9911796707
TMI Blog2021 (7) TMI 306X X X X Extracts X X X X X X X X Extracts X X X X ..... ate Tribunal, Bangalore. The subject matter of the appeal pertains to the Assessment year 2008-2009. The appeal was admitted by a Bench of this Court vide order dated 21.08.2015 on the following substantial question of law: "Whether on the facts and in the circumstances of the case, the Tribunal was justified in law in holding that the foreign currency transactions entered into by the assessee are speculative in nature and that the FCNR loss of Rs. 1,79,99,380/- are notional in character and the loss is liable to be disallowed?" 3. Facts leading to filing of this appeal briefly stated are that the assessee is a company engaged in the business of trading in steel tubes, pipes, PVC, etc. The assessee filed the return of income for the Ass ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ssed the appeal preferred by the assessee. In the aforesaid factual background, this appeal has been filed. 5. Learned Senior counsel for the assessee submitted that the transaction in question is not speculative in nature as the transaction was entered into with the intention of reducing interest caused due to higher domestic interest rates and the risk of exchange fluctuation part and parcel of the transaction. It is further submitted that loss incurred is not a notional loss as the same is based on foreign currency rates as on 31.03.2008 and the assessee as on 31.03.2008, was liable to pay a sum of Rs. 1,79,99,380/-. Alternatively, it is submitted that addition, if any, can be made to the extent of Rs. 68,81,094/- as the same is the net ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... of the business and is therefore, not eligible to claim deduction under Section 37(1) of the Act. It is further submitted that actual liability has not accrued to the assessee but has accrued by book adjustment and therefore, the same has been treated as notional loss. It is also submitted that since the assessee is not carrying on speculative business, therefore, the speculative loss does not accrue to the assessee. It is pointed out that in the cases relief upon by the learned Senior counsel for the assessee, the loss was directly linked to the business of the assessee and in the instant case, the loss sustained has not been incurred in the course of business of the assessee. It is also submitted that the decision rendered by the Supreme ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... transaction in which a contract for the purchase or sale of a commodity is settled otherwise than by the actual delivery or transfer of such commodity. However, as stated above, the assessee was not a dealer in foreign exchange. The assessee was an exporter of cotton. In order to hedge against losses, the assessee had booked foreign exchange in the forward market with the bank. However, the export contracts entered into by the assessee for export of cotton in some cases failed. In the circumstances, the assessee was entitled to claim deduction in respect of Rs. 13.50 lakhs as a business loss. This matter is squarely covered by the judgment of the Calcutta High Court, with which we agree, in the case of CIT v. Soorajmull Nagarmull [1981] ..... X X X X Extracts X X X X X X X X Extracts X X X X
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