN THE FO REIGN EXCHANGE DERIVATIVE TO THE EXTENT OF ` 1 51 45 677/-. THE LOSS CLAIMED BY THE ASSESSEE WAS DISALLOWED BY THE ASSESSING OFFICER ON THE GROUND THAT IT IS A SPECULATIVE TRANSACTION. ON APPEAL BY THE ASSESSEE THE CIT(APPEALS) FOUND THAT THE DERIVATIVE CONTRACTS WE RE NOT ENTERED INTO WITH AN INTENTION TO MANAGE THE EXPOSURE OF EX PORT PROCEEDS RECEIVED BY THE ASSESSEE. THE CIT(APPEALS) HAS ALS O FOUND THAT THE TRANSACTION DID NOT ATTRACT THE CONDITIONS PROV IDED IN SECOND LIMB OF SECTION 43(5) OF THE INCOME-TAX ACT 1961 (IN SH ORT 'THE ACT'). ULTIMATELY BY PLACING RELIANCE ON THE ORDER OF THI S TRIBUNAL IN THE ASSESSEE'S OWN CASE FOR ASSESSMENT YEAR 2008-09 IN I.T.A. NO.1327/MDS/2014 DATED 17.04.2015 THE CIT(APPEALS) ALLOWED THE CLAIM OF THE ASSESSEE. ACCORDING TO THE LD. D.R. FOREIGN EXCHANGE DERIVATIVE TRANSACTIONS ARE COVERED BY PROVISO TO S ECTION 43(5)(A) OF THE ACT. SINCE THE TRANSACTION WAS NOT DONE ON ACT UAL DELIVERY ACCORDING TO THE LD. D.R. IT IS A SPECULATIVE TRAN SACTION AS PROVIDED 3 I.T.A. NO.1465/MDS/16 IN SECTION 43(5) OF THE ACT THEREFORE THE CIT(APP EALS) IS NOT JUSTIFIED IN ALLOWING THE CLAIM OF THE ASSESSEE. 4. ON THE CONTRARY SH. T. BANUSEKAR THE LD. REPRE SENTATIVE FOR THE ASSESSEE SUBMITTED THAT THE ASSESSEE ENTERED I NTO CROSS CURRENCY OPTION CONTRACTS ON THE BASIS OF EXPERT AD VICE AND SCIENTIFIC ANALYSIS OF CURRENCY MOVEMENTS ACROSS VA RIOUS CURRENCIES. ACCORDING TO THE LD. REPRESENTATIVE T HE CONTRACTS WERE ENTERED INTO BY THE ASSESSEE WITH A VIEW TO EFFECTI VELY MANAGE THE UNDERLYING EXPOSURE ON ACCOUNT OF EXPORT PROCEEDS R ECEIVABLE BY THE ASSESSEE. THEREFORE ACCORDING TO THE LD. REPR ESENTATIVE THE PROVISO TO SECTION 43(5) IS NOT APPLICABLE AT ALL. THE LOSS ON ACCOUNT OF FOREIGN CURRENCY DERIVATIVE IS PURELY A BUSINESS LOSS THEREFORE THE LOSS SUFFERED BY THE ASSESSEE IN THE COURSE OF BUSINESS IS ALLOWABLE UNDER SECTION 28 OF THE ACT. IN FACT AN IDENTICAL ISSUE WAS CONSIDERED BY THIS TRIBUNAL IN THE ASSESSEE'S O WN CASE FOR ASSESSMENT YEAR 2008-09 IN I.T.A. NO. 1327/MDS/2014 DATED 17.04.2015. THIS TRIBUNAL ALLOWED A SIMILAR CLAIM OF THE ASSESSEE AS BUSINESS LOSS. THE CIT(APPEALS) BY PLACING RELI ANCE ON THE ORDER OF THIS TRIBUNAL IN THE ASSESSEE'S OWN CASE FOR ASSESSMENT YEAR 2008-09 ALLOWED THE CLAIM OF THE ASSESSEE. T HEREFORE 4 I.T.A. NO.1465/MDS/16 ACCORDING TO THE LD. REPRESENTATIVE THE REVENUE CA NNOT HAVE ANY GRIEVANCE AT ALL. 5. WE HAVE CONSIDERED THE RIVAL SUBMISSIONS ON EITH ER SIDE AND PERUSED THE RELEVANT MATERIAL AVAILABLE ON RECORD. DURING THE COURSE OF BUSINESS TRANSACTION THE ASSESSEE ENTERE D INTO CROSS CURRENCY OPTION CONTRACTS IN ORDER TO PROTECT THE L OSS SUFFERED ON ACCOUNT OF EXPORT PROCEEDS RECEIVABLE BY THE ASSESS EE. THE ASSESSING OFFICER FOUND THAT THE FOREIGN CURRENCY D ERIVATIVE TRANSACTION WAS IN THE NATURE OF SPECULATIVE TRANSA CTION WITHIN THE MEANING OF SECTION 43(5) OF THE ACT THEREFORE THE LOSS SUFFERED BY THE ASSESSEE CANNOT BE ALLOWED AGAINST THE INCOME F ROM BUSINESS. AN IDENTICAL SET OF FACTS WAS EXAMINED BY THIS TRIB UNAL IN THE ASSESSEE'S OWN CASE FOR ASSESSMENT YEAR 2008-09 AND THE LOSS SUFFERED BY THE ASSESSEE IN SUCH TRANSACTION WAS HE LD TO BE A BUSINESS LOSS BY THIS TRIBUNAL. THUS THIS TRIBUNA L FOR ASSESSMENT YEAR 2008-09 IN THE ASSESSEE'S OWN CASE ALLOWED A S IMILAR LOSS SUFFERED BY THE ASSESSEE. SINCE THE FACTS ARE IDEN TICAL FOR THE YEAR UNDER CONSIDERATION THIS TRIBUNAL IS OF THE CONSID ERED OPINION THAT THE CIT(APPEALS) HAS RIGHTLY FOLLOWED THE ORDER OF THIS TRIBUNAL FOR ASSESSMENT YEAR 2008-09 AND ALLOWED THE CLAIM OF TH E ASSESSEE. 5 I.T.A. NO.1465/MDS/16 THIS TRIBUNAL DO NOT FIND ANY REASON TO INTERFERE W ITH THE ORDER OF THE LOWER AUTHORITY AND ACCORDINGLY THE SAME IS CONFIRM ED. 6. IN THE RESULT THE APPEAL FILED BY THE REVENUE I S DISMISSED. ORDER PRONOUNCED ON 30 TH SEPTEMBER 2016 AT CHENNAI. SD/- SD/- (. !'# ! ) ( . . . ) (A. MOHAN ALANKAMONY) (N.R.S. GANESAN) % / ACCOUNTANT MEMBER /JUDICIAL MEMBER /CHENNAI 5 /DATED THE 30 TH SEPTEMBER 2016. KRI. / -267 87)2 /COPY TO: 1. + /APPELLANT 2. -.+ /RESPONDENT 3. 1 92 () /CIT(A)-3 COIMBATORE 4. 1 92 /CIT COIMBATORE 5. 7: -2 /DR 6. ;( < /GF.