TMI Blog2012 (11) TMI 56X X X X Extracts X X X X X X X X Extracts X X X X ..... e judgement of the Hon’ble Supreme Court of India, the amount paid as termination fee has to be allowed to the assessee in the assessment year 2004-05 and not in subsequent years - in favour of assessee. Exchange rate fluctuations - Held that:- As there is no written covenant with regard to the same, it cannot be construed that either of the parties are liable to compensate for loss on account of fluctuation in exchange rates. Therefore, the amount paid by the assessee to M/s. SMTPL on account of compensation for loss suffered due to exchange rates cannot be held to be an allowable expenses in the hands of the assessee – in favour of revenue. - ITA No.2221/Mds/2008 - - - Dated:- 20-7-2012 - Dr. O.K. NARAYANAN AND SHRI VIKAS AWASTHY, ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... The relevant terms conditions of the agreement are reproduced herein below:- a. SMTPL shall import all materials on behalf of the assessee on its account, after complying with all legal formalities and after payment of customs duty and other port and handling charges from its own funds and will not receive any advance from the assessee. b. SMTPL shall transport the goods to its warehouse, store it at its risk and dispatch as and when required by the assessee. c. SMTPL shall make remittance in foreign exchange to associated Swedish Steels AB within six months from the date of dispatch of the material from Sweden. d. SMTPL is not entitled to any advance from the assessee for making such remittances. e. SMTPL shall bear the cost o ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... nt of loss suffered by it due to fluctuation in exchange rates. The Assessing Officer disallowed the payment on the ground that as per the terms conditions, the assessee was not liable to compensate SMTPL for loss suffered on account of exchange rates and the termination fee paid by the assessee was in the financial year 2005-06. Therefore, the deduction would be allowable to the assessee in the assessment year 2006-07 and not in the assessment year 2004-05. 3. Aggrieved against the assessment order, the assessee preferred an appeal before the CIT(A). The CIT(A) allowed the appeal of the assessee. 4. The Revenue has come in appeal before the Tribunal assailing the order of the CIT(A). The DR submitted that a perusal of the record woul ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... of the relevant terms conditions of the agreement between the assessee and M/s. SMTPL would show that there is no clause for compensation on account of loss suffered due to fluctuation in exchange rates. The clauses relating to the compensation are g j . As per clause g , the compensation would be paid for the current period of six months from the date of despatch of material for remittance of payment and as per clause j , compensation was to be paid by either of the parties on account of premature termination of the agreement. Since both the parties were bound by the terms and conditions of the agreement, no covenant, which is not part of the agreement, could not be interpreted for the sake of convenience of either of the parties ..... X X X X Extracts X X X X X X X X Extracts X X X X
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