Revenue's Appeal Partially Allowed on Liquidated Damages & FX Fluctuation Claim

The Revenue's appeal against the CIT (A) order regarding the disallowance of expenses under liquidated damages and Foreign Exchange Fluctuation claim was partly allowed for statistical purposes. The Tribunal upheld the CIT (A) decision on liquidated damages, following a Special Bench order, and referred back the issue of Foreign Exchange Fluctuation claim to the Assessing Officer for fresh consideration in line with the Tribunal's directions. The decision was pronounced on 2/6/2011.

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Issues involved: Appeal by Revenue against CIT (A) order on disallowance of expenses under liquidated damages and Foreign Exchange Fluctuation claim.

Disallowance of expenses under liquidated damages: The appeal was based on two grounds - liquidated damages and Foreign Exchange Fluctuation. The assessee's counsel argued that the CIT (A) decision was in line with the Tribunal's order, hence no error. The Tribunal, following a Special Bench order, allowed the claim of liquidated damages. The CIT (A) decision was upheld as he was bound by the Tribunal's order.

Disallowance of claim under Foreign Exchange Fluctuation: The issue was also covered by a previous Tribunal order for the Assessment Years 2001-02, 2004-05, and 2006-07. The Tribunal had directed the Assessing Officer to correlate Foreign Exchange Loss/gains to specific assets and decide the issue afresh. As the issue was covered by the Tribunal's order, the CIT (A) decision was set aside, and the matter was referred back to the Assessing Officer for fresh consideration in line with the Tribunal's directions and legal principles.

Conclusion: The appeal by the Revenue was partly allowed for statistical purposes, with the Tribunal's decision pronounced on 2/6/2011.

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