Emerald Jewel Industry India Limited, Coimbatore v. Addl. CIT, Coimbatore

ITA 1491/CHNY/2015 | 2011-2012
Pronouncement Date: 07-10-2016 | Result: Allowed

Appeal Details

RSA Number 149121714 RSA 2015
Assessee PAN AABCE3430A
Bench Chennai
Appeal Number ITA 1491/CHNY/2015
Duration Of Justice 1 year(s) 3 month(s) 15 day(s)
Appellant Emerald Jewel Industry India Limited, Coimbatore
Respondent Addl. CIT, Coimbatore
Appeal Type Income Tax Appeal
Pronouncement Date 07-10-2016
Appeal Filed By Assessee
Order Result Allowed
Bench Allotted B
Tribunal Order Date 07-10-2016
Date Of Final Hearing 08-08-2016
Next Hearing Date 08-08-2016
Assessment Year 2011-2012
Appeal Filed On 22-06-2015
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.1811/MDS/2015 ( )( / ASSESSMENT YEAR : 2011-12 THE DEPUTY COMMISSIONER OF INCOME TAX CORPORATE CIRCLE -2 63-A RACE COURSE ROAD COIMBATORE. V. M/S EMERALD JEWEL INDUSTRY INDIA LTD. 230 T.V. SAMY ROAD (EAST) R.S. PURAM COIMBATORE 641 002. PAN : AABCE 3430 A (+ / APPELLANT) (-.+ / RESPONDENT) ./ ITA NO.1491/MDS/2015 ( )( / ASSESSMENT YEAR : 2011-12 M/S EMERALD JEWEL INDUSTRY INDIA LTD. 230 T.V. SAMY ROAD (EAST) R.S. PURAM COIMBATORE 641 002. V. THE ADDITIONAL COMMISSIONER OF INCOME TAX RANGE I COIMBATORE. (+ / APPELLANT) (-.+ / RESPONDENT) / 0 1 /REVENUE BY : SHRI V. NANDAKUMAR JCIT (23 0 1 /ASSESSEE BY : SHRI S. SRIDHAR ADVOCATE 4 0 3% / DATE OF HEARING : 18.08.2016 5') 0 3% / DATE OF PRONOUNCEMENT : 07.10.2016 2 I.T.A. NO.1811/MDS/15 I.T.A. NO.1491/MDS/15 / O R D E R PER N.R.S. GANESAN JUDICIAL MEMBER: BOTH THE APPEALS OF THE ASSESSEE AND THE REVENUE ARE DIRECTED AGAINST THE SAME ORDER OF THE COMMISSIONER OF INCOME TAX (APPEALS) -1 COIMBATORE DATED 12.05.2015 AND PERT AIN TO ASSESSMENT YEAR 2011-12. THEREFORE WE HEARD BOTH THE APPEALS TOGETHER AND DISPOSING OF THE SAME BY THIS COMMON O RDER. 2. THE FIRST GROUND OF APPEAL IN THE ASSESSEES APP EAL IS WITH REGARD TO DISALLOWANCE OF DEPRECIATION. 3. SHRI S. SRIDHAR THE LD.COUNSEL FOR THE ASSESSEE SUBMITTED THAT THE ASSESSEE IS ENGAGED IN THE BUSINESS OF MAN UFACTURING AND SALE OF GOLD AND DIAMOND JEWELLERY SILVER ARTICLES AND OTHER RELATED BUSINESS. DURING THE YEAR UNDER CONSIDERATION THE ASSESSEE WAS ALSO ENGAGED IN DERIVATIVES THROUGH MULTI COMMODITI ES EXCHANGE. IN THE COURSE OF ITS BUSINESS ACTIVITY THE ASSESSE E ACQUIRED A BRAND