Home Case Index All Cases Income Tax Income Tax + AT Income Tax - 2021 (7) TMI AT This
Forgot password New User/ Regiser ⇒ Register to get Live Demo
2021 (7) TMI 1132 - AT - Income TaxDisallowance of mark to market loss - forward contracts entered by the assessee with banks are in respect of underlying import/export transactions - HELD THAT:- A perusal of the impugned assessment order would reveal that simply relying upon the CBDT instruction no. 3/2010, the AO has disallowed the claim of loss - on a careful perusal of CBDT Instruction No. 3/2010 (supra), we are of the view that the instruction clearly speaks about foreign exchange derivatives contract and not hedging transactions. Thus, in our view, CBDT instruction no. 3/2010 would not be applicable to the assessee. The Hon’ble Supreme Court in case of CIT vs. Woodward Governor India (P) Ltd. [2009 (4) TMI 4 - SUPREME COURT] has held that any gain or loss on outstanding receivables at the year end would be allowable. This ratio laid down by the Hon’ble Supreme Court has been followed by subordinate Courts and Tribunals in a number of decisions. Also see BADRIDAS GAURIDU (P.) LTD. [2003 (1) TMI 61 - BOMBAY HIGH COURT] and M/S. D. CHETAN & CO. [2016 (10) TMI 629 - BOMBAY HIGH COURT] Pertinently, when the AO is accepting the gain offered as income by the assessee following similar accounting method, there is no justifiable reason to disallow the loss. It is also relevant to observe, the contention of the assessee that the loss determined on restatement of forward contract as on 31.03.2016 was reversed on 01.04.2016 i.e. on the first day of the succeeding assessment year, wherein, the forward contracts matured has not been controverted. Thus, any disallowance in the impugned assessment year would be prejudicial to the assessee, as, it would amount to double disallowance of the same amount. Thus we allow assessee’s claim of loss. - Decided in favour of assessee.
|