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2017 (4) TMI 725 - AT - Income TaxDisallowance on account of forward booking loss treated as speculation loss - CIT-A allowed claim - Held that:- Even speculative transactions, as long as such transactions are incidental to the main business of the assessee, cannot result in the profits or losses from such transactions being treated separately as that of a speculation business and thus making them ineligible for being set off against normal business profits and losses. Nothing really, therefore, turns on a transaction being settled, otherwise than through delivery, as long as such a transaction has standalone character isolated from the main activities of business. For this short reason alone, the action of the Assessing Officer must be held to be unsustainable in law. In any event, there is a categorical finding by the CIT(A) that the transactions in question were integral to the business and that the loss on such transactions is admissible as deduction under section 37(1). There is a categorical finding by the CIT(A) that the transactions were entered into to safeguard legitimate business interests of the assessee in respect of its foreign exchange transactions. Having heard the rival contentions and having perused the material on record, we approve these well reasoned findings of the first appellate authority, and, for this reason also, decline to interfere in the matter. - Decided against revenue Addition on account of EEFC account on account of forex loss claimed by Assessee - CIT-A allowed claim - Held that:- As regards the amount of ₹ 87,12,768 all it represents is the difference in conversion rate, of US Dollars into Indian rupees, at the point of time when the EEFC account was originally credited vis-à-vis the point of time when subsequent debit entry, or vice versa, is made. As a matter of fact, these entries, truly speaking, do not even represent losses but merely deal with corrections in the conversion rate with respect to the amounts utilized from EEFC account. These corrections are to be taken into account in computing the correct profits and losses. Be that as it may, whether these losses are treated as losses or corrections, the effect is the same- i.e. accounting for foreign exchange at the right rates. Quite interestingly, similar entries resulting in gains have been accepted by the Assessing Officer. These entries are admittedly in accordance with the Accounting Standards which are binding on the assessee. The method of accounting has been consistently followed by the assessee, it is fair and reasonable, and, as a result of the losses so booked, the accounts of the assessee show true and fair picture of the transactions. It is also noted that similar approach, when it resulted in net gains in subsequent assessment years i.e. 2011-12 and 2012-13, was accepted by the revenue authorities. As the assessee is consistently following the mercantile method of accounting, the same accounting treatment for the foreign exchange losses and gains has been given by the assessee all along, the assesse is making entries in respect of such losses and gains, and the treatment is consistent with the Accounting Standards. In view of these discussions, as also bearing in mind entirety of the case, we approve the conclusions arrived at by the CIT(A) and decline to interfere in the matter.- Decided against revenue
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