CALLED ISHTAA. THE ASSESSEE CLAIMED DEPRECIATION ON THE INTANGIBLE ASSET NAMELY THE BRAND ISHTAA. THE ASSESSING OFFICER HOWEVER FOUND THAT THE BRAND ISHTAA WAS OWNED BY M/S ISHTAA GOLD JEWELLERY PVT. LTD. WHICH IS AN ASSOCIATE COM PANY OF THE 3 I.T.A. NO.1811/MDS/15 I.T.A. NO.1491/MDS/15 ASSESSEE. THE COMPANY ITSELF WAS AMALGAMATED WITH ASSESSEE WITH EFFECT FROM 31.12.2009. AS PER THE SCHEME OF AMALGAMATION THE ASSESSING OFFICER FOUND THAT INTELLECTUAL PROPE RTY RIGHTS WAS ALSO TRANSFERRED TO THE ASSESSEE. THEREFORE ACCORDING TO THE LD. COUNSEL THE ASSESSING OFFICER FOUND THAT IT IS A C OLOURABLE DEVICE FOR THE PURPOSE OF REDUCING THE TAX EFFECT BY CLAIM ING DEPRECIATION ON THE BRAND VALUE. 4. THE LD. COUNSEL FOR THE ASSESSEE SUBMITTED THAT THE BRAND VALUE NAMELY ISHTAA WAS ACQUIRED BY THE ASSESSE E BEFORE THE SCHEME OF AMALGAMATION. IN FACT FOR THE ASSESSMEN T YEAR 2010-11 A SIMILAR DISALLOWANCE WAS MADE BY THE ASSESSING OF FICER AND THE ASSESSEE HAS NOT CARRIED THE MATTER ON APPEAL. ACC ORDING TO THE LD. COUNSEL MERELY BECAUSE THE ORDER OF THE ASSESS ING OFFICER FOR THE ASSESSMENT YEAR 2010-11 WAS NOT CHALLENGED IT DOES NOT MEAN THAT THE IMPUGNED ORDER FOR THE ASSESSMENT YEAR UND ER CONSIDERATION CANNOT ALSO BE CHALLENGED. ACCORDING TO THE LD. COUNSEL THE PRINCIPLE OF RES JUDICATA IS NOT APPLICABLE. ACCORDING TO THE LD. COUNSEL EACH ASSESSMENT YEAR IS SEPARATE A ND DISTINCT. THEREFORE WHEN THE ASSESSEE RAISED THE ISSUE OF DE PRECIATION IT IS FOR THE ASSESSING OFFICER TO EXAMINE THE SAME AND D ECIDE THE 4 I.T.A. NO.1811/MDS/15 I.T.A. NO.1491/MDS/15 MATTER ON MERIT. THE LD.COUNSEL FURTHER SUBMITTED THAT IN ANY WAY THE ORDER OF THE ASSESSING OFFICER FOR ASSESSMENT Y EAR 2010-11 CANNOT STAND IN THE WAY TO THIS TRIBUNAL IN EXAMINI NG THE MATTER ON MERIT FOR THE YEAR UNDER CONSIDERATION. THE ORDER OF THE ASSESSING OFFICER FOR ASSESSMENT YEAR 2010-11 CANNOT BAR THE ASSESSEE IN CLAIMING DEPRECIATION FOR THE YEAR UNDER CONSIDERAT ION. MORE SO THIS TRIBUNAL CANNOT REJECT THE CLAIM OF THE ASSESS EE ON THE GROUND THAT THE ORDER OF THE ASSESSING OFFICER FOR THE ASS ESSMENT YEAR 2010-11 WAS NOT CHALLENGED. ACCORDING TO THE LD. C OUNSEL THIS TRIBUNAL HAS TO EXAMINE THE ISSUE INDEPENDENTLY FOR THE YEAR UNDER CONSIDERATION AND DECIDE THE SAME ON MERIT. 