TMI Blog2021 (6) TMI 894X X X X Extracts X X X X X X X X Extracts X X X X ..... l expansion and panned to purchase certain machineries and accordingly decided to import such machineries from abroad against foreign currency loan - in order to safe guard its interest against the fluctuation in foreign currency entered into forward contract. CIT(A) after relying on the decision of Sutlej Cotton Mills [ 1978 (9) TMI 1 - SUPREME COURT] held that if the amount in foreign currency was a trading asset then foreign exchange fluctuation would be a revenue expenses, but if held as capital account, the loss would be a capital loss. The Ld. CIT(A) also held that the decision in assessee's own case for AY 1993-94 is also squarely applicable on this issue for the year under consideration. Hon'ble Jurisdictional High Co ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... f forward contract without appreciating the fact that the so-called asset could not be created not any foreign exchange loan was taken by the assessee for such assets. Therefore, the Assessing Officer has correctly treated the same as revenue receipt. 2. On the facts and circumstances of the facts and in law, whether the Ld. CIT(A) was justified in deleting the addition without appreciating the fact that reason/basis for which forward contract was undertaken remained unfulfilled; that rendered the whole transaction an adventure on the part of the assessee and therefore, gains from such transaction were treated rightly as revenue receipt by the Assessing Officer. 3. On the facts and circumstances of the case, the Ld. CIT(A) ought t ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... appeal before this Tribunal. 3. We have heard submission of Sh. O.P. Vaishnav learned Commissioner of Income-tax-departmental representative (ld. CIT-DR) for Revenue and Sh. Manish J Shah learned Counsel for the assessee. The ld. CIT-DR for Revenue supported the order of Assessing Officer (AO). The ld. CIT-DR for the revenue supported the order of the assessing officer. The ld. CIT-DR for the revenue further submits that the assessee before assessing officer relied on the order in its own in PCIT vs. Garden Silk Mills Ltd. (supra), observation in the said case are mere obiter. The forward contract was nothing but a right to make available foreign exchange at a particular rate irrespective of exchange rate at that point of time. Therefore ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... rs Topmet 2850 Hires 2 Slitters 3 Bopet Projects 5. The assessee decided to import the machinery and equipment against the foreign currency loan. In order to ensure and guard against the fluctuation in foreign currency, the assessee decided to enter into forward contract. However, due to certain adverse market environment and other limiting factors, the assessee decided to keep the expansion on hold and decided that forward exchange contract so made to be cancelled. On cancellation of such forward contract exchange contract, the assessee gained ₹ 3.22 Crore. The said gain is in the nature of capital receipt as the forward contract was made ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... due to adverse market situation, the assessee postponed the said project and on cancellation of such foreign forward contract, the assessee earned gain of ₹ 3.22 crore. The reply of the assessee was not accepted by the assessing officer. The assessing officer held that forward contract was nothing but a right to make available foreign exchange at a particular rate irrespective of exchange rate at that point of time. The assessing officer further held that gain so earned cannot be treated in a character of capital asset because the assessee could use it for capital asset, raw material, or even just for making profit as evident in this case. The case law relied by the assessee in its own case for AY 1993-94 was not accepted by taking vi ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... pital account, the loss would be a capital loss. The Ld. CIT(A) also held that the decision in assessee's own case for AY 1993-94 is also squarely applicable on this issue for the year under consideration. 8. Further, we find that the Hon'ble Jurisdictional High Court in assessee's own case for AY 1993-94, while considering the merit of the case clearly held that if the foreign exchange was acquired under the contract for the purpose of discharging an obligation on capital account viz, toward borrowing for the purpose of import of capital asset, which would indicate that the surplus realised on cancellation of such contract would bear the same character. After factual considering of the issue we are of the view that intended ..... X X X X Extracts X X X X X X X X Extracts X X X X
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