DCIT, Thanjavur V. S.P.Apparels, Avanashi

ITA 1699/CHNY/2015

• Counselvise Citation: [2016] 131 COUNSELVISE.COM (IT) 8550 (ITAT-CHENNAI)
• Duration Of Justice: 1 year(s) 1 month(s) 17 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 09-09-2016
• Appeal Filed By: Department
• Order Result: Dismissed
• Bench Allotted: B
• Next Hearing Date: 22-06-2016
• Assessment Year: 2009-2010
• Appeal Filed On: 23-07-2015
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: M M BHUSARI
• Assessee Lawyers: T BANUSEKAR
• Keywords: Speculation loss
• Section: 14A; 43(5); 10

Judgement Text

, , IN THE INCOME TAX APPELLATE TRIBUNAL B BENCH, CHENNAI . . . , . !'# ! ,% !& BEFORE SHRI N.R.S. GANESAN, JUDICIAL MEMBER AND SHRI A. MOHAN ALANKAMONY, ACCOUNTANT MEMBER ./ ITA NO. 1510/MDS/2015 ( )( / ASSESSMENT YEAR : 2009-10 S.P.APPARELS LTD., 39-A, EXTENSION STREET, KAIKATTIPUDUR, AVINASHI 641 654. PAN : AAJCS4031P V. THE DEPUTY COMMISSIONER OF INCOME TAX, COMPANY CIRCLE, TIRUPUR. (+,/ APPELLANT) (-.+,/ RESPONDENT) ./ ITA NO. 1699/MDS/2015 ( )( / ASSESSMENT YEAR : 2009-10 THE DEPUTY COMMISSIONER OF INCOME TAX, CIRCLE -I, TIRUPUR. V. M/S. S.P.APPARELS LTD., 39-A, EXTENSION STREET, KAIKATTIPUDUR, AVINASHI 641 654. PAN : AAJCS4031P (+,/ APPELLANT) (-.+,/ RESPONDENT) ASSESSEE BY : SHRI. T.BANUSEKAR, C.A. DEPARTMENT BY : SHRI. M.M.BHUSARI, CIT 7 89% / DATE OF HEARING : 22.06.2016 :') 89% / DATE OF PRONOUNCEMENT : 09.09.2016 2 I.T.A. NOS.1510 & 1699/MDS/2015 / O R D E R PER N.R.S. GANESAN, JUDICIAL MEMBER: BOTH THE APPEALS OF THE ASSESSEE AND REVENUE ARE DI RECTED AGAINST THE SAME ORDER OF CIT(A) -3, COIMBATORE DATED 31.03 .2015 AND PERTAINS TO ASSESSMENT YEAR 2009-10. THEREFORE, WE HEARD THE SAME TOGETHER AND DISPOSING OF THE SAME BY THIS COMMON ORDER. 2. LET US FIRST TAKE THE ASSESSEES APPEAL IN ITA N O.1510/MDS/2015. THE FIRST GROUND OF APPEAL IS DISALLOWANCE OF RS.10 ,97,35,472/- AS SPECULATIVE LOSS. SHRI T.BANUSEKAR, THE LEARNED R EPRESENTATIVE FOR THE ASSESSEE SUBMITTED THAT THE ASSESSEE ENTERED INTO C ROSS CURRENCY HYBRID OPTION CONTRACT WITH SEVERAL BANKS FOR THE PURPOSE OF BUSINESS. SUBSEQUENTLY, DUE TO FLUCTUATION IN THE FOREIGN CUR RENCY MARKET, THE ASSESSEE HAS SUFFERED LOSS. THE ASSESSEE CLAIMED BE FORE THE ASSESSING OFFICER DERIVATIVE TRANSACTION IN FOREIGN CURRENCIE S ARE NOT SPECULATIVE TRANSACTIONS, THEREFORE, THE LOSS SUFFERED BY THE A SSESSEE HAS TO BE ALLOWED AS A DEDUCTION WHILE COMPUTING THE TAXABLE INCOME. 