9911796707
TMI Blog2019 (9) TMI 399X X X X Extracts X X X X X X X X Extracts X X X X ..... confirming disallowance of Rs. 2,01,70,542 made by learned AO on the basis of incorrect perception that Hon'ble ITAT has upheld the direction of CIT while Hon'ble ITAT was only adjudicating on the validity of the jurisdiction of CIT to revise the order, under section 263 of the Income-tax Act, 1961 ('the Act') in respect of the order passed by the learned AO under section 143(3) of the Act. 2. The learned CIT(A) erred in law and facts in confirming disallowance of the foreign exchange loss of Rs. 2,01,70,542 suffered by the appellant and debited to profit & loss account. It is submitted that the same being business expenditure should be allowed to be deducted. 2.1 The learned CIT(A) failed to appreciate that the amount of foreign exchange loss in connection with outstanding liability of USD 15,00,000 towards Dow Chemicals Pacific Limited ('Dow') was only Rs. 1,73,70,000 instead of Rs. 2,50,58,516 and Rs. 2,01,70,542 disallowed by the learned AO and upheld by the learned CIT(A), respectively. 2.2. The learned CIT(A) and the learned AO erred in law and on facts in not considering the detailed submission/written-submissions and documents furnished by the appellant. 3. The ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... n exchange loss for a sum of Rs. 2,74,18,861/- in its profit and loss account. 2.1. Out of the aforesaid foreign exchange loss, a loss amounting to Rs. 2,52,58,516/- was claimed on account of reinstatement of advances received from customers. 2.2. The assessee further submitted that major foreign exchange loss was attributable on the advances received from Dow Chemicals Pacific Limited (In short DOW). As per the assessee, the impugned advance represents concerning the long term contracts entered with DOW for the supply of the products. 2.3. The assessee also claimed that it had accounted foreign exchange gains/losses on account of receivables/payables in foreign currency on a regular basis (i.e., consistently year after year) to give the effect of change in the foreign exchange rate as provided in AS-11 issued by the ICAI which is mandatory under the Companies Act, 1956. 2.4. The assessee also relied upon the opinion of Expert Advisory Committee of the ICAI on the issue of reinstatement of the closing balance on account of advances in foreign currency to be adjusted at the yearend against the future export of the goods. 2.5. The assessee also claimed that the advances abo ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... rex gain/loss to tax as income. 3.3. However, the Ld. CIT (A) observed that the assessee received advance amounting to Rs. USD 15,00,000/- from Dow to supply the Piperazine Anhydrous. However, all the transaction for the supply had been completed up to 30-06-2001. Thus the advance received of USD 15,00,000/- was on account of sale of goods and therefore there was no liability to repay the same to Dow. 3.4. The Ld. CIT (A) in view of the above noted that there was no liability existing to repay to Dow as on 31-03-2009 and therefore assessee is not eligible to claim the foreign exchange fluctuation loss in its books of account on such advances of Dow. 3.5. The Ld. CIT (A) further observed that the forex loss claimed by the assessee on the said sum was limited to Rs. 2,01,70,542/- only and balance amount was related to other contracts. The Ld. CIT (A) accordingly confirmed the order of the AO and disallowed only the loss related to the advances received from Dow amounting to Rs. 2,01,70,542.00 only. Being aggrieved by order of the Ld. CIT (A), the assessee is in appeal before us. 4. The Ld. AR before us filed a paper book running from pages 1 to 298 and submitted that the as ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... allowance of such foreign currency fluctuation loss which was subsequently confirmed by the learned CIT (A). 6.1. On perusal of the balance sheet filed by the assessee as on 31st March 2009, we note that the liability of $15 million claimed as advance, was reflecting therein which was not disturbed by the authorities below. Thus the question arises whether the assessee can claim the deduction on account of fluctuation in the foreign currency loss in relation to such advances which has been accepted by the Revenue. In this regard, we note that the authorities below has taken contradictory stand meaning thereby the Revenue on one hand has accepted the liability shown by the assessee as discussed above and on the other hand the forex losses in relation to such trading liability was not allowed as deduction. In our considered view once the Revenue has accepted trading liability shown by the assessee, then the Revenue cannot make the disallowance of the corresponding loss in relation to such advance being a trading asset. 6.2. In addition to the above, we also note that the assessee has been showing such advance in its accounts since beginning which was accepted till the immediate p ..... X X X X Extracts X X X X X X X X Extracts X X X X
|
