2017 (2) TMI 911

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....bunal in assessee's own case for the Assessment year 2011-12 vide its order dated 31/01/2017 and the addition made on similar ground which was deleted by the CIT(A) was confirmed by Tribunal. 3. The precise observation of the tribunal was as under:- 3. Rival contentions have been heard and record perused. 4. Facts in brief are that assessee is engaged in manufacturing and export of absorbent cotton. During the course of scrutiny assessment, the AO on perusal of the Balance Sheet found that notional gain on forward contracts of Rs. 45,47,858/- on foreign currency forward contracts that were outstanding as on 31.03.2011 has not been offered for taxation. He gave a show-cause notice to the assessee on the above which has b....

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....ealization for their future sales and accordingly sold dollars to the bank for delivery at forward dates. The aggregate value of contracts for forward sales to the bank outstanding as on 31.03.2011 was USD 45,00,000, GBP 1,200,000 and EURO 720,000. In respect of the said forward contracts, the notional gain as on 31.03.2011 is Rs. 45,47,858/- by taking the difference of the forward rates available as on 31.03.2011, viz-aviz the forward rates as per the contracts entered into by the Company. The said notional gain is not taken into the accounts as per practice regularly followed by the company. In respect of the said forward contracts outstanding as on 31.03.2010 there was notional gain ofRs.95,31,151/-." The AO has brought....

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....n only be notional and not actual or real and a notional loss cannot be claimed as a deduction. Whether a loss or profit, the principle applicable would be the same and the estimated profit, till the settlement of the forward foreign exchange contracts, could be regarded only as notional and not actual or real and such notional profits cannot be assessed Held, that the amounts in question were only estimated anticipated income arrived at on the basis of the rates of exchange which prevailed, presumably on the last day of the accounting year, without an actual settlement of the forward contracts in foreign currencies having been brought about and, in that sense, the amounts in question represented merely notional profits and could n....