VAISHALI EXPORTS, MUMBAI v. ADDL CIT RG 15(1), MUMBAI

ITA 7286/MUM/2013 | 2009-2010
Pronouncement Date: 31-07-2015 | Result: Allowed

Appeal Details

RSA Number 728619914 RSA 2013
Assessee PAN AAEFV8311K
Bench Mumbai
Appeal Number ITA 7286/MUM/2013
Duration Of Justice 1 year(s) 7 month(s) 19 day(s)
Appellant VAISHALI EXPORTS, MUMBAI
Respondent ADDL CIT RG 15(1), MUMBAI
Appeal Type Income Tax Appeal
Pronouncement Date 31-07-2015
Appeal Filed By Assessee
Order Result Allowed
Bench Allotted F
Tribunal Order Date 31-07-2015
Assessment Year 2009-2010
Appeal Filed On 11-12-2013
Judgment Text
IN THE INCOME TAX APPELLATE TRIBUNAL F BENCH MUMBAI BEFORE MS. SUSHMA CH O WLA JUDICIAL MEMBER AND SHRI N.K . BILLAIYA A CCOUNTANT M EMBER / I .T.A. NO . 7286/MUM/2013 ( / ASSESSMENT YEAR : 2009 - 10 M/S. VAISHALI EXPORTS 133 SHREEJI CHAMBERS TATA ROAD NO. 1 & 2 OPERA HOUSE MUMBAI - 400 004 / VS. THE ACIT RANGE - 15(1) MATRU MANDIR MUMBAI - 400 007 ./ ./ PAN/GIR NO. : AAEFV 8311K ( / APPELLANT ) .. ( / RESPONDENT ) / APPELLANT BY: SHRI B.V. JHAVERI / RESPONDENT BY : SHRI PAWAN KUMAR BEERLA / DATE OF HEARING : 28 . 0 7 .2015 / DATE OF PRONOUNCEMENT : 31 .0 7 .2015 / O R D E R PER N.K. BILLAIYA AM: THIS APPEAL BY THE ASSESSEE IS PREFERRED AGAINST THE ORDER OF THE LD. CIT(A) - 26 MUMBAI DT. 04.09.2013 PERTAINING TO ASSESSMENT YEAR 200 9 - 1 0. ITA. NO . 7286/M/2013 2 2. THE SOLE GRIEVANCE OF THE ASSESSEE IS THAT THE LD. CIT(A) ERRED IN HOLDING THAT LOSS OF RS. 4 29 000/ - INCURRED ON CANCELLATION OF FORWARD CONTRACT IN FOREIGN CURRENCY IS SPECULATION LOSS U/S . 43(5) OF THE ACT. 3. THE ASSESSEE IS IN THE BUSINESS OF EXPORT OF CUT AND POLISHED DIAMOND. DURING THE COURSE OF THE SCRUTINY ASSESSMENT PROCEEDINGS THE ASSESSING OFFICER OBSERVED THAT THE ASSESSEE HAS DEBITED RS. 4 29 000/ - IN ITS PROFIT & LOSS ACCOU NT ON ACCOUNT OF FORWARD CONTRACT CANCELLATION CHARGES. THE ASSESSEE WAS ASKED TO EXPLAIN WHY THE SAME SHOULD NOT BE TREATED AS SPECULATION LOSS U/S. 43(5) OF THE ACT. 3.1. THE ASSESSEE EXPLAINED THAT THE LOSS ON FORWARD CONTRACT CANCELLATION CANNOT BE TREATED AS SPECULATION LOSS BUT AS ORDINARY BUSINESS LOSS. THIS EXPLANATION OF THE ASSESSEE DID NOT FIND FAVOUR WITH THE AO AND THE AO TREATED RS. 4 29 000/ - AS A SPECULATION LOSS U/S. 43(5) OF THE ACT. 4. THE ASSESSEE CARRIED THE MATTER BEFORE THE LD. CIT(A) BUT WITHOUT ANY SUCCESS. 5. BEFORE US THE LD. COUNSEL FOR THE ASSESSEE REITERATED WHAT HAS BEEN STATED BEFORE THE LOWER AUTHORITIES. STRONG RELIANCE WAS PLACED ON THE DECISION OF THE HONBLE BOMBAY HIGH COURT IN THE CASE OF CIT VS BADRIDAS GAUR IDU (P) LTD. 261 ITR 256 WHICH WAS FOLLOWED BY THE TRIBUNAL IN THE CASE OF ITO VS M/S. LUCID GEMS IN ITA NO. 730 5 /MUM/2013. 6. PER CONTRA THE LD. DEPARTMENTAL REPRESENTATIVE COULD NOT BRING ANY DISTINGUISHING DECISION IN FAVOUR OF THE REVENUE. ITA. NO . 