DCIT, Circle - 4, Kolkata, Kolkata v. M/s. Neptune Exports Ltd., Kolkata

ITA 2133/KOL/2010 | 2007-2008
Pronouncement Date: 29-03-2011

Appeal Details

RSA Number 213323514 RSA 2010
Assessee PAN AAACN8502F
Bench Kolkata
Appeal Number ITA 2133/KOL/2010
Duration Of Justice 4 month(s) 2 day(s)
Appellant DCIT, Circle - 4, Kolkata, Kolkata
Respondent M/s. Neptune Exports Ltd., Kolkata
Appeal Type Income Tax Appeal
Pronouncement Date 29-03-2011
Appeal Filed By Department
Bench Allotted C
Tribunal Order Date 29-03-2011
Assessment Year 2007-2008
Appeal Filed On 26-11-2010
Judgment Text
IN THE INCOME TAX APPELLATE TRIBUNAL BEN CH C KOLKATA () BEFORE . .. . . .. . SHRI D.K.TYAGI JUDICIAL MEMBER. !' !' !' !' /AND . .. . . .. .! !! ! # SHRI C.D.RAO ACCOUNTANT MEMBER '$ '$ '$ '$ / ITA NO . 2133/KOL/2010 %&' !()/ ASSESSMENT YEAR : 2007-08 (+ / APPELLANT ) D.C.I.T. CIRCLE-4 KOLKATA - !& - - VERSUS - . (.+ / RESPONDENT ) M/S. NEPTUNE EXPORTS LTD. KOLKATA (PAN: AAACN 8502 F) + / 0 / FOR THE APPELLANT: SHRI S.I.BARA SR.DR .+ / 0 / FOR THE RESPONDENT: SHRI J.M.THARD 1 / ORDER ( (( ( . .. . . .. .! !! !) )) ) # PER SHRI C.D.RAO AM THIS APPEAL IS FILED BY THE REVENUE AGAINST THE OR DER DATED 12.07.2010 OF THE CIT(A)-IV KOLKATA PERTAINING TO A.YR. 2007-08. 2. THERE IS A DELAY OF 32 DAYS IN FILING OF THE APPEAL BY THE REVENUE FOR WHICH THE REVENUE HAS FILED A CONDONATION PETITION EXPLAINING THE REASONS FOR SUCH DELAY. AFTER CONSIDERING THE SUBMISSIONS BY THE REVENUE THE DELA Y IS CONDONED. 3. IN THIS APPEAL THE REVENUE HAS DELETED THE ADDITION MADE BY THE AO FIRST IN RESPECT OF ADDITIONS ON ACCOUNT OF INTEREST AND BAN K CHARGES SECONDLY ON ACCOUNT OF FOREIGN EXCHANGE FLUCTUATION LOSS AND THIRDLY ON AC COUNT OF PROFIT ON CONVERSION OF FOREIGN CURRENCY. 2 4. THE BRIEF FACTS OF THE ISSUE ARE THAT THE AO WHILE DOING THE SCRUTINY ASSESSMENT DISALLOWED THE FOLLOWING : ADD : INTEREST 563209 ADD : BANK CHARGES 528435 ADD: FOREIGN EXCHANGE FLUCTUATION LOSS 1038998 ADD:PROFIT ON CONVERSION OF FOREIGN CURRENCY 210821 BY OBSERVING THAT THE NATURE OF BUSINESS OF THE ASSESSEE COMPANY STA TED TO BE PROCESSING AND BLENDING OF TEA. DURING THE YEAR THE COMPANY HAS SO LD ITS ENTIRE STOCK OF RS.20368/- AND PURCHASE OF RS.6713/- BY A SINGLE SA LE TO ITS SISTER CONCERN NAMED M/S. NORTHERN PROJECTS LTD. FOR AN AMOUNT OF RS.26268/-. THE SALE WAS MADE ON 30.12.06 AND PURCHASE WAS MADE ON 01/04/06. FROM THE DETAILS IT REVEALED THAT THE LOSS WAS DUE TO INTEREST PAYMENT OF RS.563209/- BANK CHARGE OF RS.528435/- AND FOREIGN EXCHANGE (IN EEFC A/C) FLUCTUATION LOSS OF RS.828177/-. IN THE