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TMI Blog2017 (2) TMI 923X X X X Extracts X X X X X X X X Extracts X X X X ..... addition made on account of notional gain on forward contract the CIT(A) had taken note of the fact that in case of Woodward Governor India Pvt. Ltd. (2009 (4) TMI 4 - SUPREME COURT )had dealt with the loss suffered by assessee in respect of revenue liability on account of exchange difference as on the date of balance sheet. Thereafter, considering the decision of Madras High Court in case of Indian Overseas Bank [1990 (2) TMI 43 - MADRAS High Court ] CIT(A) concluded that estimated, anticipated income arrived at on the basis of rate of exchange which prevailed on the last date of forward contract in foreign currencies only represents notional profit and could not be subject to tax. Respectfully following the proposition laid down by Madras ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... t the A.O. had treated the same as speculation gain as per section 43(5) of the Act. 4. Whether on the facts and in the circumstances of the case and in law. the Ld. CIT(A ) was right in treating the gain on forward contract as notional gain and thus not taxable ignoring the fact that there had been no existing contract against which the forward contract was entered into which is essential for the transaction to be considered as incidental to existing business 5. The appellant prays that the order of CIT (A) on the above ground be set aside and that of the Assessing Officer be restored . 6. The appellant craves leave to amend or alter any ground or add a new ground which may be necessary 3. Rival contentions have bee ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... serving as under:- The issue relates to the assessment made by the AO of the notional gain on foreign currency forward contracts of ₹ 45,47,858/-' as income for the year under consideration. I find that para 9 of schedule 20 (Principal Accounting Policies) of the appellant company as mentioned at page 31 of the annual report 2010-11 reads as under: The company has entered into forward contracts in order to determine the realization for their future sales and accordingly sold dollars to the bank for delivery at forward dates. The aggregate value of contracts for forward sales to the bank outstanding as on 31.03.2011 was USD 45,00,000, GBP 1,200,000 and EURO 720,000. In respect of the said forward contracts, the ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... cannot be a tax, even though, for purposes of book-keeping, an entry is made about an hypothetical income which does not materialise and a mere book-keeping entry cannot be income unless income has actually resulted. The question whether there is a loss or profit on foreign exchange transactions can be ascertained only after the settlement of the forward contracts and not before and so long as that stage has not been reached, the loss can only be notional and not actual or real and a notional loss cannot be claimed as a deduction. Whether a loss or profit, the principle applicable would be the same and the estimated profit, till the settlement of the forward foreign exchange contracts, could be regarded only as notional and not actual or r ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... l gain on forward contract the CIT(A) had taken note of the fact that in case of Woodward Governor India Pvt. Ltd., (supra), Hon ble Supreme Court had dealt with the loss suffered by assessee in respect of revenue liability on account of exchange difference as on the date of balance sheet. Thereafter, considering the decision of Madras High Court in case of Indian Overseas Bank 183 ITR 200, CIT(A) concluded that estimated, anticipated income arrived at on the basis of rate of exchange which prevailed on the last date of forward contract in foreign currencies only represents notional profit and could not be subject to tax. Respectfully following the proposition laid down by Madras High Court, we do not find any infirmity in the order of CIT( ..... X X X X Extracts X X X X X X X X Extracts X X X X
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