3. THE LEARNED REPRESENTATIVE FURTHER SUBMITTED THA T THE DERIVATIVE TRANSACTION WAS CARRIED ON BY THE ASSESSEE IN CONFO RMITY WITH THE GUIDELINES ISSUED BY THE RESERVE BANK OF INDIA FROM TIME TO TIME AND IT 3 I.T.A. NOS.1510 & 1699/MDS/2015 WAS RELATABLE TO EXPORT ORDERS. THE TRANSACTION IN FOREIGN CURRENCY WAS MADE FOR THE PURPOSE OF BUSINESS AND IN THE COURSE OF BUSINESS. THEREFORE, THE LOSS SUFFERED BY THE ASSESSEE ACCORD ING TO THE LEARNED REPRESENTATIVE SHALL BE TREATED AS BUSINESS LOSS. A N IDENTICAL ISSUE WAS CONSIDERED BY THIS TRIBUNAL IN THE ASSESSEES OWN C ASE IN ITA 1327/MDS/2014 FOR THE ASSESSMENT YEAR 2008-09 AND T HIS TRIBUNAL FOUND THAT AN IDENTICAL ISSUE WAS CONSIDERED BY THIS TRIB UNAL IN M/S. SCM GARMENTS PVT.LTD., IN ITA NO.1645/MDS/2013 AND 2275 /MDS/2014 DATED 27.02.2015. AFTER EXTRACTING THE RELEVANT FINDING O F THE TRIBUNAL IN M/S.SCM GARMENTS PVT.LTD., THIS TRIBUNAL FOUND THAT AN IDENTICAL LOSS SUFFERED BY THE ASSESSEE ON THE DERIVATIVE TRANSACT ION DUE TO FLUCTUATION IN FOREIGN CURRENCY WAS A BUSINESS LOSS, THEREFORE, IT HAS TO BE ALLOWED TO BE SET OFF WHILE COMPUTING THE TAXABLE INCOME. ACCO RDINGLY, THE CLAIM OF THE ASSESSEE WAS ALLOWED AND IN VIEW OF THE COORDIN ATE BENCH DECISION OF THIS TRIBUNAL IN THE ASSESSEES OWN CASE FOR ASS ESSMENT YEAR 2008- 09, ACCORDING TO THE LEARNED REPRESENTATIVE, THE CI T(A) IS NOT JUSTIFIED IN CONFIRMING THE DISALLOWANCE MADE BY THE ASSESSING O FFICER AS SPECULATIVE LOSS. 4. ON THE CONTRARY, SHRI M.M.BHUSARI, THE LEARNED R EPRESENTATIVE FOR THE DEPARTMENT SUBMITTED THAT ADMITTEDLY, THE ASSES SEE ENTERED INTO HYBRID OPTION CONTRACT WITH SEVERAL BANKS PURPORTED LY, FOR THE PURPOSE OF ITS BUSINESS. ACCORDING TO THE LEARNED DEPARTMENT R EPRESENTATIVE, THE 4 I.T.A. NOS.1510 & 1699/MDS/2015 TRANSACTION CARRIED ON BY THE ASSESSEE IS IN THE NA TURE OF SPECULATIVE TRANSACTION WITH THE INTENTION TO EARN FAST MONEY I N THE FLUCTUATING FOREIGN CURRENCY MARKET. IN FACT, THE ASSESSEE CLAIMED A SU M OF RS.23.21 CRORES AS LOSS ON THE DERIVATIVE TRANSACTION. THE ASSESSIN G OFFICER AFTER EXAMINING THE TRANSACTION OF THE ASSESSEE, FOUND TH AT FORWARD CONTRACT ENTERED INTO BY THE ASSESSEE WAS ALSO A DERIVATIVE. THE ASSESSING OFFICER FURTHER FOUND THAT DERIVATIVE TRANSACTION IN FOREIG N CURRENCY WOULD BE NORMALLY USED BY EXPORTERS AND IMPORTERS TO HEDGE T HEIR CURRENCY EXPOSURES. BY ENTERING INTO CONTRACT TO SELL CURREN CIES INCLUDING CROSS CURRENCIES, THE ASSESSEE IN FACT ENTERED INTO SPECU LATIVE TRANSACTION FOR THE PURPOSE OF EXPLOITING FLUCTUATION IN FOREIGN CU RRENCY MARKET. REFERRING TO THE SERIES OF ACTIVITIES DONE BY THE ASSESSEE WI TH VARIOUS BANKS, THE ASSESSING OFFICER FOUND THAT THE ASSESSEE MADE AN A TTEMPT TO MAKE QUICK MONEY IN THE FLUCTUATING FOREIGN