2021 (6) TMI 457 - AT - Income Tax

Business loss v/s speculative loss - loss derived on currency derivative transaction as business loss - loss of the assessee as business loss derived by the assessee on currency derivative transaction - HELD THAT - We find that the ld. CIT(A) had followed this Tribunal order rendered in assessee s own case for A.Y.2013-14 2018 (1) TMI 938 - ITAT MUMBAI and had held that the loss is a regular business loss and not speculative in nature. No other contrary decision was pointed out by the revenue before us on the impugned issue. We find that the decision rendered for A.Y. 2013-14 by this Tribunal shall apply mutatis mutandis to the year under consideration also in view of identical facts, except with variance in figures. Hence we do not find any infirmity in the said order. Accordingly, the grounds raised by the Revenue are dismissed.

Issues:
1. Allowance of loss on currency derivative transaction as business loss
2. Allowance of additional claim made in the revised return of income
3. Application of section 43(5) of the Income Tax Act on speculation loss derived from currency derivative transaction

Issue 1: Allowance of loss on currency derivative transaction as business loss

The Revenue raised concerns regarding the allowance of a loss derived from currency derivative transactions as a business loss. The Revenue contended that the facts of the case did not align with a previous judgment and questioned the treatment of the loss as a business loss. The Tribunal referred to a previous decision in the assessee's case for A.Y. 2013-14, where a similar issue was addressed. The Tribunal found that the loss in question was a regular business loss and not speculative in nature, following the precedent set in the previous case. The Tribunal concluded that the decision from the earlier year applied to the current assessment year due to identical facts, except for variances in figures. Consequently, the Tribunal dismissed the grounds raised by the Revenue, upholding the allowance of the loss as a business loss.

Issue 2: Allowance of additional claim made in the revised return of income

The Revenue contested the allowance of an additional claim made in the revised return of income, which was filed beyond the time allowed under section 139 of the Income Tax Act. The Tribunal did not find any specific arguments or contrary decisions presented by the Revenue regarding this issue. As a result, the Tribunal dismissed the grounds raised by the Revenue, indicating that the additional claim made in the revised return of income was allowed.

Issue 3: Application of section 43(5) of the Income Tax Act on speculation loss derived from currency derivative transaction

The Revenue questioned the application of section 43(5) of the Income Tax Act on speculation loss derived from currency derivative transactions. The Tribunal referenced relevant provisions of the Acts and previous judicial discussions to analyze the nature of the transactions. The Tribunal determined that the transactions in question, involving foreign currency futures, were not speculative in nature based on the legal framework and the specific details of the transactions. The Tribunal highlighted that derivatives, including foreign currency and call option/put option transactions, could not be classified as speculative. By examining the contract notes provided, the Tribunal concluded that the transactions were not speculative and allowed the appeal filed by the assessee. The Tribunal upheld the decision based on the totality of facts and judicial discussions, setting aside the order of the Commissioner of Income Tax (Appeals) on this issue.

In conclusion, the Tribunal dismissed the Revenue's appeal, upholding the allowance of the loss on currency derivative transactions as a business loss, the additional claim made in the revised return of income, and the non-speculative nature of the transactions in question. The Tribunal's decision was based on previous judgments, legal provisions, and a thorough analysis of the facts and circumstances surrounding the case.

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