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TMI Blog2018 (5) TMI 1534X X X X Extracts X X X X X X X X Extracts X X X X ..... .A./6255/Mum/2013 - - - Dated:- 23-5-2018 - Sh. Rajendra, Accountant Member And Amarjit Singh, Judicial Member For The Revenue : Shri H.N. Singh-CIT-DR For The Assessee : Shri B.V. Jhaveri Order u/s. 254(1)of the Income- tax Act, 1961(Act) PER RAJENDRA, AM Challenging the order, dated 30/08/2013, of the CIT (A)-40, Mumbai, the assessee has filed the present appeal. Assessee-Firm, engaged in the business of export of diamond jewellery, filed its return of income on 30/03/2009, declaring loss of ₹ 70. 86 crores. The Assessing Officer (AO) completed the assessment, u/s. 143 (3), on 29/12/2011, determining its income at ₹ 17. 34 crores. 2. First ground of appeal is about confirming the disallowance in respect of Foreign Exchange (FE)loss of ₹ 59. 37 crores. During the assessment proceedings, the AO found that the assessee had debited and amount of ₹ 59, 69, 49, 634/-under the head FE gain/loss. He dis - allowed the claim made by the assessee on the ground that it did not furnished documentary evidences in form of purchase bills, proof of payment of customs duty bill of entries bank realisation certificates and import clear ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... osses claimed by the assessee under Forex transaction were not allowable against the income of the year under consideration. 4 . Before us, the Authorised Representative(AR)stated that the FAA had not given a finding that the assessee was covered by the proviso to section 43(5)(d), that the transactions entered into by the assessee were hedging transactions and not speculative transactions. He referred to pages 53-55 of the paper book wherein the actual loss of ₹ 24. 87 crores was computed. He further argued that forward contract cancellation to the tune of ₹ 27. 89 crores was crystallised during the year under consideration, that the AO had taxed the FE gains and disallowed the FE loss without giving any reason. He referred to pages 59 to 61 of the paper book in support of the claim that forward contract cancellation had crystallized. For exchange fluctuation loss on account of deemed export, of ₹ 1. 52 crores, he referred to page 62 of the paper book. He relied upon the cases of D. Chetan and Co. (75 Taxmann. com), M/s. Sanghavi Sons(ITA/4484/Mum/2012, AY. 2009-10, dated 31/01/2017), Mahendra Brothers Exports Private Ltd. (161 ITD 772), Foods and Inns Ltd. ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... nd account) 19. 03 lakhs Exchange Flusctuation Loss (Deemed Export sale of polished diamonds) 1. 52 crores Exchange Fluctuation gain (Export sale proceeds-SEEPZ) 16. 41 lakhs Loss on cancellation of Forward Contract 27. 89 crores Total 59. 37 crores 58. 23 crores We are unable to understand as to how he has taxed the foreign exchange gains and disallowed the losses. He has not given any reason for taxing the profits and disallowing the losses. Transaction resulting in profit and losses were not different transactions. Exchange fluctuation loss(import payment and revaluation of creditors) was disallowed, but, exchange fluctuation gain (export sale proceeds and revaluation of debtors) was taxed. In our opinion, there was no logic for applying two different yardstick is for import payments/export sale proceeds as well as for revaluation of creditors/debtors. They are the part of the chain of similar transactions. In other words the transac ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... s is to be allowed as business loss. Here, we would like to rely upon the case of D. Chetan and Co. (supra). In that matter, the assessee was engaged in the business of import and export of diamonds. For the AY. 2009-10, the assessee explained that the amount of ₹ 78. 10 lakhs claimed as loss was on account of hedging transactions entered into to safeguard variation in exchange rates affecting its transactions of import and export. The AO disallowed the claim on the ground that it was a notional loss of a contingent liability debited to the profit and loss account. The First Appellate Authority allowed the loss incurred on the forward contracts as a business loss. The Tribunal confirmed this. On appeal to the Hon ble High Court, the matter was decided as under: the Tribunal concluded that the transaction entered into by the assessee was not in the nature of speculative activities. Further the hedging transactions were entered into so as to cover variation in foreign exchange rate which would impact its business of import and export of diamonds. These concurrent findings of fact were not shown to be perverse in any manner. The Assessing Officer in the assessment orde ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... loss has to be allowed. 5. 4. We find that fluctuation loss of ₹ 1. 52 crores was accepted by the FAA as a realised loss on export of polished diamonds to SEEPZ units. However, the same was disallowed on the ground that the assessee had not produced sufficient material to show as to how the loss had actually occurred and how it was directly connected to sales realisation. Paragraph 5 of the remand report of the AO prove that documentary evidence in respect of exchange fluctuation loss had filed before him during the assessment proceedings. It appears that because of paucity of time, he could not go through the details submitted by the assessee. Therefore, in our opinion, in the interest of Justice, the issue of FE loss of ₹ 1. 52 crores should be restored back to the file of the AO for verification. He is directed to afford a reasonable opportunity of hearing to the assessee. As a result, GOA-1 is decided in favour of the assessee, in part. 6. Second ground of appeal is about confirming the addition of ₹ 1. 38 crores on ground of undervaluation of turnover. The AO had disallowed discount on sale given by the assessee to its sister concern on the ground ..... X X X X Extracts X X X X X X X X Extracts X X X X
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