5. THE LD.COUNSEL FOR THE ASSESSEE PLACED HIS RELIA NCE ON THE JUDGMENT OF APEX COURT IN MAHARANA MILLS (PRIVATE) LTD. V. ITO (1959) 36 ITR 350 JUDGMENT OF UTTARAKHAND HIGH COU RT IN CIT V. ENRON EXPAT SERVICES INC. (2010) 327 ITR 626 AND TH E JUDGMENT OF DELHI HIGH COURT IN HCL TECHNOLOGIES V. ACIT (2015) 377 ITR 483. THE LD.COUNSEL HAS ALSO SUBMITTED THAT THE AMALGAMA TION WAS WITH EFFECT FROM 31.12.2009. THE ASSESSEE ACQUIRED THE BRAND BEFORE THE AMALGAMATION. THEREFORE ACCORDING TO THE LD. COUNSEL IT CANNOT BE SAID THAT IT IS A COLOURABLE DEVICE FOR A CQUISITION OF 5 I.T.A. NO.1811/MDS/15 I.T.A. NO.1491/MDS/15 INTANGIBLE ASSET NAMELY THE BRAND ISHTAA. REFE RRING TO SECTION 32 OF THE ACT THE LD.COUNSEL SUBMITTED THAT EXPLAN ATION 3 TO SECTION 32 CLEARLY SAYS THAT INTANGIBLE ASSET NAME LY THE BRAND IS ALSO ONE OF THE ASSETS WHICH IS ELIGIBLE FOR DEPREC IATION. REFERRING TO PAGE 69 OF THE PAPER-BOOK THE LD.COUNSEL SUBMITTED THAT THESE ARE DETAILS OF THE PAYMENT MADE BY THE ASSESSEE FOR ACQ UIRING THE BRAND ISHTAA. IN FACT THE ASSESSEE ACQUIRED THE BRAND ISHTAA FOR A CONSIDERATION OF ` 8 38 00 000/-. THIS IS NOT IN DISPUTE. THEREFORE ACCORDING TO THE LD. COUNSEL THE CIT(APPEALS) IS N OT JUSTIFIED IN CONFIRMING THE ORDER OF THE ASSESSING OFFICER. 6. ON THE CONTRARY SHRI V. NANDAKUMAR THE LD. DEP ARTMENTAL REPRESENTATIVE SUBMITTED THAT FOR THE ASSESSMENT Y EAR 2010-11 THE ASSESSEE CLAIMED DEPRECIATION BEFORE THE ASSESS ING OFFICER FOR ACQUIRING THE BRAND NAMELY ISHTAA FROM M/S ISHT AA GOLD JEWELLERY PVT. LTD. THE ASSESSING OFFICER IN FACT DISALLOWED THE CLAIM OF THE ASSESSEE AND NO FURTHER APPEAL WAS FIL ED. THE FACTUAL SITUATION BEING SIMILAR AS THAT OF THE ASSESSMENT Y EAR 2010-11 THE ASSESSING OFFICER DISALLOWED THE CLAIM OF THE ASSES SEE FOR THE YEAR UNDER CONSIDERATION ALSO. MOREOVER M/S ISHTAA GOL D JEWELLERY PVT. LTD. WAS AMALGAMATED WITH ASSESSEE-COMPANY WITH EFF ECT FROM 6 I.T.A. NO.1811/MDS/15 I.T.A. NO.1491/MDS/15 31.12.2009 AS PER THE SCHEME OF AMALGAMATION APPROV ED BY THE MADRAS HIGH COURT. AS PER THE SCHEME OF AMALGAMATI ON THE ENTIRE INTANGIBLE ASSET WAS TRANSFERRED TO THE ASSESSEE. THEREFORE THERE IS NO REQUIREMENT FOR THE ASSESSEE TO PURCHASE THE BRAND NAME SEPARATELY BY EXCLUDING ALL ASSETS. THE LD. D.R. F URTHER SUBMITTED THAT AFTER AMALGAMATION THE ASSESSEE IS CLAIMING S ET OFF OF HUGE LOSSES TO THE EXTENT OF ` 9.94 CRORES OF THE AMALGAMATED