TaxTMI 
TaxTMI 
2019 (10) TMI 761
X X X X Extracts X X X X
X X X X Extracts X X X X
....ver. The appellant has not indulged in any foreign currency speculation in stock exchanges or in other alternative forums. The appellant had suffered total loss of Rs. 29,89,56,796/- foreign exchange fluctuation loss out of which there was loss of Rs. 8,95,40,121/- on account of MTM losses in accordance with AS-11 on the foreign exchange forward contracts. It was also pointed out that in the preceding two years there had been gain from forward contracts which have been offered to tax which is evident from forward contact gains of Rs. 71,58,43,411/-and Rs. 3,74,90,231/- offered for tax in AY 2010-11 and AY 2011-12 respectively. There was also income of Rs. 8,50,89,012/- and Rs. 3,97,70,567/- for AY 2010-11 and AY 2011-12 respectively offered for tax in AY 2010-11 and AY 2011-12 respectively on account of application of AS-11 on the pending forward contracts as on close of financial years. During assessment proceeding, assessee relied on the decision of the Hon'ble Apex Court in the case of CIT vs Woodward Governor India Ltd 312 ITR 254 (SC) to support the contention as to the allowability of the foreign exchange loss. Ld. AO rejected the contention of the appellant on the ground tha....
X X X X Extracts X X X X
X X X X Extracts X X X X
.... who are not employees of the company. Ld. CIT(A), however, deleted the addition of Rs. 83, 967/-made on account of cessation of liability. 7. Aggrieved by the impugned order sustaining the additions on the aspect of MTM losses on forward contract and foreign travel expenses, assessee preferred this appeal. Insofar as the first ground is concerned, it is the contention of the Ld. AR that the authorities ignored the fact that the loss claimed on forward contracts is allowable and the same has been upheld by various judicial authorities and, therefore, the Revenue is not justified in treating the loss claimed on forward contracts as notional loss and not allowable under the provisions of income tax. He placed reliance on the decision reported in CIT vs Woodward Governor P Ltd (supra), ONGC vs CIT 322 ITR 180 (SC), Silicon Graphics Systems (India) Pvt Ltd vs DCITin ITA No.2976/Del/2013 dt: 24.08.2016, CIT vs D Chetan & Co.ITA No. 278 of 2014 dt: 01.10.2016, PCIT vs International Gold Company Ltd.,ITA No. 1827 of 2016 dt: 27.02.2019, DCIT vs HCL Comnet Ltd.,ITA No.4809/Del/2016 dt: 06.06.2019 etc. 8. Per contra, Ld. DR argued that in view of CBDT instructions, the findings of the aut....
X X X X Extracts X X X X
X X X X Extracts X X X X
....ward contracts as on close of financial years. 10. In CIT vs Woodward Governor P Ltd (supra) it is held that the exchange differences on foreign currency transactions in compliance of AS-11 need be considered in the accounts and the losses and profit arising therefrom need to be recognized as such for Income Tax purposes. It is further held that when the Revenue taxed the gains which accrued to the assessee on the basis of accrual and it is only in the year in question when the dollar rate stood increased, resulting in loss that the Revenue has disallowed the deduction/debt, which amounts to double standards adopted by the department. In the absence of any finding of Ld. AO as to the completeness and correctness of the accounts and also on want of compliance of accounting standards, it was held that the loss suffered by the assessee on account of exchange difference as on date of balance sheet is item of expenditure u/s 37(1) of IT Act. 11. In ONGC vs CIT 322 ITR 180 (SC) also, Hon'ble Apex Court took a similar view and held that loss on account of foreign exchange fluctuation on balance sheet date is item of expenditure u/s 37(1) of IT Act notwithstanding that liability had not ....
X X X X Extracts X X X X
X X X X Extracts X X X X
...., who are neither family members of directors nor employees of the assessee company. On a verification of the details furnished by the assessee, learned Assessing Officer did not find any justification in respect of the expenses incurred in respect of certain family members of the directors and disallowed a sum of Rs. 17,09,423/- on the ground that no satisfactory explanations have been given by the assessee with regard to the expenses of 16 persons named in paragraph No. 3.3 of the order. 15. It is contended on behalf of the assessee that the foreign travel expenses in respect of the wife and minor children of the directors was wholly and exclusively incurred for the business of the assessee and if at all the Revenue feels, it has to be brought to tax in the hands of the beneficiary director as perquisite. Assessee vide letter dated 21.12.2015 submitted that the directors of the assessee company during their foreign business trips were accompanied by their family members and no isolated trips were made by the family members of the directors of the assessee company. According to the assessee, the trips of the family members are made to accompany directors of the assessee company d....
X X X X Extracts X X X X
X X X X Extracts X X X X
.... Board, in the absence of any specific bar created by the Statute for such expenditure. In support of this contention he placed reliance on addition of the Hon'ble Calcutta High Court in the case of J.K. Industries Ltd. Vs CIT,ITA No.624 of 2004. 19. Lastly, it is contended by the Ld. AR that if at all the Revenue feels that the amount is excessive or the family members ought should not have been permitted to travel with the director/employee, such an amount has to be treated as a perquisite in the hands of the employee, but no disallowance of expense could be made in the hands of the assessee. 20. Per contra it is the submission of the Ld. DR that in this type of cases what has to be located by the assessing officer is the status of the parties as spelt out and the nature or character of the trade or venture, the purpose for which the expenses were incurred and the object which was sought to be achieved in incurring those expenses. In the absence of any plausible and acceptable explanation by the assessee as to how the travel by an infant or minor or non-employee would serve business purpose, the assessing officer is bound to make such addition. Even before the Tribunal also exc....