TMI Blog2017 (1) TMI 1424X X X X Extracts X X X X X X X X Extracts X X X X ..... e by Miss. Anupama Singla-DR Assessee by Shri K.A. Vaidyalingan O R D E R Per Joginder Singh(Judicial Member) The Revenue is aggrieved by the impugned order dated 30/04/2012 of the Ld. First Appellate Authority, Mumbai. The only ground raised by the Revenue pertains in holding that mark to mark loss of ₹ 2,75,11,085/- arising on valuation of forward exchange contract on closing date of accounting year is not a notional loss, therefore, allowable. 2. During hearing, at the outset, the ld. counsel for the assessee, Shri K.A. Vaidyalingan, claimed that the impugned issue is covered in favour of the assessee by the order of the Hon'ble jurisdictional High Court in the case of CIT vs M/s D. Chetan Company (I ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ge rates affecting its transactions of import and export by entering into forward contracts. The Assessing Officer by order of Assessment dated 27th December 2011 disallowed the claim on the ground that it is notional loss of a contingent liability debited to Profit and Los Account. Resultantly, the same was added to the Respondent-assessee's total income. 4. Being aggrieved, the Respondent-assessee carried the issue in appeal to the commissioner of Income Tax (CIT (Appeals)). By order dated 27 April 2012, the CIT(Appeals) allowed the Respondent assessee's appeal inter alia relying upon the decisions of Tribunal in Bhavani Gems vs. ACIT and the Special Bench decision in the case of DCIT vs. Bank of Bahrain and Kuwait. The CIT (Ap ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... al has, while upholding the finding of 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 export of diamonds. These current finding of facts are not shown to be perverse in any manner. In fact, the Assessing Officer also in the Assessment Order does not find that the transaction entered into by the Respondent assessee was speculative in was dismissed by the impugned order of the Tribunal. nature. It further holds that at no point of time did Revenue challenge the assertion of the Responden ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... al. The impugned order does not indicate any such reliance. It appears that in S. Vinodkumar (supra), the Tribunal held the forward contract on facts before it to be speculative in nature in view of Section 43(5) of the Act. However, it appears that the decision of this court in CIT vs. Badridas Gauridas (P) Ltd. was not brought to the notice of the Tribunal when it rendered its decision in S. Vinodkumar (supra). In the above case, this court has held that forward contract in foreign exchange when incidental to carrying on business of cotton exporter and done to cover up losses on account of differences in foreign exchange valuations, would not be speculative activity but a business activity. 8. In the above view, the question of law, a ..... X X X X Extracts X X X X X X X X Extracts X X X X
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