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2019 (5) TMI 1593 - AT - Income TaxDisallowance of foreign currency exchange loss treating speculative - loss on account of forward contracts in US Dollar-Rupee to hedge the export receivable in USD - AO alleged that claimed expenses is for buying and selling of US Dollar and the settlement is not by way of physical delivery - CIT-A deleted the addition - HELD THAT:- There was a direct and proximate nexus between the business operations of the import and export of goods and loss on forward contracts, because the hedging of foreign currency was done on the basis of confirmed orders with the customers and past export performance of the assessee which the bankers have duly verified and thereafter the forward contract were entered before the actual delivery of goods based on the purchase orders. Clearly the hedging contracts entered were incidental to the business of the assessee and were intended to guard against losses through future price fluctuations. As pointed out that in the earlier years in scrutiny proceedings such losses have been treated to be a business loss. CIT (A) has categorically noted that it was a complete party wise details of the purchase orders against which exports were made in USD during the year and also perused the copy of purchase orders exceeding USD 25,000. In fact assessee has exported goods during the year under consideration amounting to USD 19,67,954 as against availability of purchase orders amounting to USD 22,13,453. It cannot be held that the future contracts were not connected to the assessee’s export and was a separate transactions de-hors the export of the assessee. Once the forward contracts for foreign currency was directly related to export and import and incidental to the business of assessee, then it cannot be held that it is in the nature of speculative transaction within the scope of ambit of section 43(5). See BADRIDAS GAURIDU (P.) LTD. [2003 (1) TMI 61 - BOMBAY HIGH COURT] - decided against revenue
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