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2016 (6) TMI 788 - AT - Income TaxSubscription amount paid for club membership - whether an allowable business expenditure? - Held that:- In the instant case, the subscription paid towards membership for a period of five years and the same is being paid annually, thus is an expenditure incurred wholly and exclusively for the purposes of business and not towards capital account as it only facilitates smooth and efficient running of a business enterprise and does not add to the profit earning apparatus of a business enterprise. Thus we hold that subscription amount paid towards membership in N.L.Planters club for a period of five years is an expenditure incurred wholly and exclusively for the purposes of business of the assessee. See COMMISSIONER OF INCOME TAX vs. SAMTEL COLOR LTD [2009 (1) TMI 26 - DELHI HIGH COURT] - Decided in favour of assessee Addition on marked to market loss on unexplained forex contracts - AO was of the view that the marked to market loss is a notional loss, contingent in nature and it is not allowed to be set off against the taxable income - CIT(A) deleted the addition - Held that:- the claimed loss under consideration occurred to the assessee on account of five unexpired forex forward contracts i.e is a loss incurred on account of revaluation of contract on last day of accounting period before date of maturity of forward contract. The Ld.CIT-A observed that the assessee has been following a consistent accounting policy for determining loss under AS-11 and AS-30 as required under Companies Act and it is to be noted that the accounting standards were issued by the ICAI which has received judicial recognition. Accordingly the assessee, the gain or loss on revaluation of the outstanding contracts was booked in the P&L a/c as per the mandatory requirements of RBI guidelines. The Hon’ble Supreme Court in the case of Woodward Governor India (P) Ltd. [2009 (4) TMI 4 - SUPREME COURT ] held that that the Central Government has made AS-11 mandatory. During the course of first appellate proceedings that the CIT-A noticed that the AO allowed the loss of ₹ 85,70,425/- for 2010-11 which supports to show that the assessee has been following consistently accounting standards and the liability has been accrued for a pending obligation for every year i.e the difference was arising for more than one accounting period. Thus disallowance made by the AO treating the impugned amount for A.Y 2009-10 as contingent and notional loss is not justified and that the loss incurred to the assessee on account of five unexpired forex forward contracts on the last date of the accounting period i.e. before the date of maturity of the forward contract is not contingent and it is a actual loss, is allowable. - Decided in favour of assessee
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