DCIT 8(3), MUMBAI v. S.B. & T INTERNAITIONAL LTD, MUMBAI

ITA 6970/MUM/2013 | 2007-2008
Pronouncement Date: 28-04-2015 | Result: Dismissed

Appeal Details

RSA Number 697019914 RSA 2013
Assessee PAN AAACS7275C
Bench Mumbai
Appeal Number ITA 6970/MUM/2013
Duration Of Justice 1 year(s) 4 month(s) 29 day(s)
Appellant DCIT 8(3), MUMBAI
Respondent S.B. & T INTERNAITIONAL LTD, MUMBAI
Appeal Type Income Tax Appeal
Pronouncement Date 28-04-2015
Appeal Filed By Department
Order Result Dismissed
Bench Allotted E
Tribunal Order Date 28-04-2015
Assessment Year 2007-2008
Appeal Filed On 29-11-2013
Judgment Text
E IN THE INCOME TAX APPELLATE TRIBUNAL E BENCH MUMBAI BEFORE SHRI G.S. PANNU ACCOUNTANT MEMBER AND SHRI AMIT SHUKLA JUDICIAL MEMBER ./ I.T.A. NO.6970 /MUM/2013 ( / ASSESSMENT YEAR : 2007-2008 DEPUTY COMMISSIONER OF INCOME TAX 8(3) R. NO. 217 AAYAKAR BHAVAN M.K. MARG MUMBAI -20. / VS. M/S S.B. & T INTERNATIONAL LTD. G 3 SEEPZ GEMS JEWELLERY COMPLEX ANDHERI (E) MUMBAI 400 096. ./ PAN : AAACS7275C ( / APPELLANT ) .. ( / RESPONDENT ) A PPELLANT BY SMT N .V. NADKARNI R E SPONDENT BY : DR. P. DANIEL / DATE OF HEARING : 28-04-2015 / DATE OF PRONOUNCEMENT : 28-04-2015 [ !' / O R D E R PER G.S. PANNU A.M . : THIS APPEAL BY THE REVENUE IS DIRECTED AGAINST THE ORDER PASSED BY THE LD. CIT(A) - 18 MUMBAI DATED 03-09-2013 FOR THE A. Y. 2007-08 IN THE MATTER OF AN ORDER PASSED BY THE ASSESSING OFFICER U/S 143 (3) R.W.S.263 OF THE INCOME TAX ACT 1961 DATED 15-03-2013. 2. IN THIS APPEAL ALTHOUGH THE REVENUE HAS RAISED MULTIPLE GROUNDS OF APPEAL BUT THE SOLITARY DISPUTE PERTAINS TO THE ACT ION OF THE LD. CIT(A) IN DELETING THE DISALLOWANCE OF RS. 38 92 247/- MADE B Y THE A.O. ON ACCOUNT OF LOSS SUFFERED BY THE ASSESSEE CONSEQUENT TO THE RE- STATEMENT OF LOAN GIVEN TO ITA 6970/M/13 2 M/S SB & T HOLDING LIMITED AS ON 31-3-2007 DUE TO F LUCTUATION IN FOREIGN EXCHANGE. 3. BRIEFLY PUT THE RELEVANT FACTS ARE THAT THE RES PONDENT ASSESSEE IS A COMPANY INCORPORATED UNDER THE PROVISIONS OF COMPAN IES ACT 1936 AND IS INTER ALIA ENGAGED IN THE BUSINESS OF MANUFACTURE AND EXPORT OF JEWELLERY AND DIAMONDS. THE A.O. IN THE IMPUGNED ASSESSMENT PROCE EDINGS CARRIED OUT IN TERMS OF THE DIRECTIONS OF THE COMMISSIONER UNDER S ECTION 263 OF THE ACT DATED 5-3-2012 NOTED THAT THE ASSESSEE HAD CLAIMED TOTAL FOREIGN EXCHANGE LOSS OF RS. 1 10 71 648/-. OUT OF THE AFORESAID LOS S THE A.O. DISALLOWED ONLY A SUM OF RS. 38 92 247/- WHICH IS THE SUBJECT MATTER OF DISPUTE IN THIS APPEAL BEFORE US. THE A.O. NOTED THAT THE SAID LOSS WAS AT TRIBUTABLE TO LOAN ADVANCED BY THE ASSESSEE TO ITS SUBSIDIARY M/S SB & T HOLDI NG LIMITED. NOT BEING SATISFIED WITH THE EXPLANATION FURNISHED BY THE ASS ESSEE THE A.O. TREATED THE AFORESAID LOSS AS INADMISSIBLE. 