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 export of diamonds. These concurrent 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 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 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 assessee's regular business transaction or it was a speculative transaction. On present facts, it was never the Revenue's contention that the transaction was speculative but only disallowed on the ground that it was notional.

Tribunal was justified in deleting the addition of 'Mark to Market' Loss made by the Assessing Officer on account of disallowance of loss on foreign exchange forward contract loss. - Decided in favour of assessee