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2015 (8) TMI 125 - AT - Income TaxDisallowance of exchange loss incurred on export of goods - CIT(A) directed AO to allow claim - Held that:- Hon'ble Rajasthan High Court in assessee's own case for A.Y. 90- 91 has held that under the mercantile system of accounting, the claim of a liability is required to be worked out at the close of the accounting year and in our view the assessee appellant had correctly claimed the said amount as a liability as there was fluctuation of exchange on account of Dollar vis-a-vis India Rupee. Exchange loss at the close of the financial year is allowable expenditure u/s 37(1) of the Act. In the case before the Hon'ble Rajasthan High Court, foreign exchange liability is against purchase of goods wherein it has been held that assessee has to shell out the excess amount, therefore, the said amount is allowable. The Hon'ble Rajasthan High Court has relied on the judgment of Hon'ble Apex Court in case of CIT Vs. Woodward Governor India Pvt. Ltd. [2009 (4) TMI 4 - SUPREME COURT]. In the present case also, the export advance received by the assessee was a liability which was to be adjusted against the export of goods or by actual remittance on receipt of RBI permission. The Hon'ble ITAT in A.Y. 93-94, has given a direction to allow the exchange loss on the basis of the permission of RBI to remit the export advance and also to allow the exchange loss on account of exports actually effected by the assessee during the year if it is not allowed elsewhere. The AO has allowed the exchange loss on the basis of RBI permission for remittance but he has not allowed the exchange loss on account of exports actually effected without giving any finding that such loss has been allowed elsewhere by simply stating that it is a notional loss. The Ld. CIT(A) after considering the entire material on record has therefore rightly held that exchange loss on export of goods adjusted against the export advance is allowable to the assessee. Similarly, for A.Y. 95-96, the CIT(A) has rightly allowed the exchange loss on actual remittance of US $ 37,81,155 out of the sales proceeds from PPI, Russia as per the permission of RBI received on 18.09.94 and directed to allow the exchange loss with reference to the remittance of US $14,41,332.58 in A.Y. 96-97 on the basis of the permission issued by RBI on 25.03.96. Therefore, the order of CIT(A) is upheld by dismissing the grounds of the department. - Decided in favour of assessee.
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