Scientific Publishing Services Private Limited, CHENNAI V. DCIT, CHENNAI

ITA 1102/CHNY/2015

• Counselvise Citation: [2015] 140 COUNSELVISE.COM (IT) 96659 (ITAT-CHENNAI)
• Duration Of Justice: 7 month(s) 20 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 31-12-2015
• Appeal Filed By: Assessee
• Bench Allotted: A
• Next Hearing Date: 05-10-2015
• Assessment Year: 2009-2010
• Appeal Filed On: 11-05-2015
• Court: TRIBUNAL
• Department Lawyers: JOE SEBASTIAN
• Assessee Lawyers: R VIJAYARAGHAVAN
• Keywords: Business income; Transfer pricing; International transaction; Speculation loss; Capital receipt
• Section: 142(1); 43(5); 10B; 263; 28

Judgement Text

, , IN THE INCOME - TAX APPELLATE TRIBUNAL A BENCH, CHENNAI , . , BEFORE SHRI CHANDRA POOJARI , ACCOUNTANT MEMBER & SHRI DUVVURU RL REDDY , JUDICIAL MEMBER ./ I.T.A.NO. 1 10 2 /MDS/2015 / ASSESSMENT YEAR :20 09 - 1 0 M/S. SCIENTIFIC PUBLISHING SERVICES PRIVATE LIMITED, NO. 6 & 7, 5 TH STREET, DR. RADHAKRISHNAN SALAI, MYLAPORE, CHENNAI 600 004. [PAN: A AACS6707R ] VS. THE DEPUT Y COMMISSIONER OF INCOME TAX , COMPANY CIRCLE V I (1) , CHENNAI 600 034. ( / APPELLANT ) ( / RESPONDENT ) / APPELLANT BY : SHRI R. VIJAYARAGHAVAN , ADVOCATE & SHRI VIKRAM VIJAYARAGHAVAN, ADVOCATE / RESPONDENT BY : SHRI JOE SEBASTIAN , CIT - DR / DATE OF HEARING : 0 5 . 1 0 .201 5 / DATE OF P RONOUNCEMENT : 31 . 1 2 .201 5 / O R D E R PER DUVVURU RL REDDY , JUDICIAL MEMBER : TH IS APPEAL FILED BY THE ASSESSEE IS DIRECTED AGAINST THE ORDER OF THE LD. PRINCIPAL COMMISSIONER OF INCOME TAX - 6 , CHENNAI, DATED 16 . 0 3 .20 1 5 RELEVANT TO THE ASSESSMENT YEAR 20 09 - 10 PASSED UNDER SECTION 263 OF THE INCOME TAX ACT, 1961 [ ACT IN SHORT] . BESIDES CHALLENGING THE ORDER PASSED B Y THE LD. P CIT UNDER SECTION 263 OF THE ACT, THE ASSESSEE HAS ALSO I.T.A. NO . 1 102 /M/ 15 2 CHALLENGED THE LOSS ARISING ON FOREIGN EXCHANGE FORWARD CONTRACTS AS ALLOWABLE DEDUCTION. 2. BRIEF FACTS OF THE CASE ARE THAT THE ASSESSEE IS ENGAGED IN TYPESETTING SERVICES FOR SCIEN TIFIC, TECHNICAL AND MEDICAL (STM PUBLISHERS) AND FILED ITS RETURN OF INCOME DECLARING TOTAL INCOME OF .26,29,55,199/ - . THE CASE OF THE ASSESSEE WAS PROCESSED UNDER SECTION 143(1) OF THE ACT AND SUBSEQUENTLY, THE CASE WAS TAKEN UP FOR SCRUTINY AND NOTICE UNDER SECTION 143(2) OF THE ACT WAS ISSUED TO THE ASSESSEE. FURTHER, THE NOTICE UNDER SECTION 142(1) OF THE ACT WAS ALSO ISSUED TO THE ASSESSEE. FURTHER, THE CASE OF THE ASSESSEE WAS REFERRED TO THE TRANSFER PRICING OFFICER UNDER SECTION 92CA OF THE ACT FO R COMPUTATION OF ARMS LENGTH PRICE IN RELATION TO INTERNATIONAL TRANSACTIONS AS THERE WERE INTERNATIONAL TRANSACTIONS TO THE TUNE OF MORE THAN .50 CRORES. THE LD. JCIT, TPO HAS PASSED ORDER UNDER SECTION 92CA(3) OF THE ACT, WHEREIN NO ADJUSTMENTS WERE SUGGESTED AND THE SAME WAS BROUGHT TO THE NOTICE OF THE ASSESSEE. THE ASSESSING OFFICER HAS OBSERVED THAT THE ASSESSEE COMPANY HAS FOUR UNITS AT D IFFERENT PLACES. THE FIRST UNIT IS IN THE TAX HOLIDAY PERIOD AND THEREFORE THE ASSESSEE HAS NOT CLAIMED 10B DEDUCTION. THE SECOND UNIT OBTAINED THE REGISTRATION AS 100% EOU IN THE YEAR 13.04.1999, I.E., ASSESSMENT YEAR 2000 - 01 AND COMMENCED MANUFACTURING O PERATIONS IN THE SAME YEAR AND THE ASSESSMENT YEAR 2009 - 10 IS THE LAST YEAR OF CLAIM OF 10B. THE ASSESSEE COMPANY HAS SUBMITTED I.T.A. NO . 