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Commissioner of Income Tax-16, Mumbai Versus M/s. D. Chetan & Co.

2016 (10) TMI 629 - BOMBAY HIGH COURT

Addition of 'Mark to Market' Loss - disallowance of loss on foreign exchange forward contract loss - Held that:- The impugned order of the Tribunal has, while upholding the finding of the CIT (Appeals), independently come to the conclusion that the transaction entered into by the Respondent assessee is not in the nature of speculative activities. Further the hedging transactions were entered into so as to cover variation in foreign exchange rate which would impact its business of import and expo .....

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of foreign exchange variation. Even before the Tribunal, we find that there was no submission recorded on behalf of the Revenue that the Respondent assessee should be called upon to explain the nature of its transactions. Thus, the submission now being made is without any foundation as the stand of the assessee on facts was never disputed - So far as the reliance on Accounting Standard11 is concerned, it would not by itself determine whether the activity was a part of the Respondent assesse .....

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. Sanklecha And S. C. Gupte, JJ. Mr. A. R. Malhotra for the appellant Mr. R. Murlidhar with Mr. P. C. Tripathi for the respondent ORDER P. C. This appeal under Section 260A of the Income Tax Act, 1961 (Act) challenges the order dated 14 August 2013 passed by the Income Tax Appellate Tribunal (Tribunal). The impugned order relates to assessment for Assessment Year 2009-10. 2. The Revenue has urged the following question of law for our consideration : Whether on the facts and in the circumstances .....

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explained that the amount of ₹ 78.10 lakhs claimed as loss was on account of having entered into hedging transactions to safeguard variation in exchange rates affecting its transactions of import and export by entering into forward contracts. The Assessing Officer by order of Assessment dated 27 December 2011 disallowed the claim on the ground that it is a notional loss of a contingent liability debited to Profit and Loss Account. Resultantly, the same was added to the Respondent assessee& .....

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he transaction of forward contract was entered into during the course of its business. It held it was not speculative in nature nor was it the case of the Assessing Officer that it was so. Thus the loss incurred as forward contract was allowed as a business loss. 5. Being aggrieved, the Revenue preferred an appeal to the Tribunal. The impugned order of the Tribunal upheld the finding of the CIT (Appeals) that the loss incurred by the Respondent Assessee was a revenue loss and not connected with .....

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Addl. CIT ITA 506/MUM/2013 rendered on 3 May 2013 which on similar facts is in favour of the Revenue. He further submits that the impugned order of the Tribunal is suspect because it accepts the Respondent assessee's claim without calling upon it to prove that the same was not speculative. Lastly, he sought to place reliance upon Accounting Standard11 to claim that such a loss is not allowable thereunder. 7. The impugned order of the Tribunal has, while upholding the finding of the CIT (Appe .....

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into by the Respondent assessee was speculative in nature. It further holds that at no point of time did Revenue challenge the assertion of the Respondent assessee that the activity of entering into forward contract was in the regular course of its business only to safeguard against the loss on account of foreign exchange variation. Even before the Tribunal, we find that there was no submission recorded on behalf of the Revenue that the Respondent assessee should be called upon to explain the na .....

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