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2023 (10) TMI 254 - ITAT CHENNAIDetermine the nature of loss arising on forward contracts cancelled by the assessee prior to the date of settlement - HELD THAT:- It could be seen that the assessee has entered into forward contract to safeguard against the foreign exchange fluctuation on its revenue receipts from foreign parties. These transactions, being in the nature of hedging transactions, would fall under exempted category of speculative transactions u/s 43(5)(a). Another finding is that the quantum of hedging was reasonable having regard to the export turnover of the assessee. It is actual loss which had arisen on account of cancellation of the forward contracts entered into with the banks to safeguard realization of export proceeds. CIT(A) has relied on the binding decision of Celebrity Fashions Ltd. [2020 (9) TMI 1022 - MADRAS HIGH COURT] wherein such loss was allowed as a business loss. It could thus be seen that the adjudication of CIT(A) is in line with the correct position of law and backed by binding judicial precedents. No contrary decision has been shown to us. Therefore, the adjudication rendered in the impugned order could not be faulted with. In the result, the revenue’s appeal stands dismissed. Nature of income - Forfeiture of security deposit - termination of certain lease agreement - ‘income from house property’ or 'income from other sources' - HELD THAT:- The amount waived by one party would be the income of the other party. The amount waived should only be considered as ‘income from other sources’. It is not correct on the part of the assessee that there is extinguishment of right to rent. Right to rent is not transferred to anyone. Right to rent had not extinguished also as the assessee can very well rent the property to any other person as it wishes immediately after the forfeiture of the deposit also. The right to rent the property was very much with the assessee even after the forfeiture and hence, it could not be treated as transfer. Therefore, assessee's claim that there was extinguishment of right could not be accepted. There was no transfer of any right which would justify assessment of receipt as capital gains. The deposit was in the nature of revenue only as rent gets adjusted in it. Hence, it could not be treated as capital receipt in the hands of the assessee. It could also not be assessed as advance rent as canvassed by the assessee as the property was not continuing on rent with the same person. Since it was revenue in nature and the same could not be taxed under ‘income from house property’, the same was liable to be taxed as u/s. 56(2). Accordingly, the action of ld. AO was upheld which is the grievance of the assessee. We find that this issue has rightly been clinched by learned first appellate authority. It is quite clear that from assessee’s point of view, there is no extinguishment of any right. The impugned amount was received as security deposit and a part of the same has been forfeited by the assessee. The security deposit has changed its character upon forfeiture and the same is clearly an income of the assessee. As rightly held, right to rent is not transferred by the assessee to anyone. Neither this right has been extinguished in any manner. Therefore, the aforesaid retained amount could not be assessed as capital gains. The same is also not in the nature of advance rent. Therefore, the same would be assessable under the head ‘income from house property’ only. We order so. The impugned order does not require any interference on our part.
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