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TMI Blog2013 (8) TMI 184X X X X Extracts X X X X X X X X Extracts X X X X ..... ntract was not booked against any specific export or import and not utilized in business and terminated without effecting delivery of foreign exchange and thus ought to have been treated as speculation transaction under section 43(5)." 2. The fact relating to this addition made by A.O. as they emerge from the order of Ld. CIT(A) are as under:- "4. The Assessing Officer has observed in the assessment order that the assesses has debited a sum of Rs. 54,73,161/- in the P&L Account under the head "Forward Contract Cancellation Loss". The Assessing Officer has disallowed the loss on account of forward contract for foreign exchange cancellation by treating the same as speculation loss as per section 43(5) of the Income-tax Act. The Assessing Of ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... reproduced by him in para 5 of his order has deleted this addition by following the decision of Calcutta High Court in the case of CIT vs. Soorajmull Nagarmull 129 CTR 169 and Mumbai High Court in the case of CIT vs. Badridas Gauridu (P) Ltd. 261 ITR 256 by observing as under:- "6. I have considered the basis of the addition made by the Assessing Officer and also submissions filed by the learned A.R. and the case laws relied upon and I am in agreement with the submission and arguments made by the learned A. R. In the case of the appellant, it is an undisputed fact that the appellant has been engaged in the import and export business of rough diamonds and polished diamonds respectively and the payment is made and received in foreign exchang ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... entered into foreign exchange contract to cover up the loss and the difference in exchange valuation, the transaction is not speculative transaction." In the case of CIT vs Badridas Gauridu-(P)Ltd. 261 ITR 256 (Bom.), it is held as under:- "However, as stated above, the assesses 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 Ra. 13.50 lakhs as a business loss. This matter is squarely covered by the judgment of Calcutt ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... acts are entered very much in the normal course of business & is very much in the nature of 'hedging transaction'. Accordingly, the loss arising on cancellation of forward exchange contract is allowed as 'Business Loss'. Thus, the addition of Rs.54,73,161/- is deleted and the ground of appeal is allowed." 4. After hearing both the parties and perusing the record, we find that the issue is now also covered by the decision of Hon'ble jurisdictional High Court vide tax appeal No. 251 of 2010 dated 23rd August, 2011 in the case of CIT vs. Friends and Friends Shipping Pvt. Ltd in favour of the assessee and against the revenue wherein following was held:- "Having thus heard the learned advocates for the parties and having perused the documents ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... dity. However, as state above, 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 caes failed. In the circumstances, the assessee was entitled to claim deduction in respect of Rs. 13.50 lakhs as a business loss. This matter is squarely covered by the judgment of the Culcutta High Court, with which we agree, in the case of CIT v. Soorajmull Ngurmull (1981) 129 ITR 169." Before the Calcutta High Court, the assesses was a firm engaged in the business of import and export of jute. In course of business, the ..... X X X X Extracts X X X X X X X X Extracts X X X X
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