1 102 /M/ 15 3 APPROVAL FOR SETTING UP OF STP UNIT II AT TARAMANI, CHENNAI AND THE FACILITY WAS LATER EXTENDED TO FIVE DIFFERENT PLACES. BEFORE THE ASSESSING OFFICER, THE ASSESSEE HAS SUBMITTED THAT THE APPROVAL FOR SETTING UP OF THE STPI UNIT WAS OBTAINED ON 13.04.1999 AND FURTHER UNITS ESTABLISHED WERE ONLY IN EXTENSION OF THE SAID FACILITY AND NOT NEW STPI UNITS ELIGIBLE TO BE COUNTED AS INDIV IDUAL UNITS FOR THE PURPOSE OF DEDUCTION UNDER SECTION 10B OF THE ACT. 3. THE ASSESSEE COMPANY HA S STATED TO HAVE INCURRED EXPENSES IN FOREIGN CURRENCY TO THE TUNE OF .1,29,28,229/ - . VIDE NOTICE UNDER SECTION 142(1) OF THE ACT, THE ASSESSEE WAS ASKED TO EXPLAIN AS TO WHY THE EXPENSES INCURRED IN FOREIGN CURRENCY SHOULD NOT BE EXCLUDED FROM THE EXPORT TURNOVER AS PER EXPLANATION 2(III) TO SECTION 10B OF THE ACT FOR WHIC H THE ASSESSEE HAS SUBMITTED THAT WE HAVE NOT INCURRED ANY EXPENDITURE OUTSIDE INDIA AS PER SECTION 10B EXPLANATION 2(III). BY RELYING ON THE DECISION OF THE CHENNAI BENCHES OF ITAT IN THE CASE OF CALIFORNIA SOFTWARE CO. LTD. [2009] 27 SOT 51, THE ASSESSI NG OFFICER EXCLUDED THE EXPENSES INCURRED IN FOREIGN CURRENCY FROM THE EXPORT TURNOVER AND COMPUTED 10B DEDUCTION AND DETERMINED THE TOTAL TAXABLE INCOME OF THE ASSESSEE AT .27,37,72,290/ - . 4. AFTER VERIFICATION OF THE RECORDS, THE LD. P CIT HAS OBSERVED THAT WHILE PASSING THE ASSESSMENT ORDER, THE ASSESSING OFFICER HAS GRANTED DEDUCTION UNDER SECTION 10B OF THE ACT TO THE EXTENT OF .38,33,21,153/ - AND ALSO AN AMOUNT OF .2,40,29,650/ - WAS DEBITED IN THE PROFIT AND LOSS ACCOUNT UNDER I.T.A. NO . 1 102 /M/ 15 4 THE HEAD EXCHANGE FLUCTUATIONS (NET) TOWARDS FORWARD EXCHANGE CONTRACTS FOR CONTRACT TRANSACTIONS ENTERED IN EURO, USD AND GREAT BRITAIN POUNDS. THE LD. P CIT HAS FURTHER OBSERVED THAT WITHOU T PROPER VERIFICATION, THE ASSESSING OFFICER HAS ALLOWED DEDUCTION UNDER SECTION 10B OF THE ACT SINCE THE ASSESSEE HAS NOT FURNISHED THE APPROVAL LETTER FOR 100% EXPORT ORIENTED UNDERTAKING FROM THE BOARD APPOINTED ON THIS BEHALF BY CENTRAL GOVERNMENT IN E XERCISE OF POWERS CONFERRED BY SECTION 14 OF INDUSTRIES (DEVELOPMENT AND REGULATION) ACT, 195 1, BY INVOKING THE PROVISIONS OF SECTION 263 OF THE ACT, THE LD. P CIT HAS HELD THAT THE ASSESSEE IS NOT ELIGIBLE TO CLAIM DEDUCTION UNDER SECTION 10B OF THE ACT. D URING THE COURSE OF 263 PROCEEDINGS, THE ASSESSEE HAS SUBMITTED THAT THE ASSESSEE DERIVES ITS INCOME FROM EXPORT OF SOFTWARE AND RECEIVED INCOME IN CONVERTIBLE FOREIGN EXCHANGE AND THEREFORE, ELIGIBLE FOR DEDUCTION UNDER SECTION 10A OF THE ACT. THE LD. P CI T WAS OF THE OPINION THAT THERE IS MERIT IN THE SUBMISSIONS OF THE ASSESSEE THAT IN THE EVENT OF REJECTION OF ITS CLAIM FOR DEDUCTION UNDER SECTION 10B OF THE ACT, IT SHALL BE COVERED UNDER SECTION 10A, SINCE IT IS AN UNDERTAKING DERIVING PROFITS FROM EXPO RT OF COMPUTER SOFTWARE AND ACCORDINGLY , DIRECTED THE ASSESSING OFFICER TO CONSIDER THE ALTERNATE CLAIM OF THE ASSESSEE FOR DEDUCTION UNDER SECTION 10A OF THE ACT IN THE LIGHT OF THE EVIDENCE FILED. 5 . ON BEING AGGRIEVED, THE ASSESSEE IS IN APPEAL BEFOR E THE TRIBUNAL AND THE LD. COUNSEL FOR THE ASSESSEE HAS SUBMITTED THAT WITH REGARD TO THE CLAIM I.T.A. NO . 1 102 /M/ 15 5 OF DEDUCTION UNDER SECTION 10B OF THE ACT, THE APPROVALS GIVEN BY DIFFERENT AUTHORITIES WERE AVAILABLE AND THE CLAIM OF THE ASSESSEE HAS TO BE SUSTAINED. 6 . ON THE OTHER HAND, THE LD. DR STRONGLY SUPPORTED THE ORDER PASSED BY THE LD. PCIT. 7 . WE HAVE HEARD BOTH SIDES, PERUSED THE MATERIALS ON RECORD AND GONE THROUGH THE ORDERS OF AUTHORITIES BELOW. THE LD. PCIT HAS OBSERVED THAT THE ASSESSING OFFICER GRANTE D DEDUCTION UNDER SECTION 10B OF THE ACT TO THE EXTENT OF .38,33,21,153/ - . IF THE ASSESSEE COMPANY IS APPROVED AS 100% EXPORT ORIENTED UNDERTAKING BY THE BOARD APPOINTED IN THIS BEHALF BY CENTRAL GOVERNMENT IN EXERCISE OF POWERS CONFERRED BY SECTION 14 OF INDUSTRIES (DEVELOPMENT AND REGULATION) ACT, 1951. FOR THE SAKE OF CLARITY, THE EXPLANATION TO SECTION10B OF THE ACT IS REPRODUCED AS UNDER: EXPLANATION. FOR THE PURPOSES OF THIS SECTION, (I) HUNDRED PER CENT EXPORT - ORIENTED UNDERTAKING MEANS AN UNDE RTAKING WHICH HAS BEEN APPROVED AS A HUNDRED PER CENT EXPORT - ORIENTED UNDERTAKING BY THE BOARD APPOINTED IN THIS BEHALF BY THE CENTRAL GOVERNMENT IN EXERCISE OF THE POWERS CONFERRED BY SECTION 14 OF THE INDUSTRIES (DEVELOPMENT AND REGULATION) ACT, 1951 (65 OF 1951), AND THE RULES MADE UNDER THAT ACT; 8 . BEFORE THE LD. PCIT, THE ASSESSEE HAS SUBMITTED THAT THE FOLLOWING APPROVALS ARE IN EXISTENCE IN GENERAL FOR SUBSTANTIATING THEIR CLAIM UNDER SECTION 10B OF THE ACT: I.T.A. NO . 