Emmsons International Ltd. Vs ACIT (ITAT Delhi)
Exchange differences on foreign currency transactions in compliance of AS-11 need be considered in the accounts and the losses and profit arising therefrom need to be recognized as such for Income Tax purposes. It is further held that when the Revenue taxed the gains which accrued to the assessee on the basis of accrual and it is only in the year in question when the dollar rate stood increased, resulting in loss that the Revenue has disallowed the deduction/debt, which amounts to double standards adopted by the department. In the absence of any finding of Ld. AO as to the completeness and correctness of the accounts and also on want of compliance of accounting standards, it was held that the loss suffered by the assessee on account of exchange difference as on date of balance sheet is item of expenditure u/s 37(1) of IT Act.
In PCIT vs International Gold Company ltd. (supra),the question that had fallen for consideration was whether the loss from foreign exchange contract is a notional or contingent in nature. Hon’ble Bombay High Court referred to instruction No.03/2010 dt: 23.03.2010 to confirm that such loss is business loss allowable under the Act and held that CBDT circular/instruction has no applicability.
On a careful consideration of the facts involved in this case, we are of the considered opinion that the decision in the case of Woodward Governor P Ltd (supra) and ONGC vs CIT (supra) are applicable, and the line of judicial view is that the Revenue cannot be permitted to contend that there is a CBDT instruction No. 03/2010 dated 23/3/2010 to the contrary. No CBDT circular or instruction can be contrary to the decision of the Hon’ble Apex Court, even subsequent to the decision of the Hon’ble Apex Court. We, therefore, accept the contention of the assessee and hold that the addition is unsustainable. We, accordingly, direct the Assessing Officer to delete the same.
