DCIT 16(3), MUMBAI v. VISHINDA DIAMONDS, MUMBAI

ITA 5341/MUM/2009 | 2004-2005
Pronouncement Date: 21-05-2010 | Result: Dismissed

Appeal Details

RSA Number 534119914 RSA 2009
Assessee PAN AACFV3647G
Bench Mumbai
Appeal Number ITA 5341/MUM/2009
Duration Of Justice 8 month(s) 3 day(s)
Appellant DCIT 16(3), MUMBAI
Respondent VISHINDA DIAMONDS, MUMBAI
Appeal Type Income Tax Appeal
Pronouncement Date 21-05-2010
Appeal Filed By Department
Order Result Dismissed
Bench Allotted F
Tribunal Order Date 21-05-2010
Assessment Year 2004-2005
Appeal Filed On 17-09-2009
Judgment Text
IN THE INCOME TAX APPELLATE TRIBUNAL F BENCH MUMBAI. BEFORE SHRI R.V.EASWAR SR.VP AND SHRI A.L. GEHLOT AM I.T.A.NO.5341/MUM/2009 (ASSESSMENT YEAR: 2004-05) THE DEPUTY COMMISSIONER OF INCOME TAX 16(3) MATRU MANDIR 2 ND FLOOR R.NO.206 TARDEO ROAD MUMBAI-400 007. VS. M/S.VISHINDA DIAMONDS 102 PRASAD CHAMBERS OPERA HOUSE MUMBAI-400 004. PAN:AACFV3647G (APPELLANT) (RESPONDENT) APPELLANT BY : MR. DEBASHISH CHANDA RESPONDENT BY : MR.A.V. SONDE O R D E R PER R.V.EASWAR SENIOR VICE PRESIDENT: THE FOLLOWING GROUNDS HAVE BEEN TAKEN BY THE REVENUE IN THIS APPE AL WHICH RELATES TO THE ASSESSMENT YEAR 2004-05:- 1. THE CIT(A) ERRED IN ACCEPTING THE FACT THAT THE PROFIT/GAIN EARNED ON FOREIGN EXCHANGE CONTRACT IS A SPECULATIVE PROFIT IS NOT DIRECTLY RELATED TO EXPOR T OF GOODS OR MERCHANDISE AND THE ASSESSEE IS NOT DEALING IN THE BUSINESS OF FOREIGN EXCHANGE. 2. THE CIT(A) ERRED IN TREATING THAT THE GAIN FROM THE FOREIGN EXCHANGE CONTRACT AS BUSINESS RECEIPTS 90% OF WHICH RECEIPTS IS TO BE REDUCED AS PER THE PROVISIONS OF EXPLANATION (BAA) OF SECTION 80HHC. 3. THE CIT(A) ERRED IN STATING THAT THE PROVISO (A) SECTION 43(5) IS APPLICABLE TO THIS CASE AS THE PRO VISO SAY THAT IF THE ASSESSEE ENTERS INTO CONTRACT IN RESPECT OF RAW MATERIAL OR MERCHANDISE TO GUARD AGAINST LOSS THROUGH PRICE FLUCTUATION IN RESPECT O F HIS CONTRACT FOR ACTUAL DELIVERY OF GOODS MANUFACTURED OR MERCHANDISE TO GUARD AGAINST LOSS THROUGH PRICE FLUCTUATION IN RESPECT OF HIS CONTRAC T FOR ACTUAL DELIVERY OF GOODS MANUFACTURED OR MERCHANDISE SOLD BY HIM WOULD NOT BE COVERED BY SPECULATIVE TRANSACTION. ITA NO.5341/M/09 2 4. THE CIT(A) ERRED IN FOLLOWING THE DECISION OF THE BOMBAY HIGH COURT IN THE CASE OF BADRIDAS GAURIDU 271 ITR 256 WHICH HAS NOT BEEN ACCEPTED BY THE DEPARTMENT AND A SLP HAS BEEN FILED AGAINST THE SAID ORDER. 2. AT THE TIME OF THE HEARING THE LEARNED COUNSEL FOR THE ASSESSEE SUBMITTED THAT THE GROUNDS ARE COVERED IN FAVOUR OF THE ASSESSEE BY THE ORDER OF THE TRIBUNAL IN THE CA SE OF DCIT VS. SHRI DILIPKUMAR V. LAKHI IN ITA NO.624/MUM/2007 DAT ED 11.03.2008 WHICH HAS BEEN FOLLOWED BY THE CIT(A) IN DECIDING THE GROUNDS IN FAVOUR OF THE ASSESSEE. THE QUESTION IS WHETHER THE GAINS MADE BY THE ASSESSEE ON CANCELLATION OF C ERTAIN CONTRACTS WITH ITS FOREIGN CLIENTS CAN BE TREATED A S EXPORT PROFITS SO AS TO QUALIFY FOR THE DEDUCTION UNDER SECTION 80 HHC OF THE INCOME TAX ACT. THE ASSESSING OFFICER TOOK THE VIEW THAT THE GAINS WERE IN THE NATURE OF SPECULATIVE INCOME WHER EAS THE CIT(A) HAS TAKEN THE VIEW REFERRING TO THE ORDER O F THE TRIBUNAL CITED SUPRA AND THE JUDGEMENT OF THE HONBLE BOMBAY HIGH COURT IN CIT VS. BADRIDAS GAURIDU (P) LTD. 261 ITR 256 THAT THE GAINS FROM THE FOREIGN EXCHANGE CONTRACTS SHOUL D BE TREATED AS BUSINESS INCOME QUALIFYING FOR THE DEDUCTION. HE HAS ALSO DIRECTED THAT 90% OF THE RECEIPTS ARE TO BE REDUCED AS PER EXPLANATION (BAA) OF SECTION 80HHC ABOUT WHICH THE RE IS NO DISPUTE. SINCE THE CIT(A) HAS FOLLOWED THE JUDGEMEN T OF THE HONBLE BOMBAY HIGH COURT WHICH HAS BEEN APPLIED AN D FOLLOWED BY THE MUMBAI BENCH OF THE TRIBUNAL IN THE ORDER CITED SUPRA RESPECTFULLY FOLLOWING THEM WE UPHOLD THE D ECISION OF THE CIT(A) AND DISMISS THE GROUNDS FILED BY THE REVENUE . ORDER PRONOUNCED ON THIS 21 ST DAY OF MAY 2010. SD/- ( A.L. GEHLOT ) SD/- ( R.V.EASWAR ) ACCOUNTANT MEMBER SENIOR VICE PRESIDENT MUMBAI DATED 21 ST MAY 2010. SOMU ITA NO.5341/M/09 3 COPY TO : 1. THE APPELLANT 2. THE RESPONDENT 3. THE CIT-16 MUMBAI. 4. THE CIT(A)-XVII MUMBAI 5. THE DR F BENCH /TRUE COPY/ BY ORDE R ASSTT. REGISTRAR I.T.A.T MUMBAI