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2021 (10) TMI 93 - AT - Income TaxLosses from Forex Derivatives - CIT deleted the addition - DR argued as losses claimed by the assessee are MTM losses and unrealized, contingent in nature, therefore, requested to set aside the order of the Ld.CIT(A) and allow the appeal of the revenue - HELD THAT:- The company had to pay difference to the banks between the expected rate of dollar at the time of booking the contract and actual value of dollar at the time of cancellation of contract and the resultant loss was debited to the account of the assessee, thus the losses were crystalised and not contingent in nature. There is no dispute that the bank has debited the loss and the assessee has incurred the forex loss on forward contracts. Entering into forward contract in foreign exchange is permitted by RBI and the losses were incurred during the course of business of the assessee. The assessee is not in the trade of foreign exchange and is engaged in the business of export of agri products and the loss was incurred in the course of business. Therefore, the facts of the assessee’s case are identical to the case of Sri Ramalingeswara Rice & Oil Mill of this Tribunal, relied upon by the Ld.CIT(A). This Tribunal in the case of Sri Ramalingeswara Rice & Oil Mill [2016 (10) TMI 924 - ITAT VISAKHAPATNAM] held that the losses are crystalised and the foreign exchange loss incurred by the assessee is business loss. Waiver of loan by way of One Time Settlement (OTS) - deemed income - Remission or cessation of liability under section 41(1) - HELD THAT:- In the instant case, the assessee did not get any such benefit or the cessation of liability in respect of expenditure or trading liability incurred in the earlier years. The sum of ₹ 26.03 crores was not a profit and loss item, for which the assessee claimed any deduction or loss of expenditure. Therefore, there is no case for making the addition u/s 41(1) of the Act. This Tribunal while dealing the issue in the case of Vasavi Polymers on similar facts held that the AO is not permitted to tax the principal amount as income. As per SRI VASAVI POLYMERS P. LTD. [2020 (6) TMI 401 - ITAT VISAKHAPATNAM] there is no dispute that the benefit by the assessee was in respect of Principal amount but not the expenditure debited to the Profit and loss account and the facts are identical to the case supra. The department did not bring any other case to controvert the case cited above. Therefore CIT(A) erred in confirming the addition - Decided in favour of assessee.
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