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2011 (1) TMI 1244 - AT - Income TaxAmount accrued but not received - Accrued interest on securities – Held that:- The decision in DCIT (International Taxation) vs. Bank of Bahrain and Kuwait [2010 (8) TMI 578 - ITAT, MUMBAI] followed – the interest accrues only on the coupon dates and not on day to day basis - Union Bank of India cannot be prevented from urging in the return that the interest on govt. securities accrued only on the specified coupon dates notwithstanding that credit has been taken in the profit & loss account for the interest on day to day basis – Decided in favour of Assessee. Disallowance of loss on unmatured foreign exchange contracts – Held that:- The decision in DCIT (International Taxation) vs. Bank of Bahrain and Kuwait [2010 (8) TMI 578 - ITAT, MUMBAI] followed – Forward Foreign exchange contract means an agreement to exchange different currencies at a forward rate. Forward rate is a specified rate for exchange of currency at a specified date. The assessee enters into forward contract with clients to buy or sell foreign exchange at an agreed price at a future date in order to hedge against the possible future financial loss on account of wide fluctuation in the rate of foreign currency - where a forward contract is entered into by the assessee to sell the foreign currency at an agreed price at a future date falling beyond the last date of accounting period, the loss is incurred to the assessee on account of evaluation of the contract on the last date of the accounting period i.e. before the date of maturity of the forward contract – Decided in favour of Assessee. Reduction of claim of bad debt u/s 36(1)(vii) of the Act – Held that:- The decision in Oman International Bank, SAOG vs. DCIT [2003 (11) TMI 286 - ITAT BOMBAY-H ] followed - The deduction s. 36(1)(vii) is only supplemental in nature inasmuch as it comes to the play only when, and is admissible to the extent, the provision for bad and doubtful debts allowed u/s 36(1)(viia)(b) falls short of the actual bad debts written off as irrecoverable – thus, the AO is directed to allow deduction u/s 36(1)(vii), without taking into account the admissible deduction u/s 36(1) (viia)(b) for the relevant previous year which can only be taken into account for computing deduction u/s 36(1)(vii) for subsequent year(s) – Decided partly in favour of Assessee.
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