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TMI Blog2014 (4) TMI 163X X X X Extracts X X X X X X X X Extracts X X X X ..... to market losses on foreign exchange contracts. 3. Brief facts, qua the issue involved in ground no.1, are that the assessee has claimed Rs. 1,13,88,976 as marked to market loss on foreign exchange contract as per the details given in Schedule-XVII of the Balance Sheet. The assessee is in the business of manufacturing of flexible packaging material / paper for which it has to import raw materials and also the exports. The assessee company had entered into foreign exchange forward contract to Hedge the Forecast transactions against currency fluctuation. Based on the mercantile system of accounting followed by the assessee, the unexpired contracts were revalued and were marked to market value at the end of the accounting year and the loss d ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... t loss due to foreign exchange fluctuation in the foreign currency transactions has to be considered on the last date of the accounting year and is deductible as expenditure under section 37(1). 6. Learned Departmental Representative, on the other hand, strongly relied upon the order of the Assessing Officer. 7. After carefully considering the rival submissions and also on a perusal of the relevant findings of the learned Commissioner (Appeals), we find that this issue of marked to market loss on foreign exchange contract is covered in favour of the assessee not only by the decision of the Hon'ble Supreme Court in Woodward Governor India P. Ltd. (supra) but also series of decisions of the co-ordinate bench of the Tribunal. For the sak ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ing liability relating to import of raw material using closing rate of foreign exchange and any difference, loss or gain, arising on conversion of said liability at closing rate should be recognized in profit and loss account for reporting period. From the judgment of the Hon'ble Supreme Court it can be clearly deduced that unrealized loss due to foreign exchange fluctuation in foreign currency transactions on revenue item as on the last date of the accounting year is deductible. 9. ITAT, in the case of Kotak Mahindra Investment Ltd. (supra) also considered a similar issue. In the said case the assessee-company was engaged in the business of granting of loans and advances against shares and securities also traded in derivative segment by e ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 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 loans in foreign exchange on revenue a ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... on'ble High Court reversed the decision of the Tribunal on both the issues. On further appeal to the Apex Court, the decision of the High Court was reversed and it was held that (a) that the loss claimed by the assessee on account of fluctuation in the rate of foreign exchange as on the date of the balance-sheet was allowable as an expenditure u/s 37(1), and (b) that the assessee was entitled to adjust the actual cost of imported assets acquired in foreign currency on account of fluctuation in the rate of exchange at each of the relevant balance sheet dates, pending actual payment of the liability u/s 43A, prior to its amendment by Finance Act, 2002. 11. In view of above decisions, it is clear that the loss due to foreign exchange fluctuat ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ee is allowed. 9. Ground no.2, relates to disallowance of Rs. 20 lakhs on account of write-off of 1/10th of non-compete fee. 10. The assessee has claimed Rs. 20 lakhs as deferred revenue expenditure amortised on account of non-compete fees which has been disallowed by the Assessing Officer. 11. The learned Commissioner (Appeals), following the decision of the earlier year's order of the Tribunal in assessee's own case right from the A.Y. 1998-99 to 2003-04, decided the issue against the assessee. 12. Before us, the learned Counsel for the assessee submitted that though this issue is covered against the assessee, by series of decisions of the Tribunal in assessee's own case, however, the assessee's appeal has been admitted under section ..... X X X X Extracts X X X X X X X X Extracts X X X X
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