The DCIT, Circle-4,, Ahmedabad v. Lahar Trading & Inv. Pvt. Ltd.,, Ahmedabad

ITA 3267/AHD/2010 | 2006-2007
Pronouncement Date: 21-07-2011 | Result: Dismissed

Appeal Details

RSA Number 326720514 RSA 2010
Assessee PAN AAACL3469P
Bench Ahmedabad
Appeal Number ITA 3267/AHD/2010
Duration Of Justice 7 month(s) 11 day(s)
Appellant The DCIT, Circle-4,, Ahmedabad
Respondent Lahar Trading & Inv. Pvt. Ltd.,, Ahmedabad
Appeal Type Income Tax Appeal
Pronouncement Date 21-07-2011
Appeal Filed By Department
Order Result Dismissed
Bench Allotted A
Tribunal Order Date 21-07-2011
Date Of Final Hearing 15-07-2011
Next Hearing Date 15-07-2011
Assessment Year 2006-2007
Appeal Filed On 10-12-2010
Judgment Text
IN THE INCOME TAX APPELLATE TRIBUNAL A BENCH AHMEDABAD (BEFORE S/SHRI BHAVNESH SAINI JM AND A. K. GARODIA AM) ITA NO.3267/AHD/2010 A. Y.: 2006-07 THE D. C. I. T. CENT. CIRCLE-1 (3) ROOM NO.3004 3 RD FLOOR AAYAKAR BHAVAN AHMEDABAD VS LAHAR TRADING AND INVESTMENTS PVT. LTD. 100 ASHIMA HOUSE KAVI NANALAL MARG AHMEDABAD PA NO. AAACL 3469 P (APPELLANT) (RESPONDENT) APPELLANT BY SHRI S. K. MEENA SR. DR RESPONDENT BY SNRI P.M. MEHTA AR O R D E R PER BHAVNESH SAINI: THIS APPEAL BY THE REVENUE IS DIRECTED AGAINST THE ORDER OF THE LEARNED CIT(A)-XX AHMEDABAD DATED 16-09-2010 FOR ASSESSMENT YEAR 2006-07 CHALL ENGING THE ORDER OF THE LEARNED CIT(A) IN DELETING THE DISALLO WANCE OF RS.12 15 000/- ARISEN ON ACCOUNT OF FLUCTUATION OF FOREIGN EXCHANGE RATES. 2. BRIEFLY THE FACTS OF THE CASE ARE THAT THE AO D ISALLOWED LOSS ON FOREIGN EXCHANGE FLUCTUATION CLAIMED BY THE ASSESSE E. THE ASSESSEE CLAIMED LOSS ON FOREIGN EXCHANGE FLUCTUATION OF RS. 12.15 000/- AS EXPENDITURE. THE ASSESSEE HAS AVAILED WORKING CAPIT AL LOAN IN THE NATURE OF EXTERNAL COMMERCIAL BORROWING. REPAYMENT OF THE PRINCIPAL AMOUNT WAS DUE IN MAY 2006. BUT ON ACCOUNT OF FORE IGN EXCHANGE FLUCTUATION THE LIABILITY TO REPAY THE SAID LOAN IN CREASED AT THE END OF ITA NO.3267/AHD/2010 DCIT CC-1 (3) AHMEDABAD VS LAHAR TRADING AND INVES TMENTS PVT. LTD. 2 THE YEAR I.E. ON 310-03-2006 ON ACCOUNT OF INCREASE IN THE VALUE OF US DOLLAR WHICH RESULTED IN THE ABOVE LOSS AND THE SAME WAS CLAIMED AS EXPENDITURE. THE AO HOWEVER TREATED IT AS CAPIT AL EXPENDITURE AND MADE THE ADDITION. THE ASSESSEES DETAILED SUBM ISSION IS REPRODUCED IN THE APPELLATE ORDER IN WHICH COMPLETE FACTS WERE EXPLAINED FOR INCURRING OF THE LOSS ON ACCOUNT OF F LUCTUATION OF FOREIGN EXCHANGE RATE AND WAS ALSO SUBMITTED THAT IN THE PR ECEDING ASSESSMENT YEARS 2003-04 TO 2005-06 WHEN THERE WAS GAIN ON ACCOUNT OF FOREIGN EXCHANGE RATE FLUCTUATION THE S AME WAS OFFERED AS INCOME WHICH WAS ACCEPTED BY THE DEPARTMENT. IT WAS EXPLAINED THAT THE ASSESSEE MADE CLAIM ON ACCOUNT OF ACCOUNTING ST ANDARD PRESCRIBED IN THIS BEHALF. THE ASSESSEE RELIED UPON THE DECISION OF THE HONBLE SUPREME COURT IN THE CASE OF CIT VS WOO DWARD GOVERNOR INDIA (P) LTD. 210 CTR 354 ( 312 ITR 254 ). IT WAS ALSO SUBMITTED THAT THE SAID LOSS WAS ON ACCOUNT OF FORE IGN EXCHANGE FLUCTUATION LOSS AND THE LOAN WAS AVAILED BY THE AS SESSEE FOR THE PURPOSE OF WORKING CAPITAL REQUIREMENT OF THE WORKI NG CAPITAL REQUIREMENT OF THE COMPANY AND THE SAID LOSS IS ALL OWABLE AS PER THE FURTHER DECISION OF THE HONBLE SUPREME COURT IN TH E CASE OF OIL & NATURAL GAS CORPORATION LTD. 322 ITR 180. THE LEARN ED CIT(A) CONSIDERING THE SUBMISSION OF