2013 (5) TMI 458

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....g the disallowance of Rs.15,04,910/- made on account of Foreign Exchange Difference ?" From the record, it emerges that the assessee who is an exporter had entered into forward contracts with the Bankers to hedge against any loss arising out of fluctuation in foreign currency. From the order passed by the CIT(A), we gather that the contract between the assessee and the bank provided that the assessee would buy some quantity of dollars at a particular rate to cover export bill payment. The contract gave delivery option dates. The assessee had to take the delivery within the period indicated in the contract and if for some reason it was not possible to do so, the assessee had to give instructions to the Bank for cancellation of the contrac....

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....u (P) Ltd. (supra). The assessee is admittedly not a dealer in foreign exchange. The charges that the assessee had to pay to the Bank were in the nature of revenue expenditure in the course of business. Counsel further submitted that the Reserve Bank of India's guidelines would not permit the Bank to enter into a forward contract with respect to foreign currency unless the assessee had export contract on hand. Having thus heard the learned advocates for the parties and having perused the documents on record, we find that the issue is covered by the decisions of the Bombay High Court in the case of Badridas Gaurida (P) Ltd. and the Calcutta High Court in the case of Soorajmull Nagarmull (supra). In the decision of the Bombay High Court....

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....However, the export contracts entered into by the assessee for export of cotton in some caes failed. In the circumstances, the assessee was entitled to claim deduction in respect of Rs.13.50 lakhs as a business loss. This matter is squarely covered by the jdugment of the Calcutta High Court, with which we agree, in thecase of CIT v.Soorajmull Nagurmull(1981) 129 ITR 169." Before the Calcutta High Court, the assessee was a firm engaged in the business of import and export of jute. In course of business, the assessee would enter into forward contract in foreign exchange in order to cover the loss which may arise due to difference in foreign exchange valuation. In one such contract, the assessee had to pay to the Bank difference of Rs.80,49....