BALANCE SHE ET THE OPENING AMOUNT OF SECURED LOAN WAS RS.2 74 00 000/- AND CLOSING AMOUN T OF LOAN WAS NIL. DURING THE YEAR THE ONLY SALE WAS MADE TO ITS SISTER CONCE RN. THE AMOUNT OF PURCHASE WAS MEAGER AMOUNT. THEREFORE I AM OF THE OPINION T HAT BANK LOAN (PACKING CREDIT LOAN) WAS NOT USED IN THE BUSINESS OF THE AS SESSEE. THEREFORE BANK CHARGE AND INTEREST ON BANK LOAN ARE DISALLOWED. FROM THE DETAILS IT IS SEEN THAT LOSS ON FOREIGN EX CHANGE WAS OCCURRED ON THE FOLLOWING :- PROFIT ON ENCASHMENT OF EURO +103000 LOSS ON ENCASHMENT OF USD -104000 LOSS ON ENCASHMENT OF USD +161000 PROFIT ON FOREIGN REMITTANCE + 50821 +210821 THE FOLLOWING AMOUNT REPRESENTS FLUCTUATION LOSS ON FOREIGN CURRENCY IN EEFC ACCOUNT : UCO BANK IBB BRANCH CLOSING VALUATION 416374 ICICI BANK RNM BRANCH CLOSING VALUATION 622624 1038998 THE DEPOSIT AMOUNT IN THE EEFC A/C WAS RS.5 61 18 0 47/- AS AGAINST OPENING BALANCE OF RS.87422825/-. IT IS MANDATORY FOR THE E XPORTER TO MAINTAIN EEFC ACCOUNT FOR RECEIPT OF FOREIGN CURRENCY OUT OF EXPO RT. BUT IT IS NOT MANDATORY TO KEEP DEPOSIT FOREIGN CURRENCY IN THE EEFC ACCOUNT B EING CURRENT ACCOUNT. THE DEPOSIT IN FOREIGN CURRENCY IS NOT A FIXED DEPOSIT. KEEPING AMOUNT IN THE EEFC ACCOUNT IS ALSO CANNOT BE BUSINESS OF THE ASSESSEE AS PER MOA. BESIDES KEEPING FOREIGN CURRENCY IN ORDER TO EARN PROFIT IS NOT A RECOGNIZED BUSINESS. SINCE THE LOSS IS NOT ATTRIBUTABLE TO THE BUSINES S THE CLAIM IS NOT ADMISSIBLE. RULE 115 OF IT RULE 1962 ALSO NOT APPLI CABLE IN THE CASE OF THE ASSESSEE WHEN IT DID NOT MAKE ANY EXPORT OR BROUGHT ANY EXPORT VALUE IN CONVERTIBLE FOREIGN EXCHANGE. SIMILAR VIEW WAS ALSO TAKEN IN THE EARLIER ASSESSMENTS. THEREFORE THE LOSS ON FOREIGN EXCHANG E OF RS.1038998/- IS 3 DISALLOWED AND ADDED BACK WITH TOTAL INCOME SINCE N OT INCIDENTAL TO BUSINESS OF THE ASSESSEE. SIMULTANEOUSLY THE PROFIT/LOSS ON CON VERSION OF CURRENCY IS CONSIDERED AS REVENUE PROFIT/LOSS. 4.1. ON APPEAL THE LD. CIT(A) HAS DELETED THE SAME AFTER TAKING INTO CONSIDERATION THE SUBMISSIONS MADE BY THE LD. COUNSEL BY OBSERVIN G AS UNDER :- 3.3. I HAVE CAREFULLY CONSIDERED THE FACTS AND T HE SUBMISSIONS OF THE A/RS. THERE IS NO MATERIAL TO SHOW THAT ANY PART OF THE B ANK CHARGES OR THE INTEREST PAYMENT RELATED TO NON-BUSINESS PURPOSES. IT APPEAR S THAT THE YEAR UNDER CONSIDERATION WAS A PERIOD OF LULL AND INACTIVITY F OR THE BUSINESS OF THE COMPANY AND THE BANK CHARGES WERE INCURRED IN RESPE CT OF THE EXISTING BANK ACCOUNTS OF THE COMPANY MAINTAINED FOR EXPORT BUSIN ESS OF THE COMPANY. I DO NOT FIND ANY JUSTIFICATION FOR DISALLOWING THE BANK