COMPANY. AT THE VERY SAME TIME THE ASSESSEE IS ALSO CLAIMIN G DEPRECIATION ON THE BRAND NAME ISHTAA BY CLAIMING THAT THE ASS ESSEE HAS PURCHASED THE BRAND NAME FOR ` 8.38 CRORES. ACCORDING TO THE LD. D.R. THE CLAIM OF DEPRECIATION IS NOTHING BUT A CO LOURABLE DEVICE TO REDUCE THE TAX LIABILITY THEREFORE THE CIT(APPEAL S) HAS RIGHTLY CONFIRMED THE ORDER OF THE ASSESSING OFFICER. 7. WE HAVE CONSIDERED THE RIVAL SUBMISSIONS ON EITH ER SIDE AND PERUSED THE RELEVANT MATERIAL AVAILABLE ON RECORD. THE ASSESSEE CLAIMS DEPRECIATION ON THE BRAND ISHTAA CLAIMING THAT IT WAS PURCHASED FOR A TOTAL CONSIDERATION OF `8 .38 CRORES. THE DETAILS OF PAYMENT MADE BY THE ASSESSEE ARE AVAILABLE AT PAGE 69 OF THE PAPER-BOOK. IN FACT THE FUNDS WERE TRANSFERRED TH ROUGH BANKING CHANNEL. THERE IS NO DISPUTE ABOUT THE DETAILS OF PAYMENT MADE BY 7 I.T.A. NO.1811/MDS/15 I.T.A. NO.1491/MDS/15 THE ASSESSEE FOR ACQUIRING THE BRAND VALUE ISHTAA . THE ASSESSEE CLAIMS THAT THE PAYMENTS WERE MADE AS FOLLOWS:- DETAILS OF BANK PAYMENTS FOR BRAND RIGHTS DATE BANK AMOUNT ` `` ` 16/11/2009 STATE BANK OF INDIA CC A/C 1 55 00 000 17/11/2009 STATE BANK OF INDIA CC A/C 2 10 00 000 17/11/2009 STATE BANK OF INDIA CURRENT A/C 94 00 000 18/11/2009 STATE BANK OF INDIA CC A/C 1 00 00 000 24/12/2009 STATE BANK OF INDIA CC A/C 1 00 00 000 26/12/2009 HDFC BANK CURRENT A/C 1 00 00 000 30/12/2009 HDFC BANK CURRENT A/C 84 00 000 TOTAL 8 38 00 000 SUBSEQUENTLY M/S ISHTAA GOLD JEWELLERY PVT. LTD. W HICH OWNED THE BRAND ISHTAA WAS AMALGAMATED WITH THE ASSESSEE-C OMPANY. ADMITTEDLY M/S ISHTAA GOLD JEWELLERY PVT. LTD. IS THE ASSOCIATE COMPANY OF THE ASSESSEE. EVEN THOUGH M/S ISHTAA GO LD JEWELLERY PVT. LTD. IS THE ASSOCIATE COMPANY OF THE ASSESSEE IN THE EYE OF LAW THE ASSESSEE IS A SEPARATE AND INDEPENDENT ENT ITY AND M/S ISHTAA GOLD JEWELLERY PVT. LTD. IS ALSO A DIFFERENT AND DISTINCT ENTITY. UNDER THE INCOME-TAX ACT THEY ARE SEPARATE INDEPEN DENT ASSESSABLE UNIT. THEREFORE FOR ALL PRACTICAL PURP OSES THE ASSESSEE AS WELL AS M/S ISHTAA GOLD JEWELLERY PVT. LTD. HAS TO BE CONSIDERED AS INDEPENDENT AND SEPARATE ENTITY. 