Vardhman Stampings P. Ltd. Vs PCIT-4 (ITAT Ahmedabad)
ITAT Ahmedabad held that loss on foreign currency derivative transactions and loss on account of exchange rate difference are not speculative in nature and hence the same is allowable as business expense. Accordingly, order passed by Pr. CIT u/s. 263 directed to be quashed.
Facts- The present appeal is filed against order passed by PCIT. It is pointed out that error noted by the Pr.CIT in the assessment order was with respect to the allowance of loss incurred by the assessee on foreign currency derivative transactions amounting to Rs.1,50,12,699/- which the ld.Pr.CIT found to be “marked to market” loss and noting the same to be notional loss, contingent in nature and not allowable in terms of the CBDT Instruction No.3/2010 dated 23.03.2010, he found, the AO to have allowed this claim erroneously without examining the issue and conducting due enquiries with regard to the same.
Conclusion- With respect to the portion of the loss claimed by the assessee on account of exchange difference in respect of outstanding balance of creditors, this fact undoubtedly had been brought to the notice of the AO, and the ld.Pr.CIT also during the revisionary proceedings. The assessee had also demonstrated that the claim of this loss had been made following the AS-11 recommended by the ICAI for this purpose; that it was also pointed out that the Hon’ble Apex Court in a series of the decisions beginning with CIT Vs. Woodward Governor P. Ltd. and ONGC Vs. CIT (supra) had held such identical claims to be allowable in terms of section 37(1) of the Act.
