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TMI Blog2022 (9) TMI 659X X X X Extracts X X X X X X X X Extracts X X X X ..... l and Natural Gas Corporation Ltd., Dehradun [ 2010 (3) TMI 81 - SUPREME COURT] Validity of CBDT Circular No.3/2010 dated 23rd March, 2010 - CBDT Instruction has been issued in respect of loss on account of trading in foreign exchange derivatives. In the present case, however, the assessee had entered into derivative contracts in order to hedge its exchange risk in respect of export proceeds receivable by it in foreign exchange. Forward contracts entered into by the assessee were not by way of trading per se in foreign exchange derivatives. Consequently, CBDT Circular No.3/2010 dated 23rd March, 2010 has no application to the facts of the present case. This Court is of the opinion that no substantial question of law arises for ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e earlier judgment has been followed, is reproduced hereinbelow:- Having carefully perused the decision of this Court in Woodward case, we are of the opinion that both the issues stand concluded by the said decision. Dealing with the said issues extensively, speaking for the Bench, S.H. Kapadia, J, summarised the following factors which should be taken into account in order to find out if an expenditure on account of fluctuation in the foreign currency rates, when the Assessee is following the mercantile system of accounting, is deductible: (i) whether the system of accounting followed by the assessee is the mercantile system, which brings in the debits of the amount of expenditure for which a legal liability has been incurred eve ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... is of the opinion that all the aforesaid conditions stipulated by the Supreme Court stand satisfied in the present case. 6. As far as the finding of the ITAT that the CBDT Circular No.3/2010 dated 23rd March, 2010 is contrary to the judgment of the Supreme Court in Oil and Natural Gas Corporation Ltd., Dehradun though Managing Director Vs. The Commissioner of Income Tax, Dehradun (supra) and CIT Vs. Woodward Governor India Ltd (supra), this Court is of the view that the same was not called for, as the said CBDT Instruction has been issued in respect of loss on account of trading in foreign exchange derivatives. In the present case, however, the assessee had entered into derivative contracts in order to hedge its exchange risk in resp ..... X X X X Extracts X X X X X X X X Extracts X X X X
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