4. IN APPEAL BEFORE THE LD. CIT(A) THE ASSESSEE MA DE VARIOUS SUBMISSIONS AND IN PARTICULAR IT WAS POINTED OUT THAT THE LOAN GIVEN TO M/S SB & T HOLDING LIMITED HAS BEEN ACCEPTED IN THE PAST TO BE ON REVENUE ACCOUNT AND THE LOSS/GAIN ON ACCOUNT OF RESTATEMENT DUE TO FORE IGN EXCHANGE FLUCTUATION WAS ACCEPTED TO BE ON REVENUE ACCOUNT. IN SUPPORT ASSESSEE RELIED UPON THE DECISION OF THE TRIBUNAL IN ITS OWN CASE FOR A.Y. 2 006-07 VIDE ITA NO. 554/MUM/2010 DATED 9-3-2011. THE LD. CIT(A) FOLLOW ED THE DECISION OF THE TRIBUNAL FOR A.Y. 2006-07 (SUPRA) AND DELETED THE D ISALLOWANCE MADE BY THE A.O. IN THE ABOVE BACKGROUND THE REVENUE IS IN APP EAL BEFORE US. 5. AT THE TIME OF HEARING THE LD. REPRESENTATIVE O F THE ASSESSEE REFERRED TO THE DECISION OF THE TRIBUNAL IN ASSESSEES OWN CASE FOR A.Y. 2006-07 (SUPRA) AND CONTENDED THAT THE SAID PRECEDENT CONTINUES TO HOLD THE FIELD AND THEREFORE THE APPEAL OF THE REVENUE IS WITHOUT ANY MERIT. ITA 6970/M/13 3 6. THE LD. D.R. APPEARING ON BEHALF OF THE REVENUE HAS NOT OPPOSED THE AFORESAID FACTUAL MATRIX OF THE CASE BROUGHT OUT BY THE LD. REPRESENTATIVE OF THE ASSESSEE. 7. HAVING HEARD THE RIVAL SUBMISSIONS WE FIND THAT IN A.Y. 2006-07 AN IDENTICAL CONTROVERSY HAD ARISEN AND THE TRIBUNAL F OLLOWING THE DECISION OF HONBLE KERALA HIGH COURT IN THE CASE OF CIT VS. IN TERNATIONAL CREATIVE FOODS (P) LTD. (ITA NO. 1382 OF 2009 DATED 1-10-2010) DEC IDED THE ISSUE IN FAVOUR OF THE ASSESSEE. THE FOLLOWING DISCUSSION IN THE ORDE R OF THE TRIBUNAL DATED 9-3- 2011 IS RELEVANT:- WE HAVE HEARD THE ARGUMENTS OF BOTH THE SIDES AND ALSO PERUSED THE RELEVANT MATERIAL ON RECORD. AS SUBMITTED BY THE LE ARNED COUNSEL FOR THE ASSESSEE INTEREST RECEIVED BY THE ASSESSEE ON THE L OAN GIVEN TO S.B. & T HOLDINGS LTD. WAS OFFERED TO TAX UNDER THE HEAD 'P ROFITS AND GAIN OF BUSINESS OR PROFESSION' AND THE SAME WAS ALSO ASSES SED BY THE ASSESSING OFFICER UNDER THAT HEAD. MOREOVER! AS SUB MITTED ON BEHALF OF THE ASSESSEE BEFORE THE LEARNED CITCA) AS WELL AS B EFORE US THE LOSS AS WELL AS GAINS AS A RESULT OF FLUCTUATION IN FOREIGN EXCHANGE IN RESPECT OF LOAN GIVEN TO S.B. & T HOLDINGS LTD. WAS SHOWN BY THE ASSESSEE CONSISTENTLY UNDER THE HEAD 'PROFITS AND GAINS OF B USINESS OR PROFESSION'. THE DETAILS THEREOF AS GIVEN BY THE LEARNED CIT(A) IN PARA NO. 5.2 ARE EXTRACTED BELOW: ASSESSMENT YEAR FOREIGN EXCHANGE GAIN FOREIGN EXCHANGE LOSS 2005-06 26 26 177 2006-07 7 82 842 2007-08 38 92 247 2008-09 1 11 10 231 2009-10 3 36 18 311 TOTAL 3 44 01 153 1 76 28 655 5. A PERUSAL OF THE ABOVE DETAILS CLEARLY SHOWS THA T EVEN THE GAIN RESULTING FROM FLUCTUATION IN FOREIGN EXCHANGE IN R ESPECT OF LOAN