Loss suffered in foreign exchange due to fluctuation in foreign exchange liabilities is allowable as Income Tax Act

IN THE INCOME TAX APPELLATE TRIBUNAL,

MUMBAI BENCH “G”, MUMBAI

BEFORE SHRI J. SUDHAKAR REDDY (AM) & SHRI S.S. GODARA (JM)

I.T.A. No.3236/Mum/2010

(A.Y. 2004-05)

Asstt. Commr. of Income-tax-8(1),

R.No.210, 2nd floor, Aaykar Bhavan,

M.K. Road, Mumbai-400 020.

Appellant

Vs.

M/s. Afcons Pauling (India) Ltd.,

Afcons House,

16, Shah Industrial Estate,

Veera Desai Road, Azad Nagar,

Andheri (E), Mumbai-400 053.

PAN: AAACA9592N.

Respondent

I.T.A.No. 2023/Mum/2010

(A.Y. 2004-05)

M/s. Afcons Pauling (India) Ltd.,

Afcons House,

16, Shah Industrial Estate,

Veera Desai Road, Azad Nagar,

Andheri (E), Mumbai-400 052.

PAN: AAACA9592N.

Appellant

Vs.

Dy. Commr. of Income-tax-8(1),

R.No.210, 2nd floor, Aaykar Bhavan,

M.K. Road, Mumbai-400 020.

Respondent

Department by Shri K. Ravi Kiran.

Assessee by Ms. Vasanti Patel.

Date of hearing 04-04-2012

Date of pronouncement 18-04-2012

O R D E R

PER J. SUDHAKAR REDDY, AM:

These are cross appeals and are directed against the order of the CIT(A)-16, Mumbai, dated 11-02-2010 for the assessment year 2004-05.

2. The assessee is a company which is engaged in the business of civil construction.

3. We have heard Ms. Vasanti Patel, the ld. counsel for the assessee, and Shri K. Ravi Kiran, the ld. Departmental Representative. We first take up the Revenue’s appeal which is on the following grounds:

1. “On the fact and in the circumstances of the case and in law, the Ld. CIT(A) erred in deleting the addition of Rs.17,34,716/- made by the A.O. on account of foreign exchange loss claimed by the assessee without any supporting evidences.

2. On the fact and in the circumstances of the case and in law, the Ld. CIT(A) erred in deleting the addition without appreciating the facts that the loss is only notional loss and not actually incurred by the assessee as well as it is not backed by any actual transactions”.

The assessee debited an amount of Rs.17,34,716/- being foreign exchange loss that arose due to re-statement of current liabilities. The liability had arisen in the earlier years due to consultancy services rendered by Alfred Mcalphine, UK. The assessee contended that the loss arising due to fluctuation in foreign exchange liabilities, when such liabilities are re-instated as on 31st March, is ascertained liability and not contingent liability. The AO rejected the contention of the assessee. The CIT(A) followed the judgment of Hon’ble Supreme Court in the case of CIT vs. Woodward Governor India (P) Ltd. (312 ITR 254) (SC) and held that the loss suffered by the assessee is allowable. We find no infirmity in the order of the ld. CIT(A) which is also in consonance with the principles laid down by the Special Bench of the Tribunal in the case of ONGC Ltd. vs. CIT (83 ITD 151) (Del) (SB). Hence, we uphold the finding of the first appellate authority and dismiss the sole ground of the Revenue.

4. In the result, the appeal of the Revenue is dismissed.

5. Coming to the assessee’s appeal in I.T.A. No.2023/Mum/2010, we dismiss the same as withdrawn as requested by the assessee vide its letter dated 04-04-2012.

6. In the result, the appeal of the assessee is dismissed.

Order pronounced on the 18th day of April, 2012.

                                                    Sd/-                                          Sd/-

                                         (S.S. GODARA)           (J. SUDHAKAR REDDY)

                                     JUDICIAL MEMBER   ACCOUNTANT MEMBER

Mumbai: 18th April, 2012.

NG:

Copy to:

1. Department.

2. Assessee.

3. CIT (A)-16,Mumbai.

4. CIT-VIII,Mumbai.

5. DR,”G” Bench,Mumbai.

6. Master file.

(TRUE COPY)

BY ORDER,

Asst. Registrar, ITAT, Mumbai.