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ITAT allows Rs. 489.66 lakhs forex loss deduction for 2009-10 assessment year The ITAT upheld the allowability of a loss of Rs. 489.66 lakhs on the revaluation of foreign exchange outstanding as a deduction for the assessment year ...
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ITAT allows Rs. 489.66 lakhs forex loss deduction for 2009-10 assessment year
The ITAT upheld the allowability of a loss of Rs. 489.66 lakhs on the revaluation of foreign exchange outstanding as a deduction for the assessment year 2009-10. The ITAT relied on precedents and ruled that such losses are deductible, even if not accounted for in the books, due to foreign exchange fluctuations. The issue of potential double deduction was referred back to the Assessing Officer for further examination.
Issues: Allowability of loss on revaluation of foreign exchange outstanding as deduction.
Analysis: The appeal pertains to the allowability of a loss of Rs. 489.66 lakhs on the revaluation of foreign exchange outstanding as a deduction for the assessment year 2009-10. The Assessing Officer disallowed the claim as the loss was not accounted for in the books of account, contrary to Accounting Standard-11 and CBDT instruction No. 3 of 2010. However, the CIT(A) allowed the claim, citing the decision in the case of Kedarnath Jute Manufacturing Co. Ltd. vs. CIT and Woodward Governor India Pvt. Ltd., where it was held that such losses are allowable deductions even if not accounted for in the books. The CIT(A) noted that the loss was disclosed in the annual accounts and accounted for in the succeeding year, resulting in a net profit. The Revenue challenged this decision.
The ITAT agreed with the CIT(A) and held that the loss of Rs. 489.66 lakhs is allowable as a deduction. The ITAT relied on the decisions in the cases of Kedarnath Jute Manufacturing Co. Ltd. and Woodward Governor India Pvt. Ltd., emphasizing that unrealized losses due to foreign exchange fluctuations are deductible. Additionally, the ITAT referenced a decision by the Bombay High Court in a similar case. However, the ITAT observed that the CIT(A) did not consider that the loss was accounted for in the succeeding year, leading to a potential double deduction. To address this, the issue was remanded to the Assessing Officer for further examination, directing the assessee to provide necessary information.
In conclusion, the ITAT dismissed the Revenue's appeal and upheld the allowability of the loss on revaluation of foreign exchange outstanding as a deduction for the assessment year 2009-10. The issue regarding the potential double deduction was referred back to the Assessing Officer for verification.
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