2022 (4) TMI 1468 - AT - Income Tax

Rectification of mistake - Tribunal has not adjudicated the ground Nos.5.1 to 5.7 relating to Mark to Market losses - HELD THAT - We heard Ld D.R and he also accepted that the Ground No.5.1 to 5.7 have not been adjudicated. We find merit in the submissions made by the assessee in this miscellaneous petition. Accordingly, we are of the view that the main grounds 5.1 to 5.7 needs to be adjudicated and accordingly proceed to adjudicate the same below. Accordingly, the paragraph 7.7 and 7.8 of our order dated 22.12.2021 are substituted. Miscellaneous application is allowed.

Summary

Issues:
- Mistake apparent from record in the common order dated 22.12.2021 passed by the Tribunal.
- Adjudication of ground Nos.5.1 to 5.7 relating to Mark to Market losses in appeal No. IT(TP)A No.130/Bang/2014.
- Allowability of mark to market losses as deduction under the Income-tax Act,1961.
- Disallowance of loss arising on account of revaluation of forward contracts.
- Consistency in the Tribunal's view regarding the treatment of loss arising on revaluation of outstanding forward contracts.

Analysis:
The assessee filed a miscellaneous application pointing out a mistake in the Tribunal's order, specifically related to the adjudication of ground Nos.5.1 to 5.7 concerning Mark to Market losses in appeal No. IT(TP)A No.130/Bang/2014. The assessee contended that these losses should be allowable as deduction since they relate to revenue items only. Additionally, an alternative contention was raised regarding the increase in total income of undertakings eligible for deduction u/s 10A of the Act if mark to market losses were disallowed. The Tribunal had initially accepted the alternative contention and directed the Assessing Officer to grant the benefit of deduction u/s 10A in respect of the disallowance of MTM losses.

Further, the assessee argued that the main grounds 5.1 to 5.7, which were not adjudicated by the Tribunal, needed to be addressed. The Tribunal acknowledged this oversight, and after hearing both parties, proceeded to adjudicate the main grounds. The Tribunal substituted paragraphs 7.7 and 7.8 of the previous order, emphasizing that the loss arising on the revaluation of forward contracts related to revenue assets and should be allowable as a deduction. The Tribunal cited previous decisions supporting the allowance of such losses and directed the AO to delete the disallowance of the loss amount.

The Tribunal highlighted its consistent view that losses arising on the revaluation of forward contracts safeguarding revenue assets are eligible for deduction. Citing relevant case law, the Tribunal emphasized that such losses are not speculative or notional and should be fully allowable as deductions. Consequently, the Tribunal allowed the claim of the assessee in adjudicating ground nos. 5.1 to 5.7, rendering the alternative contention unnecessary. As a result, the miscellaneous application was allowed, and the other application was dismissed as infructuous.