THE ASSESSEE AND MATE RIAL ON RECORD ALLOWED THE CLAIM OF THE ASSESSEE. THE FINDINGS OF THE LEARNED CIT(A) IN PARA 4.3 AND 4.4. OF THE APPELLATE ORDER ARE REP RODUCED AS UNDER: 4.3 I HAVE GONE THROUGH THE ASSESSMENT ORDER AND T HE SUBMISSIONS OF THE AR ACCORDINGLY. IT IS SEEN THAT THE AO HAS NOT QUESTIONED THE CLAIM OF THE APPELLANT THAT LOAN ON WHICH THE FOREIGN EXCHANGE FLUCTUATION LOSS HAS BEE N ITA NO.3267/AHD/2010 DCIT CC-1 (3) AHMEDABAD VS LAHAR TRADING AND INVES TMENTS PVT. LTD. 3 CLAIMED HAD BEEN TAKEN FOR WORKING CAPITAL REQUIREM ENT OF THE APPELLANT COMPANY. IT IS SEEN THAT THE FACTS OF THE CASE OF ONGC V/S. CIT ARE SQUARELY APPLICABLE IN TH IS CASE. IN THAT CASE QUESTION BEFORE THE SUPREME COU RT IS AS UNDER: (1) WHETHER ON THE FACTS AND CIRCUMSTANCES OF THE CASE THE ADDITIONAL LIABILITY ARISING ON AC COUNT OF FLUCTUATIONS IN THE RATE OF EXCHANGE IN RESPECT OF LOANS TAKEN FOR REVENUE PURPOSES COULD BE ALLOWED AS DEDUCTION UNDER S. 37(1) OF THE IT ACT 1961 (FO R SHORT THE ACT) IN THE YEAR OF FLUCTUATION IN THE RATE OF EXCHANGE OR WHETHER THE SAME IS ALLOWABLE ONLY IN THE YEAR OF REPAYMENT OF SUCH LOANS? THE SUPREME COURT WHILE HOLDING THAT THE EXPENSES WERE ALLOWABLE DECIDED AS UNDER: 1.1 WE ARE OF THE OPINION THAT THE RATIO OF THE SAID DECISION WITH WHICH WE ARE IN RESPECTFUL AGREEMENT SQUARELY APPLIES TO THE FACTS AT HAND AND THEREFORE THE LOSS CLAIMED BY THE ASSESSEE ON ACCOUNT OF FLUCTUATION IN THE RATE OF FOREIGN EXCHANGE AS ON THE DATE OF BALANCE SHEET IS ALLOWABLE AS EXPENDITURE UNDER S. 37(1) OF THE ACT. 4.4 IN VIEW OF THE ABOVE THE ADDITION MADE BY THE AO IS NOT ON SOUND FOOTING THE SAME IS DELETED. 3. THE LEARNED DR RELIED UPON THE ORDER OF THE AO. ON THE OTHER HAND THE LEARNED COUNSEL FOR THE ASSESSEE REITERAT ED THE SUBMISSIONS MADE BEFORE THE AUTHORITIES BELOW AND S UBMITTED THAT THE ISSUE IS NOW COVERED BY THE DECISION OF THE HON BLE SUPREME COURT IN THE CASE OF OIL & NATURAL GAS CORPORATION LTD. (SUPRA). 4. ON CONSIDERATION OF THE RIVAL SUBMISSIONS WE DO NOT FIND ANY MERIT IN THE APPEAL OF THE REVENUE. THE AO HAS NOT DISPUTED THE CLAIM ITA NO.3267/AHD/2010 DCIT CC-1 (3) AHMEDABAD VS LAHAR TRADING AND INVES TMENTS PVT. LTD. 4 OF THE ASSESSEE THAT LOAN ON WHICH FOREIGN EXCHANGE FLUCTUATION LOSS HAS BEEN CLAIMED HAD BEEN TAKEN FOR WORKING CAPITAL REQUIREMENT OF THE ASSESSEE COMPANY. THE HONBLE SUPREME COURT IN THE CASE OF OIL & NATURAL GAS CORPORATION CONSIDERING ITS EARLI ER DECISION IN THE CASE OF WOODWARD GOVERNOR INDIA (P) LTD. (SUPRA) DE CIDED THE ISSUE IN FAVOUR OF THE ASSESSEE HOLDING THAT THE LOSS CLA IMED BY THE ASSESSEE ON ACCOUNT OF FLUCTUATION IN THE RATE OF F OREIGN EXCHANGE IS ALLOWABLE EXPENDITURE U/S 37 OF THE IT ACT. THE ISS UE IS THEREFORE COVERED IN FAVOUR OF THE ASSESSEE BY THE ABOVE DECI SION OF THE HONBLE SUPREME COURT. WE THEREFORE DO NOT FIND A NY INFIRMITY IN THE ORDER OF THE LEARNED CIT(A). WE CONFIRM THE SAME AN D DISMISS THE APPEAL OF THE REVENUE. 5. IN THE RESULT THE APPEAL OF THE REVENUE IS DISM ISSED. ORDER PRONOUNCED IN THE OPEN COURT ON 21-07-2011 SD/- SD/- (A. K. GARODIA) ACCOUNTANT MEMBER (BHAVNESH SAINI) JUDICIAL MEMBER DATE : 21-07-2011 LAKSHMIKANT/- COPY OF THE ORDER FORWARDED TO: 1. THE APPELLANT 2. THE RESPONDENT 3. THE CIT CONCERNED 4. THE CIT(A) CONCERNED 5. THE DR ITAT AHMEDABAD 6. GUARD FILE BY ORDER D Y. REGISTRAR ITAT AHMEDABAD