Case Law Details
Emmsons International Ltd. Vs ACIT (ITAT Delhi)
In ONGC vs CIT 322 ITR 180 (SC) also, Hon’ble Apex Court took a similar view and held that loss on account of foreign exchange fluctuation on balance sheet date is item of expenditure u/s 37(1) of IT Act notwithstanding that liability had not been discharged in which fluctuation in the rate of foreign exchange occurred. This view is followed by the Bombay High Court in the case of CIT vs D Chetan & Co.,ITA No. 278 of 2014 dt: 01.10.2016 and PCIT vs International Gold Company Ltd.,ITA No. 1827 of 2016 dt: 27.02.2019 wherein it was held that loss on forward contracts is not a notional loss and therefore need be allowed. In this case, it is the contention of the department that such loss is a notional loss was decided against the department on the ground that in case of export and import business hedging of risk in foreign exchange is a normal course of business activity and such loss need to be allowed.
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.
FULL TEXT OF THE ITAT JUDGEMENT
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