Principal Commissioner Of Incometax (Central-1), Kolkata v. M/S. Himadri Chemicals & Industriesltd

ITAT/124/2021IA No.GA/2/2021 IN THE HIGH COURT AT CALCUTTASpecial Jurisdiction (Income Tax)ORIGINAL SIDE PRINCIPAL COMMISSIONER OF INCOMETAX (CENTRAL-1), KOLKATA -Versus- M/S. HIMADRI CHEMICALS & INDUSTRIESLTD. Appearance:Mr. Prithu Dudheria, Adv....for the appellant. Mr. J. P. Khaitan, Sr. Adv.Mr. Saumya Kejriwal, Adv....for the respondent. BEFORE: The Hon’ble JUSTICE T.S. SIVAGNANAM The Hon’ble JUSTICE BIVAS PATTANAYAK The Court : This appeal filed by the revenue under Section 260A of the Income Tax Act, 1961 (the ‘Act’ for brevity)is directed against the order dated 5[th] September, 2018 passed bythe Income Tax Appellate Tribunal, Kolkata, “B” Bench, Kolkata inITA No.813/Kol/2018 for the assessment years 20125-13. The revenue has raised the following substantial questionof law for consideration: i) Whether the learned ITAT erred in not consideringthat in the present case, the assessing officer We have heard Mr. Prithu Dudheria, learned standingcounsel for the appellant/revenue and Mr. J. P. Khaitan, learnedsenior counsel assisted by Mr. Saumya Kejriwal, learned Advocatefor the respondent/assessee. It is not disputed before the revenue that thesubstantial questions of law which have been suggested by therevenue were considered by this Court in the case of PrincipalCommissioner of Income Tax-I, Kolkata vs. PriceWaterhouse CoopersPvt. Ltd. in ITAT/269/2017 dated 17[th] December, 2021 and thequestions were decided against the revenue and in favour of theassessee. The operative portion of the said decision is asfollows: “The assessee apart from placing materials fromthe paper book before the Tribunal placed relianceon the decision of the Hon’ble Supreme Court in the caseof Commissioner of Income Tax vs. Woodward GovernorIndia [P] Ltd. & Ors., [2007] 210 CTR [Del] 354 .The revenue resisted the plea raised by the assesseeby contending that the Tribunal’s circular issuedby the CBDT in instruction no.3 of 2010 dated 23.03.2010was issued after the decision in Woodward Governor India[P] Ltd. & Ors. case which was rendered on08.04.2009 and, therefore, contended that thecircular would bind the authorities. The Tribunalafter hearing the parties has recorded the finding thatthe facts in the case are not in dispute and theloss has arisen in respect of forward contracts,which had not expired on the last day of theaccounting year. Further, the Tribunal noted that theAssessing Officer did not dispute the fact that theassessee was following the mercantile system ofaccounting which requires to account for all expenses inthe profit and loss on accrual basis. Therefore, the Tribunal concluded that the assessee is illegible fordeduction on the loss recorded by them. The Tribunalrelied upon the decision in Woodward Governor India [P]Ltd. & Ors.., and after taking note of therelevant paragraph of the judgement the Tribunal hasrecorded that the facts of the assessee’s case isidentical to that of the facts of the case in WoodwardGovernor India [P] Ltd. & Ors. Thus, the assesseewas granted relief and the appeal was allowed. Therevenue is before us challenging the same as contendedbefore the Tribunal. The revenue before us has alsoplaced the instruction issued by CBDT circularno.3 of 2010 dated 23.03.2010 contending that thesaid instruction was issued post the decision inWoodward Governor India [P] Ltd. & Ors. In ourconsidered view, the circular instruction issuedby the Board may bind the authority but it would notbind the Court more so when the law has been laiddown by the Hon’ble Supreme Court as rightlypointed out by the Tribunal the facts are notin dispute and the revenue did not dispute that theloss is arising in respect of forward contract, whichhave been expired on the last day of the accounting yearand it was also not disputed by the revenue thatthe assessee was following the mercantile system ofaccounting. * * * * * * * * *The learned senior counsel for the respondentpointed out that identical issue was considered in thecase of Principal Commissioner of Income Tax vs.Suzlon Energy Ltd., 2018 [2] TMI 1789 [Gujarat]and the Court held that the decision of the Tribunal in so far as deleting the disallowancebeing notional loss on outstanding foreignderivative contracts was approved by holding that thedecision is in-conformity with the decision of theHon’ble Supreme Court in Woodward Governor India[P] Ltd. & Ors. The revenue had filed a SpecialLeave Petition in Special Leave to Appeal [C]No[s].1422/2019 which was dismissed by order dated17.01.2020. In the case of the same assessee, namelySuzlon Energy Limited, the Hon’ble Supreme Court inPrincipal Commissioner of Income Tax vs. Suzlon EnergyLtd. [2020] 121 taxmann.com 137 approved thedecision of the High Court upholding the order ofthe Tribunal allowing the assessee’s claim of foreignexchange fluctuation loss on mark to market basis.” Following the above decision, the appeal filed by therevenue (ITAT/124/2021) is dismissed and the substantial questionsof law are answered against the revenue. Consequently, the connected application for stay(GA/2/2021) also stands closed. (T.S. SIVAGNANAM, J.) (BIVAS PATTANAYAK, J.)