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2014 (10) TMI 776 - AT - Income TaxForeign currency forward contract treated as speculation loss – Held that:- The assessee is dealing in diamonds, it had entered in to 24 forward contracts, that total forward contract cancelled were of ₹ 28 Crores, that the total sales during the year amounted to ₹ 27.78 Crores - the amount involved in the forward contract (FC) is more than 100% of the turnover of the assessee, that FC were not relatable to specific bills, that the assessee had not related any single bill to any of the contract and had not provided any purchase order during the assessment or appellate proceedings - the definition of 'speculative transaction' in section 43(5) of the Act, gives a simple test for deciding, for the purpose of Act, as to what a speculative transaction means - The true test is delivery of commodities/goods as per the contract, including a FC Profit/loss in respect of unperformed contracts is considered speculation profit or loss - CIT(A) was rightly of the view that the disputed transactions were speculative and not hedging transaction, that the assessee could not relate any single bill to any of the contract and it had not provided detail of any purchase order relatable to specific transaction, during the assessment or appellate proceedings - Thus, the transactions undertaken by it have to be taken as transactions relatable to Foreign Exchange - the order of the FAA does not suffer from any legal or factual infirmity – Decded against assessee.
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