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2015 (3) TMI 140 - AT - Income TaxTreatment of foreign exchange fluctuation loss as operating cost - Held that:- The forex gain or loss is the difference between the price at which an import or export transaction was recorded in the books of account on the basis of rate of foreign exchange then prevailing and the amount actually paid or received at the rate of foreign exchange prevailing at the time of actual payment or receipt. Since such forex loss or gain is a direct outcome of the purchase or sale transaction, it partakes of the same character as that of the transaction to which it relates. When we read the ratio of the case of Sutlej Cotton (SC)(1978 (9) TMI 1 - SUPREME Court) in juxtaposition to that of the Special Bench in case of Prakash I Shah (2008 (8) TMI 387 - ITAT BOMBAY-K ), there remains no doubt that forex gain or loss from a trading transaction is not only an item of revenue nature, but is, in fact, a part of the price of import or value of export transaction, as the case may be. - Decided in favour of assessee. Assessee claiming that difference in the foreign exchange rate of Euro beyond a particular point is abnormal and hence the same be not considered as recurring expense - Held that:- This contention is devoid of any merits because of the obvious reason that fluctuation in the foreign currency is across the board and is applicable not only to the assessee but to the comparables as well. It was fairly admitted that in some of the comparable cases, there is a figure of forex gain/loss. This shows that such change in the foreign exchange rate is not assessee-specific so as to warrant any adjustment. As it is applicable to one and all, there can be no case for treating some part of the forex loss as normal and the other as abnormal so as to warrant exclusion of the second part from operating cost by treating it as an abnormal loss. It is further relevant to note that the assessee earned forex gain of around `18.40 lac under the ‘Trading segment’. As such, the contention of the assessee claiming exclusion of some part of the forex loss from the ambit of operating expenses on the basis of the abnormal loss theory, is not sustainable. CIT(A) has taken an unimpeachable view by considering the forex loss of ₹ 50.04 lac as a part of operating cost. - Decided against assessee. Denial of working capital adjustment - Held that:- The assessee cannot be deprived of the working capital adjustment, if it is rightly due. The claim of the assessee for working capital adjustment cannot be rejected at the outset. The impugned order on this issue is set aside and the matter is sent back to the AO/TPO for verifying the calculation so made by the assessee in support of its working capital adjustment, and then allow it as per law, if available, after allowing a reasonable opportunity of being heard to the assessee. - decided in favour of assessee for statistical purposes. Addition on account of forex loss - CIT(A) delted the addition - Held that:- No infirmity in the impugned order on this score because such a claim is permissible as per the judgment of the Hon’ble Supreme Court in the case of Sutlej Cotton Mills Ltd. (1978 (9) TMI 1 - SUPREME Court) ) and the Special Bench order in the case of Oil and Natural Gas Corpn. Ltd. vs. DCIT [2002 (8) TMI 802 - ITAT DELHI] - Decided against revenue Addition u/s 68 - CIT(A) deleted the addition - Held that:- Assessee furnished additional evidence before the ld. CIT(A) in support of the deletion of the addition. Such additional evidence was sent to the AO for comments. The AO simply objected to the admission of additional evidence without controverting the position stated in such evidence. It is noticed that a sum of ₹ 9,25,430/- was received as advance from Pioneer Agro Exports Ltd. during financial years 2000-01 and 2001-02. Since the credit in respect of this amount did not generate during the year, there can be no question of the applicability of section 68 of the Act to such a credit. As regards the second amount of ₹ 6,50,000/- from M/s Spic Pharmaceutical Division, it is seen that the assessee received it as an advance which was adjusted against the invoice raised in August, 2003. In view of these circumstances, we are of the considered opinion that the ld. CIT (A) was fully justified in deleting this addition. - Decided against revenue
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