8 I.T.A. NO.1811/MDS/15 I.T.A. NO.1491/MDS/15 8. THE ASSESSEE HAS PAID ABOUT ` 8.38 LAKHS BY MEANS OF CHEQUE AS REFERRED IN THE EARLIER PART OF THIS ORDE R. THE REVENUE DISALLOWED THE CLAIM OF THE ASSESSEE ON THE INTELLE CTUAL PROPERTY NAMELY BRAND NAME ISHTAA THAT THE OWNER OF THE B RAND NAME ISHTAA WAS SUBSEQUENTLY AMALGAMATED WITH ASSESSEE -COMPANY. THE ASSESSING OFFICER HAS ALSO OBSERVED THAT M/S IS HTAA GOLD JEWELLERY PVT. LTD. IS A LOSS MAKING COMPANY AND AF TER AMALGAMATION THE ASSESSEE ITSELF CLAIMING SET OFF OF LOSSES AGAINST THE PROFIT EARNED BY IT. THIS TRIBUNAL IS OF THE C ONSIDERED OPINION THAT THE MERE CLAIMING SET OFF OF LOSS SUFFERED BY THE AMALGAMATED COMPANY CANNOT BE A REASON TO DISALLOW THE CLAIM OF THE ASSESSEE FOR DEPRECIATION. AS RIGHTLY SUBMITTED BY THE LD.C OUNSEL FOR THE ASSESSEE EXPLANATION 3 TO SECTION 32 SPECIFICALLY SAYS THAT THE BRAND NAME THE INTANGIBLE ASSET IS ALSO ONE OF THE ASSETS ELIGIBLE FOR DEPRECIATION. THE ASSESSEE DEMONSTRATED BEFORE THIS TRIBUNAL THAT A SUM OF ` 8.38 00 000/- WAS PAID THROUGH BANKING CHANNEL WHICH IS NOT DISPUTED BY THE REVENUE. THE ONLY OBJE CTION OF THE ASSESSEE APPEARS TO BE THAT AFTER AMALGAMATION THE INTELLECTUAL PROPERTY RIGHT TO THE BRAND NAME SHOULD BE TRANSFER RED TO THE ASSESSEE. THEREFORE THE CLAIM OF THE ASSESSEE THA T THE BRAND 9 I.T.A. NO.1811/MDS/15 I.T.A. NO.1491/MDS/15 NAME ISHTAA ACQUIRED OUTSIDE THE SCHEME OF AMALGA MATION IS NOTHING BUT A COLOURABLE DEVICE. WHEN THE ASSESSEE CLAIMS THAT THE BRAND NAME ISHTAA WAS ACQUIRED OUTSIDE THE SCHEME OF AMALGAMATION AND THE PAYMENT WAS ALSO MADE THIS TR IBUNAL IS OF THE CONSIDERED OPINION THAT THE ACQUISITION OF BRAN D NAME CANNOT BE DOUBTED ESPECIALLY WHEN THE PAYMENT WAS NOT IN DISP UTE. 9. THE SUBSEQUENT AMALGAMATION MADE IN RESPECT OF O THER INTANGIBLE ASSETS LEFT OUT OTHER THAN THE BRAND NAM E ISHTAA. M/S ISHTAA GOLD JEWELLERY PVT. LTD. IS ALSO ENGAGED IN DESIGNING MANUFACTURING AND SALE OF GOLD JEWELLERY IT HAS SE VERAL INTANGIBLE ASSETS APART FROM THE BRAND NAME. THEREFORE THE I NTANGIBLE ASSETS OTHER THAN THE BRAND NAME MIGHT HAVE BEEN TRANSFER RED DURING THE COURSE OF AMALGAMATION. THIS TRIBUNAL IS OF THE CO NSIDERED OPINION THAT MERELY BECAUSE THERE WAS SUBSEQUENT AMALGAMATI ON WITH EFFECT FROM 31.12.2009 THAT CANNOT BE CONSTRUED AS IF THE ASSESSEE HAS NOT ACQUIRED ANY BRAND NAME. WHEN THE ASSESSEE ACQUIRED THE BRAND NAME BY MAKING PAYMENT THROUGH BANKING CH ANNEL BEFORE AMALGAMATION THIS TRIBUNAL IS OF THE CONSID ERED OPINION THAT THE ASSESSEE IS ELIGIBLE FOR DEPRECIATION AS CLAIME D. 10 I.T.A. NO.1811/MDS/15 