1 102 /M/ 15 6 1. APPROVAL OBTAINED AS A 100% SOFTWAR E EXPORT ORIENTED UNIT UNDER THE SOFTWARE TECHNOLOGY PART (STP) SCHEME. 2. THE STP WAS NOTIFIED BY THE MINISTRY OF COMMERCE AND SUBSEQUENTLY AMENDED. 3. NOTIFICATION ISSUED BY THE INTER - MINISTERIAL STANDING COMMITTEE (IMSC) AS AN AUTHORITY FOR APPROVI NG UNITS UNDER THE STP SCHEME. BASED ON THE ABOVE NOTIFICATION AND APPROVALS ISSUED BY DIFFERENT AUTHORITIES, THE CLAIM OF THE ASSESSEE UNDER SECTION 10B OF THE ACT WAS ACCEPTED BY THE ASSESSING OFFICER . THEREFORE, THE LD. PCIT HAS HELD THAT THE ASSESSMEN T ORDER IS ERRONEOUS AND PREJUDICIAL TO THE INTEREST OF REVENUE. IN THE ABSENCE OF APPROVAL LETTER FOR 100% EXPORT ORIENTED UNDERTAKING FROM THE BOARD APPOINTED ON THIS BEHALF BY CENTRAL GOVERNMENT IN EXERCISE OF POWERS CONFERRED BY SECTION 14 OF INDUSTRIE S (DEVELOPMENT AND REGULATION) ACT, 1951 AS SPECIFIED UNDER EXPLANATION (I) TO SECTION 10B OF THE ACT, WE ARE OF THE OPINION THAT THE LD. PCIT HAS RIGHTLY INVOKED PROVISIONS OF SECTION 263 OF THE ACT AND HELD THAT THE ASSESSEE IS NOT ENTITLED TO CLAIM DEDU CTION UNDER SECTION 10B OF THE ACT SINCE THE ASSESSEE HAS NOT FULFILLED THE REQUIREMENT UNDER SECTION 10B OF THE ACT. ACCORDINGLY, THE GROUND RAISED BY THE ASSESSEE IS DISMISSED. 9 . THE OTHER PLEA OF THE ASSESSEE IS THAT SINCE THE ASSESSEE COMPANY DERIVE S ITS INCOME FROM EXPORT OF SOFTWARE AND RECEIVED INCOME IN CONVERTIBLES FOREIGN EXCHANGE, THE ASSESSEE IS ELIGIBLE TO CLAIM DEDUCTION I.T.A. NO . 1 102 /M/ 15 7 UNDER SECTI ON 10A OF THE ACT. THE LD. PCIT HAS ACCEPTED THE CLAIM OF THE ASSESSEE AND DIRECTED THE ASSESSING OFFICER TO C ONSIDER THE CLAIM OF THE ASSESSEE F OR DEDUCTION UNDER SECTION 10A IN THE LIGHT OF EVIDENCES AS MAY BE FILED BY THE ASSESSEE . IN VIEW OF THE ABOVE FINDINGS OF THE LD. PCIT, THE ASSESSEE IS REQUIRED TO FILE THE EVIDENCES TO CLAIM DEDUCTION UNDER SECTION 10A OF THE ACT BEFORE ASSESSING OFFICER FOR VERIFICATION AND TO DECIDE THE ISSUE IN ACCORDANCE WITH LAW. ACCORDINGLY, THE GROUND RAISED BY THE ASSESSEE IS ALLOWED FOR STATISTICAL PURPOSES. 10 . THE NEXT ISSUE RELATES TO DEBITING .2,40,29,650/ - UNDER THE HEAD OF EXCHANGE FLUCTUATIONS (NET) WITH RESPECT TO FORWARD EXCHANGE CONTRACTS, THE LD. PCIT HAS OBSERVED THAT THE ASSESSEE HAS ENTERED INTO FORWARD EXCHANGE CONTRACTS IN EURO, USD AND GREAT BRITAIN POUND AND SUFFERED SUCH LOSS. HE FURTHER OBSERVED THAT THE BUSINESS OF THE ASSESSEE DOES NOT HAVE A DIRECT NEXUS WITH THE GOODS MANUFACTURED/SOLD, THE LOSS HAS TO BE TREATED AS SPECULATIVE LOSS. WITH REGARD TO THE ABOVE, THE AR OF THE ASSESSEE HAS SUBMITTED THAT ONLY AN AMOUNT OF .89,59,571/ - PERTAINS TO LOSS ON FOREIGN EXCHANGE FORWARD CONTRACTS AND THAT THE COMPANY IS PRIMARILY ENGAGED IN THE BUSINESS OF PROVIDING TYPESETTING AND PREPRESS SERVICES AND SOLUTION PROVIDER FOR THE PUBLISHING INDUSTRY. IT WAS ALSO SUBMITTED THAT THE ASSESSEE INVOICES ITS CUSTOMERS IN FOREIGN CURRENCY AND IN ORDER TO HEDGE AGAINST ANY RISK OF LOSS ON CURRENCY FLUCTUATIONS, IT ENTERS INTO FORWARD CONTRACTS WITH THE I.T.A. NO . 1 102 /M/ 15 8 AUTHORIZED DEALER BANK AND PRAYED THAT THE LOSS/GAIN ARISES FROM FOREIGN EXCHANGE FORWARD CONTRACTS SHOULD BE TREATED AS LOSS/GAIN FROM BUSINESS ONLY. HOWEVER, THE LD. PCIT HAS HELD THAT SINCE THE ASSESSEE HAS NOT SATISFIED THE CONDITION LAID DOWN IN THE PROVISO S (A) AN D (D) TO SECTION 43(5) OF THE ACT, THE LOSS SUFFERED BY THE ASSESSEE COMPAN Y ON ACCOUNT OF FORWARD CONTRACTS IS SPECULATIVE IN NATURE AND CAN BE ADJUSTED ONLY WITH SPECULATION GAIN AND NOT AGAINST BUSINESS INCOME. 