2014 (4) TMI 1239

X X   X X   Extracts   X X   X X

Full Text of the Document

X X   X X   Extracts   X X   X X

....forward contract entered with Banks." 2. The assessee is engaged in the business of import, export and trading of rough and polished diamonds. It entered into forward contract for foreign exchange in the normal course of its business. According to assessee the transactions were entered for hedging of foreign exchange fluctuations on account of the assessee's business of export and import of diamonds. It was submitted that according to the decision of Hon'ble Bombay High Court in the case of CIT vs. Badridas Gauridu Pvt. Ltd. 134 Taxman 376 ( 2004), the loss incurred by the assessee is allowable as business loss. In the process the assessee has incurred total loss of Rs. 98,85,546/-, which was disallowed by the AO being speculation loss an....

X X   X X   Extracts   X X   X X

Full Text of the Document

X X   X X   Extracts   X X   X X

.... and has filed aforementioned grounds of appeal. 3. After narrating the facts, it was submitted by Ld. AR that the forward contracts in foreign exchange were entered into by the assessee with regard to its activity of import and export of diamonds. She submitted that all the details were submitted to Ld. CIT(A) vide letter dated 3/2/2011, copy of which is filed at pages 1 to 9 of the paper book. She invited our attention towards Annexure-C attached to the said letter, copy of which is placed at page 7 of the paper book. Referring to the said annexure it was submitted by her that all the forward contracts of foreign exchange were in relation to import and export contracts entered into by the assessee with regard to its business of import an....

X X   X X   Extracts   X X   X X

Full Text of the Document

X X   X X   Extracts   X X   X X

....s of Rs. 13,85,718/- aising on valuation of forward exchange contracts on the closing date of accounting year is not a notional loss and, therefore, allowable." Following the decision of Co-ordinate Bench in the case of London Star Diamond Co. India Pvt. Ltd. Vs. DCIT, ITA No.6169/Mum/2012 order dated 11/10/2013 the issue was decided in favour of assessee as under: " 4 Before us, it has been submitted that this issue had come up for consideration in series of decisions of the co-ordinate bench of the Tribunal. Strong reliance was placed on the latest decision of the Tribunal, Mumbai Bench, in London Star Diamond Co.India Pvt Ltd v/s DCIT, ITA no.6169/Mum./2012, order dated 11th October 2013. The relevant conclusion of the Tribunal is as....

X X   X X   Extracts   X X   X X

Full Text of the Document

X X   X X   Extracts   X X   X X

....thod of accounting followed by the Appellant cannot be disregarded The Appellant has consistently followed the same method of accounting in regard to recognition of profit or loss both, in respect of forward foreign exchange contract as per the rate prevailing on March, 31. iii) A liability is said to have crystallized when a pending obligation on the balance Sheet date is determinable with reasonable certainty. iv) As per AS-Il, when the transaction Is not settled hi the same accounting period as that in which it occurred, the exchange difference arises over more than one accounting period. v) In view of the decision of the Supreme Court in the case of Woodward Governor India (I) P. Ltd., the Appellant's claim is allowable. vi)....