I.T.A. NO.1491/MDS/15 10. THE LD. D.R. CONTENDED THAT DURING THE ASSESSME NT YEAR 2010-11 A SIMILAR CLAIM OF THE ASSESSEE WAS DISALL OWED BY THE ASSESSING OFFICER ON THE GROUND THAT IT WAS A COLOU RABLE DEVICE. NO DOUBT NO APPEAL WAS FILED BY THE ASSESSEE AGAINST THE ORDER OF THE ASSESSING OFFICER. THEREFORE THE ASSESSING OFFICE R HAS FOLLOWED HIS ORDER FOR ASSESSMENT YEAR 2010-11. AS RIGHTLY SUBMITTED BY THE LD.COUNSEL FOR THE ASSESSEE EACH ASSESSMENT YEAR I S SEPARATE AND DISTINCT. MOREOVER THE ORDER OF THE ASSESSING OFF ICER CANNOT BE A BAR ON THIS TRIBUNAL TO APPRECIATE THE MATTER ON ME RIT. IN OTHER WORDS THIS TRIBUNAL CAN GO INTO THE MERIT OF THE C LAIM IRRESPECTIVE OF THE ORDER OF THE ASSESSING OFFICER FOR ASSESSMENT Y EAR 2010-11. THEREFORE MERELY BECAUSE THE ASSESSEE HAS NOT FILE D ANY APPEAL AGAINST THE ORDER OF THE ASSESSING OFFICER FOR ASSE SSMENT YEAR 2010-11 THAT CANNOT BE A REASON FOR REJECTING THE C LAIM OF THE ASSESSEE BY THIS TRIBUNAL. THEREFORE THIS TRIBUNA L IS OF THE CONSIDERED OPINION THAT THE ASSESSEE IS ELIGIBLE FO R DEPRECIATION ON THE BRAND VALUE ACQUIRED ON PAYMENT OF ` 8 38 00 000/-. THEREFORE THE ASSESSING OFFICER IS NOT JUSTIFIED IN DISALLOWI NG THE CLAIM OF THE ASSESSEE. 11 I.T.A. NO.1811/MDS/15 I.T.A. NO.1491/MDS/15 11. NOW COMING TO REVENUES APPEAL THE FIRST GROUN D OF APPEAL IS WITH REGARD TO DISALLOWANCE OF THE CLAIM OF THE ASSESSEE UNDER SECTION 80-IA OF THE ACT. 12. WE HAVE HEARD THE LD. DEPARTMENTAL REPRESENTATI VE AND THE LD.COUNSEL FOR THE ASSESSEE. THE ASSESSING OFFICER DISALLOWED THE CLAIM OF THE ASSESSEE ONLY ON THE GROUND THAT AN SL P IS PENDING BEFORE THE APEX COURT AGAINST THE JUDGMENT OF THE M ADRAS HIGH COURT IN VELAYUDHASWAMY SPINNING MILLS (P) LTD. V. ACIT (340 ITR 477). AFTER HEARING THE LD. D.R. AND THE LD.COUNSE L FOR THE ASSESSEE THIS TRIBUNAL FINDS THAT THE CBDT BY ITS CIRCULAR ACCEPTED THE JUDGMENT OF MADRAS HIGH COURT IN VELAYUDHASWAMY SPINNING MILLS (P) LTD. (SUPRA) AND INSTRUCTED ALL ITS OFFIC ERS TO WITHDRAW THE PENDING APPEAL. THEREFORE THIS TRIBUNAL IS OF THE CONSIDERED OPINION THAT THE CIT(APPEALS) HAS RIGHTLY ALLOWED T HE CLAIM OF THE ASSESSEE BY APPLYING THE JUDGMENT OF MADRAS HIGH CO URT. THIS TRIBUNAL DO NOT FIND ANY REASON TO INTERFERE WITH T HE ORDER OF THE LOWER AUTHORITY AND ACCORDINGLY THE SAME IS CONFIRM ED. 13. THE NEXT GROUND OF REVENUES APPEAL IS WITH REG ARD TO DISALLOWANCE OF LOSS SUFFERED BY THE ASSESSEE IN DE RIVATIVES TRANSACTIONS. 