2003 (1) TMI 61 - HC - Income Tax

Speculative Transaction - forward contract - The assessee was not a dealer in foreign exchange. The assessee was an exporter of cotton. In order to hedge against losses the assessee had booked foreign exchange in the forward market with the bank. However the export contracts entered into by the assessee for export of cotton in some cases failed. In the circumstances the assessee was entitled to claim deduction in respect of Rs. 13.50 lakhs as a business loss. - In the circumstances the assessee was entitled to claim deduction in respect of Rs. 13.50 lakhs as a business loss.

Summary

The High Court of Bombay upheld the Tribunal's decision in favor of an assessee-company, allowing deduction of Rs. 13.50 lakhs as a business loss for failed foreign exchange contracts related to export orders of cotton. The court found that the contracts were incidental to the assessee's regular business and not speculative transactions. The appeal by the Department was dismissed. (Case citation: 2003 (1) TMI 61 - BOMBAY High Court)