CHARGES. AS REGARDS INTEREST I FIND THAT THERE IS NO MATERIAL TO SHOW THAT NAY P ART OF THE PACKING CREDIT LOAN TAKEN IN THE PRECEDING YEAR WAS USED FOR NON-BUSINE SS PURPOSES. MOREOVER THE INCOME FROM INTEREST DURING THE YEAR WAS FOR RS.24 57 582/- WHICH FULLY SET OFF OF THE INTEREST PAID DURING THE YEAR AMOUNTING TO R S.5 63 209/- AFTER WHICH THERE STILL REMAINED INCOME FORM INTEREST OF RS.18 94 373/-. I THEREFORE DO NOT FIND ANY JUSTIFICATION IN DISALLOWING THE INTEREST PAYMENT OF RS.5 62 209/-. THE DISALLOWANCE OF THE BANK CHARGES AND THE INTEREST P AYMENT OF RS.5 28 435/- AND RS.5 63 209/- RESPECTIVELY ARE DELETED. GROUND NO.1 IS ALLOWED. 4.3. I HAVE CAREFULLY CONSIDERED THE FACTS AND S UBMISSIONS OF THE APPELLANT AND FIND THAT THE AO HAS TAKEN A DIAGONALLY OPPOSIT E VIEW IN THIS YEAR IN RESPECT OF THE LOSS IN THE EEFC A/C DUE TO VALUATIO N AT THE CLOSE OF THE YEAR. THE PROFIT OR LOSS DUE TO VALUATION OF THE FOREIGN CURRENCY BALANCE IN THE EEFC A/C HAS BEEN A REGULAR FEATURE IN THE PRECEDING YEA RS AND HAVE BEEN INCLUDED IN THE INCOME OF THE APPELLANT. THE AO APPEARS TO HAVE DISALLOWED THE AMOUNT DUE TO SOME MISCONCEIVED NOTION THAT SUCH LOSS WAS DISALLOWED IN THE PRECEDING YEAR WHICH IS NOT CORRECT. MOREOVER IN A NY CASE THE LOSS DUE TO SUCH VALUATION IS A BUSINESS LOSS AND AN ALLOWABLE DEDUC TION. SIMILAR VIEW HAS BEEN TAKEN BY ME IN THE APPEAL OF M/S. V.N.ENTERPRISES L TD. A SISTER CONCERN HAVING SIMILAR BUSINESS (APPEAL NO.188/CIT(A)-IV/08-09) AL SO DECIDED TODAY. THE AO IS THEREFORE DIRECTED TO DELETE THE DISALLOWANCE OF THE LOSS OF RS.10 38 998/- AND ALSO DELETE THE ADDITION OF RS.2 10 821/- FOR P ROFIT FORM CONVERSION OF FOREIGN CURRENCY WHICH IS ALREADY INCLUDED BY THE A PPELLANT IN ITS INCOME. IN THE RESULT GROUND NOS.2 AND 3 ARE ALLOWED AND THE A DDITIONS OF RS.10 38 998/- AND RS.2 10 821/- ARE DELETED. 4.2. AGGRIEVED BY THIS THE REVENUE IS IN APPEAL BEF ORE US. 5. AT THE TIME OF HEARING THE LD. DR APPEARING ON BEHALF OF THE REVENUE HEAVILY RELIED ON THE ORDER OF THE AO. 6. ON THE OTHER HAND THE LD. COUNSEL FOR THE ASSES SEE RELIED ON THE ORDERS OF THE LD. CIT(A). HE FURTHER RELIED ON THE CASE OF CIT VS WOODWARD GOVERNOR INDIA PVT. 4 LTD. AS REPORTED IN 312 ITR 254 IN RESPECT OF FORE IGN FLUCTUATION LOSS AS WELL AS PROFIT ON CONVERSION OF FOREIGN CURRENCY. 