11 . ON BEING AGGRIEVED, THE ASSESSEE IS IN APPEAL BEFORE THE TRIBUNAL AND THE LD. COUNSEL FOR THE ASSESSEE HAS SUB MITTED THAT THE FOREIGN EXCHANGE IS NEITHER COMMODITY NOR GOODS AND THEREFORE, THE FORWARD CONTRACT IS NOT SPECULATIVE, BUT IT IS A BUSINESS LOSS. HE ALSO SUBMITTED THAT THE LOSS ON FOREIGN CURRENCY FORWARD CONTRACTS BY A MANUFACTURER/EXPORTER IS A HEDGIN G LOSS AND NOT A SPECULATION LOSS . BY RELY ON FOLLOWING DECISIONS, THE LD. COUNSEL FOR THE ASSESSEE PRAYED THAT THE ORDER OF THE LD. PCIT ON THIS ISSUE MAY BE SET ASIDE. A ) CIT VS. SOORAJMULL NAGARMULL [1981] 129 ITR 169 (CAL) B) CIT VS. BADRIDAS GA URIDU (P) LTD [2003] 261 ITR 256 (BOM) C) CIT V. FRIENDS AND FRIENDS SHIPPING PVT. LTD. 217 TAXMAN 267 (GUJ) D) CIT V. PANCHMAL STEEL LTD. 215 TAXMAN 140 (GUJ) E) MUNJAL SHOWA LTD VS. DCIT [2005] 94 TTJ (DEL) 227 F) ACIT V. K. MOHAN & CO 126 ITD 59 (BANG .) G) COTTON BLOSSOM ITA NO. 2032/MDS/2012 H) MAJESTIC EXPORT ITA NO. 1336 & 3072/MDS/2014 12 . ON THE OTHER HAND, THE LD. DR STRONGLY SUPPORTED THE ORDER PASSED BY THE LD. PCIT AND SUBMITTED THAT THE FOREIGN CURRENCY DERIVATE CONTRACTS ARE I.T.A. NO . 1 102 /M/ 15 9 SPECULATIVE IN NATURE AND THEREFORE, LOSS ARISING OUT OF THE SAME HAS TO BE TREATED AS SPECULATIVE LOSS AS DEFINED U NDER SECTION 43(5) OF THE ACT. 13. W E HAVE HEARD BOTH SIDES, PERUSED THE MATERIALS ON RECORD AND GONE THROUGH THE ORDERS OF AUTHORITIES BELOW. WITH REG ARD TO THE LOSS ARISING ON FOREIGN EXCHANGE FORWARD CONTRACTS IS WHETHER A SPECULATIVE LOSS OR BUSINESS LOSS, IT IS AN UNDISPUTED FACT THAT THE ASSESSEE COMPANY HAS ENTERED INTO FORWARD EXCHANGE CONTRACTS IN EURO, USD AND GREAT BRITAIN POUND AND SUFFERED S UCH LOSS. THE ASSESSEE IS PRIMARILY ENGAGED IN THE BUSINESS OF PROVIDING TYPESETTING AND PREPRESS SERVICES AND SOLUTION PROVIDER FOR THE PUBLISHING INDUSTRY. THE ASSESSEE COMPANY INVOICES ITS CUSTOMERS IN FOREIGN CURRENCY AND IN ORDER TO HEDGE AGAINST ANY RISK OF LOSS ON CURRENCY FLUCTUATIONS IT ENTERS INTO FORWARD CONTRACTS WITH THE AUTHORIZED DEALER BANK AND THEREFORE, IT WAS THE SUBMISSIONS OF THE ASSESSEE THAT THE LOSS/GAINS FROM FOREIGN EXCHANGE FORWARD CONTRACTS, SUCH LOSS/GAIN SHOULD BE TREATED AS LO SS/GAIN FROM BUSINESS ONLY. HOWEVER, THE LD. PCIT HAS HELD THAT SINCE THE ASSESSEE HAS NOT SATISFIED THE CONDITION LAID DOWN IN THE PROVISOS (A) AN D (D) TO SECTION 43(5) OF THE ACT, THE TRANSACTIONS WERE NOT CARRIED OUT THROUGH RECOGNIZED STOCK EXCHANGE BU T THROUGH DEALER BANKS, THE FORWARD CONTRACTS WERE SPECULATIVE IN NATURE AND HAS TO BE COMPUTED SEPARATELY IN VIEW OF EXPLANATION 2 TO SECTION 28 AND ALSO IN ACCORDANCE WITH SECTION 73 OF THE ACT. I.T.A. NO . 1 102 /M/ 15 10 14. ONE OF THE METHODS TO PROTECT LOSS AGAINST FOREIGN CU RRENCY FLUCTUATION IS BY WAY OF HEDGING . HEDGING TRANSACTIONS ARE ENTERED IN ORDER TO PROTECT AGAINST THE LOSS DUE TO COMPENSATORY PRICE MOVEMENT. IT PROTECTS AN ASSET OR LIABILITY AGAINST FLUCTUATION IN FOREIGN EXCHANGE RATE. ONE OF THE TOOLS FOR HEDG ING THE FOREX RISK IS BY WAY OF FOREIGN EXCHANGE FORWARD CONTRACTS . IN THE CASE BEFORE US, THE UNDERLYING EXPOSURE IS THE FOREIGN CURRENCY VIZ., ERUO, USD AND GREAT BRITAIN POUND . THE ASSESSEE COMPANY INVOICES ITS CUSTOMERS IN FOREIGN CURRENCY AND IN ORDER TO HEDGE AGAINST ANY RISK OF LOSS ON CURRENCY FLUCTUATIONS IT ENTERS INTO FORWARD CONTRACTS WITH THE AUTHORIZED DEALER BANK . UPON THE PAYMENT OF THE SAME, THE EXPORTER IS HEDGED AGAINST ADVERSE CURRENCY MOVEMENT AND ALSO NOT LIABLE TO LOOSE IN CASE OF FAV ORABLE CURRENCY MOVEMENT. THEREFORE, IT IS APPARENT IN THE CASE OF THE ASSESSEE THAT THE ASSESSEE HAD ENTERED INTO FORWARD CONTRACTS WITH THE AUTHORIZED DEALER BANK IN ORDER TO HEDGE ITS FOREIGN EXCHANGE RISK. IN THE CASE OF THE ASSESSEE, WHAT HAS HAPPENED IS THAT DUE TO ADVERSE FOREIGN EXCHANGE MOVEMENT, THE BANK HAS DEBITED THE LOSS TO THE ASSESSEE S ACCOUNT. THUS, THE LOSS DEBITED BY THE BANK IN THE ASSESSEE S ACCOUNT HAS CRYSTALLIZED AND IS A REALISTIC LOSS SUFFERED BY THE ASSESSEE. IN THESE CIRCUMSTANC ES, THE ISSUE UNDER CONSIDERATION BEFORE US IS THAT, WHETHER LOSS ON ACCOUNT FOREX FORWARD CONTRACTS ARE TO BE CONSIDERED AS A BUSINESS LOSS IN PARLANCE WITH SECTION 28 OF THE ACT. FURTHER, IN THE CASE OF THE ASSESSEE BEFORE US, THE I.T.A. NO . 