The Mumbai bench of the Income Tax Appellate Tribunal (ITAT) ruled that actual profit in Indian currency was declared after determining the foreign profit by calculating all transactions in foreign currency as valid method.
The assessee was represented by Shri Tejveer Singh and the revenue was represented by Shri Mehul Jain.
The assessee filed its return of income declaring ₹.40,78,600/- and had computed business loss on sale of securities at ₹.36,06,106/-. The Assessing Officer observed that the assessee has submitted a closing stock and opening stock in the return of income as there was a difference in the closing stock of the previous year and the opening stock of the current year and observed that the assessee has followed the closing stock as per Rule 115A of Income Tax Rules. The AO had taken the value of the closing stock as the opening stock of the current year and made the addition of ₹.1,00,63,228/-.
The assessee contended that Assessing Officer has adopted the value of opening stock and closing stock and the difference he added as additional income for the assessee, whereas the assessee has followed Rule 115 of I.T.Rules. Further stated that he declared the profit and loss earned in USD as well as in AED account which was proper as per Rule 115 of I.T. Rules
As per Rule 115, the assessee normally has two options to determine the income earned from the assets held in foreign currency and the assessee followed the Method-2 which was approved by the legislature to simplify the determination of profit earned by the assessee in the assets held in foreign currency. By this, the assessee has to only determine the actual profit earned in foreign currency i.e. the actual profit earned by the assessee and no need to declare the profit or loss with the impact of currency fluctuation.
Shri Vikas Awasthy, judicial member and Shri S Rifaur Rahman, accountant member observed that the method proposed in Rule 115 of I.T. Rules was an approved way of declaring the income and deleted the addition made by the Assessing Officer is deleted. The appeal of the assessee was allowed.
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