2011 (1) TMI 1453 - AT - Income Tax

Summary

Issues involved: Appeal against CIT(A) order regarding loss on valuation of unmatured forward exchange contract and allowance of interest u/s 244A.

Issue 1: Loss on valuation of unmatured forward exchange contract

The Revenue contended that the claim of loss on valuation of unmatured forward exchange contract is not allowable as it is notional in nature and forward exchange contracts cannot be considered as stock in trade. However, the Tribunal referred to a decision in the case of Bank of Bahrain and Kuwait vs. DCIT where it was held that the loss incurred by the assessee on account of evaluation of the contract before the date of maturity is allowable. Following this precedent, the Tribunal dismissed the Revenue's ground regarding this issue.

Issue 2: Allowance of interest u/s 244A

The Revenue challenged the allowance of interest u/s 244A by CIT(A) on the refund arising from self-assessment tax, arguing that self-assessment tax was not specifically included in the relevant clause of the Act. The Tribunal, citing decisions of the Special Bench and High Courts, upheld the allowance of interest u/s 244A in favor of the assessee. The Tribunal dismissed the Revenue's ground on this issue, stating that it is covered by previous decisions and in line with legal precedents.

Cross objection by the assessee

The assessee filed a cross objection on various grounds, including the allowance of loss on revaluation of unmatured Forward Foreign Exchange Contracts and the claim for credit of tax deducted at source. The Tribunal dismissed certain grounds as infructuous and directed the Assessing Officer (AO) to verify the claim of the assessee for tax credit. Additionally, the Tribunal remitted the issue of interest u/s 244A back to the AO for consideration in accordance with relevant legal decisions. The cross objection of the assessee was allowed for statistical purposes.

In conclusion, the Revenue's appeal was dismissed, and the assessee's cross objection was allowed for statistical purposes. The Tribunal provided directions to the AO regarding the verification of tax credit claims and consideration of interest u/s 244A in line with legal precedents.