1 102 /M/ 15 11 FOLLOWING FACTS EMERG E AND THE LEGAL ISSUES INVOLVED ARE DISCUSSED AND SUMMARIZED HEREIN BELOW: - (I) THE ASSESSEE HAS ENTERED INTO FOREX FORWARD CONTACTS ONLY IN ORDER TO CON TROL THE FOREIGN CURRENCY FLUCTUATION RISK. (II) THUS, THE LOSS ES ON ACCOUNT OF FOREX TRANSACTIONS ARE DIRECTLY ATTRIBUTABLE TO THE NORMAL BUSINESS OF THE ASSESSEE. (III) THE LOSS INCURRED BY THE ASSESSEE IS REALISTIC AND NOT NOTIONAL. (IV) ONLY DEALER BANK WAS AUTHORIZED TO TRADE IN FOREIGN CURRENCY AND THE ASSESSEE IS NEITHER A MONEY CHANGER NOR A BANK. (V) THE ASSESSEE HAS ONLY UTILIZED THE SERVICE OF BANK IN ORDER TO IRON OUT THE LOSS ARISING OUT OF FOREIGN CURRENCY FLUCTUATION RISK BY ENTERING INTO FOREX FORWARD CONTRACT. (VI) THE SPECIAL BENCH OF THE ITAT, KOLKATA BENCH IN THE CASE OF SHRI CAPITAL S ERVICES LTD VS. ACIT IN 121 ITD 498(KOL.)(SB) HAS HELD THAT FOREIGN CURRENCY IS NEITHER COMMODITY NOR SHARES AS DEFINED UNDER SECTION 43(5) OF THE ACT . ( V II) S ECTION 73(1) OF THE ACT RESTRICTS THE SET OFF OF SPECULATION LOSS AGAINST THE OTHER BUSINESS IN COME IN ONLY THOSE CASES WERE SPECULATIVE TRANSACTIONS CARRIED ON BY THE ASSESSEE ARE OF SUCH NATURE SO AS TO CONSTITUTE A BUSINESS BY ITSELF. IT IS PERTINENT TO MENTION HERE THAT RBI DOES NOT PERMIT ANY BANK UNDER ITS UMBRELLA TO ENTERTAIN ITS CLIENT IN ANY SEPARATE BUSINESS OF FOREX DERIVATIVE TRANSACTIONS. PERMISSION IS I.T.A. NO . 1 102 /M/ 15 12 GRANTED ONLY FOR THE CLIENTS OF THE BANK TO HEDGE ON FOREIGN EXCHANGE IN ORDER TO MINIMIZE THE RISK OF THE FOREIGN CURRENCY EXPOSURE ARISING OUT OF IMPORT AND EXPORT TRADE. 15. FURTHER, IT IS A FACT THAT THE FOREIGN CURRENCY IS NEITHER COMMODITY NOR STOCK OR SHARES. FOREIGN CURRENCY IS NOTHING BUT CURRENCY PRINTED IN A DIFFERENT COUNTRY. IT IS MONEY OF A COUNTRY OTHER THAN ONE S OWN. CURRENCY IS A GENERALLY ACCEPTED FORM OF MONEY INC LUDING COINS AND PAPER NOTES WHICH IS ISSUED BY A GOVERNMENT AND CIRCULATED WITHIN AN ECONOMY. IT IS A MEDIUM BASED ON THE VALUE OF AN UNDERLYING COMMODITY. IT IS USED AS MEDIUM OF EXCHANGE FOR GOODS AND SERVICES. THE CURRENCY VALUE OF ONE COUNTRY WITH ANO THER COUNTRY FLUCTUATES ACCORDING TO THE ECONOMIC FACTORS PREVALENT IN THOSE COUNTRIES. THEREFORE HOLDING FOREIGN CURRENCY IS PLACING RELIANCE ON THE ECONOMIC FACTORS PREVALENT IN THAT COUNTRY AND STOCK/SHARES IS PLACING RELIANCE IN THE ECONOMIC STRENGTH A ND BUSINESS POLICIES OF THE COMPANY. SECTION 43(5) OF THE ACT DEFINES SPECULATIVE TRANSACTIONS AS UNDER: - SECTION 43 (5): SPECULATIVE TRANSACTION MEANS A TRANSACTION IN WHICH A CONTRACT FOR THE PURCHASE OR SALE OF ANY COMMODITY, INCLUDING STOCKS AND SHA RES, IS PERIODICALLY OR ULTIMATELY SETTLED OTHERWISE THAN BY THE ACTUAL DELIVERY OR TRANSFER OF THE COMMODITY OR SCRIPS: THAT FOR THE PURPOSES OF THIS CLAUSE (A) A CONTRACT IN RESPECT OF RAW MATERIALS OR MERCHANDISE ENTERED INTO BY A PERSON IN THE COURS E OF HIS MANUFACTURING OR MERCHANTING BUSINESS TO GUARD AGAINST LOSS THROUGH FUTURE PRICE FLUCTUATIONS IN RESPECT OF HIS CONTRACTS FOR ACTUAL DELIVERY OF GOODS MANUFACTURED BY HIM OR MERCHANDISE SOLD BY HIM; OR I.T.A. NO . 