12 I.T.A. NO.1811/MDS/15 I.T.A. NO.1491/MDS/15 14. SHRI V. NANDAKUMAR THE LD. DEPARTMENTAL REPRES ENTATIVE SUBMITTED THAT SECTION 43(5)(E) OF THE ACT WAS INSE RTED BY FINANCE ACT 2013 WITH EFFECT FROM 01.04.2014. THIS APPEAL OF THE ASSESSEE RELATES TO ASSESSMENT YEAR 2011-12 THEREFORE THE PROVISIONS OF SECTION 43(5)(E) OF THE ACT IS NOT APPLICABLE AT AL L TO THE ASSESSEES CASE. ACCORDING TO THE LD. D.R. BEFORE THE INTROD UCTION OF SECTION 43(5)(E) OF THE ACT WITH EFFECT FROM 01.04.2014 TH E TRANSACTION OF THE ASSESSEE WAS COVERED BY SECTION 43(5)(A) OF THE ACT. THEREFORE ACCORDING TO THE LD. D.R. FOR THE YEAR UNDER CONSIDERATION THE TRANSACTION ENTERED INTO BY THE ASSESSEE IN DERIVATIVES THROUGH MULTI COMMODITIES EXCHANGE IS A SPECULATIVE TRANSACTION. THEREFORE THE LOSS SUFFERED BY THE A SSESSEE CANNOT BE ALLOWED TO SET OFF AGAINST THE PROFIT OF THE ASSESS EE. 15. REFERRING TO THE ORDER OF THE CIT(APPEALS) THE LD. DEPARTMENTAL REPRESENTATIVE SUBMITTED THAT THE ASSE SSEE ENTERED INTO A HEDGING TRANSACTION WHICH IS NOTHING BUT A S PECULATIVE ONE. ACCORDING TO THE LD. D.R. MERELY BECAUSE THE ASSES SEE CARRIED ON THE TRANSACTION IN ORDER TO REDUCE THE LOSSES SUFFE RED IN DIFFERENT BUSINESS IT WILL NOT LOOSE ITS CHARACTER AS SPECUL ATIVE TRANSACTION. HENCE THE TRANSACTION ENTERED INTO BY THE ASSESSEE FALLS WITHIN THE 13 I.T.A. NO.1811/MDS/15 I.T.A. NO.1491/MDS/15 AMBIT OF SPECULATIVE TRANSACTION. ACCORDING TO THE LD. D.R. THE LOSS SUFFERED IN SUCH TRANSACTION CANNOT BE ALLOWED TO S ET OFF. 16. WE HAVE CONSIDERED THE RIVAL SUBMISSIONS ON EIT HER SIDE AND PERUSED THE RELEVANT MATERIAL AVAILABLE ON RECORD. WE HAVE CAREFULLY GONE THROUGH THE ORDERS OF BOTH THE AUTHO RITIES BELOW. THE ASSESSING OFFICER DISALLOWED THE CLAIM OF THE ASSES SEE TO THE EXTENT OF ` 2 97 27 437/- ON THE GROUND THAT IT IS A LOSS ARISI NG OUT OF SPECULATIVE TRANSACTION. THE MAIN CONTENTION OF TH E ASSESSING OFFICER APPEARS TO BE THAT THE TRANSACTION OF THE A SSESSEE WOULD NOT FALL UNDER THE PROVISIONS OF SECTION 43(5)(A) OF TH E ACT. THE SPECIFIC PROVISION EXCLUDING THE DERIVATIVES TRANSACTION W AS INTRODUCED BY FINANCE ACT 2013 WITH EFFECT FROM 01.04.2014 IN SE CTION 43(5)(E). THEREFORE THE PROVISIONS OF SECTION 43(5)(E) OF TH E ACT