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DCIT-24 (3) , R. No. 701, Mumbai Versus M/s Unique Gems & Jewellery

2016 (5) TMI 616 - ITAT MUMBAI

Addition made on account of foreign exchange loss - Held that:- No reason to interfere with the impugned order passed by the CIT(A) as he has rightly held that loss on account of fluctuation in foreign exchange rate on account of advances received from customers on account of sale realization is related to the revenue account only. The transactions made by the assessee in foreign currency have been accounted for in accordance with AS-11 issued by ICAI and therefore the loss on account of foreign .....

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ORDER Per Sandeep Gosain, J. M.: The Present Appeal has been filed by the revenue against the order of Commissioner of Income Tax (Appeals) - 34, dated 12.03.2014 for A.Y. 2009-10 whereby CIT(A) has allowed the appeal filed by the assessee against the order of AO dated 17.11.2011 on the grounds of appeal mentioned herein below. 1. On the facts and in the circumstances of the case and in law, the Ld. CIT(A) erred in directing the Assessing Officer to delete the addition made on account of foreign .....

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were only used for giving interest free advances for the assessee s sister concerns and not for assessee s business purposes and hence the loss is not allowable u/s37(1) of the I.T. Act. 3. On the facts and in the circumstances of the case and in law, the Ld. CIT(A) erred in directing the Assessing Officer to delete the addition ignoring the fact that the fluctuation of foreign exchange was not an item of balance sheet and hence not an item of expenditure u/s37(1) of the I.T. Act. 4. On the fac .....

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ort of cut and polished diamonds. This is the first year of its operation. The return of income declaring total income of ₹ 22,54,270/- was E-filed on 12.09.2009. The same was processed u/s 143(1) of the Act and thereafter the case was selected under CASS and notice u/s 143(2) of the Act was issued on 19.08.2010 which was duly served upon the assessee. After considering reply submitted by the assessee, assessment order dated 17.11.2011 was passed u/s 143(3) of the Income tax Act and total .....

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(A), the revenue filed the present appeal before us on the grounds mentioned herein above. Ground Nos. 1-4: 4. All the grounds raised by the assessee are inter-connected and inter-related therefore we thought it fit to dispose off the same by the consolidated order. 4.1 Ld. DR relied upon the order passed by the AO as well as initial orders of the CIT(A) dated 28.09.2012 and submitted that the additions were rightly made by the AO. Ld. DR further submitted that the loss on account of exchange ra .....

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al and upholding the additions made by the AO was correct. It was also argued by ld. DR that since the assessee was not holding foreign currency and it was not at all utilized in the business therefore the loss on account of exchange fluctuation is not on revenue account. 4.2 On the contrary ld. AR representing the assessee relied upon the order dated 12.03.2014 and requested to dismiss Revenue s appeal. 5. We have heard counsels for both the parties and we have also perused the material placed .....

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.1.2014 in the matter of above referred assessee. The Hon'ble Tribunal has set aside the ground for fresh adjudication to your honour with a direction to analyse if loss on account of foreign exchange fluctuation is relatable to revenue account or capital account. If the loss is on account of revenue then appellant is entitled to the relief in view of the judgement of the Hon.Supreme Court in CIT vs. Woodword India Pvt. Ltd. 312 ITR 254. In this connection we are enclosing following document .....

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ns on record and pass the order in accordance with the direction given by the Hon. Tribunal." I have carefully considered the submissions made by the appellant, order of the Hon. Tribunal dated. 8.1.2014 and paper book filed before the CIT(A) & Hon. Tribunal. After perusal of the records, it is found that the exchange difference was arisen on account of advances received from the customers and against the sale .realization and hence the transactions made by the appellant in foreign curr .....

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towards loss on account of fluctuation of foreign exchange. Accordingly this ground of appeal is allowed. 6. In addition to the above, we have also analysed the initial orders passed by the CIT(A) dated 28.09.2012 and after considering the facts of the case and considering the judgements passed by the CIT(A), we find that the Hon ble ITAT while dealing with the initial order passed by CIT(A) had observed that the issue in question was whether losses arising out of depreciation of foreign currenc .....

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