EXCHANGE MAR KET. 5. THE LEARNED DEPARTMENT REPRESENTATIVE FURTHER SU BMITTED THAT THE ASSESSEE HAD A REGULAR TRANSACTION WITH STATE BANK OF MYSORE, AVINASHI BRANCH THROUGH WHICH THE ASSESSEE WAS RECEIVING THE EXPORT PROCEEDS. THE ASSESSEE HAS ALSO ENTERED INTO CONTRACT WITH OT HER BANKS NAMELY ABN AMRO BANK, HDFC BANK, CITI BANK, IDBI BANK, ETC . FOR CARRYING ON THE TRANSACTION IN FOREIGN EXCHANGE DERIVATIVE. THE ASSESSING OFFICER FOUND THAT THE FOREIGN DERIVATIVES ARE ALSO COMMODI TIES. THEREFORE, THE HEDGING ACTIVITY CARRIED ON BY THE ASSSSEE IN THE F OREIGN EXCHANGE 5 I.T.A. NOS.1510 & 1699/MDS/2015 CURRENCY HAS TO BE NECESSARILY TREATED AS SPECULATI VE TRANSACTION. THE LOSS OR PROFIT HAS TO BE NECESSARILY TREATED AS ARI SING OUT OF SPECULATIVE TRANSACTION. THEREFORE, THE ASSESSEE CANNOT SET OFF THE LOSS ON SPECULATIVE TRANSACTION WHILE COMPUTING THE TAXABLE INCOME. 6. WE HAVE CONSIDERED THE RIVAL SUBMISSIONS ON EITH ER SIDE AND ALSO PERUSED THE MATERIAL AVAILABLE ON RECORD. THE ASSES SEE ENTERED INTO THE CROSS CURRENCY HYBRID DERIVATIVE CONTRACT WITH AXIS BANK, CITI BANK, HDFC BANK, IDBI BANK, ING VYSYA BANK AND ABN AMRO B ANK. ADMITTEDLY, THE ABOVE SIX BANKERS ARE NOT REGULAR B ANKERS FOR THE ASSESSEE. ADMITTEDLY, THE ASSESSEE HAD REGULAR TRAN SACTION WITH STATE BANK OF MYSORE, AVINASHI BRANCH. FROM THE ORDER OF THE CIT(A), IT APPEARS THAT CITI BANK IS ALSO ONE OF THEIR REGULAR BANKER FOR ASSESSEE. THE MAIN CONTENTION OF THE ASSESSEE BEFORE THIS TRI BUNAL IS THAT DERIVATIVE CONTRACT ENTERED INTO BY THE ASSESSEE HA VE A CONTRACT UNDERLYING CURRENCY EXPOSURE ON ACCOUNT OF EXPORT P ROCEEDS RECEIVABLE BY THE ASSESSEE. THE ASSESSEE ALSO CONTENDS BEFORE THIS TRIBUNAL THAT FOREIGN EXCHANGE IS NOT A COMMODITY. THEREFORE, IT IS OUTSIDE THE PURVIEW OF SECTION 43(5) OF THE INCOME TAX ACT. THE CIT(A) AFTER EXAMINING THE PROVISIONS OF SECTION 43(5) OF THE INCOME TAX ACT F OUND THAT DERIVATIVE TRANSACTIONS ARE EXCLUDED FROM THE PROVISIONS OF SE CTION 43(5) OF THE ACT. 6 I.T.A. NOS.1510 & 1699/MDS/2015 7. HOWEVER, BY PLACING RELIANCE ON THE DECISION OF THIS TRIBUNAL IN CRAFTSMAN AUTOMATION (PVT.) LTD. VS. ADDITIONAL COM MISSIONER OF INCOME TAX, RANGE IV, COIMBATORE IN ITA NO.2153/MDS/2011 FOUND THAT THE DERIVATIVE TRANSACTION ENTERED INTO BY THE ASSESSEE ARE SHORT TERM SPECULATIVE TRANSACTION. HENCE, THE LOSS SUFFERED B Y THE ASSESSEE TO THE EXTENT OF RS.10,97,35,472/- HAS TO BE TREATED AS SP ECULATIVE LOSS. 8. WE HAVE CAREFULLY GONE THROUGH THE PROVISIONS O F SECTION 43(5) OF THE INCOME TAX ACT. SECTION 43(5) DEFINES SPECULAT IVE TRANSACTION AS SPECULATIVE TRANSACTION