Home Case Index All Cases Income Tax Income Tax + AT Income Tax - 2017 (6) TMI AT This
Forgot password New User/ Regiser ⇒ Register to get Live Demo
2017 (6) TMI 339 - AT - Income TaxDisallowance of losses on account of re-measuring of forward contracts - assessee characterized the said losses as “marked to market” ( MTM) losses - Held that:- Hedging forward contracts of foreign currency cannot be “marked to market” (MTM) on balance sheet date as already there is a underlying asset and there is no extra outgo for settlement of the forward contract other than already determined in the contract and thus there is no additional liability or benefit to the assessee on the settlement date. Once there is no liability or benefit on the settlement date, there is no possibility of liability or benefit to the assessee on balance sheet date also. It is contested by the Revenue that in certain forward contracts, there was no underlying asset as on the date of balance sheet and, therefore, it need to be examined whether same were forward contract transaction in the nature of hedging or in the nature of speculation. However, in our opinion, when the contention of the assessee that all the forward contracts were settled by way of actual delivery through dollars received on export receivables, the assessee cannot be allowed “mark to market” losses on such forward contract and therefore it is not required to examine whether those forward contract transactions were speculative in nature. In view of above we hold that the loss claimed by the assessee on account of mark to market losses on account of fluctuation in foreign currency in respect of hedging forward contract is not allowable. - Decided against assessee.
|