Kohinoor Foods Ltd. Vs DCIT (ITAT Delhi)
DRP Acted Beyond Jurisdiction; Cannot Create New Source – Consistency Wins; ITAT Delhi Upholds Hedging Loss Claim & Rejects Ad-Hoc Stock Additions
DRP Acted Beyond Jurisdiction; Cannot Create New Source – Consistency Wins; ITAT Delhi Upholds Hedging Loss Claim & Rejects Ad-Hoc Stock Additions
Kohinoor Foods Ltd., engaged in processing & trading rice, pulses, & food products, appealed against multiple additions made by AO & sustained by DRP in relation to forex derivative losses, stock discrepancy, notional interest on AE loans & receivables & corporate guarantee commission.
On the domestic issues, Tribunal held that disallowance of loss on forex derivatives was unjustified. Relying on its earlier order in AY 2008-09 (affirmed by Delhi High Court in ITA 79/2015), it noted that the losses arose from genuine hedging contracts undertaken to safeguard against forex fluctuations in exports, imports & borrowings. AO had previously taxed gains on similar contracts; therefore, by rule of consistency, losses too must be allowed. Likewise, addition on account of alleged discrepancy in closing stock (1% of sales) was deleted, as in prior years both ITAT & Delhi High Court had accepted Assessee’s consistently higher yield & GP margins & held that ad-hoc additions without specific defects in books were unsustainable.
