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2015 (12) TMI 47 - AT - Income TaxDisallowance of loss on eligible derivate transactions in foreign exchange - Held that:- The assessee company has entered into derivative transactions in foreign currency through recognised stock exchange and has complied with the other conditions as stipulated in Section 43(5) read with proviso(d) and explanation 1 to the said Section 43(5) of the Act for which cogent material is brought on record. The contract for derivatives in foreign currency are commodity as defined u/s 43(5) of the Act, the underlying asset being foreign currency and are hence entitled for exemption from being treated as speculative provided all other conditions as stipulated u/s 43(5) are complied with. A binding obligation accrued against the assessee the minute it entered into contract for derivative in foreign currency. A liability is said to have crystallized when a pending obligation on the balance sheet date is determinable with reasonable certainty. The considerations for accounting the income are entirely on different footing. As per AS-11, when the transaction is not settled in the same accounting period as that in which it occurred, the exchange difference arises over more than one accounting period. The contract for derivative in foreign currency have all the trappings of stockin- trade. In the ultimate analysis, there is no revenue effect and it is only the timing of taxation of loss/profit and in case the derivative contract is squared off/settled in the succeeding year, the difference in loss/profit will be brought to tax in the succeeding assessment year and hence its allowability in the current year is tax neutral. Hence, we order that loss incurred by the assessee company on the contract for transaction in un-expired contracts as on the date of Balance Sheet as at 31st March 2009 in derivatives in foreign currency complies with the provisions of Section 43(5) of the Act read with proviso (d) and explanation 1 of the Section 43(5) of the Act and is exempt to be categorised as speculation loss and further hold that the said loss as at the date of financial statement as at 31st March 2009 arising due to adverse movement in exchange rate between United States Dollars vis-avis in relation to Indian Rupee as on the date of Balance Sheet as at 31st March 2009 is not a notional or contingent loss rather it is a ascertained liability which has crystallized on the date of Balance Sheet as at 31st March 2009 and can be computed with reasonable certainty and accuracy, hence allowable as non-speculation loss. - Decided in favour of assessee. Payment of stamp duty and fee to Ministry of Corporate Affairs, New Delhi towards increase in authorized capital - revenue v/s capital expenditure - Held that:- Hon'ble Supreme Court in the case of Brooke Bond India Ltd. v. CIT (1997 (2) TMI 11 - SUPREME Court) and Punjab State Ind. Corp. Ltd. v. CIT (1996 (12) TMI 6 - SUPREME Court ) has clearly held that these stamp duties/fees to Ministry of Corporate Affairs, GOI paid towards the increase in authorized capital of the company is held to be for expansion of capital base of the company and hence these are capital expenditure and cannot be allowed. Respectfully following the above decisions of the Hon'ble Supreme Court, we uphold the orders of assessing officer as confirmed by the CIT(A) and decide this issue against the assessee company and in favour of the Revenue by holding that payment by assessee company towards stamp duty and fee to Ministry of Corporate Affairs, New Delhi towards increase in authorized capital of the assessee company is capital expenditure and disallowed as revenue expenditure as claimed by the assessee company. - Decided against assessee.
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