IS ONE IN WHICH A CONTRACT FOR THE PURCHASE OR SALE OF ANY COMMODITY, INCLUDING STOCKS AND SHARES, IS PERIODICALLY OR ULTIMATELY SETTLED OTHERWISE THAN BY THE ACTUAL DEL IVERY OR TRANSFER OF THE COMMODITY OR SCRIPS. THIS TRIBUNAL IS THE ASSESSEE S OWN CASE FOR THE ASSESSMENT YEAR 2008-09 FOUND THAT A SIMILAR ARRANG EMENT MADE BY THE ASSESSEE TO PROTECT THE LOSS THAT MAY ARISE DUE TO FOREIGN EXCHANGE FLUCTUATION IN THE EXPORT OF GARMENTS TO VARIOUS CO UNTRIES HAS TO BE ALLOWED AS BUSINESS LOSS. IN FACT, BY PLACING RELIA NCE ON THE EARLIER DECISION OF THIS TRIBUNAL IN THE CASE OF SCM GARMEN TS PVT.LTD., IT WAS FOUND THAT THE LOSS SUFFERED BY THE ASSESSEE HAS TO BE ALLOWED AS BUSINESS LOSS. THIS TRIBUNAL HAS ALSO PLACED ITS RE LIANCE ON THE JUDGMENT OF THE BOMBAY HIGH COURT IN THE CASE OF CIT VS. BAD RIDAS GAURIDU (P) LTD. REPORTED IN [2003] 261 ITR 256 (BOM.). IN VIEW OF THIS DECISION OF THE TRIBUNAL IN THE ASSESSEES OWN CASE, THIS TRIBUNAL IS OF THE CONSIDERED 7 I.T.A. NOS.1510 & 1699/MDS/2015 OPINION THAT THE LOSS SUFFERED BY THE ASSESSEE ON T HE DERIVATIVE TRANSACTION PURSUANT TO CROSS CURRENCY HYBRID DERIV ATIVE CONTRACT WITH SEVERAL BANKS ARE BUSINESS LOSS, THEREFORE, IT HAS TO BE ALLOWED AS BUSINESS LOSS WHILE COMPUTING THE TAXABLE INCOME. THEREFORE, THIS TRIBUNAL IS UNABLE TO UPHOLD THE ORDER OF THE LOWER AUTHORITIES. ACCORDINGLY, THE ORDERS OF THE LOWER AUTHORITIES AR E SET ASIDE. THE ASSESSING OFFICER IS DIRECTED TO ALLOW A SUM OF RS. 10,97,35,472/- AS BUSINESS LOSS. 9. THE NEXT GROUND OF APPEAL IS DISALLOWANCE MADE BY THE ASSESSING OFFICER UNDER SECTION 14A OF THE ACT. SHR I T.BANUSEKAR, THE LEARNED REPRESENTATIVE FOR THE ASSESSEE SUBMITTED T HAT THE ASSESSEE DISCLOSED A SUM OF RS.12,22,743/- AS DIVIDEND INCOM E EXEMPTED FROM TAX. THE ASSESSEE CLAIMED BEFORE THE ASSESSING OFFI CER THAT NO EXPENDITURE WAS INCURRED. HOWEVER, THE ASSESSING OF FICER FOUND THAT 0.5% OF THE AVERAGE VALUE OF THE INVESTMENT TO THE EXTENT OF RS.7,99,000/- HAS TO BE ADDED TO THE RETURN INCOME. REFERRING TO RULE 8D OF THE INCOME TAX RULE, THE LEARNED REPRESENTATIVE FOR THE ASSESSEE SUBMITTED THAT UNDER RULE 8D (2)(III), 0.5% OF THE AVERAGE INVESTMENT AS DISCLOSED IN THE BALANCE SHEET INCOME FROM WHICH DO ES NOT FORM PART OF THE TOTAL INCOME HAS TO BE TAKEN INTO CONSIDERATION . IN THIS CASE, THE ASSESSING OFFICER HAS TAKEN THE ENTIRE INVESTMENT M ADE BY THE ASSESSEE. 8 I.T.A. NOS.1510 & 1699/MDS/2015 THEREFORE, ACCORDING TO THE LEARNED REPRESENTATIVE, THE ASSESSING OFFICER IS NOT JUSTIFIED IN MAKING AN ADDITION OF RS.7,99,0 00/-. 