9911796707
TMI Blog2017 (3) TMI 966X X X X Extracts X X X X X X X X Extracts X X X X ..... ugned loss. See CIT Vs. Woodward Governor India (P) Ltd [2009 (4) TMI 4 - SUPREME COURT] Thus the losses which are arising due to the foreign exchange fluctuation should be accounted for in the books of accounts and accordingly the assessee is eligible to claim the deduction of such losses. - Decided in favour of assessee - ITA No.1156/Kol /2014 - - - Dated:- 17-3-2017 - Shri Aby.T Varke, Judicial Member and Shri Waseem Ahmed, Accountant Member For The Appellant Shri K.M. Gupta, Advocate and Shri Bikash Kr. Jain, AR For The Respondent : Shri Niraj Kumar, CIT-DR ORDER PER Waseem Ahmed, Accountant Member:- This appeal by the assessee is directed against the order of Commissioner of Income Tax (Appeals)-XX, Kolk ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... defiance of settled principles laid down by the Apex Court. 3. Only issue raised by assessee in this appeal is that Ld. CIT(A) erred in confirming the order of Assessing Officer by sustaining the disallowance of ₹8,46,64,000/- on account of foreign exchange loss due to fluctuation. 4. Briefly, the facts of the case are that assessee in the present case is a Private Limited Company and is engaged in consultancy business. The assessee in its computation of income has claimed loss of ₹8,46,64,000/- on account of foreign exchange fluctuation. The impugned aforesaid loss was representing the fees receivable in foreign currency. During the course of assessment proceedings, AO observed that fees receivable in foreign exchange ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ant in respect of loss of foreign exchange. The appellant had entered into foreign currency derivatives with the objective of hedging its foreign currency exposures. On going through the various agreements undertaken by the appellant with the banks for hedging its foreign exchange exposure, the banks certified the net mark to market loss of ₹ 846,64 laksh. Since, the loss was a notional loss as no sale of goods/settlement of contract had been taken place. Being notional loss/contingent liability, the AO disallowed the ape s claim. Though the appellant claimed that the loss was claimed as per their system of accounting consistently was being followed by them and the loss was certified by the banks, the loss arose due to fall in the pri ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... d that the Hon ble Apex Court passed the judgment in the case of Woodward Governor India (P) Ltd. (Supra) dated 8th April 2009. Thus, it is clear that the said instruction was issued subsequent to the date of Hon ble Apex Court judgment and so the said instruction was not considered by the Hon ble Apex Court and other courts. The ld. DR vehemently relied on the order of Authorities Below. 7. We have heard rival contentions of both the parties and perused the materials available on record. The assessee-company had debited to its profit and loss account certain unrealized loss due to foreign exchange fluctuation in foreign currency transaction on revenue items, on the last date of the accounting year. The Assessing Officer held that the ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... currency and the foreign currency at the date of the transaction. This is known as recording of transaction on initial recognition. Para 7 of AS-11 deals with reporting of the effects of changes in exchange rates subsequent to initial recognition. Para 7(a) inter alia states that on each balance sheet date monetary items, enumerated above, denominated in a foreign currency should be reported using the closing rate. In case of revenue items falling under s. 37(1), para 9 of AS-11 which deals with recognition of exchange differences, needs to be considered. Under that para, exchange differences arising on foreign currency transactions have to be recognized as income or as expense in the period in which they arise, except as stated in para 10 ..... X X X X Extracts X X X X X X X X Extracts X X X X
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