6.1. AS REGARDING INTEREST AS WELL AS BANK CHARGES HE CONTENDED THAT THE YEAR UNDER CONSIDERATION WAS ALREADY LULL AND INACTIVITY FOR T HE BUSINESS OF THE COMPANY AND THE BANK CHARGES WERE INCURRED IN RESPECT OF THE EXISTI NG BANK ACCOUNTS OF COMPANY MAINTAINED FOR EXPORT BUSINESS OF THE COMPANY. THER EFORE THE LD. CIT(A) IS JUSTIFIED IN DELETING THE SAME. 7. AFTER HEARING THE RIVAL SUBMISSIONS AND ON CAREF UL PERUSAL OF THE MATERIAL AVAILABLE ON RECORD IT IS OBSERVED THAT THE LD. CI T(A) HAS RIGHTLY DELETED THE ADDITION ON ACCOUNT OF INTEREST BY OBSERVING THAT I DO NOT F IND ANY JUSTIFICATION FOR DISALLOWING THE BANK CHARGES. AS REGARDS INTEREST I FIND THAT THERE IS NO MATERIAL TO SHOW THAT NAY PART OF THE PACKING CREDIT LOAN TAKEN IN THE PRECED ING YEAR WAS USED FOR NON-BUSINESS PURPOSES. MOREOVER THE INCOME FROM INTEREST DURING THE YEAR WAS FOR RS.24 57 582/- WHICH FULLY SET OFF OF THE INTEREST PAID DURING THE YEAR AMOUNTING TO RS.5 63 209/- AFTER WHICH THERE STILL REMAINED INCOME FORM INTERE ST OF RS.18 94 373/- AND THE LD. DR COULD NOT CONTRADICT THE ABOVE FINDINGS OF THE LD. CIT(A). WE FIND NO INFIRMITY IN THE ORDERS OF THE LD. CIT(A). THEREFORE WE CONFIRM THE SAME. 7.1. SIMILARLY THE BANK CHARGES OF RS.2 28 435/- H AS ALREADY BEEN PAID BY THE ASSESSEE ON ACCOUNT OF THE EXISTING BUSINESS. THERE FORE WE CONFIRM THE ACTION OF THE LD. CIT(A) ON THIS ISSUE ALSO. 7.2. IN THE RESULT GROUND NO.1 OF THE REVENUES A PPEAL IS DISMISSED. 7.3. AS REGARDING DISALLOWANCE ON ACCOUNT OF FOREIG N EXCHANGE FLUCTUATION LOSS AS WELL AS PROFIT ON CONVERSION OF FOREIGN CURRENCY KE EPING IN VIEW OF THE FACT THAT THE HONBLE APEX COURT CITED SUPRA HAS HELD THAT LOSS SUFFERED BY THE ASSESSEE IN RESPECT OF THE REVENUE LIABILITY ON ACCOUNT OF EXCHANGE DIF FERENCE AS ON THE DATE OF THE BALANCE SHEET IS AN ITEM OF EXPENDITURE ALLOWABLE U/S 37(1) IN THE YEAR OF ACCRUAL. SINCE THE VIEW TAKEN BY THE LD. CIT(A) IS IN CONFOR MITY WITH THE DECISION OF THE 5 HONBLE APEX COURT WE FIND NO INFIRMITY IN THE ORDE RS OF THE LD. CIT(A) AND WE CONFIRM THE SAME AND DISMISS THE APPEAL OF THE REVE NUE. 7.4. IN THE RESULT THIS ISSUE IS ALSO DECIDED IN FA VOUR OF THE ASSESEE BY DISMISSING THE GROUND RAISED BY THE REVENUE. 8. IN THE RESULT THE APPEAL FILED BY THE REVENUE I S DISMISSED. ORDER PRONOUNCED IN THE COURT ON 29.03.2011. SD/- SD/- . .. . . .. . % % % % D.K.TYAGI JUDICIAL MEMBER . .. . . .. .! !! ! # # # # C.D.RAO ACCOUNTANT MEMBER. ( (( (# # # #) )) ) DATE: 29.03.2011. ORDER PRONOUNCED IN THE COURT ON 29.03.2011 SD/- SD/- AM JM (CDR) (MS) 1 / .%%2 32(4- COPY OF THE ORDER FORWARDED TO: 1. M/S. NEPTUNE EXPORTS LTD. 6 OLD POST OFFICE STREE T 8 TH FLOOR KOLKATA- 700069. 2 THE DCIT CIRCLE-4 KOLKATA 3. THE CIT 4. THE CIT(A)-IV KOLKATA 5. DR KOLKATA BENCHES KOLKATA 2 .%/ TRUE COPY 1&9/ BY ORDER DEPUTY /ASST. REGISTRAR ITAT KOLKATA BENCHES R.G.(.P.S.)