Revenue's appeals dismissed by ITAT, allowing exchange losses on export & remittance, emphasizing genuine nature & compliance.

The ITAT dismissed the Revenue's appeals, upholding the CIT(A)'s decisions to allow exchange losses on export of goods and remittance of outstanding advances. The losses were deemed actual due to currency devaluation and RBI permissions, not notional, aligning with accounting principles and prior judgments. The ITAT directed the AO to verify conversion rates and allow the losses, emphasizing their genuine nature and compliance with the mercantile accounting system.

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Issues Involved:
1. Allowance of exchange loss incurred on export of goods.
2. Allowance of exchange loss on remittance of outstanding advance.

Detailed Analysis:

Issue 1: Allowance of Exchange Loss Incurred on Export of Goods

ITA NO. 15/JP/2013:
The Revenue challenged the decision of the CIT(A), Alwar, which directed the assessing officer to allow the exchange loss of Rs. 55,88,368/- incurred on export of goods worth US $3,41,380/- without appreciating the facts of the case. The CIT(A) found that the exchange loss was actual and real, arising due to the devaluation of the Indian Rupee against the advanced received in US dollars. The ITAT upheld the CIT(A)'s decision, directing the AO to allow the exchange loss after verifying the conversion rates applied. The ITAT noted that the loss should be allowed as it was not covered under any other head.

ITA NO. 16/JP/2013:
The Revenue contended the CIT(A)'s decision to allow the exchange loss of Rs. 89,77,386/- incurred on export of goods worth US $5,43,504/-. The CIT(A) allowed the exchange loss on the grounds that the loss was actual and not notional. The ITAT upheld this decision, directing the AO to allow the loss after verifying the conversion rates.

ITA NO. 17/JP/2013:
The Revenue argued against the CIT(A)'s decision to allow the exchange loss of Rs. 45,17,084/- incurred on export of goods worth US $2,72,376/-. The CIT(A) allowed the exchange loss following the same rationale as in previous years, considering it an actual loss due to currency devaluation. The ITAT upheld the CIT(A)'s decision, directing the AO to allow the exchange loss after verifying the conversion rates.

Issue 2: Allowance of Exchange Loss on Remittance of Outstanding Advance

ITA NO. 17/JP/2013:
The Revenue opposed the CIT(A)'s decision to allow the exchange loss incurred on remittance of outstanding advance of US $37,81,155.42. The CIT(A) allowed the exchange loss on the remittance of US $37,81,155 out of the realization of export sales proceeds from PPI, Russia, based on the RBI's permission received on 18.04.1994. The CIT(A) did not allow the exchange loss with reference to the remittance of US $14,41,332.58, as the RBI's permission for this amount was issued on 25.03.1996, which falls in A.Y. 96-97. The ITAT upheld the CIT(A)'s decision, stating that the exchange loss on remittance should be allowed based on the RBI's permission date.

Conclusion:
The ITAT dismissed the appeals of the Revenue, upholding the CIT(A)'s decisions to allow the exchange losses incurred on export of goods and on remittance of outstanding advances, based on actual losses due to currency devaluation and RBI permissions. The ITAT emphasized that such losses should be allowed as they are actual and not notional, aligning with the principles laid down in previous judgments and the mercantile system of accounting.

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