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TMI Blog2016 (7) TMI 561X X X X Extracts X X X X X X X X Extracts X X X X ..... was determined at Rs. 2,14,88,054/-. Aggrieved by the order of the Assessing Officer (AO), assessee carried the matter before the ld.CIT(A), who vide order dated 25/05/2012 (in Appeal No.CIT(A) XIV/ACIT.Cir.8/156/2011-12) granted partial relief to the assessee. Aggrieved by the order of ld.CIT(A), Assessee and Revenue are now in cross-appeals before us. 3. Grounds raised by the assessee in ITA No.1396/Ahd/2012are as under:- 1. The learned CIT(A) has erred in law and on facts in partly confirming the assessment order passed by the Assessing Officer u/s.143(3) of the Act. 2. The learned CIT(A) has erred in holding the loss on account of transactions carried out through Karvy Stock Broking Ltd. as Speculative Loss in spite of the plea of the appellant that the same is hedging loss. The same is prayed for treatment as business loss. 3. The learned CIT(A) has erred in law and on facts in upholding order of the Assessing Officer only on the erroneous basis that the expenditure incurred for raising the capital by payment to ROC is Capital in nature and also ignoring the judicial precedent cited by the appellant. The same is prayed for allowance. 4. The learned CIT(A) has erred in ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... speculative business. He after considering the facts that the transaction of forex derivatives were carried with the bank and not recognized exchange, disallowed Rs. 39,33,576/-. Aggrieved by the order of AO, assessee carried the matter before the ld.CIT(A), who after considering the submissions of the assessee, granted partial relief to the assessee by holding as under:- "3.3. Decision : I have carefully considered the assessment order and the submission filed by the appellant. The A.O. has disallowed the loss of Rs. 39,33,576/- under the head loss on forward cover transaction by treating it as speculative transaction. The appellant has submitted that it was doing business of importing goods from foreign countries and it has imported goods of more than Rs. 50 crores during the year, the payment for which has to be made after 5-6 months at the prevailing market rates of the currency. The rate of foreign exchange vary from time to time and, therefore, to hedge against the possible loss due to volatility of market fluctuation, the importers enter into contract with authorized bankers to purchase the foreign currency at the prevailing market rate at the time of entering the import ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... own by the Honourable Gujarat High Court in the case mentioned by the appellant is also similar. The Honourable Court has held that the onus is on the appellant to prove that the transaction was not speculative but hedging. The transaction that are done through HDFC Bank are clearly linked with the business of the appellant and can be considered as hedging transactions. Hedging in foreign exchange is a normal practice for the persons engaged in import of export. Whereas the transactions done through Karvy Stock Broking Ltd. are not in the nature of hedging transactions but are in the nature of speculative transactions as these are for trading in Currency Futures. The A. O. is, therefore, directed to treat the loss incurred through the transaction done through HDFC Bank as nonITA No.1396/Ahd/2012 (By Assessee) and ITA No.1678/Ahd/2012 (By Revenue) Tower Overseas Ltd. vs. ACIT Asst.Year - 2009-10 - 7 - speculative and business loss. The transactions carried out through Karvy Stock Broking Ltd. should accordingly be treated as speculative in nature and the loss is accordingly directed to be disallowed. Therefore, the loss to that extent will be allowed as business loss and the balance ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... terest-free loans of Rs. 18,84,892/- to the Director of the Company. AO therefore concluded that assessee had diverted the interest-bearing funds for the purpose of non-business use and therefore to the extent of interest paid on the amount advanced to Director cannot be allowed as deduction. He thereafter worked out the interest disallowance @ 11.5% and disallowed Rs. 2,16,762/- Aggrieved by the order of the Assessing Officer (AO), assessee carried the matter before the ld.CIT(A), who after considering the submission of the assessee, deleted the addition by observing as under:- "5.3. Decision: I have carefully considered the assessment order and the submission filed by the appellant. The appellant has submitted that the transaction with Shri Ambani are current account type transaction with the company. There was an opening credit balance of Rs. 66,59,425/- in the account for which Mr.Ambani did not charge any interest from the company. Similarly, the appellant company has also not charged the interest. It has further been submitted by the appellant that the company is having its own capital of Rs. 2.5 crores and another Rs. 4 crores of share application money which are interest ..... X X X X Extracts X X X X X X X X Extracts X X X X
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