TMI Blog2015 (1) TMI 1275X X X X Extracts X X X X X X X X Extracts X X X X ..... tract entered into by a member of a forward market or a stock exchange in the course of any transaction in the nature of jobbing, etc. to guard against loss which may arise in the ordinary course of his business to such member from the definition of speculative transaction. Thus we hold that Forex contracts entered into by the assessee will not fall under the definition of “speculative transaction” - Decided in favour of assessee. Denial of duty draw back while computing deduction under section 80IB - Held that:- We do not find any infirmity or good reason to interfere with the order of Commissioner of Income Tax (Appeals) since the Commissioner of Income Tax (Appeals) has only followed the decision of Hon'ble Supreme Court in the case o ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... essee s own case for the immediately preceding assessment year and he places a copy of the order of this Tribunal in ITA No.2032/Mds/2012 dated 21.02.2013. Counsel submits that ground no.2 raised against the order of the Commissioner of Income Tax (Appeals) in confirming the disallowance of foreign currency derivative loss by treating it as speculation loss and holding that it cannot be allowed to set off against income of regular business of the assessee is decided in favour of the assessee by the co-ordinate Bench of this Tribunal in ITA No.2032/Mds/2012. With regard to ground no.4 i.e denying deduction under section 80IB of the Act on duty draw back, he submits that the issue has been decided against the assessee by the co-ordinate Bench ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ompany is an exporter of cotton. On 30th Dec., 1992, the assessee filed its return of income showing an income of ₹ 1,13,100. The assessee had entered into forward contracts with the banks in respect of foreign exchange. Some of these contracts could not be honoured by the assessee for which it had to pay ₹ 13.50 lakhs, which was debited to the P L a/c. The assessee claimed the same as business loss being payment made on account of cancellation of forward booking of foreign exchange with the banks in respect of export orders. The AO disallowed the deduction on the ground that the assessee had short sold the foreign exchange and that the payments made were not in the nature of damages, but they were made to settle the transaction ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ract for the purchase or sale of a commodity is settled otherwise than by the actual delivery or transfer of such commodity. However, as stated 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 cases failed. In the circumstances, the assessee was entitled to claim deduction in respect of ₹ 13.50 lakhs as a business loss. This matter is squarely covered by the judgment of the Calcutta High Court, with which we agree, in the case of CIT vs. Soorajmull Nagarmull (1981) 22 CTR (Cal) 8 : (1981) 12 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... t foreign currency was neither commodity nor shares. 33. The definition of speculative transaction , will not apply to a situation where the purpose of entering a forward contract was to hedge/safeguard against any loss on account of repayment of principal amount of the loan: cancellation of the contract was identical to that object and consequently any loss/gain arising from such cancellation is directly related to repayment of the loan. 34. Further, attention is also drawn to proviso (c) to s.43(5) of the Act, which excludes a contract entered into by a member of a forward market or a stock exchange in the course of any transaction in the nature of jobbing, etc. to guard against loss which may arise in the ordinary course of his bu ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... laimed deduction u/s.80IB wherein they had included Duty Draw back amount as profits derived from industrial undertaking. The Assessing Officer has denied this benefit on the basis that duty draw back amount cannot be included in the eligible profit for claiming deduction u/s80IB. This issue is squarely covered in favour of the revenue by the decision of Hon'ble Apex Court in the case of Liberty India vs. CIT reported in 183 Taxman 349(2009)(SC),wherein it is held as under :- DEBP is an incentive. It is given under Duty Exemption Remission Scheme. Essentially, it is an export incentive. No doubt, the object behind DEBP is to neutralize the incidence of customs duty payment on the import content of export product. This neutralization ..... X X X X Extracts X X X X X X X X Extracts X X X X
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