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2017 (8) TMI 851 - AT - Income TaxMark-to-Market’ losses arising on revaluation of forward contract agreements on the closing date of accounting year - Held that:- he assessee is into the business of import and export of diamonds and restate foreign denominated assets and liabilities at year-end in Indian rupees and recognize resultant profit or gain in the profit & loss account. This accounting methodology is consistently being followed by the assessee and further the same accounting treatment has been given to assets as well as liabilities. The Ld. CIT(A) has noted that the assessee has recognized gain in similar fashion for ₹ 331.86 Lacs in the impugned AY. The foreign exchange contracts have been entered into by the assessee to hedge against the foreign exchange risk arising against import / export transactions carried out by the assessee. It is also an admitted fact that quantum of foreign exchange contracts stands fully covered by the underlying business assets i.e. Sundry Debtors. Therefore, on facts and circumstances, we find that Ld. CIT(A) has clinched the issued in the right perspective. The matter stood in assessee’s favor by several judicial pronouncements as rightly observed by Ld. CIT(A). Foreign currency forward contracts have expired in the next assessment year when actual loss on these transactions has been ascertained. Therefore, in principal, while upholding the decision of Ld. CIT(A), we deem it fit to restore the matter back to the file of Ld. AO for limited purpose of verifying the fact that the actual resultant loss on forward contracts has first been adjusted from the loss claimed by the assessee in the impugned AY and resultant gain, if any, has been offered to tax and there is no double deduction of the losses. The assessee is directed to provide the requisite information / documents to substantiate his claim in this regard failing which the Ld. AO shall be at liberty to decide the matter on the basis of material available on record.
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