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TMI Blog2024 (3) TMI 1360X X X X Extracts X X X X X X X X Extracts X X X X ..... from the underlying transactions on the value of the foreign exchange on the due date. The corresponding losses/gains under the Forward Contracts, thus, were also required to be accounted for to arrive at the real profits. It would be anomalous if, on the one hand, debtors and creditors, in respect of current assets, are stated at the current value of foreign exchange and the corresponding loss on the hedging transaction is not accounted for. In essence, the Assessee has stated his income by taking into account the foreign exchange value as it stands on the due date. It is well settled that the CBDT Instructions and circulars which are contrary to law are not binding. We additionally take note of the legislative amendments which have been ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... law as it ignored the principle of consistency by ignoring the position of law settled in Appellant s own case in AY 2008-09? 2. Having heard learned counsels for parties, we find that the principal question which stands raised appears to be conclusively settled in light of the following binding conclusions rendered by a coordinate Bench of this Court in Pr. Commissioner of Income Tax vs Simon India Ltd. [2022 SCC Online Del 4284]. We deem it apposite to extract the following passages from that decision: 25. Thus, according to the Revenue, the learned CIT(A) and the learned Tribunal had erred in finding that the loss on account of Forward Contracts is allowable under Section 37(1) of the Act and is covered as a hedging transaction under Sec ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... reditors in connection with execution of contracts entered into with foreign entities on the basis of the value of the foreign exchange. Thus, clearly the loss on account of Forward Contracts would require to be recognized as well. 29. It is also relevant to refer to the findings of the learned CIT(A) in this regard. Paragraph no.13 of the appellate order reads as under: 13. It may be noted that the valuation-loss is reflected on the debit side of the P L account whereas the corresponding valuation Gains resulting on the valuation of the debtors is reflected on the credit side included as part of sales / exchange Gains and in respect of imports as reduction in the import price on the debit of the Profit Loss account. In other words, the ent ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... tionally take note of the legislative amendments which have been introduced pursuant to the view which was expressed by the Supreme Court in Commissioner of Income Tax vs Woodward Governor India Private Limited [(2009) 13 SCC 1] and which has led to the introduction of Section 43AA of the Income Tax Act, 1961 [ Act ] with effect from 01 April 2017 and which reads as follows: Taxation of foreign exchange fluctuation. 43AA. (1) Subject to the provisions of section-43A, any gain or loss arising on account of any change in foreign exchange rates shall be treated as income or loss, as the case may be, and such gain or loss shall be computed in accordance with the income computation and disclosure standards notified under sub-section (2) of secti ..... X X X X Extracts X X X X X X X X Extracts X X X X
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