1 102 /M/ 15 13 (B) A CONTRACT IN RESPECT OF STOCKS AND SHAR ES ENTERED INTO BY A DEALER OR INVESTOR THEREIN TO GUARD AGAINST LOSS IN HIS HOLDINGS OF STOCKS AND SHARES THROUGH PRICE FLUCTUATIONS; OR (C) A CONTRACT ENTERED INTO BY A MEMBER OF A FORWARD MARKET OR A STOCK EXCHANGE IN THE COURSE OF ANY TRANSACTION IN THE NATURE OF ACTUAL DELIVERY , SEE TAXMAN S DIRECT TAXES MANUAL, VOL. 3. JOBBING OR ARBITRAGE TO GUARD AGAINST LOSS WHICH MAY ARISE IN THE ORDINARY COURSE OF HIS BUSINESS AS SUCH MEMBER; [OR] (D) AN ELIGIBLE TRANSACTION IN RESPECT OF TRADING IN DERIVAT IVES REFERRED TO IN CLAUSE 35[(AC)] OF SECTION 236 OF THE SECURITIES CONTRACTS (REGULATION) ACT, 1956 (42 OF 1956) CARRIED OUT IN A RECOGNIZED STOCK EXCHANGE;] (E) AN ELIGIBLE TRANSACTION IN RESPECT OF TRADING IN COMMODITY DERIVATIVES CARRIED OUT IN A REC OGNIZED ASSOCIATION, WHICH IS CHARGEABLE TO COMMODITIES TRANSACTION TAX UNDER CHAPTER VII OF THE FINANCE ACT, 2013 (17 OF 2013) SHALL NOT BE DEEMED TO BE A SPECULATIVE TRANSACTION. EXPLANATION . FOR THE PURPOSES OF THIS CLAUSE, THE EXPRESSIONS (I) ELI GIBLE TRANSACTION MEANS ANY TRANSACTION, (A) CARRIED OUT ELECTRONICALLY ON SCREEN - BASED SYSTEMS THROUGH A STOCK BROKER OR SUB - BROKER OR SUCH OTHER INTERMEDIARY REGISTERED UNDER SECTION 12 OF THE SECURITIES AND EXCHANGE BOARD OF INDIA ACT, 1992 (15 OF 19 92) IN ACCORDANCE WITH THE PROVISIONS OF THE SECURITIES CONTRACTS (REGULATION) ACT, 1956 (42 OF 1956) OR THE SECURITIES AND EXCHANGE BOARD OF INDIA ACT, 1992 (15 OF 1992) OR THE DEPOSITORIES ACT, 1996 (22 OF 1996) AND THE RULES, REGULATIONS OR BYE - LAWS MAD E OR DIRECTIONS ISSUED UNDER THOSE ACTS OR BY BANKS OR MUTUAL FUNDS ON A RECOGNISED STOCK EXCHANGE; AND (B) WHICH IS SUPPORTED BY A TIME STAMPED CONTRACT NOTE ISSUED BY SUCH STOCK BROKER OR SUB - BROKER OR SUCH OTHER INTERMEDIARY TO EVERY CLIENT INDICATING IN THE CONTRACT NOTE THE UNIQUE CLIENT IDENTITY NUMBER ALLOTTED UNDER ANY ACT REFERRED TO IN SUB - CLAUSE (A) AND PERMANENT ACCOUNT NUMBER ALLOTTED UNDER THIS ACT; (II) RECOGNISED STOCK EXCHANGE MEANS A RECOGNISED STOCK EXCHANGE AS REFERRED TO IN CLAUSE (F) OF SECTION 238 OF THE SECURITIES CONTRACTS (REGULATION) ACT, 1956 (42 OF 1956) AND WHICH FULFILS SUCH CONDITIONS AS MAY BE PRESCRIBED AND NOTIFIED 39 BY THE CENTRAL GOVERNMENT FOR THIS PURPOSE;] 16. IT IS PERTINENT TO NOTE THAT BANKS HAVE OPTION TO TRADE IN FOREIGN CURRENCY EITHER THROUGH RECOGNIZED STOCK EXCHANGE OR THROUGH RBI. WHEN I.T.A. NO . 1 102 /M/ 15 14 THE BANKS FACILITATES ITS CLIENTS TO DEAL IN FOREIGN EXCHANGE FORWARD CONTRACTS THROUGH RBI, MORE STRINGENT REGULATIONS ARE COMPLIED AND THEREFORE THESE TRANSACTIONS CANNOT BE DENIED THE BENEFITS PROVIDED UNDER THE ACT WHEN TRADED THROUGH RECOGNIZED STOCK EXCHANGE. 17 . NOW THE QUESTION IS WHETHER TO TREAT THE FOREIGN EXCHANGE FORWARD CONTRACT AS COMMODITIES, OR STOCKS AND SHARES. IF IT IS TREATED AS COMMODITIES, SECT ION 43(5)(A) OF THE ACT COMES TO THE RESCUE OF THE ASSESSEE BECAUSE IN THE PRESENT CASE, THE ASSESSEE IS ENGAGED IN THE BUSINESS OF PROVIDING TYPESETTING AND PREPRESS SERVICES AND SOLUTION PROVIDER FOR THE PUBLISHING INDUSTRY. FURTHER, THE ASSESSEE COMPANY INVOICES ITS CUSTOMERS IN FOREIGN CURRENCY AND IN ORDER TO HEDGE AGAINST ANY RISK OF LOSS ON CURRENCY FLUCTUATIONS IT ENTERS INTO FORWARD CONTRACTS WITH THE AUTHORIZED DEALER BANK. THE ARGUMENT OF THE REVENUE IS THAT, SINCE THE TRANSACTIONS ARE MADE THOUG H BANKING SECTORS, THE SAME WILL FALL WITHIN THE SCOPE OF SPECULATIVE TRANSACTIONS. THIS ARGUMENT APPEARS TO BE ABSURD AND ILLOGICAL BECAUSE BOTH RECOGNIZED STOCK EXCHANGE AND BANKS ARE EITHER GOVERNMENT REGULATORY BODY OR EXTENDED ARM OF THE GOVERNMENT. FURTHER THE CHARACTERISTIC OF THE CURRENCY AND STOCK/SHARES ARE NOT THE SAME AND THEREFORE, CURRENCY CANNOT BE HELD AS STOCK OR SHARES. THIS VIEW IS ALSO FORTIFIED WITH THE VARIOUS DECISIONS. (A) IN THE CASE OF CIT VS. SOORAJ M ULL NAGARMULL , REPORTED IN ( 1981) 129 ITR 169(CAL.) WHEREIN IT WAS HELD THAT THE ASSESSEE USED TO CARRY ON EXPORT AND IMPORT I.T.A. NO . 