Case Law Details
ABB Global Industries and Services Pvt. Ltd. Vs DCIT (ITAT Bangalore)
A perusal of the order of the AO shows that the AO called upon the assessee to justify the allowability of the losses on account of exchange loss on forward contracts. The assessee gave two submissions dated 8.1.2014 and 23.1.2014, copies of which are placed at page nos. 26-27 & 28-34 respectively. In both the submissions, the details of forward contracts has not been mentioned.
As far as law on the issue is concerned, it is very clear that the forward contracts entered into for the purpose of protecting against loss and which has a nexus to the business of the assessee and which are on revenue account have to be allowed as a deduction. The decision cited on behalf of ld. counsel for the assessee supports the claim made in this regard. We, however, find that the details of forward contracts and nexus with the business of the assessee have not been submitted by assessee before the AO. We therefore are of the view that while upholding the principle that losses on account of exchange fluctuation on forward covered contracts are allowable as a deduction, we hold that the factual details in this regard should be examined by the AO and for the purpose we set aside the order of CIT(Appeals) and remand the issue to the AO for fresh consideration. The assessee has to show the nature of forward contracts and its nexus with the business of assessee and also the fact that such contracts are on revenue account and not on capital account.
FULL TEXT OF THE ITAT JUDGEMENT
ITA No.1448/Bang/2017 is an appeal by the assessee, while ITA No.1660/Bang/2017 is an appeal by the revenue. Both these appeals are directed against the order dated 12.04.2017 of the CIT(Appeals)-I, Bengaluru, relating to assessment year 2010-11.
Please become a Premium member. If you are already a Premium member, login here to access the full content.
