TaxTMI 
TaxTMI 
2025 (3) TMI 1946
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....ents of Sales Tax and Service Tax." 3. Ground No. 1 relates to allowing the claim of Foreign Exchange Loss u/s 37(1) r.w.s. 93 of the Act - Rs. 17,28,23,000/- 3.1 Brief facts of the case are that the assessee is a company engaged in the business of supply and installation of ATMs. Return for AY 2009-10 was filed on 29.09.2009 declaring a total income of Rs. 15,56,06,400/-. The case was selected for scrutiny and reference u/s 92(CA)(1) of the Act was made to the Transfer Pricing Officer [TPO] for determination of the Arm's Length Price [ALP] in respect of the international transactions entered into by the assessee with its Associate Enterprises [AE]. Vide order dated 31.12.2012, Ld. TPO held that no adjustment was required to the value of international transactions entered by the assessee. Thereafter, the assessment was completed u/s 143(3) of the Act under which a disallowance of foreign exchange loss of the tune of Rs. 17,28,23,000/- u/s 37(1) was made by the Ld. AO. 3.2 Aggrieved with the order of Ld. AO, the assessee preferred an appeal before Ld. CIT(A). Vide order dated 24.09.2024, Ld. CIT(A) allowed the assessee's appeal. Aggrieved with the order of Ld. CIT(A), th....
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....ed to the Appellant by the AD bank. The outstanding amount to Diebold Inc, where payment is delayed beyond the timelines prescribed under FEMA, does not represent an 'offence' or is not 'prohibited". Consequently, the foreign exchange loss on restatement of liability payable to Diebold Inc is not related to a any transaction that constitutes an offence, is prohibited, or is in itself an offence or prohibited. 6.1.3 Further. The Reserve Bank of India's guidelines under FEMA regarding payment of trading liability within the timelines have no applicability for construing the provisions of the Act and do not override the provisions of the Act. The Appellant has remitted funds through The Royal Bank of Scotland to Diebold Inc during subsequent period solely as trade credits, without any reclassification made to External Commercial Borrowings (ECB) by the banker. Hence, the AO's recharacterization of these obligations as loans is not sustainable. Section 37(1) does not mandate the expense to be actually paid to be allowed as a deduction. The Appellant employs the mercantile system of accounting and has rightfully recognized losses when they occur. The content....
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....ome on account of foreign exchange fluctuation gain which had been offered for tax. In fact, for AY 2010-11, this issue was considered by the co-ordinate bench in ITA No. 6135/Mum/2024 wherein the issue of taxability of unrealised foreign exchange fluctuation gain amounting to Rs. 9,67,06,326/- was considered. In the return of income filed for AY 2010-11, the assessee had offered this amount as income and the assessment was completed after accepting income offered by the assessee. However, for AYs 2009-10, 2014-15 & 2016-17, the assessee incurred a loss on account of fluctuation in the rate of foreign exchange in respect of similar payments to be made to the overseas AE, but the loss claimed by the assessee was not accepted by the AO. Accordingly in the appeal for AY 2010-11 before Ld. CIT(A), the assessee raised an additional ground claiming that in case the department does not allow the loss on account of fluctuation in foreign exchange rate for these years, then the gain on similar transactions should be treated as income. Accordingly, the foreign exchange fluctuation gain offered as income in AY 2010-11 was sought to be withdrawn at the stage of first appellate authority. In th....
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....y, the assessee has been declaring gain on account of foreign exchange fluctuation and offered the same for the tax in -several years as is evident from the chart furnished by the Ld. AR. The assessee has consistently followed the Accounting Standard (AS) 11 and there is no change in facts and circumstances over the years. Accordingly, as has rightly been held by the co-ordinate bench in ITA No. 6135/Mum/2024, the rule of consistency has to be applied by the assessee as well as the revenue. Since the gain derived in some of the years has been treated as revenue, loss arising on similar transactions also has to be allowed as a deduction in respective years. We, therefore, hold that the Ld. CIT(A) has rightly allowed the appeal of the assessee on this issue and we see no justification to interfere with the order of Ld. CIT(A). 3.6 Accordingly, the appeal of the revenue on this issue is dismissed. 4. Ground No. 2 relates to the claim of interest of delayed payment of sales tax and service tax - Rs. 19,11,951/- 4.1 Brief facts are that the assessee had paid interest on delayed payment of sales tax and service tax amounting to Rs. 19,11,951/- which was disallowed by the Ld. AO ....