TMI Blog2012 (5) TMI 216X X X X Extracts X X X X X X X X Extracts X X X X ..... as irrecoverable in the accounts of the assessee -As bad debts had been written off as irrecoverable in the accounts of the assessee, therefore, the Assessing Officer was not justified in making the addition – against revenue. Addition out of disallowance of foreign exchange fluctuation – Held that:- The assessee entered into forward exchange contract through State Bank of India for purchase of 7,30,000 USD after 11 months at a fixed price to cover up the risk of upward fluctuation of the USD rate and paid fixed premium over the support rate – the proportionate amount for the period falling in the assessment year was charged by the assessee in the profit and loss account - since the amount of premium paid was fixed and there was no element of speculation in the transaction, the amount so paid set to rest the possible fluctuation liability of the assessee company at the time of repayment of loan - on verification of the calculations furnished by the assessee it can be concluded that no element of speculation in the transaction exists - the transaction in question was a business transaction – against revenue. - INCOME TAX APPEAL No. - 359 of 2011 - - - Dated:- 28-2-2012 - R. ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... to two sister concern namely M/s Standard Sulphonators Ltd. and M/s Uniflex Industries Ltd. In respect of M/s Standard Sulphonators Ltd. the assessee had given deposit of Rs.50 lakhs whereas in respect of Uniflex Industries it had given advances/deposits on various dates. The opening balance as on Ist April, 2001 was Rs.55,69,854/- and closing balance as on 31.3.2002 was at Rs.2,14,742/-. The Assessing Officer was of the view that the assessee had charged interest on various advances/deposits made to various persons and has also paid interest on advances/ loans taken by it. Therefore, he disallowed sum of Rs.31,60,273 towards interest paid on loans which have not been utilised for business purposes. While examining the books of account, the Assessing Officer found that the assessee had written off a sum of Rs.5,81,875 as bad debts which did not relate to the business purpose. Another item which he disallowed was in respect of exchange rate difference. The total disallowance made on this account was Rs.5,63,427/- on the ground that the same related to contract for forward business in foreign exchange and not related to the assessee's business. The assessee feeling aggrieved preferre ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... of the assessee's compilation which reveals that as on 1.4.2001 the opening balance was at Rs.55,69,854 and closing balance was at Rs.2,14,742 as on 31.3.2002. The assessee was purcashing adhesive tape etc. from the said company. Since the amount was given on account of business transaction, so the addition made by the Assessing Officer was not justified particularly when this contention of the assessee that advance was given to purchase the material was not rebutted. Similarly, in the case of M/s Standard Sulphonators Ltd., the assessee was selling goods to the said company and the closing balance in the name of that company as on 31.3.2002 was at Rs.30,22,594.33 as against opening balance as on 1.4.2001 at 1,48,033.33. The copy of account of the said company is placed at pages 12 to 15 of the assessee's compilation which reveals that the assessee was selling goods to the said company. As the transaction with M/s Standard Suphonators Ltd. was a business transaction and the debit balance in the name of M/s Standard Sulphonators Ltd. represented outstanding of business transaction. Moreover, in the instant case, the Assessing Officer has not established that interest bearing loan we ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... cluding the premium cost as against 14.5% interest charged by the bank on cash account. The ld. CIT (A) verified the calculations furnished by the assessee and came to the conclusion that no element of speculation in the transaction was there. Since the transaction in question was a business transaction, therefore, the disallowance made by the Assessing Officer was not justified and the ld. CIT(A) rightly deleted the same. We do not see any valid ground to interfere with the findings of the ld. CIT (A) on the issue. Hence ground no.3 is dismissed. We have heard Sri Shambhu Chopra, learned senior standing counsel appearing for the Revenue and Sri Suyash Agrawal, learned counsel for the respondent-assessee. Sri Shambhu Chopra submitted that the assessee had not produced sufficient evidence and material on record so as to enable the Assessing Officer to examine the true nature and extent of the loans/advances/deposits made by the assessee to its sisters concern writing of bad and doubtful debts as also foreign exchange fluctuation and the CIT (A) as also the Tribunal has committed an error in accepting the explanation given by the assessee. The submission is wholly misconceived. W ..... X X X X Extracts X X X X X X X X Extracts X X X X
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