At, Income Tax Appellate Tribunal Mumbai
By, THE HONOURABLE MR. D. MANMOHAN
By, VICE-PRESIDENT & THE HONOURABLE MR. RAJENDRA
By, ACCOUNTANT MEMBER
For the Appearing Parties: S. Senthil Kumaran, Ritesh V. Zaveri, Advocates.
1. Challenging the orders dated 08.01.2013 of the CIT(A)-6,Mumbai,Assessing Officer(AO) has raised following grounds of appeal:
"On the facts and in the circumstances of the case and in law, the learned CIT(A) has erred in allowing relief to the assessee to the extent impugned in the grounds enumerated below:
1. The order of the CIT(A) is opposed to law and facts of the case.
2. On the facts and circumstances of the case and in law, the Ld. CIT(A) has erred in deleting the addition of Rs. 70,18,210/- made on account of mark to market loss claimed on account of trading in derivative transactions, without appreciating the fact that the loss claimed on the basis of value of derivative as on 31st March is merely notional loss and the actual loss or the profit in respect of such derivative transactions would get crystallized only at the time of settlement of such transaction.
3. For these and other grounds that may be urged at the time of hearing, the decision of the CIT(A) may be set aside and that of the AO restored."
2. Assessee-company, engaged in the business of trading and investment, filed its return of income on 25.09.2009 declaring loss of Rs.24.65 Crores Assessing officer(AO) finalised the assessment u/s.143(3) of the Act, on 19.12.2011,determining the income of the assessee at Rs.(-)16.55 crores.
3. During the assessment proceedings, AO found that the assessee had incurred loss of Rs. 17.24 crores in the Future & Option (F&O) segment, that it included loss of Rs.70.18 lakhs on account of Mark to Market (M to M) on F&O upon possession as on 31.03.2009.He issued a show cause notice to the assessee asking it as to why the M to M loss on F&O segment should not be disallowed. Assessee argued before the AO that it was dealing in derivatives(F&O),that it was part of business of the assessee, that it followed the principle of cost or market price whichever is lower in valuing the derivatives which was in accordance with the Guidance Note on accounting issued by the Institute of Chartered Accountants of India, that following the said system loss of Rs. 70.18 lakhs had been claimed. However, the AO was not satisfied with the submissions of the assessee. Referring to the cases of Bharat R. Ruia (HUF)(241 CTR 1), Tuticorin Alkaline Chemicals & Fertilizers Ltd. (277 ITR 172) & Arjan Khimji & Co.(121 ITR 421), he held that loss claimed by the assessee was not allowable.
4. Assessee preferred an appeal before the First Appellate Authority (FAA).It was argued before 2 ITA No. 2450/Mum/2013 M/s. Urudavan Investment & Trading Pvt. Ltd. him that the assessee had rightly claimed the loss arising out of F&O segment, that it had never claimed foreign exchange loss and return of income for the year under consideration as well as in the earlier years,that to that extent observation of the AO were incorrect. Assessee relied uon the following decisions:
i). Edelweiss Capital Ltd. (ITA No. 5324/Mum/2007).
ii). Woodword Governor India P. Ltd. (312 ITR 254).
iii). Bank of Bahrain and Kuwait (ITA No. 4404 & 1883/Mum/2004).
iv). Bank of India (218 ITR 371).
After considering the submissions of the assessee, FAA held that issue was covered in favour of the assessee by the order of the Tribunal in the case of Eleilweiss Capital Ltd. (supra), that the decisions of Bharat R. Ruia, Tuticorin Alkaline Chemicals & Fertilizers Ltd. and Urjan Khimji & Co.(supra) were not relevant to decide the issue of M to M loss on derivatives on the last date of particular financial year. Following the order of Edelweiss Capital Ltd.,he allowed the appeal filed by the assessee.
5. Before us, Departmental Representative (DR) referred the instruction issued by the CBDT on 23.03.2
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010 (Instruction no. 03/2010).AR supported the order of the FAA. We have heard the rival submission and perused the material before us.We find that identical issue has been decided by 'J' bench of Mumbai Tribunal on 10.11.2010 in the case of Eleilweiss Capital Ltd.(supra),therefore, following that order, we decide the effective ground of appeal against the AO. As a result, Appeal filed by the AO stands dismissed.