2017 (6) TMI 1086 - HC - Income Tax

Disallowance of loss on foreign exchange forward contract loss - whether the said loss was a notional loss and hence cannot be allowed? - Held that - The issue in the present matter is covered by the judgment of the Division Bench of this Court in Commissioner of Income Tax Vs. D.Chetan & Co. (2016 (10) TMI 629 - BOMBAY HIGH COURT). It is also pointed that the loss depicted to profit and loss account is on account of actual cancellation of forward contract during the year under consideration. No substantial question of law.

Summary

Issues Involved: Appeal related to Assessment Year 2009-2010 regarding the addition of loss on foreign exchange forward contract, reliance on specific legal provisions, classification of loss as business loss, and following precedent judgments.

Analysis:

1. Issue I - Addition of Loss on Foreign Exchange Forward Contract:
The appellant questioned the Tribunal's decision to delete the addition of ?88,13,515 made by the Assessing Officer, arguing that the forward contract loss was notional and should not be allowed. The Tribunal's decision was based on the facts and circumstances of the case. The appellant's contention was that the loss on foreign exchange forward contract was notional and hence should not be allowed. However, the Tribunal's decision to delete the addition was upheld, considering the specific circumstances and legal provisions involved.

2. Issue II - Reliance on Specific Legal Provisions:
The appellant raised concerns regarding the Tribunal's reliance on a specific decision of the High Court of Bombay in a similar case. The appellant argued that the transaction in the forward contract should have been guided by a specific legal provision that came into effect after the cited judgment. However, the Tribunal's decision to rely on the precedent judgment was upheld, indicating that the specific provision was not applicable in this case.

3. Issue III - Classification of Loss as Business Loss:
The Tribunal held that the loss from the cancellation of the forward contract was a business loss, without considering the specific provision of Section 43(5)(d) of the Act treating such losses as speculative losses. The appellant contested this classification, but the Tribunal's decision was upheld based on the specific circumstances and legal provisions governing the classification of such losses.

4. Issue IV - Following Precedent Judgments:
The appellant questioned the Tribunal's decision not to follow a previous decision of the ITAT, 'E' Bench, Mumbai, which was decided in favor of the Revenue on similar grounds. However, the Tribunal's decision not to follow the previous judgment was upheld, as the current case was distinguishable based on the specific facts and legal arguments presented.

In conclusion, the High Court dismissed the appeal as it was covered by a previous judgment of the Division Bench, and no substantial question of law was found. The appellant's arguments regarding the addition of the loss on the foreign exchange forward contract, reliance on specific legal provisions, classification of the loss, and following precedent judgments were carefully considered and addressed in the detailed analysis provided.