ITO, WARD-7(1), KOLKATA, KOLKATA vs. M/S MANGALAM FISCAL SERVICES PVT. LTD., KOLKATA

Ground No.1 raised by the revenue reads as follows :- “l. Whether on the facts and circumstances of the case and in law Ld.CIT(A) erred in allowing donation as admissible expenditure ."

The Assessee is a company engaged in the finance business. In the course of assessment proceedings u/s 143(3) of the Income Tax Act, 1961 (Act) the AO noticed that the assessee had claimed a sum of Rs.16,280/- as deduction under the head “Donation and Subscription” . The AO held that the sum cannot be allowed as a deduction as it was not for the purpose of business of the assessee. The AO also observed that no certificate u/s 80G of the Act was filed to show that the donation can be claimed as deduction. Mangalam Fiscal services (P)Ltd A.Y.2009-10 2

On appeal by the assessee the CIT(A) held that donation was in connection with the business of the assessee for fostering business environment on the occasion of festivals , ceremonies, functions etc. He therefore directed the AO to allow deduction u/s 37(1) of the Act.

Aggrieved by the order of CIT(A) the revenue has raised ground no.1 before the tribunal.

We have considered the submissions of the ld. DR, who relied on the order of AO. We are of the view that in the light of the specific finding of CIT(A) that donations were made to maintain and foster business relationship and were made on the occasion of festivals, ceremonies and functions etc. The deduction was rightly considered as allowable u/s 37(1) of the Act. We find no grounds to interfere with the order of CIT(A). Ground No.1 raised by the revenue is accordingly dismissed.

Ground No.2 raised by the revenue reads as follows :- “2. Whether on the facts and circumstances of the case and in law Ld. CIT(A) allowed foreign currency fluctuation loss to be treated as business loss instead of speculative loss."

The assessee debited a sum of Rs.48,33,767/- under the head Exchange Rate Fluctuation. The assessee had sold products to one Bunge S.A. of USA. The amounts payable by Bunge S.A. were restated as the last date of the previous year and due to exchange rate fluctuation the sum receivable was less by Rs.48,33,767/- and this was claimed as a loss. The AO held that this is a speculation loss. The CIT(A) however after noticing the fact that the loss in question was on account of revenue transaction in the ordinary course of business of the assessee the loss had to be regarded as normal business loss and allowed as deduction. The CIT(A) found that the Hon’ble Supreme Court in the case of CIT vs Woodward Governor India Pvt. Ltd. 312 ITR 254 (SC) held that loss on revenue account was allowable as a business expenditure u/s 37(1) of the Act. The Mangalam Fiscal services (P)Ltd A.Y.2009-10 3 CIT(A) held that the loss in the present case was on account of advance received on sale and therefore it was a revenue account. The CIT(A) therefore allowed the claim of the assessee.

Aggrieved by the order of CIT(A) the revenue has raised ground no.2 before the tribunal. 10. We have heard the submissions of the ld. DR, who relied on the order of AO. We are of the view that in the light of a clear finding that the fluctuation is on account of money receivable on sale done in the normal course of business, the exchange fluctuation loss connected with such transactions had to be regarded as allowable business expenditure. We find no ground to interfere with the order of CIT(A). Ground No.2 raised by the revenue is dismissed.

In the result the appeal by the revenue is dismissed. Order pronounced in the Court on 01.03.2018.