IS NOT APPLICABLE FOR THE YEAR UNDER CONSIDERATION. THERE FORE THE ASSESSING OFFICER FOUND THAT THE LOSS SUFFERED BY T HE ASSESSEE IS IN THE NATURE OF SPECULATIVE TRANSACTION. THEREFORE IT CANNOT BE ALLOWED TO SET OFF. 17. FROM THE MATERIAL AVAILABLE ON RECORD IT APPEAR S THAT THE ASSESSEE-COMPANY PURCHASED THE GOLD THROUGH BANK OF NOVA SCOTIA AND CORRESPONDING SALE OF JEWELLERY AND BULL ION WAS MADE ON 14 I.T.A. NO.1811/MDS/15 I.T.A. NO.1491/MDS/15 THE BASIS OF TRADE SETTLEMENT ADVICES WITH MULTI CO MMODITIES EXCHANGE. AS AND WHEN THE GOLD JEWELLERY WAS MANUF ACTURED THE ASSESSEE EITHER MAKES BANK OF NOVA SCOTIA TO TAKE P HYSICAL DELIVERY OR THROUGH BOOKING WITH MULTI COMMODITIES EXCHANGE. HEDGING WAS RESORTED TO WHEN THE FUNDS POSITION WAS NOT COMFORTABLE AND THE PRICE OF THE GOLD WAS NOT BENEF ICIAL IN THE SPOT MARKET. THE SERIES OF TRANSACTIONS MADE BY THE ASS ESSEE WITH BANK OF NOVA SCOTIA AND MULTI COMMODITIES EXCHANGE ARE CLOSELY LINKED WITH THE ASSESSEES BUSINESS OF MANUFACTURIN G AND SALE OF GOLD JEWELLERY AND PURCHASE OF GOLD. THEREFORE TH E TRANSACTION OF ASSESSEE IS APPARENTLY FOR PURCHASE OF RAW MATERIAL NAMELY THE GOLD FOR MANUFACTURING THE GOLD JEWELLERY AND IN OR DER TO SAFEGUARD THE LOSS THE ASSESSEE WAS SELLING THE JEWELLERY TH ROUGH MULTI COMMODITIES EXCHANGE. THEREFORE THIS TRIBUNAL IS OF THE CONSIDERED OPINION THAT THE TRANSACTION OF THE ASSE SSEE WOULD SQUARELY FALL UNDER SECTION 43(5)(A) OF THE ACT. T HEREFORE THE CONTENTION OF THE REVENUE THAT THE TRANSACTION OF T HE ASSESSEE WOULD NOT FALL UNDER SECTION 43(5)(A) OF THE ACT IS NOT JUSTIFIED. THEREFORE THE CIT(APPEALS) HAS RIGHTLY ALLOWED THE CLAIM OF THE ASSESSEE AND HENCE THIS TRIBUNAL DO NOT FIND ANY R EASON TO 15 I.T.A. NO.1811/MDS/15 I.T.A. NO.1491/MDS/15 INTERFERE WITH THE ORDER OF THE LOWER AUTHORITY AND ACCORDINGLY THE SAME IS CONFIRMED. 18. IN THE RESULT THE ASSESSEES APPEAL IN I.T.A. NO.1491/MDS/2015 IS ALLOWED AND THE REVENUES APPEA L IN I.T.A. NO.1811/MDS/2015 IS DISMISSED. ORDER PRONOUNCED ON 7 TH OCTOBER 2016 AT CHENNAI. SD/- SD/- (. !'# ! ) ( . . . ) (A. MOHAN ALANKAMONY) (N.R.S. GANESAN) % / ACCOUNTANT MEMBER /JUDICIAL MEMBER /CHENNAI 7 /DATED THE 7 TH OCTOBER 2016. KRI. 0 -389 :9)3 /COPY TO: 1. (23 /ASSESSEE 2. -.+ /RESPONDENT 3. 4 ;3 () /CIT(A)-1 COIMBATORE 4. PRINCIPAL CIT-1 COIMBATORE 5. 9< -3 /DR 6. =( > /GF.