1 102 /M/ 15 15 OF JUTE BUSINESS. IN THE COURSE OF NORMAL BUSINESS IT USED TO ENTER INTO FOREIGN EXCHANGE CONTRACTS IN ORDER TO COVER UP LOSS AND DIFFERENCE IN FOREIGN EXCHANG E VALUATION. THE ASSESSEE UTILIZED PART OF THE AMOUNT OF THE FOREIGN EXCHANGE COVERED. THIS FINDING OF FACT HAS NOT BEEN CHALLENGED, IF IN THE COURSE OF NORMAL CARRYING ON OF BUSINESS CERTAIN LOSS OR OBLIGATION OR INTEREST ARISE THESE MUST BE DEFERRABLE TO THE CARRYING ON OF THE BUSINESS AND THESE MUST BE INCIDENTAL TO THE CARRYING ON OF THE BUSINESS. UNDOUBTEDLY, THE CONTRACT FOR FOREIGN EXCHANGE AS SUCH CAN BE TREATED AS A CONTRACT FOR COMMODITY. BUT THE QUESTION HERE ESSENTIALLY IS THAT THE ASSESSEE WAS CARRYING ON BUSINESS OF EXPORT AND IMPORT OF JUTE GOODS. IN ORDER TO CARRY OUT THESE TRANSACTIONS, THE ASSESSEE HAD TO ENTER INTO FOREIGN EXCHANGE CONTRACT IN ORDER TO COVER UP THESE TRANSACTIONS. IN THOSE FOREIGN EXCHANGE CONTRACTS, IF ANY LOSS OCCUR RED THEN SUCH LOSS WAS A LOSS REFERABLE TO AND RELATED TO THE BUSINESS CARRIED ON AND ARISING OUT OF THE BUSINESS OF THE ASSESSEE. HERE THERE IS NO FINDING THAT ENTERING INTO FOREIGN EXCHANGE CONTRACT WAS THE NATURE OF THE BUSINESS OPERATION FOR THE EXPORT AND IMPORT OF THE GOODS BY THE ASSESSEE. THE ASSESSEE WAS NOT A DEALER IN FOREIGN EXCHANGE CONTRACT AS SUCH. HERE IN THIS CASE, THE CONTRACT WAS FOR A FULL AMOUNT AND WHAT THE ASSESSEE PAID IN FULFILLMENT OF THE OBLIGATION WHICH WAS AN IMPLIED TERM AT TH E TIME OF ENTERING INTO THE CONTRACT DID NOT AMOUNT TO BREACH OF CONTRACT. THE BREACH OF CONTRACT DID NOT COME WITHIN THE MEANING OF CONTRACT SETTLED AS USED IN EXPLN.2 OF S.24(1) OF IT ACT, 1922, CONTRACT SETTLED MEANT CONTRACT SETTLED BEFORE BREACH. WHERE THE MONEY WHICH THE ASSESSEE PAID WAS IN SETTLEMENT OF THE AMOUNT OF DAMAGES SUFFERED BY THE ASSESSEE BY REASON OF BREACH OF THE CONTRACT TO DELIVERY, IT IS TO BE HELD THAT THE PAYMENT WAS NOT A LOSS FROM A SPECULATIVE TRANSACTION AS DEFINED IN EXPL N.2 OF S.24(1) OF IT ACT, 1922. (B) IN THE CASE OF CIT VS. BADRIDAS GAURIDU (P) LTD ., REPORTED IN (2003) 261 ITR (BOM) WHEREIN IT WAS HELD THAT THE ASSESSEE WAS NOT A DEALER IN FOREIGN EXCHANGE. THE ASSESSEE WAS A COTTON EXPORTER. THE ASSESSEE WAS AN EX PORT HOUSE. THEREFORE, FOREIGN EXCHANGE CONTRACTS WERE BOOKED ONLY AS INCIDENTAL TO THE ASSESSEE S REGULAR COURSE OF BUSINESS. THE TRIBUNAL HAS RECORDED A CATEGORICAL FINDING TO THIS EFFECT IN ITS ORDER. THE ASSESSING OFFICER HAS NOT CONSIDERED THESE FACT S. UNDER S.43(5) OF THE IT ACT, SPECULATIVE TRANSACTION HAS BEEN DEFINED TO MEAN A 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 B Y THE ASSESSEE FOR EXPORT OF COTTON IN SOME CASES FAILED. IN THE CIRCUMSTANCES, THE ASSESSEE WAS ENTITLED TO CLAIM DEDUCTION IN RESPECT TO 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 LD. CIT VS. SOORAJMULL NAGARMULL (1981) 22 CTR (CAL.) 8: (1981) 129 ITR 169 (CAL.). (C) IN THE CASE OF MUNJAL SHOWA LTD. VS. DCIT , REPORTED IN (2005) 94 TTJ (DEL.) WHEREIN IT WAS HELD THAT PROFIT ON CANCELLATION OF FORWAR D CONTRACT IN FOREIGN CURRENCY ENTERED INTO FOR SAFEGUARDING AGAINST LOSS BY FLUCTUATION IN FOREIGN I.T.A. NO . 1 102 /M/ 15 16 CURRENCY FOR PURCHASE OF PLANT AND MACHINERY WITH LOAN OBTAINED IN FOREIGN EXCHANGE IS CAPITAL RECEIPT AND NOT SPECULATIVE PROFIT. (D) IN THE CASE OF COTTO N BLOSSOMS (INDIA) PVT. LTD. V ACIT , IN ITA NO. 2032/ MDS /2012 VIDE ORDER DATED 21.02.2013, ALSO THE CHENNAI BENCH OF THE TRIBUNAL HELD THAT, IN RESPECT OF FOREX CONTRACTS ENTERED INTO BY THE ASSESSEE IN SIMILAR CIRCUMSTANCES WILL NOT FALL UNDER THE DEFINI TION OF SPECULATIVE TRANSACTION. (E) IN THE CASE OF MAJESTIC EXPORTS V. JCIT IN I.T.A. NOS. 1336 & 3072/MDS/2014 VIDE ORDER DATED 24.07.2015 [WHEREIN THE LD. AM IS AUTHOR OF THE ORDER] , THE TRIBUNAL HAS HELD THAT THE TOTAL TRANSACTION CONSIDERED FOR DETER MINING THIS BUSINESS LOSS FROM DERIVATIVE TRANSACTIONS CANNOT BE MORE THAN THE TOTAL EXPORT TURNOVER OF THE ASSESSEE FOR THE ASSESSMENT YEAR UNDER CONSIDERATION AND IF THE DERIVATIVE TRANSACTION IS IN EXCESS OF EXPORT TURNOVER, THEN THAT LOSS SUFFERED IN R ESPECT OF THAT PORTION OF EXCESS TRANSACTIONS TO BE CONSIDERED AS SPECULATIVE LOSS ONLY AS THAT EXCESS DERIVATE TRANSACTION HAS NO PROXIMITY WITH EXPORT TURNOVER AND THE