10. ON THE CONTRARY, SHRI M.M.BHUSARI, THE LEARNED REPRESENTATIVE FOR THE DEPARTMENT SUBMITTED THAT EVEN THOUGH A SPECIFI C GROUND WAS RAISED BY THE ASSESSEE WITH REGARD TO THE DISALLOWANCE MAD E UNDER SECTION 14A READ WITH RULE 8D, THE CIT(A) HAS NOT RECORDED ANY FINDING. IN FACT, THE CT(A) HAS DISPOSED OFF THE GROUND WHICH RELATES TO DERIVATIVE TRANSACTIONS AND HE HAS NOT RECORDED ANY FINDING WI TH REGARD OTHER GROUNDS RAISED BY THE ASSESSEE. THEREFORE, THE MATT ER MAY BE REMANDED BACK TO THE FILE OF THE CIT(A) FOR RE-CONSIDERATION . 11. WE HAVE CONSIDERED THE RIVAL SUBMISSIONS ON EI THER SIDE AND ALSO PERUSED THE MATERIAL AVAILABLE ON RECORD. THE ASSES SEE HAS SPECIFICALLY RAISED A GROUND WITH REGARD TO DISALLOWANCE OF RS.7 ,99,000/- UNDER SECTION 14A. AS RIGHTLY SUBMITTED BY THE DEPARTMENT REPRESENTATIVE, THE CIT(A) WHILE REPRODUCING THE GROUNDS RAISED BY THE ASSESSEE HAS TAKEN OUT THE DISALLOWANCE MADE BY THE ASSESSING OFFICER UNDER SECTION 14A. HOWEVER, HE HAS NOT RECORDED ANY FINDING WITH REGAR D TO GROUNDS RAISED BY THE ASSESSEE. THEREFORE, THIS TRIBUNAL IS OF THE CONSIDERED OPINION THAT THE MATTER NEEDS TO BE RECONSIDERED. THE DISALLOWAN CE UNDER SECTION 14A HAS TO BE ESTIMATED ON THE BASIS OF THE METHOD PRESCRIBED UNDER RULE 8D(2) OF INCOME TAX RULES. EVEN THOUGH, THE AS SESSEE CLAIMS THAT 9 I.T.A. NOS.1510 & 1699/MDS/2015 NO EXPENDITURE WAS INCURRED FOR EARNING THE EXEMPTE D INCOME, THE ASSESSING OFFICER WAS EXPECTED TO COMPUTE THE EXPEN DITURE IN CASE HE IS NOT SATISFIED ABOUT THE CLAIM MADE BY THE ASSESSEE. THE ASSESSING OFFICER APPARENTLY HAS TAKEN 0.5% OF THE AVERAGE VA LUE OF THE INVESTMENT WITHOUT CONSIDERING THE INCOME EARNED BY THE ASSESS EE WHICH DOES NOT FORM PART OF THE TOTAL INCOME. THE ASSESSING OFFICE R HAS NOT CONSIDERED RULE 8D(2)(II) WITH REGARD TO EXPENDITURE INCURRED BY THE ASSESSEE WHICH IS NOT DIRECTLY ATTRIBUTABLE TO ANY PARTICULAR INCO ME. 12. THEREFORE, THIS TRIBUNAL IS OF THE CONSIDERED OPINION THAT IT NEEDS TO BE REEXAMINED BY THE ASSESSING OFFICER INSTEAD O F CIT(A) AS SUGGESTED BY THE DEPARTMENT REPRESENTATIVE. ACCORDINGLY, THE ORDERS OF THE LOWER AUTHORITIES ARE SET ASIDE AND THE DISALLOWANCE MADE BY THE ASSESSING OFFICER UNDER SECTION 14A IS REMITTED BACK TO THE F ILE OF THE ASSESSING OFFICER. THE ASSESSING OFFICER SHALL RE-EXAMINE THE MATTER AFRESH IN THE LIGHT OF THE MATERIAL THAT MAY BE FILED BY THE ASSE SSEE AND THEREFORE COMPUTE THE DISALLOWANCE STRICTLY AS PER THE PROVIS IONS OF RULE 8D(2) OF THE INCOME TAX RULES. 