9911796707
TMI Blog2010 (11) TMI 117X X X X Extracts X X X X X X X X Extracts X X X X ..... constitute an admissible expenditure being incidental to the business operations. The requirement of sec. 37 thus ends with transactions for the purposes of business and it is not essential that the funds received during the course of such transactions must also be used for the purposes of business. It is important to bear in mind that the loss which is claimed as deduction is in the course of the business operations and is not in the nature of cost of funds and for this reason the use of funds is not really relevant for the purpose of deciding deductibility of such loss. - Decided in favor of assessee. - ITA NO. 5031/MUM/2009 - - - Dated:- 24-11-2010 - N. V. VASUDEVAN, JUDICIAL MEMBER J, AND PRAMOD KUMAR, ACCOUNTANT MEMBER J, ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... partners for his personal use. We may add that the loss on account of exchange difference arose as the amounts were received by the assessee in US Dollars and the same were refunded also in US Dollars. The accounting, however, was done on the basis of prevalent exchange rate as at the time of receiving these advances and as at the time of refunding the same and these two exchange rates being different, the loss arose in terms of rupees on such refund of advances. It was in this background that the AO disallowed the loss on exchange rate difference on the following grounds : " ( i ) Assessee firm is not having its own funds in the form of positive capital balance of partners. ( ii ) Assessee firm is not having any accumulated profit ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 2004-05 and 2005-06, have been offered as income of the assessee. Consistent with the method of accounting regularly followed by the assessee and having noted that the exchange difference had arisen due to assessee being bound to account for foreign exchange fluctuation as per Rule 115 of the I.T. Rules, 1962, the CIT(A) concluded that the loss on foreign exchange is admissible deduction. The disallowance was thus deleted. The AO is aggrieved of the relief so granted by the ld. CIT(A) and is in appeal in appeal before us. 5. The main thrust of ld. D.R.'s contention is that since the amounts which were received by the assessee were not used for the purposes of business, any exchange loss on refund of these amounts cannot be allowed as a ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... nts have been withdrawn by the partner through his capital account. He, however, submits that this usage does not make any difference to the question of deductibility of exchange loss inasmuch as beyond any dispute or controversy the amounts have been received by the assessee from its customers in the course of business and amounts have been refunded by the assessee in the course of business. He also points out that it is not even the case of the Revenue that the amounts received by the assessee were in the nature of accommodation transactions or that the amounts have been received from the sister concern. He further invites our attention to the ld. CIT(A)'s finding that the assessee had supplied goods worth Rs. 54.18 crores to these custom ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... hat the loss has arisen due to refund in respect of advance received from customers as also on account of bringing the outstanding amount as per the exchange rate prevailing as on 31-3-2006. It is pointed out that the loss has thus not only arisen on account of refunds but also on account of bringing the outstanding amounts as per exchange rate prevailing at the year end. The ld. D.R. prays for the matter being sent back to the file of AO for fresh examination. 8. Having given our careful consideration to the rival submissions and having perused the material on record, we are of the considered view that so far as the exchange loss on refund of advances received from the customers is concerned, the same indeed constitutes admissible dedu ..... X X X X Extracts X X X X X X X X Extracts X X X X
|
