TaxTMI 
TaxTMI 
2021 (7) TMI 1132
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....nt from the case of Bechtal India (P) Ltd. (supra). d. not appreciating that disallowance of Rs. 4,04,22,903/- resulted in double disallowance as appellant had itself reversed the loss on 31.03.2016 in its books of accounts in April, 2016 and hence was doubly hit. e. ignoring the consistently followed method without any change in facts." 3. Briefly the facts are, the assessee, a resident company, is stated to be engaged in the business of manufacturing of toilet soaps, fatty acids and fatty alcohols. For the assessment year under dispute, assessee filed its return of income on 26.11.2016 declaring total loss of Rs. 119,75,64,719/-. In course of assessment proceedings, the Assessing Officer (AO) while verifying the audit report of the assessee noticed that assessee has claimed unrealized loss in respect of forward contracts due to foreign currency fluctuation. Noticing the above, he called upon the assessee to explain why the loss claimed by the assessee should not be disallowed in view of instruction no. 3 of 2010 dated 23.03.2010 issued by Central Board of Direct Taxes (CBDT). In response to the query raised, the assessee filed a detailed submission on 21.12.2....
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....submitted, the AO has accepted loss in respect of receivables and debtors, whereas, he did not accept loss incurred on year end conversion of outstanding forward contracts. He submitted, following same accounting method, in assessment year 2015-16, the assessee has offered gain on restatement in value of un-settled contracts which was accepted by the Department. In this context, he drew our attention to the assessment order passed for the assessment year 2015-16. Thus, he submitted, when the AO is accepting the gain shown by the assessee, there is no reason to disallow the loss arising out of a similar situation. He submitted, now, it is fairly well settled that loss arising out of unsettled forward contract is allowable. In this regard, he relied upon the following decisions:- 1. "CIT Vs. Woodward Governor India (P) Ltd. (312 ITR 254)-Supreme Court. 2. CIT Vs. Badridas Gauridas (P) Ltd. (261 ITR 256)-Bombay HC 3. CIT Vs. D. Chetan & Co. (ITA No. 278/2014)-Bombay HC 4. Pr. CIT Vs. International Gold Company Ltd. (ITA No. 1827/2016)- Bombay HC 5. Pr. CIT Vs. Vishinda Diamonds (ITA No. 1841/2016)-Bombay HC 6. Pr. CIT Vs. Osia Gems....
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....entered by the assessee with banks are in respect of underlying import/export transactions. Thus, they are in the nature of hedging contracts to safeguard against loss, if any, arising on account of fluctuation in foreign currency. It is also a fact that as per the consistent method of accounting followed by assessee and applying Accounting Standard-11, the assessee restates the value of debtors, creditors, borrowings and unsettled forward contracts at the yearend applying closing rate of the foreign currency. It is also uncontroverted fact that on such restatement, if there is any gain, the assessee offers it as income and in case there is a loss, assessee claims it as deduction. The Departmental Authorities have also not disputed that the aforesaid accounting method is consistently followed by the assessee and gain arising on reinstatement of unsettled forward contracts at the yearend have been offered as income in some assessment years and accepted by the Department. 7. A perusal of the impugned assessment order would reveal that simply relying upon the CBDT instruction no. 3/2010, the AO has disallowed the claim of loss. However, on a careful perusal of CBDT Instruction N....
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....ould impact its business of import and export of diamonds. These concurrent finding of facts are not shown to be perverse in any manner. In fact, the Assessing Officer also in the Assessment Order does not find that the transaction entered into by the Respondent assessee was speculative in nature. It further holds that at no point of time did Revenue challenge the assertion of the Respondent assessee that the activity of entering into forward contract was in the regular course of its business only to safeguard against the loss on account of foreign exchange variation. Even before the Tribunal, we find that there was no submission recorded on behalf of the Revenue that the Respondent assessee should be called upon to explain the nature of its transactions. Thus, the submission now being made is without any foundation as the stand of the assessee on facts was never disputed. So far as the reliance on Accounting Standard11 is concerned, it would not by itself determine whether the activity was a part of the Respondent assessee's regular business transaction or it was a speculative transaction. On present facts, it was never the Revenue's contention that the transaction was spe....