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TMI Blog2003 (11) TMI 297X X X X Extracts X X X X X X X X Extracts X X X X ..... nder: "Considering the fact that there is no change either in the facts and circumstances or position of law, we are of the opinion that in the interest of consistency, the order of the Tribunal deserves to be followed. No contrary view was relied upon by the learned Departmental Representative. Accordingly, the ground raised by the assessee is allowed." 4.2 While holding so the Tribunal has followed its order in ITA No. 5772/Del/1995, wherein the decision of the Madras High Court in Soma Finance & Leasing Co. Ltd. vs. CIT (2000) 161 CTR (Mad) 291 : (2000) 244 ITR 440 (Mad) and decision of Bombay High Court in Padamjee Pulp & Paper Mills Ltd. vs. CIT (1994) 117 CTR (Bom) 288 : (1994) 210 ITR 97 (Bom) were followed. Therefore, in view of the decisions of the Tribunal for earlier years, we allow this ground here also. 5. Ground Nos. 3 to 3.3 relate to confirming the addition of Rs. 2,40,57,000 made by the AO in respect of income on cancellation of foreign exchange forward contract alleging that the same was not linked to any capital asset. 5.1 The brief facts of the case are that assessee has taken foreign currency loans in 1984 and 1987 for purchase of fixed assets. The assessee ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ttention of the Bench was drawn on various copies of audited reports indicating that the forward contract was made on account of purchase of machinery. It was further stated that without permission of the Reserve Bank ofIndiano private agency or person can do the trading by entering forward contract. It was further stated that only the authorised agents can trade in foreign currency. It was further stated that s. 8 of Foreign Exchange Regulation Act, 1973, provides that except with prior general or special permission of the Reserve Bank of India, no person other than an authorised dealer shall purchase, acquire, borrow or sell foreign currency. It was further stated that prior to the LERMS, residents inIndiawere not even permitted to cancel forward contract. The presumption of any speculative transaction is, therefore, directly rebutted in view of the legal impossibility and in view of the fact that foreign currency was neither commodity nor shares. It was also stated that the definition of 'speculative transaction' will not apply to a situation where the purpose of entering a forward contract was to hedge/safeguard against any loss on account of repayment of principal amount of lo ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e of Sutlej Cotton Co. Ltd. vs. CIT 1978 CTR (SC) 155 : (1979) 116 ITR 1 (SC) at p. 13 of the report has observed as under : 'The law may, therefore, now be taken to be well-settled that where profit or loss arises to an assessee on account of appreciation or depreciation in the value of foreign currency held by it, on conversion into another currency, such profit or loss would ordinarily be trading profit or loss if the foreign currency is held by the assessee on revenue account or as a trading asset or as part of circulating capital embarked in the business. But, if on the other hand, the foreign currency is held as a capital asset or as fixed capital, such profit or loss would be of capital nature.' 37. Hon'ble Delhi High Court in case of Triveni Engineering Works vs. CIT (1985) 156 ITR 202 (Del) followed the same. The Ahmedabad Bench of the Tribunal in the case of Gujarat Narmada Valley Enterprises has held as under: 'After considering the rival submissions we do not have any hesitation in holding that the receipt by way of gain on cancellation of foreign exchange contracts is a capital receipt which is not liable to tax in view of the clear pronouncement of the apex Court i ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ard contracts) amounting to Rs. 240.57 lakhs. At p. 48 the note on contingency liability is given.Para6, which is in regard to forward foreign exchange contract reads as under: "During the year, with the introduction of LERMS which, inter alia, permitted cancellation of forward foreign exchange contracts, the company cancelled some contracts which had been entered into in earlier years to recover repayment of loans utilised for acquisition of fixed assets. The net excess on such cancellation of Rs. 240.57 lakhs, after adjusting roll over charges debited to fixed assets in earlier years, has been treated as an extraordinary income in the P&L a/c." 5.7 At pp. 53 to 57, a copy of investment agreement is placed on record and by this agreement the assessee entered into a foreign contract agreement in regard to purchase of machines. The detail is also given at p. 56 of this agreement. 5.8 From all these details it is clearly established that assessee has not entered into agreement for speculation purpose or for trading in foreign currency but only for purchase of machinery. We are not able to understand that why both the lower authorities drew an inference that assessee has not entere ..... X X X X Extracts X X X X X X X X Extracts X X X X
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