Tribunal upholds 'Mark-to-Market' loss on forward contracts for A.Y. 2009-10 The Tribunal upheld the CIT(A)'s decision to allow the 'Mark-to-Market' loss on re-valuation of forward contract agreements for A.Y. 2009-10. The appeal ...
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Tribunal upholds 'Mark-to-Market' loss on forward contracts for A.Y. 2009-10
The Tribunal upheld the CIT(A)'s decision to allow the 'Mark-to-Market' loss on re-valuation of forward contract agreements for A.Y. 2009-10. The appeal by the Revenue was dismissed, affirming that since gains on revaluation were previously taxed, there was no basis to disallow the loss in the current year. The Tribunal's decision, based on legal precedents and consistent principles, was pronounced on 24th June 2015.
Issues: 1. Allowability of 'Mark-to-Market' loss on re-valuation of forward contract agreements for A.Y. 2009-10.
Analysis: The appeal before the Appellate Tribunal ITAT Mumbai centered around the question of whether the 'Mark-to-Market' loss of Rs. 7,05,11,295 arising on the re-valuation of forward contract agreements on the closing date of the accounting year was allowable. The assessee, engaged in the diamond business, entered into forward contracts to hedge currency risks in line with RBI guidelines. The loss incurred on revaluation of outstanding forward contracts was disallowed by the AO but allowed by the CIT(A) based on the ITAT Special Bench decision and the Supreme Court's ruling in a relevant case. The CIT(A) held that since gains on revaluation were previously taxed, there was no reason to disallow the loss in the current year.
The Revenue, aggrieved by the CIT(A)'s decision, appealed to the Tribunal. The assessee's counsel argued that the factual matrix was undisputed, and the CIT(A) correctly applied the legal precedents. Referring to a recent ITAT decision in another case, the counsel contended that the CIT(A)'s decision was consistent with established principles. The Revenue, through the learned D.R., conceded that the issue was unfavorable to them.
After considering the arguments and legal precedents, the Tribunal upheld the CIT(A)'s order and dismissed the Revenue's appeal. The decision was based on the existing legal framework and the consistent application of principles in similar cases. The judgment was pronounced on 24th June 2015 by the Tribunal, consisting of Shri D. Manmohan, Vice President, and Shri Sanjay Arora, Accountant Member.
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