2018 (11) TMI 376

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....efined/crude edible oils and vanaspathi. In the course of assessment proceedings, A.O examined the foreign exchange loss reported by Assessee and after discussion considered the following disallowances. (i) Foreign exchange loss in purchases of capital assets of Rs. 41,76,716/-. (ii) Foreign exchange loss on commodity hedging of Rs. 4,05,15,922/-. (iii) Foreign exchange fluctuation loss of Rs. 20,11,60,005/-. 1.1 Aggrieved on the above, Assessee preferred an appeal before Ld. CIT(A). After considering the detailed submissions and facts of the case, Ld. CIT(A) allowed the Commodity hedging loss by following the Coordinate Bench decision on similar facts and Revenue has accepted the same. 2. Coming to the claim of Foreign exchange flu....

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....the issue as under: "7.3. During appeal proceedings, the AR contends that as f ar as the unrealised f orex loss of Rs. 14.23 Croes is concerned, the assessee has submitted that the method of accounting of MTM is mandated by the Accounting Standard of the ICAI, and f urther such loss is known as MTM (MARK to MARKET). It is also contended that the assessee f ollows this consistently and prof it or loss is always taken into account. It is f urther submitted that this prof it or loss on account of MTM is actual prof it or loss and is not a notional entry and hence, it is allowable as a deduction for income tax purposes in view of the decision of the Supreme Court in the case of Woodward Governor India Pvt Ltd .. With regard to realized forex ....

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....rmul1 (129 ITR 169) held that when the assessee is not a dealer in foreign exchange and for the purpose of hedging the loss due to fluctuation in foreign exchange while implementing export contract the assessee had entered into the f orward contract with the bank, then the loss arising as a result of such forward contract cannot be said to be speculative as per section 43(5)(d) of the Act. Considered in the light of ratio in the judicial precedents mentioned herein above it is admitted f act that the assessee is not a dealer in foreign exchange but engaged in the business of export / import of cigarettes and tobacco. In f act the CIT(A) himself has accepted the f act that the forward contract has been entered into in the ordinary course of ....

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....(MTM) loss claimed by the respondentassessee? We have heard the learned Counsel for the parties and have gone through the judgment and order of the learned Tribunal. It appears that the learned Tribunal on fact f ound as follows: "The assessee is not a dealer in f oreign exchange. The assessee is engaged in the business of manuf acturing and sale of cigarettes and in the process of its business activity it exports cigarettes to foreign countries. It is also a f act that for the purpose of its export / import activities, the assessee has entered into f orward contracts with banks relating to its export / import business transactions." On af oresaid f actual position, the learned Tribunals consistently held that the loss/expenditure cla....