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2015 (2) TMI 401 - AT - Income TaxAccrual of income or loss - Provision for FCNR fluctuation loss - Applicability of Accounting Standards 11 ('AS-11') - Held that:- The liability has neither been ascertained nor crystallised as on the Balance Sheet date. Further, the transaction in 'question is not related to monetary items, as the underlying exposure behind the transaction is only foreign exchange. In this view of the matter, we are in agreement with the decision of the learned CIT (Appeals) that the decision of the Hon'ble Apex Court in the case of Woodward Governor India (P.) Ltd. (2009 (4) TMI 4 - SUPREME COURT) does not apply to the facts of the case on hand. Transactions entered into by the assessee were not hedging transactions, but the same were speculative and therefore the assessee's case is not covered by proviso (a) to section 43(5) of the Act. The transactions in question in the case on hand are speculative transactions and therefore, the learned CIT (Appeals) was right in upholding the decision of the Assessing Officer that the transaction entered into by the assessee is speculative in nature; the losses shown are notional in character and therefore the provision for loss claimed as a deduction is liable to be disallowed. As regards the alternate contention of the assessee that if the transaction in question is held to be speculative in nature, then the provision for loss should be allowed as a deduction from the gains reported from such transactions, we are unable to agree with the contention of the assessee in this regard. It is nobody's case that the assessee is engaged in the business of speculation. It has also been held that the loss shown is a notional loss only and such notional loss is not liable to be adjusted against the profit actually earned by the assessee. The stage for adjustment arises only when the loss/liability actually crystallises. - Decided against assessee.
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