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TMI Blog2016 (7) TMI 561X X X X Extracts X X X X X X X X Extracts X X X X ..... ue have not placed any material on record to controvert the findings of ld.CIT(A) Addition made u/s.36(1)(vii) - Held that:- We find that the ld.CIT(A) while deciding the issue in favour of assessee has noted that the transactions with the Directors were of current account type and there was opening credit balance in the account for which the Directors did not charge any interest from the assessee and assessee has also not charged the interest. He has further given finding that the interest-free funds in the form of Share Capital were far in excess of the amount advanced to the Director and in view the decision of Hon’ble Bombay High Court in the case of Reliance Utilities and Power Ltd. (2009 (1) TMI 4 - BOMBAY HIGH COURT), no disallowance u/s.36(1)(iii) of the Act was called for. Before us, Revenue has not placed any material on record to controvert the findings of ld.CIT(A) - Decided in favour of assessee - I.T.A. No.1396/Ahd/2012, I.T.A. No.1678/Ahd/2012 - - - Dated:- 7-7-2016 - SHRI R.P. TOLANI, JUDICIAL MEMBER And SHRI ANIL CHATURVEDI, ACCOUNTANT MEMBER For The Assessee : Shri Samir S. Jani, AR For The Revenue : Shri K. Madhusudan, Sr.DR ORDER PER S ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... The Ld.Commissioner of Income-tax (Appeals)-XIV, Ahmedabad has erred in law and on facts in partly deleting the disallowance made by speculation loss u/s.43(5) of the Act. 2) The Ld.Commissioner of Income-Tax (Appeals)-XIV, Ahmedabad has erred in law and on facts in deleting the disallowance made u/s.36(1)(viii) of the Act. 3) On the facts and in the circumstances of the case, the Ld.Commissioner of Income-Tax (Appeals)-XIV, Ahmedabad ought to have upheld the order of the Assessing Officer. 3. It is therefore, prayed that the order of the Ld.Commissioner of Income-Tax (Appeals)-XIV, Ahmedabad may be set-aside and that of the order of the Assessing Officer be restored. 4. We first take up the Revenue s appeal in ITA No.1678Ahd/2012. 4.1. First ground is with respect to deleting the disallowance of speculation loss u/s.43(5) of the Act. 4.2. Before us, at the outset, ld.Sr.DR submitted that Ground No.1 raised by the Revenue and ground No.2 raised by the Assessee are interconnected and therefore it can be considered together. 4.3. During the course of assessment proceedings and on perusing the Profit Loss Account, AO noticed that assessee has debited ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ened in the month of June and July and the payment due date was in the month of February and March. To safeguard against the future risk the appellant had hedged ₹ 4 lac US $ with HDFC Bank on 27/08/2008 after the opening of LC. Since the appellant expected the dollar to rise up to 52, he decided to cancel the contract incurring the loss of ₹ 23.6 lacs. The appellant has further given details of total transactions of such hedging contract and it has been submitted that in some transaction there is a loss but in some cases, the appellant has earned profit also. However, there is overall loss in the account. The appellant has further submitted that the advice to enter into hedging transaction was given by the HDFC Bank as letter of credit was opened with it and it was a general trade practice. Later on the foreign exchange transaction, were also done through Karvy Stock Broking Ltd. The appellant has further relied on the decision of Gujarat High Court in the case of M/s. Friends and Friends Shipping Pvt. Ltd. in Tax Appeal No. 251 of 2010 dated 23/08/2011. After considering the factual position, the submission of the appellant and the finding of the A. O., I am of ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ore us. 4.4. Before us, ld.Sr.DR supported the order of AO. Ld.AR, on the other hand, reiterated the submissions made before the ld.CIT(A) and AO and submitted that the ld.CIT(A) has erred in considering the loss incurred from the transactions done through Karvy Stock Broking Ltd. as speculative transactions. 5. We have heard the rival submissions, perused the material available on record and gone through the orders of the authorities below. We find that the ld.CIT(A) while deciding the issue has noted that the assessee had done transactions through HDFC Bank and Karvy Stock Broking Ltd., the transactions done through HDFC Bank were very few, whereas the transactions done through Karvy Stock Broking Ltd. were frequent and the number of transactions done with Karvy Stock Broking Ltd. indicated that they were not in the nature of hedging transactions but were in the nature of speculative transactions and for arriving at aforesaid conclusion, he also relied on the decision of Hon ble Gujarat High Court in the case of M/s.Friends and Friends Shipping Pvt.Ltd. in Tax Appeal No.251 of 2010 dated 23/08/2011. He therefore concluded that the transactions done through HDFC Bank were li ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... mission given by the appellant. The appellant had sufficient interest free funds and the decision of Reliance Utilities and Power Limited (2009) 313 ITR 340 (Bom) is squarely applicable on these facts. Further, it is also noted that the Director is also not charging any interest from the company for giving the loan and accordingly the A.O. was not justified in making the disallowance u/s.36(1)(iii) of the Act. The addition is therefore, directed to be deleted and the ground of appeal is accordingly allowed. 6.2. Before us, ld.Sr.DR supported the order of AO. On the other hand, ld.AR reiterated the submissions made before the AO and ld.CIT(A) and thus supported the order of ld.CIT(A). 7. We have heard the rival submissions, perused the material available on record and gone through the orders of the authorities below. We find that the ld.CIT(A) while deciding the issue in favour of assessee has noted that the transactions with the Directors were of current account type and there was opening credit balance in the account for which the Directors did not charge any interest from the assessee and assessee has also not charged the interest. He has further given finding that the i ..... X X X X Extracts X X X X X X X X Extracts X X X X
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