TaxTMI 
TaxTMI 
2015 (11) TMI 1200
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....nt books in respect of losses and gain the deduction of Rs. 1,65,75,342/- was not allowed to the assessee. 3. By the impugned order the CIT(A) deleted the additions so made after observing as under :- 3.3(a) Before, I. take up the issue it is imperative to understand what is the concept of Mark-to-market . or fair value accounting refers to the accounting standards of assigning a value to .a position held in a financial instrument based on the current fair market price for the instrument or similar instruments. Fair value accounting has been a part-I of US Generally Accepted Accounting Principles (GAAP) since the early 1990s. The use of fair value measurements has increased steadily over the past decade, primarily in response to investor demand for relevant and timely financial statements that will aid in making better informed decisions. Mark to market is a concept under, which you are declaring the actual value of your assets at the market rates. It's quite a good and healthy concept. Let us say, I have purchased some 100 stock two years back at Rs. 20 and so at the time of purchases, value of my asset was Rs. 2000(Rs.Rs.20x100=Rs.2000). But, suppose as on today, the ma....
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....er s.209 of the Companies Act, mercantile system of accounting is made mandatory for companies. In other words, Accounting Standard which is continuously adopted by an assessee can be superseded or modified by legislative intervention. However but for such intervention or in cases falling under s. 145(3),the method of accounting undertaken by the assessee continuously is supreme. In the present batch of Gases, there is no finding given by the AO on the correctness or completeness of the accounts of the assessee. Equally, there is no finding given by the AO stating that the assessee has not complied with the Accounting Standards. For the reasons given hereinabove, the "loss" suffered by the assessee on account of the exchange difference as on the date of the balance sheet is an item of expenditure under s. 37(1). 3.3(c) The Hon'ble Mumbai ITAT following the decision of Special bench in the case of DCIT (International Taxation) vs. Bank of Bahrain and Kuwait, held that no addition can be made where a forward contract is entered into by the assessee to sell the foreign currency at an agreed price at a future date falling beyond the last date of accounting period, the loss is in....
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....e was entitled to deduction. Relying on the decision of the Apex Court in the case of ClTI vs. Woodward Governor India (P) Ltd (2009) 312 ITR (SC) 254 , the Hon'ble High Court held that the first and foremost requirement of the. Apex Court decision is that he must be adopting mercantile system of accounting. Secondly, the said loss claimed should have been claimed not only in the year in dispute, but a continuous course of conduct to show that, that is the way said claim is reflected in the accounts. Thirdly, it should be bonafide one. The Tribunal on appreciating the material on record had held that the aforesaid conditions were satisfied. It is only after being satisfied of the said conditions, it has granted the relief; in these circumstances, there is no justification to interfere with the said order or to impose any conditions, as the conditions imposed by the Supreme Court air stand fully satisfied. In this view of the matter, no substantial question of law arises for consideration. 3.3(e) In the case of Indusind Bank Ltd vs. Addl. CIT, the Ld. AD made a disallowance of Joss amounting to RS.98,27,032 on un-matured foreign exchange contracts CIT(A) confirmed the order o....
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....s out of the forward contracts would be very much entitled for deduction or adjustment if it is a loss. 3.3:(h) Oil & Natural Gas Corporation Ltd. Vs err (2010) 322 ITR 180(SC), the assessee is a public sector undertaking, engaged in exploration and prospecting oil. It largely depends on foreign loans to cover its capital and revenue expenses. Fluctuation in foreign currency rates results in loss and assessee claims deduction u/s 37(1) in the year of fluctuation apart from adjusting .the actual cost of imported capital assets acquired in foreign currency on account of fluctuation at each . balance-sheet date, pending actual payment of the varied liability. AO disallowed the claim and Ld. CIT(A) goes with the AO on the assessee's claim for foreign exchange loss in revenue account but accepts the assessee's stand relating to capital account. Tribunal disagrees with the AD but High Court reverses the Tribunal's order - held, in view of the Apex Court decision in the Woodward Governor case and the fact that this case pertains to the period prior to the amendment in Sec 43A, both the issues were settled in favour of the assessee. 3.3(i) It has been submitted that the a....