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2017 (1) TMI 615 - AT - Income TaxLoss on Forward Contracts in foreign exchange - assessee does not deal in foreign exchange and is a diamond merchant - Held that:- The appellant has cancelled some of its foreign exchange forward contracts before the due date, but such transactions has resulted in net profit. For the sake of discussion, even if such transactions are held to be speculative in nature simply because the appellant has cancelled these transactions before the maturity date, still it does not have any adverse effect on revenue because net result of such transactions is profit and not the loss. Therefore, after considering the totality and circumstances of the instant case as well as the principle laid down by the Hon’ble ITAT in appellant’s own case in A.Y.2009-10, it is noted that the net loss of the appellant is in respect of the transactions of only those forward contracts which was incurred on settlement on or after due date of the contracts. Since such transactions were carried out in the normal course of business to guard against the fluctuation in foreign exchange such transactions are in nature of hedging transactions, loss on which is genuinely business loss, hence the AO is directed to allow the same.
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