Case Law Details
Assessee booked mart to market loss of Rs.21.80 crore as on 31.3.09 being difference in the INR value of the USD as on 31.3.09 and the value of which the hedging contract was agreed to be settled. We further note that the assessee is following mercantile system of account for recognition of this loss in its financial statements.
When we see the order of the DRP para 3.7.1, then it is amply clear that the ld. DRP has alleged that the forward contracts are not fully supported by the underlying support invoice both in terms of the amount as well as the tenure. DRP has drawn the table in this appeal and thereafter noted that out of 9 forward contracts, the assessee has only used 4 forward contract fully and the assessee has not used these forward contracts immediately but started using them against the sale invoice after the lapse of time of few months. Ld. DRP further noticed that contract no. 1461 was used for the first time on 31.10.08 for a nominal sum of USD 632 and thereafter in November for USD 144247 and balance in December 2008 for USD 2755121. Thus, it shows that there was no underlying asset for this contract from 6.8.2008 till 31.10.08. The entire forward contract could be utilised only by 31.12.08. For the sake of clarity in our conclusion para 3.7.1 of the ld. DRP order is being reproduced below:-
“3.7.1 Without prejudice to the above, in case the higher appellant authorities’ grants relief to the assessee on account of its claim discussed above, the relevant issue for consideration would be to what extent the claim made by the assessee is admissible? This for the reason that in this case, the FCs are not fully supported by the underlying export invoices both in terms of the amount as well as the tenor.
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