9911796707
TMI Blog2017 (9) TMI 1598X X X X Extracts X X X X X X X X Extracts X X X X ..... tion u/s 35(2AB) by admitting additional evidence violating Rule 46A of I. T Rules. 3. The Ld.CIT(A) erred in deleting the disallowance of derivate loss of Rs. (-)3,48,06,000/- 4. The Ld.CIT(A) ought to have appreciated the fact that the loss claimed by assessee is only a notional loss and such notional liability would be contingent in nature which is not allowable under any of the provisions of the Act. 5. Any other ground(s) that may be urged at the time of hearing". 2. Brief facts of the case are that the assessee company which is engaged in the business of manufacturing of bulk drugs and intermediates, filed its return of income for the A.Y 2012-13 on 28.09.2012 declaring a net loss of Rs. 12,10,65,228. The assessee paid tax u/s ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... d the balance of the claim of the assessee i.e. @ 200% of the expenditure provided. As regards the disallowance of the derivative loss, the CIT (A) followed the decision of the I.T.A.T. in the assessee's own case for the A.Y 2006-07 to 2009-10 in ITA Nos.109, 124 to 126/Hyd/2013, dated 29.07.2013 to allow the same. Aggrieved by the relief given by the CIT (A), the Revenue is in appeal before us. 4. The learned DR submitted that the CIT (A) has accepted the additional evidence filed by the assessee in the form of Form 3CL i.e. the report of the prescribed authority u/s 35(2AB) of the Act to allow the claim of the assessee without sending the same to the AO for verification. Thus, according to the learned DR, it is in clear violation of the ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... allowed as it is against the CBDT Instruction No.3 of2010 . 22. The brief facts of the case relating to this issue are that the assessee had debited a derivative loss of Rs. 50.35 lakhs under the head 'Finance Charges' to its profit and loss account. The assessee's explanation with regard to its above claim was called for. The assessee, vide its reply dated 12/9/2011, explained that the assessee had entered into Forward Currency exchange derivative Contracts to hedge the risk against foreign currency exchange fluctuations. Although the forward derivative contracts have not matured during the year 2008-09, the assessee company has recognized the 'mark to market loss' of Rs. 50.35 lakhs on account of currency fluctuatio ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... the CIT (A), the Revenue is in appeal before us. 25. The learned DR placed reliance upon the order of the AO as well as the CBDT Instruction No.3 of 2010 dated 23.3.2010. The learned counsel for the assessee, on the other hand, supported. the order of the CIT(A). 26. Having heard both the parties and having considered their rival contentions, we find that undisputedly, the assessee had entered into foreign exchange forward contract to hedge against risks of foreign exchange fluctuations and though the contract has not matured during the relevant financial year, in order to arrive at actual profits or loss to the assessee, it followed the Accounting Standard 11 and 31 issued by ICAI as notified by sec. 211(3C) of me Companies Act and had ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... of Bahrain and Kuwait (cited Supra), a foreign bank carrying on business in India, which entered into forward contracts with its clients to buy or sell foreign exchange at an agreed price on a future date and in respect of contracts. Where the date of maturity fell beyond accounting period, the assessee valued the forward contracts on the last day of the accounting period on the basis of rate of foreign exchange prevailing on the date and accounted for the loss or profit as the case may be. The Special Bench has considered the question as to whether the loss was notional or contingent or whether it was accrued loss. After considering the commercial principles of policy of prudence, the Special Bench has held that the loss which is incurred ..... X X X X Extracts X X X X X X X X Extracts X X X X
|
