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TMI Blog2015 (4) TMI 1281X X X X Extracts X X X X X X X X Extracts X X X X ..... ation, of course subject to the application of provisions of Section 43A of the Act. If the transactions undertaken are on account of revenue items, the gain is clearly taxable and so the loss also is clearly allowable. The assessee except making bald assertion that the transactions were undertaken on account of capital items no evidence was brought on record to establish that the foreign currency transactions were undertaken on capital items. AO also had failed to undertake this exercise. The Hon ble Supreme Court in the case of CIT Vs. Woodward Governor India Pvt. Ltd. reported in [ 2009 (4) TMI 4 - SUPREME COURT] had clearly held that the actual payment was not a condition precedent for making adjustment in respect of foreign currenc ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 9/Del/2011 by the Revenue. 2. First we shall take up ITA No.4949/Del/2011 appeal filed by the Revenue. The assessee is a company incorporated the provisions of Companies Act. The assessee company is engaged in the business of software development and IT enabled services for the AY 2007-08. The assessee company filed the return of income on 30.10.2007, declaring a total income of ₹ 4,96,43,190/-. After processing the return of income u/s 143(1) of the Act, the case was selected for scrutiny assessment and finally the assessment was completed u/s 143(3) of the Act, vide order dated 16.12.2010 at a total income of ₹ 5,65,96,889/-. The disparity between the returned income and assessed income is on account of making ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 78,226 65,45,376 66,23,602 REVENUE NATURE Realised Reinstatement Total a Exchange Fluctuation on aDebtors and other Trade aAssets/Liabilities a 10,50,897 (46,988) 10,03,909 Bank Accounts (15,94,111) (3,39,694) (19,33,805) ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ion gain on reinstatement/realization of ECB loans etc. and profit from export of computer software. Being aggrieved the assessee preferred an appeal before the CIT(A)-XVIII, New Delhi who vide order dated 27.07.2011 had partly allowed the claim by holding that the gains made out of restatement of foreign currency transaction (without actual payment) should not be brought to tax as it represents only notional profit. However, he further held that the gains made out of foreign exchange fluctuation in the case of actual repayment should alone be brought to tax. Aggrieved by this order, the Revenue come up with the present appeal before us raising the following grounds of appeal: 1. The ld. CIT(A) has erred in law ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... :- (Page 13) The law may, therefore, now be taken to be well settled that where profit or loss arises to an assessee on account of appreciation or depreciation in the value of foreign currency held by it, on conversion into another currency, such profit or loss would ordinarily be a trading profit or loss if the foreign currency is held by the assessee on revenue account or as a trading asset or as a part of circulating capital embarked in the business. But, if on the other hand, the foreign currency is held as a capital asset or as fixed capital, such profit or loss would be of capital nature. The ratio of the above decision is whether the gain or loss should be brought to tax o ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ) Ltd. (Supra) has been rendered with regard to items in the revenue account and capital account. 5. In the light of our above findings, we restore the matter to the file of AO with the direction that to re-do the assessment keeping in view the principles enunciated above after affording a reasonable opportunity of being heard to the assessee. Accordingly, the appeal of the Revenue is disposed of. 6. In the result, appeal is partly allowed for statistical purposes. 7. We shall now take up the appeal filed by the assessee in ITA No The assessee has raised the following grounds of appeal:- 1.Whether under the facts and in circumstances of the case and in law, the l ..... X X X X Extracts X X X X X X X X Extracts X X X X
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