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2021 (11) TMI 709 - AT - Income TaxRevision u/s 263 by CIT-A - allowability of mark-to-market loss on forward contracts - HELD THAT:- AO scrutinized the expenses debited to the Profit and Loss account for the subject year in detail and cannot have said to missed mark-to-market loss on forward contracts which is apparent in the other expenses note of Financial statements. This clearly shows that the documents and submissions/ details filed were duly verified and considered by the Ld. AO while passing the Assessment order. AO duly examined the issue and with due application of mind, the ld. AO did not invoke any disallowance on account of mark-to-market on forward contracts. This view is supported by the order of Jurisdictional bench of ITAT in the case of Vidisha Tractors [1995 (5) TMI 73 - ITAT INDORE] Assessee co. meets all the requirements viz. it has been consistently following the mercantile system of accounting, it has been consistently recognising the mark to market gains/losses as per the accounting standards and it has been giving the same treatment to mark to market gains as given to mark to market losses i.e. the mark to market gains credited to the Profit and Loss Account are duly offered to tax, then the Ld. AO was justified in allowing the mark to market loss of ₹ 30,31,69,199 on forward contracts. We find that the identical issue of mark to market loss on forward contracts (that are not entered for trading/speculation purposes) has also been held to be an allowable deduction by the ratio laid down in the case of HEG Limited [2018 (10) TMI 59 - ITAT INDORE] AO’s order is not erroneous and prejudicial to the interest of revenue since mark to market loss incurred by Company on revaluation of forward contracts is an allowable deduction as the loss claimed by the assessee co. was in accordance with a recognized method of accounting, the loss claimed by the assessee co. was not a notional/contingent loss, but is an actual loss and the mark-to-market loss on forward contracts has not been treated as a contingent liability in the audited financial statements. Thus, the mark-to-market loss on forward contracts cannot be said as contingent in nature. Therefore, the Ld. PCIT has erred in invoking powers under section 263 of the Act. Accordingly, we set aside the order of the ld. PCIT holding it invalid and restore the order of the Assessing Officer. Consequently, grounds raised in the appeal of the assessee for the assessment year 2014-15 stand allowed.
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