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TMI Blog2014 (2) TMI 836X X X X Extracts X X X X X X X X Extracts X X X X ..... – the order of the CIT set aside – Decided in favour of Assessee. - I.T.A. No.7223/Mum/2011 - - - Dated:- 20-11-2013 - B.R.MITTAL And SANJAY ARORA, JJ. For the Appellant : Arvind Sonde For the Respondent : Santosh Kumar ORDER:- PER : B.R. Mittal The assessee has filed this appeal for assessment year 2008-09 against the order of Commissioner of Income Tax dated 26.8.2011 passed under section 263 of the Income Tax Act, 1961 (the Act) taking following grounds of appeal: 1. The ld. CIT(LTU) erred in passing the order under section 263 of the Act, and directing the additional CIT(LTU), Mumbai to modify the order u/s 143(3) of the Act. The appellant submits that the notice u/s 263 of the Act for modifying the order u/s 143(3) of the Act is bad in law, illegal, ultra-virus, in excess of and/or in want of jurisdiction and otherwise void; 2. The ld. CIT erred in holding that the losses of Rs.43.78 crores arising out of "Mark to Market" transaction are disallowable and directing the Addl. CIT(LTU), Mumbai to modify the order u/s 143(3) of the Act accordingly. The appellant submits that on the facts and circumstances of the case and in law t ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... he contention of the assessee and stated that MTM loss is a notional loss as no sale/conclusions/settlement of contract has taken place and the asset continues to be owned by the Assessee-Company. Such a notional loss would be contingent in nature and cannot be allowed to be set off against the taxable income. That the same should be added back for the purpose of computing taxable income of assessee. The Commissioner of Income Tax stated that the order passed by AO is erroneous to the extent of such loss considered to be an allowable and also prejudicial to the interest of revenue. Hence, Commissioner of Income Tax directed the AO to modify the order passed u/s 143(3) of the Act and make addition of Rs.43.78 crores to the income of the assessee, since loss is contingent in nature and the same would be considered in the year in which the transaction is settled. Hence the assessee is in appeal before the Tribunal. 6. At the time of hearing, ld.AR submitted that the above issue is squarely covered by the decision of the Hon'ble Apex Court in the case of CIT v. Woodward Governor India (P.) Ltd. ( 312 ITR 254), wherein Their Lordships have held that "Loss" suffered by the assessee on ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... by the above decisions, the order of ld. CIT(A) be quashed. 7. On the 13th November, 2013, ld. DR requested for time to go through the case laws relied upon by ld. AR and, the case was adjourned to 20.11.2013. On the date fixed for hearing i.e.20.11.2013, the ld. DR conceded that the issue is covered by the aforesaid decisions in favour of the assessee that unrealized loss due to foreign exchange fluctuation in foreign currency transactions as on the last date of accounting year is deductible. 8. We have carefully considered the order of ld. Commissioner of Income Tax and the submissions of ld. Representatives of the parties. We have also carefully considered the cases cited before us (supra). It is relevant to state that in the case of Woodward Governor India (P.) Ltd. (supra), the Hon'ble Apex Court observed and held that the assessee debited to its profit and loss account certain unrealized loss due to foreign exchange fluctuation in foreign currency transactions towards revenue items as on the last day of the accounting year. The A.O. held that the liability as on the last date of the previous year was not an ascertained but a contingent liability. Resultantly, the same was ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... urt in the case of Woodward Governor India (P.) Ltd. (supra) and also the decision of Tribunal in the case of Edelweiss Capital Ltd. v. ITA No.5324/Mum/2007 (AY-2004-05) dated 10.11.2010 and the decision in the case of Ramesh Kumar Damani V/s Addl.CIT in ITA No.1443/Mum/2009 (AY-2006-07) dated 26.11.2010. Copies of which are placed in the compilation of case laws at pages 76 to 84 and pages 85 to 90 respectively. 10. We also observe that similar issue was considered by Hon'ble Apex Court in the case of ONGC Ltd (supra). The assessee a public sector undertaking was engaged in the capital intensive exploration and production of petroleum products for which it had to heavily depend on foreign loans to cover its expenses, both capital and revenue and for payment to non-resident contractors in foreign currency for various services rendered. The assessee made three types of foreign exchange borrowings i.e.(i) on revenue account; (ii) on capital account, and (iii) for general purposes. Some of the loans became repayable in the relevant accounting year and the date of payment of some loans fell after the end of the relevant accounting year. The assessee revalued its foreign exchange loan ..... X X X X Extracts X X X X X X X X Extracts X X X X
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