TMI Blog2016 (5) TMI 1529X X X X Extracts X X X X X X X X Extracts X X X X ..... of the assessee. If the derivative transaction undertaken by the assessee is in excess of export turnover then that loss suffered in respect of that portion of excess transaction has to be considered as speculative loss only and that excess derivative transaction has no proximity with export turnover and the AO is directed to compute accordingly. AO has to see whether there is any premature cancellation of forward contract of foreign exchange and that transaction should be taken out for the purpose of considering the business loss and only the transactions which are completed to be considered for the purpose of determining the business loss from these foreign exchange forward contract. With this observation, we remand this issue to the file of the Assessing Officer for fresh consideration. Appeal of assessee is partly allowed for statistical purposes. - I.T.A.No.2179/Mds/2015, I.T.A.No.2160/Mds/2015 - - - Dated:- 27-5-2016 - Shri Chandra Poojari, Accountant Member And Shri Duvvuru Rl Reddy, Judicial Member Assessee by: Mr.J.Prabhakar,C.A Revenue by: Mr.Arun C.Bharat,CIT,D.R ORDER Chandra Poojari, These cross appeals are directed against the orde ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... this issue would go back to the file of AO for fresh consideration after giving due opportunity to the assessee. 6. Hence, the appeal of Revenue is partly allowed for statistical purposes. 7. Coming to the assessee s appeal, the facts of the case are that the assessee claimed forex fluctuation loss. The AO observed that the assessee had hedged the export receivables by entering into forward contracts with SBI and ICCI Bank the loss on such account was ₹ 93,30,000/-, further three transactions noted on 28.02.2009 and 28.02.2009 by which contracts have been eventually settled with SBI and the loss was ₹ 1,94,07,300/-. Further, AO observed that apart from these, forward contracts entered into by the assessee in SBI and ICICI Banks have not been settled through actual delivery and he portion of turnover involved in the forward contracts which have been settled by way of actual delivery is ₹ 8,31,88,500/-. Further, the assessee has hedged the export proceeds receivable much more than what is available in stock as receivables Therefore, falling within the ambit of speculative transactions. The CIT(A) confirmed that the order of AO on this issue. Against this, the ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... med to be carrying on a speculation business to the extent to which the business consists of the purchase. In order to resolve the issue before us, the section has to be read in the manner as follows: Explanation : Where any part of the business of a company ( . . . .. .. .. .. .. .. .. . .. .. . ) consist in the purchase and sale of shares of other companies, such company shall, for the purposes of this section, be deemed to be carrying on a speculation business to the extent to which the business consists of the purchase and sale of such shares. It would, thus, appear that where an assessee, being the company, besides dealing in other things also deals in purchase and sale of shares of other companies, the assessee shall be deemed to be carrying on a speculation business. The assessee, in the present case, principally is a share broker, as already indicated. The assessee is also in the business of buying and selling of shares for self where actual delivery is taken and given and also in buying and selling of shares where actual delivery was not intended to be taken o ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... had failed to discharge the onus cast upon him by the statute. It was also not able to contradict the finding of fact that booking and cancellation of FC of foreign exchange were not in respect of specified export or import. Besides, finding of fact given by the Revenue Authorities remained un-contravened that loss in question, shown by it pertained to those FC transactions, against which no actual delivery of foreign exchange was made. On appreciation of the facts surrounding the transaction ITAT had reached at the conclusion that transactions entered in to by the assessee were speculative in nature and the case of the assessee is not covered by proviso(a) of the section 43(5) of the Act. Disputed transactions were speculative and not hedging transaction,that the assessee could not relate any single bill to any of the contract and it had not provided detail of any purchase order relatable to specific transaction, during the assessment or appellate proceedings. Thus, the transactions undertaken by it have to be taken as transactions relatable to Foreign Exchange. ITAT was of the opinion that the order of the FAA does not suffer from any legal or factual infirmity. Therefore, consid ..... X X X X Extracts X X X X X X X X Extracts X X X X
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