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TMI Blog2020 (2) TMI 144X X X X Extracts X X X X X X X X Extracts X X X X ..... by using their expertise and these services cannot be obtained by the assessee in the stock exchange where their scope of service is very limited, the Tribunal has consistently allowing the transactions carried out through recognized bank. In the present case, it is also not clear from the orders of authorities below as to whether the assessee has transacted through recognized bank or not. However, no details such as, number of contracts, nature of the contract, details of forward contract entered into, banker details, currency details, another party willing to take a reverse position, which is a pre-requisite of a forward contract, etc. are brought on record while making the disallowance by the Assessing Officer or any relevant detail e ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ny. After considering the details furnished by the assessee against statutory notices and other submissions, the Assessing Officer completed the assessment under section 143(3) of the Act by determining the loss at ₹ 19,29,14,962/- after making various disallowances. 3. With regard to the deletion of the addition towards forex fluctuation and forward premium, from the submissions of the assessee, the Assessing Officer noticed that the assessee has hedged their outstanding forex liability of USD 86.33 lacs. The difference between the purchase and hedging rate was booked as exchange fluctuation as on 31.03.2012 and the cost of such hedging was ₹ 3,52,72,000/-. The total forex fluctuation expenditure of the assessee amounted to ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... x derivative transactions through its bankers and these transactions are not speculative nature because they are transacted in the normal course of business to hedge the loss from depreciation of rupee against purchase of raw materials under different contract in foreign currency, which is in accordance with the regulations laid down by the Reserve Bank of India (RBI). Hence, it is not a transaction as stipulated under section 43(5) (a) of the Act. By filing the exchange fluctuation working for outstanding as on 31.03.2012 along with notes forming part of accounts containing details of foreign currency exposure which are not hedged as on 31.03.2012, etc. and placing reliance on the decision of the Hon ble Supreme Court in the case of CIT v. ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ide their submission dated 12.03.2015, which was not considered by the Assessing Officer before concluding the assessment and by ignoring the same the Assessing Officer disallowed the exchange loss on forward contract and exchange loss on outstanding import bills holding that the said amounts were spent towards premium in respect of forward contract, where expenditure on hedging was not to be allowed. After considering the submissions of the assessee and by following the decision in the case of SCM Garments (P) Ltd. v. DCIT (supra), the ld. CIT(A) held that the disallowance is liable to be deleted and this ground stands allowed by passing two sentence order. 7. One of the methods to protect loss against foreign currency fluctuation is b ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... nt of the contracts, directed the Revenue to treat the same as speculative transaction when they are transacted through nationalized banks and as not speculative, when these transactions are transacted through recognized stock exchange. Moreover, as per proviso (a) to sub-section 5 of section 43 of the Act, the legitimate contract entered to guard against the loss that may arise through future price fluctuations cannot be treated as speculative transactions and are to be treated as regular business expense. Since the bankers act as an advisory agent to the assessee in order to protect them from foreign exchange exposure by using their expertise and these services cannot be obtained by the assessee in the stock exchange where their scope of ..... X X X X Extracts X X X X X X X X Extracts X X X X
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