2019 (2) TMI 1715 - HC - Income Tax

Loss due to revaluation of forward exchange contracts being mark to market loss was only notional and contingent in nature - set off against taxable income as per CBDT instruction 03/2010 dated 23.03.2010 - HELD THAT - It is an agreed position between the parties that the issue raised herein stands concluded against the Appellant Revenue by the decision of this Court in CIT v/s. M/s. D. Chetan Co. 2016 (10) TMI 629 - BOMBAY HIGH COURT Revenue states that in view of the Instruction No.3 of 2010 dated 23rd March 2010 the issued by the CBDT contend that loss in such case is notional and contingent in nature and same should be added but for the purpose of computing taxable income. The aforesaid submission was the basis of the order of the Assessing Officer and not accepted by this Court in M/s. D. Chetan Co. (supra). Therefore the above Circular/ Instruction would not have any application in the face of the decision of this Court in M/s. D.Chetan Co. (supra). No substantial question of law

Summary

Issues:
Challenge to order of Income Tax Appellate Tribunal regarding revaluation of forward exchange contracts for Assessment Year 2009-10.

Analysis:
The High Court of Bombay heard an appeal challenging the order of the Income Tax Appellate Tribunal related to the revaluation of forward exchange contracts for the Assessment Year 2009-10. The main issue raised by the Revenue was whether the mark to market loss on forward exchange contracts, as per CBDT instruction 03/2010, could be set off against taxable income. The court noted that this issue had already been settled in a previous decision dated 1st October, 2016 in CIT v/s. M/s. D. Chetan & Co. The Revenue argued that the loss was notional and contingent in nature as per the CBDT instruction, but the court held that this argument was not accepted in the previous decision. Therefore, the circular/instruction could not be applied in light of the earlier court ruling.

The court emphasized that the question raised did not present any substantial issue of law based on the previous decision's precedent. Consequently, the court dismissed the appeal, and no costs were awarded. The judgment underscores the importance of precedent and how prior decisions can influence the outcome of similar cases. It also highlights the significance of legal interpretations and the application of relevant instructions or circulars in tax matters. The judgment provides clarity on the treatment of mark to market losses on forward exchange contracts for tax purposes, based on established legal principles and previous court rulings.