7286/M/2013 3 7. WE HAVE CAREFULLY PERUSED THE ORDERS OF THE AUTHORITIES BELOW AND THE JUDICIAL DECISIONS BROUGHT TO OUR NOTICE. THE UNDISPUTED FACT IS THAT THE ASSESSEE IS IN THE BUSINESS OF EXPORT OF CUT AND POLISHED DIAMOND. ON 27.10.2008 THE ASSESSEE ENTERED INTO A FOR WARD CONTRACT OF SALE OF $ 3 00 000/ - @ 50.35 PER DOLLAR TO BE DELIVERED BETWEEN 1 ST MARCH AND 15 TH MARCH 2009 IN RESPECT OF THE EXPORT EFFECTED TO M/S. SURAJ INTER GOLD DUBAI. THE SAID FORWARD CONTRACT WAS CANCELLED BY THE ASSESSEE VIDE ITS LETTER DATED 13 TH MARCH 2009 AND THE BANK CANCELLED THE CONTRACT @ RS. 51.78 PER DOLLAR AND ACCORDINGLY THE A SSESSEE INCURRED LOSS ON CANCELLATION OF RS. 4 29 000/ - WHICH WAS DEBITED TO THE PROFIT AND LOSS ACCOUNT . BEING IN THE BUSINESS OF EXPORT THE ASSESSEE HAS TO HEDGE ITSELF AGAINST THE FOREIGN EXCHANGE FLUCTUATION WHICH IS VERY MUCH PREVALENT IN THIS LINE OF BUSINESS. 7.1. IT IS INCORRECT TO HOLD THE LOSS AS A SPECULATION LOSS BECAUSE THE ASSESSEE IS NOT A DEALER IN FOREIGN EXCHANGE BUT IT IS ONLY HEDGING ITSELF AGAINST FOREIGN EXCHANGE FLUCTUATION. ON IDENTICAL SET OF FACTS THE HONBLE BOMBAY HIGH COURT IN THE CASE OF BADRIDAS GAURIDU (P) LTD (SUPRA) HAS HELD AS UNDER: THE ASSESSEE WAS NOT A DEALER IN FOREIGN EXCHANGE. THE ASSESSEE WAS A COTTON EXPORTER. THE ASSESSEE WAS AN EXPORT HOUSE. THEREFORE FOREIGN EXCHANGE CONTRACTS WERE BOOKED ONLY AS INCIDENTAL TO THE ASSESSEES REGULAR COURSE OF BUSINESS. THE TRIBUNAL HAS RECORDED A CATEGORICAL FINDING TO THIS EFFECT IN ITS ORDER. THE ASSESSI NG OFFICER HAS NOT CONSIDERED THESE FACTS. UNDER SECTION 43(5) OF THE INCOME - TAX ACT SPECULATIVE TRANSACTION HAS BEEN DEFINED TO MEAN A TRANSACTION IN WHICH A CONTRACT FOR THE PURCHASE OR SALE OF A COMMODITY IS SETTLED OTHERWISE THAN BY THE ACTUAL DELIV ERY OR TRANSFER OF SUCH COMMODITY. HOWEVER AS STATED ABOVE THE ASSESSEE WAS NOT A DEALER IN FOREIGN EXCHANGE. THE ASSESSEE WAS AN EXPORTER OF COTTON. IN ORDER TO HEDGE AGAINST LOSSES THE ASSESSEE HAD BOOKED FOREIGN EXCHANGE IN THE FORWARD ITA. NO . 7286/M/2013 4 MARKET WITH TH E BANK. HOWEVER THE EXPORT CONTRACTS ENTERED INTO BY THE ASSESSEE FOR EXPORT OF COTTON IN SOME CASES FAILED. IN THE CIRCUMSTANCES THE ASSESSEE WAS ENTITLED TO CLAIM DEDUCTION IN RESPECT OF RS. 13.50 LAKHS AS A BUSINESS LOSS. THIS MATTER IS SQUARELY COVER ED BY THE JUDGMENT OF THE CALCUTTA HIGH COURT WITH WHICH WE AGREE IN THE CASE OF CIT V. SOORAJMULL NAGARMULL [1981] 129 ITR 169 . RESPECTFULLY FOLLOWING THE DECISION OF THE HONBLE JURISDICTIONAL HIGH COURT WE SET ASIDE THE ORDER OF THE LD. CIT(A) AND DIRECT THE AO TO ALLOW THE LOSS OF RS. 4 29 000/ - AS BUSINESS LOSS. 8. IN THE RESULT THE APPEAL FILED BY THE ASSESSEE IS ALLOWED. OR DER PRONOUNCED IN THE OPEN COURT ON 31 ST JULY 2015 SD/ - SD/ - ( SUSHMA CH O WLA ) (N.K. BILLAIYA) /JUDICIAL MEMBER / ACCOUNTANT MEMBER MUMBAI ; DATED : 31 ST JU LY 2015 . . ./ RJ SR. PS / COPY OF THE ORDER FORWARDED TO : 1. / THE APPELLANT 2. / THE RESPONDENT. 3. ( ) / THE CIT(A) - 4. / CIT 5. / DR ITAT MUMBAI 6. / GUARD FILE . / BY ORDER //TRUE COPY// / (DY./ASSTT. REGISTRAR) / ITAT MUMBAI