CA Suraj R. Agrawal
Brief of the case:
ITAT Mumbai has held in the case of ACIT vs. M/s Venus Jewel that Loss on account of forward contract entered into by the assessee to hedge against the loss arising on account of fluctuations in foreign exchange is an allowable deduction.
Facts of the case:
- After taking note of the claim of forward contracts and the accounting policies, i.e. AS-11 (revised) and applying the ratio laid down by the Apex Court in the case of Woodward Governor India Pvt. Ltd. (supra) the claim of the assessee was allowed by the CIT (A), against which the Revenue is in appeal.
- The AO disallowed the claim of the assessee as the same had not been settled at the year end and hence the losses were not actual losses.
- The AO rejected the claim of the assessee because it has entered into mark to market loss on forward exchange contracts and disallowed a sum of `66,51,21,162/-.
- The said transaction of entering into forward contracts was claimed by the assessee to be an integral part and incidental to export business undertaken by the assessee
- On such revaluation the assessee had claimed mark to market loss on the said forward exchange contracts amounting to `66,51,21,162/
- The assessee had entered into forward exchange contracts, which were revalued by it on the closing day of the accounting year.
- The assessee was engaged in the business of import and export of diamonds.
- The assessee has field cross objections against the appeal filed by the Revenue relating to assessment year 2010-11 against the order passed under section 143(3) of the Act.
- Two appeals filed by the Revenue are against the consolidated order of the CIT(A) dated 16.09.2013 relating to assessment years 2009-10 and 2010-11 against the order passed under section 143(3) of the Act.
Issue put before ITAT Mumbai:
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