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TMI Blog2015 (8) TMI 125X X X X Extracts X X X X X X X X Extracts X X X X ..... be adjusted against the export of goods or by actual remittance on receipt of RBI permission. The Hon'ble ITAT in A.Y. 93-94, has given a direction to allow the exchange loss on the basis of the permission of RBI to remit the export advance and also to allow the exchange loss on account of exports actually effected by the assessee during the year if it is not allowed elsewhere. The AO has allowed the exchange loss on the basis of RBI permission for remittance but he has not allowed the exchange loss on account of exports actually effected without giving any finding that such loss has been allowed elsewhere by simply stating that it is a notional loss. The Ld. CIT(A) after considering the entire material on record has therefore rightly held that exchange loss on export of goods adjusted against the export advance is allowable to the assessee. Similarly, for A.Y. 95-96, the CIT(A) has rightly allowed the exchange loss on actual remittance of US $ 37,81,155 out of the sales proceeds from PPI, Russia as per the permission of RBI received on 18.09.94 and directed to allow the exchange loss with reference to the remittance of US $14,41,332.58 in A.Y. 96-97 on the basis of the permission ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 1st 16.09.1987 13,00,000 1,68,83,116.88 12.987 1st 17.09.1987 10,00,000 1,29,70,168.60 12.970 1st 22.10.1988 45,00,000 6,65,68,047.00 14.793 2nd 28.11.1988 26,00,000 3,73,48,927.00 14.365 2nd 2.1. In the returns the exchange loss was claimed on accrual basis in different A.Y.'s as under:- A.Y. Working of loss Remarks 91-92 Rs.4,19,42,259/- Not provided in the books but raised during the course of assessment. AO while passing the order rejected the claim. The Hon'ble ITAT confirmed the action of the AO. 92-93 Rs.7,36,22,000/- As above 93-94 Rs.2,06,31,512/- Assessee claimed in the books ₹ 3,57,68,238/-. ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ,01,461 Total 65,26,136 41,73,864 1,07,00,000 2.3 The foreign exchange loss claimed on accrual basis in 91-92 and 92-93 was disallowed by Hon'ble ITAT by holding it to be a notional loss. However, in A.Y. 93- 94, Hon'ble ITAT in ITA No. 1683/JP/96 dt. 25.08.2006 directed to allow the loss as per Para 16 to 21 of its order reproduced hereunder:- 16. We have given thoughtful consideration to the rival arguments and perused the material available on record. The assessee company entered into two supply agreement with M/s. Gillette U. K. Ltd. and received the advance in U.S. Dollars as under: Description Date of agreement Amount received US $ For sale and supply of 150MM blades during the period of 3 years beginning with 01.09.87 23.9.87 36,00,000/- For sale and supply of safety razor blades and other products 31.8.88 71,00,000/- 17. Against the first export advance of US$ 36,00 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... developments during the year, the grounds of disallowance of the impugned loss in A Y 1991-92 and 1992-93 do not survive during the year under consideration. There is no dispute that amount was received as an export advance i.e. towards the revenue generation activity of the assessee. This Bench in assessee's own case for A Y 1998-99 in ITA No. 273/JP/2003 dated 9.6.2006 after considering the principles laid down for allowing a business loss as explained at page 1436 to 1439 of the commentary of Chaturvedi and Pitthisaria, 5th edition and the decision of Special Bench in case of ONGC Vs. DCIT 261 ITR page 1 (AT) has held that loss arising to the assessee as a result of fluctuation in foreign exchange rate on the closing day of the year is a loss incurred by the assessee and the same loss is not a loss which can be called as a notional loss. In view of the above discussion, the AO is directed to allow foreign exchange fluctuation loss on accrual basis in respect of US$ 13,03,648/-, the liability of which crystallized during the year on permission of the RBI. 20. In respect of the claim of foreign exchange fluctuation loss in respect of second agreement, we find that applicat ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ground that it is a notional loss. 3. The Ld. CIT(A) has allowed the claim of exchange loss on export of goods in all the three years and also allowed the exchange loss on remittance of US $37,81,155 out of the realization of export sales proceeds from PPI, Russia but at the same did not allow the exchange loss with reference to remittance of US $14,41,332.58 allowed by the AO for the reason that RBI permission for the same was issued on 25.03.1996 which fall in A.Y. 96-97. The relevant finding of CIT(A) in Para 4.3, 5.3 and 6.3 of his order is reproduced as under:- 4.3(ii) As regards the second ground, it is the submission of the appellant that there is an actual and real exchange loss of ₹ 5588369/- since the obligation to export the goods, against the advanced received of USD 341380 in October/November 1988, has inflated in rupee terms from rupees 4996438/- to ₹ 105848061/- because of the devaluation of Indian Currency. The Hon'ble ITAT have directed the AO to examine whether the loss on account of exports of goods of USD 341380, made during AY 93-94 at committed prices, against the advance given as per second agreement stand allowed elsewhere under any o ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... exchange loss claimed at ₹ 5588368/- after verifying the working of the loss with respect to the conversion rates applied. This ground is allowed. 5.3. I have considered the AOs order and the submissions made by the AR of the appellant. The AO has disallowed the exchange loss of ₹ 827072/- since the same was claimed on notional basis. In view of the order of the Hon'ble ITAT Jaipur dated 25.08.2006, this action of the AO is upheld. I find that the following exports during the AY 94-95 have been made by the appellant on or before 18.01.94 i.e. USD 214656 on 26.05.93, USD 159120 on 15.04.93 and USD 169728 on 18.01.94. In view of my decision given above in Para 4.3(ii), it is held that the exchange loss with respect to the above said exports amounting to USD 543504/- is to be allowed during AY 94-95. This exchange loss has been worked out at ₹ 8977386/- by the appellant. This AO is directed to allow this loss after verifying the working of the loss with respect to the conversion rates applied. This ground is allowed. 6.3. I have considered the AOs order and the submissions made by the AR of the appellant. The Hon'ble ITAT in Para 20 of their order dat ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ates. The appellant has claimed exchange loss on export of USD 272376 made on 11.01.95 in AY 95-96. Following my decision in pare 4.3(ii) above, the AO is directed to allow the exchange loss on this amount of USD 272376 claimed by the appellant at ₹ 4517084/- after verifying the conversion rates. The ground of this appeal is partly allowed. 4. The Ld. DR reiterated the finding of the AO whereas the Ld. AR relied on the order of Ld. CIT(A) and also submitted that the Rajasthan High Court in assessee's own case for A.Y. 90-91 reported in 101 DTR 258 has held that foreign currency liability against the purchase of goods wherein the assessee has to shell out excess amount is in the nature of revenue expenditure and therefore allowable as an expenditure. Therefore, on export of goods against the foreign exchange which is already received by the assessee in earlier years, the exchange difference on account of devolution of rupee between the time when the advance was received and the time when goods are exported is to be allowed as a revenue loss/expenditure. 5. We have considered the facts of the case and the rival contention of both the parties. We find that Hon' ..... X X X X Extracts X X X X X X X X Extracts X X X X
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