ASSESSING OFFICER IS DIRECTED TO COMPUTE ACCORDINGLY. THIS GROUND IS ALLOWED AS INDICA TED ABOVE. (F) IN THE CASE OF VST INDUSTRIES LTD. V. ADDL.CIT IN I.T.A. NO. 647/HYD/2012 VIDE ORDER DATED 23.08.2013 [WHEREIN THE LD. LD. A.M. IS CO - AUTHOR] , THE HYDERABAD BENCH OF THE TRIBUNAL, BY FOLLOWING THE COORDINATE BENCH DECISION IN THE CASE OF L EO EDIBLES & FATS LTD. V. DCIT IN I.T.A. NO. 396/HYD/2012 DATED 31.05.2013 AS WELL AS BY FOLLOWING THE DECISION IN THE CASE OF FRIENDS AND FRIENDS SHIPPING PVT. LTD. IN T.C.A. NO. 251 OF 2010 DATED 23.08.2011 (GUJ), HELD THAT THE LOSS/ EXPENDITURE CLAIMED BY THE ASSESSEE ON ACCOUNT OF FLUCTUATION IN THE RATE OF FOREIGN EXCHANGE CANNOT BE CONSIDERED TO BE NOTIONAL BY FOLLOWING THE INSTRUCTION NO. 3 OF 2010 OF CBDT. THE DECISION IN THE CASE OF WOODWA RD GOVERNOR INDIA P. LTD. 312 ITR 254 (SC) AND DCIT V. BANK OF BAHRAIN AND KUWAIT (41 SOT 290 (MUM S.B.) ALSO SUPPORT SUCH A VIEW. THEREFORE, CONSIDERING THE CASE OF THE ASSESSEE IN THE LIGHT OF THE LAW PROPOUNDED IN THE JUDICIAL PRECEDENTS DISCUSSED HERE INABOVE, WE ARE OF THE VIEW THAT THE ASSESSEE IS ENTITLED TO CLAIM THE LOSS OF .40,00,107/ - . 1 8 . THUS TO SUM UP IN THE PRESENT CASE BEFORE US, THE ASSESSEE IS ENGAGED IN TYPESETTING SERVICES FOR SCIENTIFIC, TECHNICAL AND MEDICAL (STM PUBLISHERS) WHO HAS ENTERED INTO FOREX FORWARD CONTRACTS THROUGH ITS BANKERS WITH A VIEW TO EFFEC TIVELY HEDGE ITS FOREIGN CURRENCY RISK. THEREFORE, THESE FOREX FORWARD CONTRACTS HAVE A CLOSE PROXIMITY OR RATHER INCIDENTAL TO THE EXPORT BUSINESS OF THE ASSESSEE, WHICH CANNOT BE CONSIDERED AS I.T.A. NO . 1 102 /M/ 15 17 SPECULATIVE. SECTION - 43(5) OF THE ACT IS APPLICABLE TO TRANSA CTIONS IN COMMODITY OR STOCKS AND SHARES. IF CURRENCY IS TREATED AS COMMODITY, THEN ACCORDING TO S ECTION 43(5)(A) OF THE ACT, SUCH TRANSACTION SHALL NOT BE DEEMED TO BE SPECULATIVE TRANSACTION. FURTHER , THE CURRENCY CANNOT BE TREATED AS STOCK OR SHARES BEC AUSE INHERENTLY THEY HAVE DIFFERENT CHARACTERISTIC. FURTHER, IN THE CASE OF THE ASSESSEE, THE FOREIGN EXCHANGE EXPOSURE FOR THE RELEVANT PERIOD SPECIFIED BY RBI REGULATIONS IS QUIET SUBSTANTIAL IN ORDER TO JUSTIFY THE FOREX TRANSACTIONS MADE BY THE ASSESSE E THROUGH GOVERNMENT RECOGNIZED CHANNEL, OTHERWISE THE RBI WOULD NOT HAVE ENTERTAINED THESE TRANSACTIONS AND WOULD HAVE RESTRAINED THE BANKS FROM ENTERING INTO SUCH TRANSACTION WITH ITS CLIENTS. THUS , CONSIDERING THE TOTALITY OF THE FACTS AND CIRCUMSTANCE OF THE CASE , WE ARE OF THE OPINION THAT THE ASSESSING OFFICER HAS TO CONSIDER THE FOREIGN EXCHANGE DERIVATIVE IN PROPORTION TO EXPORT TURNOVER AS REGULAR BUSINESS TRANSACTION OF THE ASSESSEE. IF THE DERIVATIVE TRANSACTION UNDERTAKEN BY THE ASSESSEE IS IN E XCESS OF EXPORT TURNOVER THEN THAT LOSS SUFFERED IN RESPECT OF THAT PORTION OF EXCESS TRANSACTION HAS TO BE CONSIDERED AS SPECULATIVE LOSS ONLY AND THAT EXCESS DERIVATIVE TRANSACTION HAS NO PROXIMITY WITH EXPORT TURNOVER AND THE ASSESSING OFFICER IS DIRECT ED TO COMPUTE ACCORDINGLY. FURTHER, THE ASSESSING OFFICER HAS TO SEE WHETHER THERE IS ANY PREMATURE CANCELLATION OF FORWARD CONTRACT OF FOREIGN EXCHANGE AND THAT TRANSACTION SHOULD BE TAKEN OUT FOR THE PURPOSE OF CONSIDERING THE BUSINESS LOSS AND ONLY THE TRANSACTIONS WHICH I.T.A. NO . 1 102 /M/ 15 18 ARE COMPLETED TO BE CONSIDERED FOR THE PURPOSE OF DETERMINING THE BUSINESS LOSS FROM THE FOREIGN EXCHANGE FORWARD CONTRACT. WITH THIS OBSERVATION, WE REMAND THIS ISSUE TO THE FILE OF THE ASSESSING OFFICER FOR FRESH CONSIDERATION. 1 9 . IN THE RESULT, THE APPEAL FILED BY THE ASSESSEE IS PARTLY ALLOWED FOR STATISTICAL PURPOSES . ORDER PRONOUNCED ON THE 31 ST DECEMBER , 2015 AT CHENNAI. SD/ - SD/ - ( CHANDRA POOJARI ) ACCOUNTANT MEMBER ( DUVVURU RL REDDY ) JUDICIAL MEMBER CHENNAI, DATED, THE 31. 1 2 .201 5 VM/ - / COPY TO: 1. / APPELLANT , 2. / RESPONDENT , 3. ( ) / CIT(A) , 4. / CIT , 5. / DR & 6. / GF.