13. THE NEXT GROUND OF APPEAL OF THE ASSESSEE RELA TES TO THE DEDUCTION UNDER SECTION 35D OF THE INCOME TAX ACT. SHRI T.BANUSEKAR, THE LEARNED REPRESENTATIVE FOR THE ASSESSEE SUBMITT ED THAT THE ASSESSEE CLAIMED RS.14,44,673/- BEING THE 1/5 TH EXPENDITURE UNDER SECTION 35D OF 10 I.T.A. NOS.1510 & 1699/MDS/2015 THE ACT. ACCORDING TO THE LEARNED REPRESENTATIVE, T HIS IS THE THIRD YEAR CLAIM OF THE CAPITAL ISSUE EXPENSES TO THE EXTENT O F RS.72,23,365/-. THE ASSESSING OFFICER AS WELL AS THE CIT(A) HAS NOT CON SIDERED THE CLAIM OF THE ASSESSEE. 14. ON THE CONTRARY, SHRI M.M.BHUSARI, THE LEARNED REPRESENTATIVE FOR THE DEPARTMENT SUBMITTED THAT IT IS NOT KNOWN WHETH ER THE ASSESSEE MADE A CLAIM UNDER SECTION 35D BEFORE THE ASSESSING OFFICER. HOWEVER, THE GROUNDS REPRODUCED BY THE CIT(A) SHOWS THAT THE ASSESSEE RAISED THE ISSUE BEFORE THE CIT(A). THEREFORE, THE CIT(A) OUGHT TO HAVE DISPOSED OFF THE GROUNDS RAISED BY THE ASSESSEE. SI NCE THE CIT(A) HAS NOT DISPOSED OFF THE GROUNDS, THE LEARNED REPRESENT ATIVE SUBMITTED THAT THE MATTER MAY BE REMITTED BACK TO THE FILE OF THE CIT(A) OR THE ASSESSING OFFICER. 15. WE HAVE CONSIDERED THE RIVAL SUBMISSIONS ON EI THER SIDE AND ALSO PERUSED THE MATERIAL AVAILABLE ON RECORD. THE CLAIM OF DEDUCTION UNDER SECTION 35D WAS NOT CONSIDERED BY THE ASSESSING OFF ICER AS WELL AS BY THE CIT(A). THEREFORE, THIS TRIBUNAL IS OF THE CONS IDERED OPINION THAT IN THE INTEREST OF JUSTICE, THE ASSESSING OFFICER HAS TO CONSIDER THE ISSUE FIRST. ACCORDINGLY, THE CLAIM MADE BY THE ASSESSEE UNDER SECTION 35D IS REMITTED BACK TO THE FILE OF THE ASSESSING OFFICER. THE ASSESSING OFFICER SHALL RECONSIDER THE ISSUE WITH REGARD TO THE CLAIM MADE BY THE ASSESSEE 11 I.T.A. NOS.1510 & 1699/MDS/2015 UNDER SECTION 35D AND DECIDE THE SAME IN ACCORDANCE WITH LAW AFTER GIVING REASONABLE OPPORTUNITY TO THE ASSESSEE. 16. NOW COMING TO THE REVENUES APPEAL IN ITA NO.1 699/MDS/2015, THE ONLY ISSUE ARISES FOR CONSIDERATION IS DISALLOW ANCE OF SPECULATION LOSS OF RS.12,23,87,167/- ON ACCOUNT OF CANCELLATION OF FOREIGN CURRENCY FORWARD CONTRACT. SHRI M.M.BHUSARI, THE LEARNED DEP ARTMENT REPRESENTATIVE SUBMITTED THAT EVEN THOUGH THE CIT(A ) TREATED TRANSACTION AS SPECULATIVE LOSS IN RESPECT OF CANCELLATION OF F ORWARD CONTRACT, THE CIT(A) FOUND THAT CANCELLATION OF FORWARD CONTRACT CANNOT BE EQUATED WITHOUT DERIVATIVE CONTRACT. ACCORDING TO THE LEARN ED DEPARTMENT REPRESENTATIVE, THE FORWARD CONTRACTS ARE NOT RELAT ABLE TO ANY SPECIFIC EXPORT BILLS OF THE ASSESSEE. THE ASSESSEE FAILED T O SUBSTANTIATE THE TRANSACTION IN RESPECT OF EXPORT BILLS. THEREFORE, THE CIT(A) IS NOT CORRECT IN ALLOWING THE CLAIM OF THE ASSESSEE. 