GIVEN TO M/S S.B. & T HOLDINGS LTD. HAS BEEN OFFERED BY THE ASSESSEE AS ITS 'INCOME IN THE SUBSEQUENT YEARS WHICH IS MUCH MORE THAN THE LAST YEAR AND THE SAME HAS ALREADY BEEN ASSESSED BY THE A.O. 6. IN THE CASE OF CIT VS. INTERNATIONAL CREATIVE FO ODS (P) LTD. (ITA NO. 1382 OF 2009 DATED I.L0.2010)A SIMILAR ISSUE HA D COME UP FOR CONSIDERATION BEFORE THE HON'BLE KERALA HIGH COURT INVOLVING IDENTICAL FACTS. 'IN' THE 'SAID CASE THE CLAIM OF THE ASSESSE E FOR DEDUCTION' ON ITA 6970/M/13 4 ACCOUNT OF LOSS AS A RESULT OF EXCHANGE RATE FLUCTU ATION IN RESPECT OF OUTSTANDING LOAN WAS DISALLOWED BY THE ASSESSINQ OF FICER. THE SAID CLAIM HOWEVER WAS 'ALLOWED BY THE FIRST APPELLATE AUTHORITY AS WELL AS THE TRIBUNAL RELYING ON THE ACCOUNTING STANDARD -11 ISSUED' BY THE INSTITUTE OF CHARTERED ACCOUNTANTS OF INDIA. WHEN T HE MATTER REACHED TO THE HON'BLE KERALA HIGH COURT IT WAS ALSO CONTE NDED ON BEHALF OF THE ASSESSEE THAT THE CLAIM FOR FOREIGN EXCHANGE LOSS W AS MADE BY THE ASSESSEE AS PER THE PRACTICE CONSISTENTLY FOLLOWED WHEREBY EVEN THE GAIN AS A RESULT OR FOREIGN EXCHANGE FLUCTUATION WA S TAKEN INTO ACCOUNT WHILE COMPUTING THE TOTAL INCOME OF THE RELEVANT YE AR. IT WAS HELD BY THE HON'BLE KERALA HIGH COURT IN THIS CONTEXT THAT IF THE ASSESSEE HAS FOLLOWED A UNIFORM PRACTICE DEBITING AND CREDITING THE PROFIT & LOSS ACCOUNT WITH VARIATION IN EXCHANGE RATE FLUCTUATION THEN THE DEDUCTION SHOULD BE ALLOWED FOR THE YEAR UNDER CONSIDERATION IF THE EXCHANGE RATE FLUCTUATION HAD CAUSED INCREASE IN RUPEE LIABILITY OF THE LOAN ACCOUNT. IN OUR OPINION THE DECISION OF THE HON'BLE KERALA HIGH COURT IN THE CASE OF INTERNATIONAL CREATIVE FOODS (P) LTD. (SUPR A) IS SQUARELY APPLICABLE TO THE FACTS OF THE PRESENT CASE AND RES PECTFULLY FOLLOWING SAME WE DELETE THE DISALLOWANCE MADE BY THE A.O A ND CONFIRMED BY THE LEARNED CIT(A) ON ACCOUNT OF ASSESSEE'S CLAIM F OR LOSS AS A RESULT OF FLUCTUATION IN FOREIGN EXCHANGE RATE IN RESPECT OF LOAN GIVEN TO S.B. & T HOLDINGS LTD. 8. RESPECTFULLY FOLLOWING THE AFORESAID PRECEDENT THE ORDER OF THE LD. CIT(A) IS HEREBY UPHELD AND ACCORDINGLY REVENUE FAI LS IN ITS APPEAL. 9. THE ABOVE DECISION WAS PRONOUNCED IN THE OPEN CO URT IN THE PRESENCE OF BOTH THE PARTIES AT THE CONCLUSION OF THE HEARIN G ON 28-04-2015. SD/- SD/- (AMIT SHUKLA) (G.S. PANNU) JUDICIAL MEMBER ACCOUNTANT MEMBER . / MUMBAI ; 0! DATED 28-4-2015 .8../ RK RKRK RK SR. PS ITA 6970/M/13 5 ! '#$% &%# / COPY OF THE ORDER FORWARDED TO : 1. / THE APPELLANT 2. / THE RESPONDENT. 3. 9 () / THE CIT(A) 33 MUMBAI 4. 9 / CIT - 23 MUMBAI 5. <=> 88?@ ?@ . / / DR ITAT MUMBAI B BENCH 6. >BC D / GUARD FILE. ' / BY ORDER < 8 //TRUE COPY// (/') * ( DY./ASSTT. REGISTRAR) . / / ITAT MUMBAI