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TMI Blog2018 (6) TMI 1279X X X X Extracts X X X X X X X X Extracts X X X X ..... involving proceedings u/s 144C r.w.s. 144C(5) r.w.s. 143(3) of the Income Tax Act, 1961 (Act). 2. We come to the former issue of disallowance of foreign exchange fluctuation loss of Rs. 35,79,659/- deleted in the course of the lower appellate proceedings as under :- "I have considered the material before me. The A.O held that the 'unrealised' loss of Rs. 685,30,676/- on foreign exchange as provisional loss which was adjusted with 'realised' gain of Rs. 6,49,51,016/- on foreign exchange. It was observed that the provisional loss has been set-off with gain from the foreign exchange fluctuation and the net amount of Rs. 35,75,659/- has been debited to the P&L Account and claimed as deduction. According to the A.O, the CBDT has Issued 'inst ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... "or in the nature of Capital Loss'. ' The A.R has argued that apparently, the A.O had already made up his mind to disallow the loss due to foreign exchange fluctuations without bothering to study the statements filed. Had perused the statements filed, he would have found that the loss in foreign exchange had arisen mainly due to restatement of monetary items in foreign currency (cash, receivables, payables etc.) using the exchange rate on the Balance Sheet date, namely, 31st March, 2010. As a result, the Ld. DCIT deliberately disregarded the specific direction of the Hon'ble DRP thereby violating the provisions of section 144C (10) which reads as under: "( 10) Every direction issued by the Dispute Resolution panel shall be binding on ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... the nature of "derivative transactions" or in the nature of "capital loss ". On careful consideration of the material on record, it is found that the A.O had treated the amount of Rs. 35,79,659/- claimed as foreign exchange fluctuation loss as debited to the P/I by the appellant company. The AO in the assessment order after referring to CBDT instruction no. 3/2010 held that the transaction entered into by the appellant was on account of hedging and was a provision for the future period for which payment was still to be made and disallowed the appellant's claim for loss. The appellant's AR had mainly argued that the AO had misconstrued the direction of the DRP, Kolkata vide its direction dated 29.12.2014, to the AO to verify the nature o ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... using & Leasing Ltd Vs CIT 257 ITR 235(MP) followed in DCIT Vs. Shan Sundar Sharma (ITAT Chandigarh) ITA NO. 966/Chd/2014. In view of the above discussion, since the nature of the transaction in question were found to comprise of Net Loss on foreign exchange on account of restatement of cash receivable/payables etc in foreign currency as on 31.03.2010 the action of the AO in disallowing the amount of Rs. 35,79,659/- as provision on account of hedging is found to be not justified. The AO is directed to delete the disallowance of Rs. 35,79,659/-. This ground is allowed." 3. Learned Departmental Representative vehemently contends during the course of hearing that the Assing Officer had rightly disallowed the assessee's impugned foreign excha ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... y. 4. The Revenue's latter substantive ground seeks to revive the disallowance made by the Assessing Officer on account of failure to deduct TDS u/s 194H of the Act. We find first of all that the CIT(A) has accepted the assessee's corresponding arguments in part only in restricting the impugned disallowance to Rs. 33,71,711/- as per the DRP directions (supra) holding the relevant TDS to be deductible @ Rs. 17 per card u/s 194H of the Act than @ Rs. 30 per card as per the Assessing Officer. It had also pleaded during the course of appellate proceedings to have paid @ Rs. 30 per card which comes to Rs. 25,99,909/- and not Rs. 59,79,620/- in its profit and loss account. Be as it may, the fact remains that the DRP had issued a clear cut direct ..... X X X X Extracts X X X X X X X X Extracts X X X X
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