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2014 (8) TMI 1051 - ITAT MUMBAIDisallowance of Mark to Market loss are notional losses - Held that:- Facts emerging out of the assessment record show that assessee is in the business of import and export of diamonds substantial portion of its transaction are denominated in US dollars and accordingly current assets and liabilities are also denominated in US dollars to hedge itself against risk out of fluctuation in foreign exchange. The assessee was entering into forward contract to hedge itself. Forward contract in foreign exchange are booked in the assessee’s regular course of business, which are always denominated in foreign currency. Whenever there is a gain the assessee is recognizing the same in its P & L Account. Hedging is a commercial necessity being followed by all engaged in import & export line because of the highly volatile currency fluctuation. As relying on the decision of DCIT vs. Bank of Bahrain and Kuwait (2010 (8) TMI 578 - ITAT, MUMBAI) to hold that the liabilities for foreign exchange was incurred during the normal course of assessee’s business and in fact the gain earned on such revaluation having been accepted and brought to tax in the respective years, there is no reason to arrive at a different conclusion in this year merely because there is a loss. Thus directing the AO to delete the addition - Decided in favour of assessee.
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