Home Case Index All Cases Income Tax Income Tax + AT Income Tax - 2021 (6) TMI AT This
Forgot password New User/ Regiser ⇒ Register to get Live Demo
2021 (6) TMI 894 - ITAT SURATAddition made on account of gains from cancellation of forward contract - AO observed that, the so-called asset could not be created not any foreign exchange loan was taken by the assessee for such assets - Assessing Officer treated the same as revenue receipt - CIT-A deleted the addition - HELD THAT:- CIT(A) after considering the facts on the issue held that the assessee company is engaged in manufacturing of polyester chips, yarn, and other fabrics and is not in a banking business. The assessee also not engaged in the business of foreign exchange nor trading in machineries sought to be imported. The assessee intended to expend its capital expansion and panned to purchase certain machineries and accordingly decided to import such machineries from abroad against foreign currency loan - in order to safe guard its interest against the fluctuation in foreign currency entered into forward contract. CIT(A) after relying on the decision of Sutlej Cotton Mills [1978 (9) TMI 1 - SUPREME COURT] held that if the amount in foreign currency was a trading asset then foreign exchange fluctuation would be a revenue expenses, but if held as capital account, the loss would be a capital loss. The Ld. CIT(A) also held that the decision in assessee's own case for AY 1993-94 is also squarely applicable on this issue for the year under consideration. Hon'ble Jurisdictional High Court in assessee's own case for AY 1993-94 [2009 (2) TMI 95 - GUJARAT HIGH COURT] while considering the merit of the case clearly held that if the foreign exchange was acquired under the contract for the purpose of discharging an obligation on capital account viz, toward borrowing for the purpose of import of capital asset, which would indicate that the surplus realised on cancellation of such contract would bear the same character. Thus we are of the view that intended loan have been raised for the purpose of acquisition of plant & machinery and gain so earned on fluctuation of foreign exchange rate was on capital account. Thus, the gain so earned would partake the character of capital asset. We do not find any infirmity in the order of ld. CIT(A) which we affirm - Decided against revenue.
|