TMI Blog2019 (9) TMI 399X X X X Extracts X X X X X X X X Extracts X X X X ..... the assessee is entitled for the deduction of such forex loss on account of principles of consistency. It is because till the immediate preceding assessment year the Revenue has accepted all the losses and gains qua to the impugned advance shown by the assessee. Assessee is entitled for the deduction on the basis of principle of consistency. Assessee in the subsequent assessment year has offered the amount of trading advance as income including the effect of forex losses and gain. This fact has not been doubted and disputed by the authorities below. Addition on account of such loss in the year under consideration will lead to the double addition to the income of the assessee which is contrary to the provisions of law. Assessee is entitled for deduction on account of forex loss in relation to such trade advance. See CIT VERSUS M/S WOODWARD GOVERNOR INDIA P. LTD. M/S HONDA SIEL POWER PRODUCTS LTD. [ 2009 (4) TMI 4 - SUPREME COURT] - assessee is entitled for the forex loss in the given facts and circumstance as it is arising in the course of its business. - Decided in favour of assessee. - ITA No.1414/Ahd/2017 - - - Dated:- 14-5-2019 - SHRI MAHAVIR PRASAD, JUDICIAL ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ding that the learned AO's observation was correct that the advance received was Dow was never a liability and was primarily a consideration for all the signatories of agreement to waive their claim on Dow. 3.1. The learned Assessing Officer as well as learned CIT(A) failed to appreciate that such liability continued from earlier assessment years and every foreign exchange fluctuation gain in that respect was offered to tax by the appellant in the assessment years whenever there was such gains due to favourable foreign exchange fluctuation. Similarly, foreign exchange loses also in respect of the very same liability were allowed as deduction in the earlier years wherever such loss arose due to adverse exchange fluctuation in respect of very same liability. Under the circumstances even on ground of rule of consistency such loss should have been allowed to the assessment proceedings. It is submitted to be so held now. 3.2. The learned AO as well as learned CIT(A) failed to appreciate that liability was already considered as genuine liability from the earlier assessment years when such liability arose and in the year under consideration, what th ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... the yearend against the future export of the goods. 2.5. The assessee also claimed that the advances above from DOW had been written back including the effect of foreign exchange loss and the same was offered to tax in F.Y.2009-10 corresponding to Assessment Year 2010-11. The assessee in support of its claim filed the copy of the Return of Income along with relevant extracts of Profit Loss account for the F.Y. 2009-10 (A.Y.2010-11). 2.6. However, the AO was of the view that the amount as claimed as the advance was no longer payable by the assessee to DOW. There was also no supply of the goods by the assessee to DOW against such advance. As such the amount of the advance was waived off by DOW and therefore such advance cannot be treated as a liability. Accordingly, the AO disallowed the claim of foreign exchange loss amounting to ₹ 2,52,58,516/- u/s 37(1) of the Act and added to the total income of the assessee. Aggrieved, assessee preferred an appeal before the Ld. CIT (A). 3. The assessee before the Ld. CIT (A) reiterated the submission as made before the AO. However, the assessee further submitted that prior ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... es received from Dow amounting to ₹ 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 assessee entered into a long term contracts with a company namely DOW for the supply of the products. The assessee was already doing commercial transaction. Accordingly the DOW provided advances of USD 15,00,000/- to the assessee to continue the contracts. The assessee accordingly treated the said advances as revenue in nature and claimed effect of foreign exchange gain/loss on it. 4.1. The Ld. AR for the assessee in support of his claim drew our attention on pages 92 to 109 of the PB where the copy of the agreement was placed. 4.2. The Ld. AR for the assessee also claimed that it was booking consistently foreign exchange gains/losses since beginning (i.e. F.Y. 2000-01) on the said advances and the same was accepted by the Revenue. 4.3. The Ld. AR also filed the financial statements to justify that the assessee has recognized the income and offered to tax the aforesaid ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... w 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 preceding assessment year. As such we note that there was no change in the facts and circumstances of the case in the year under consideration, therefore in our considered view the assessee is entitled for the deduction of such forex loss on account of principles of consistency. It is because till the immediate preceding assessment year the Revenue has accepted all the losses and gains qua to the impugned advance shown by the assessee. Therefore we are of the view that the assessee is entitled for the deduction on the basis of principle of consistency. 6.3 We further note that, the assessee in the subsequent assessment year has offered the amount of trading advance as income including the effect of forex losses and gain. This fact has not been doubted and disputed by the authorities below. Therefore ..... X X X X Extracts X X X X X X X X Extracts X X X X
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