17. ON THE CONTRARY, SHRI T.BANUSEKAR, THE LEARNED COUNSEL FOR THE ASSESSEE SUBMITTED THAT THE ASSESSEE ENTERED INTO F ORWARD CONTRACT IN THE ORDINARY COURSE OF BUSINESS AS ON EXPORT OF GAR MENTS. THE CIT(A) AFTER CONSIDERING THE MATERIAL AVAILABLE ON RECORD FOUND THAT THE CONTRACT NOTE FILED BY THE ASSESSEE SHOWS THAT THE FORWARD C ONTRACT IS THE PART OF THE REGULAR BUSINESS ACTIVITY OF THE ASSESSEE. THE CIT(A) PLACING HIS RELIANCE ON THE JUDGMENT OF THE GUJARAT HIGH COURT DECISION IN THE CASE OF 12 I.T.A. NOS.1510 & 1699/MDS/2015 CIT VS. PANCHMAHAL STEEL REPORTED IN [2013] 215 TAX MANN 140 (GUJ.) AND THE JUDGMENT OF BOMBAY HIGH COURT IN THE CASE O F CIT VS. BADRIDAS GAURIDU (P) LTD. REPORTED IN [2003] 261 ITR 256 (BO M.) FOUND THAT THE ASSESSEE HAS ENTERED INTO FORWARD CONTRACT IN THE O RDINARY COURSE OF BUSINESS TRANSACTION. THEREFORE, THE LOSS ARISING F ROM FORWARD CONTRACT HAS TO BE TREATED AS A NORMAL BUSINESS LOSS. ACCORD INGLY, HE ALLOWED THE SAME. 18. WE HAVE CONSIDERED THE RIVAL SUBMISSIONS ON EI THER SIDE AND ALSO PERUSED THE MATERIAL AVAILABLE ON RECORD. ADMITTEDL Y, THE ASSESSEE IS ENGAGED IN THE BUSINESS OF EXPORT OF GARMENTS TO VA RIOUS COUNTRIES. IN THE COURSE OF BUSINESS ACTIVITIES, THE ASSESSEE CLA IMS THAT IT ENTERED INTO FORWARD CONTRACT TO GUARD ITSELF FROM THE LOSS THAT MAY BE INCURRED DUE TO FOREIGN EXCHANGE FLUCTUATION. HOWEVER, THE ASSESSIN G OFFICER DISALLOWED THE CLAIM OF THE ASSESSEE ON THE GROUND THAT THE FO RWARD CONTRACTS ENTERED INTO BY THE ASSESSEE ARE IN THE NATURE OF S PECULATIVE TRANSACTION. AS DISCUSSED EARLIER, THIS TRIBUNAL IS OF THE CONSI DERED OPINION THAT THE DERIVATIVE TRANSACTION ENTERED INTO BY THE ASSESSEE TO GUARD ITSELF FROM THE LOSS THAT MAY ARISE DUE TO FOREIGN EXCHANGE FLU CTUATION CANNOT BE CONSIDERED TO BE A SPECULATIVE TRANSACTION. THEREFO RE, THE CIT(A) HAS RIGHTLY ALLOWED THE CLAIM OF THE ASSESSEE BY PLACIN G HIS RELIANCE IN GUJARAT HIGH COURT DECISION IN THE CASE OF PANCHMAH AL STEEL AND THE JUDGMENT OF BOMBAY HIGH COURT IN THE CASE OF BADRID AS GAURIDU (P) LTD. 13 I.T.A. NOS.1510 & 1699/MDS/2015 CITED SUPRA. THEREFORE, THIS TRIBUNAL DO NOT FIND A NY REASON TO INTERFERE WITH THE ORDER OF CIT(A). ACCORDINGLY, THE SAME IS CONFIRMED. 19. IN THE RESULT, THE APPEAL OF THE ASSESSEE IN ITA NO. 1510/MDS/2015 IS ALLOWED AND THE REVENUES APPEAL IN ITA NO.1699/ MDS/2015 IS DISMISSED. ORDER PRONOUNCED ON 09 TH SEPTEMBER, 2016 AT CHENNAI. SD/- SD/- (. !'# ! ) ( . . . ) (A. MOHAN ALANKAMONY) (N.R.S. GANESAN) % / ACCOUNTANT MEMBER /JUDICIAL MEMBER /CHENNAI, < /DATED, THE 09 TH SEPTEMBER, 2016. SP. 8 -9=> ?>)9 /COPY TO: 1. +, /APPELLANT 2. -.+, /RESPONDENT 3. 7 @9 () /CIT(A) 4. 7 @9 /CIT, 5. >A -9 /DR 6. B( C /GF.