The Dy. CIT, (OSD)-I, Circle-4, Ahmedabad V. M/s. Mark Bioscience Ltd., Ahmedabad

ITA 2379/AHD/2015

• Counselvise Citation: [2019] 117 COUNSELVISE.COM (IT) 9908 (ITAT-AHMEDABAD)
• Duration Of Justice: 3 year(s) 7 month(s) 17 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 29-03-2019
• Appeal Filed By: Department
• Order Result: Dismissed
• Bench Allotted: Not Allotted
• Assessment Year: 2010-2011
• Appeal Filed On: 11-08-2015
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: LALIT P JAIN
• Assessee Lawyers: S N SOPARKAR
• Keywords: Depreciation; Additional evidence; Notional interest; Commercial expediency
• Section: 143(3); 37

Judgement Text

, C IN THE INCOME TAX APPELLATE TRIBUNAL C BENCH, AHMEDABAD BEFORE SHRI PRADIP KUMAR KEDIA, ACCOUNTANT MEMBER & SHRI MAHAVIR PRASAD, JUDICIAL MEMBER ./ I.T.A. NO. 2379/AHD/2015 ( ASSESSMENT YEAR : 2010-11) ASST. COMMISSIONER OF INCOME TAX CIR. 2(1)(2), ABAD 1 ST FLOOR, NAVJIVAN TRUST BUILDING, AHMEDABAD - 380009 / VS. M/S. MARK BIOSCIENCE LTD. 5 TH FLOOR, HERITAGE, NR. GUJARAT VIDYAPITH, NR. USMANPURA, ASHRAM ROAD, AHMEDABAD ./ ./ PAN/GIR NO. : AABCM0366P ( APPELLANT ) .. ( / RESPONDENT ) / APPELLANT BY : SHRI LALIT P. JAIN, SR. DR / RESPONDENT BY : SHRI S. N. SOPARKAR, A.R. DATE OF HEARING 09/01/2019 !'# / DATE OF PRONOUNCEMENT 29/03/2019 / O R D E R PER PRADIP KUMAR KEDIA - AM: THE CAPTIONED APPEAL HAS BEEN FILED AT THE INSTANCE OF THE REVENUE AGAINST THE ORDER OF THE COMMISSIONER OF IN COME TAX (APPEALS)-2, AHMEDABAD (CIT(A) IN SHORT), DATED 2 5.05.2015 ARISING IN THE ASSESSMENT ORDER DATED 07.03.2013 PASSED BY THE ASSESSING OFFICER (AO) UNDER S. 143(3) OF THE INCOME TAX ACT, 1961 (THE ACT) CONCERNING AY 2010-11. ITA NO.2379/AHD/15 [ACIT VS. M/S. MARK BIOSCIENCE LTD.] A.Y. 2010-11 - 2 - 2. AS PER ITS GROUND OF APPEAL, THE REVENUE HAS CHA LLENGED THE ACTION OF THE CIT(A) IN REVERSING THE DISALLOWANCE OF RS.1,46,62,979/- BEING LOSS ON DERIVATIVES FOREIGN EXCHANGE TRANSACT IONS. 3. BRIEFLY STATED, THE ASSESSEE IN THE INSTANT CASE , FILED ITS RETURN OF INCOME FOR AY 2010-11 AND INTER ALIA DECLARED LOSS OF RS.1,46,62,979/- BEING LOSS ON DERIVATIVES. THE ASSESSEE IN JUSTI FICATION OF THE AFORESAID LOSS TO BE REVENUE IN NATURE SUBMITTED BE FORE THE AO THAT THE ASSESSEE ENTERED INTO DERIVATIVES FOREIGN EXCHANGE TRANSACTION WITH ICICI BANK LTD. ON 16 TH JULY, 2007 FOR A PERIOD OF TWO YEARS WHEREIN AS PERMITTED BY RESERVE BANK OF INDIA, THE INDIAN R UPEE LOAN OF RS.600 LAKHS WAS CONVERTED INTO CHF (SWISS CURRENCY ) LOAN. THE OBJECTIVE OF TAKING THE AFORESAID DERIVATIVE FOREIG N EXCHANGE TRANSACTION WAS TO REDUCE THE INTEREST COST. THE I NTEREST RATE ON RUPEE TERM LOAN WAS STATED TO BE 11.5%. AS AGAINST THIS, THE INTEREST RATE OF CHF LOAN WAS 1.67% ONLY. THUS, THE ASSESSEE INT ENDED SAVING IN INTEREST COSTS OF NEARLY 10% BY SUCH PROTECTION STR UCTURE BY WAY OF FOREIGN EXCHANGE TRANSACTION. IT WAS FURTHER EXPLA INED THAT DESPITE ALL PRECAUTIONS, THE ASSESSEE SUFFERED LOSS ON ACCOUNT OF SEVERE EXCHANGE FLUCTUATION OWING TO UNPRECEDENTED GLOBAL MELT DOWN IN FOREX MARKET. IT WAS SUBMITTED THAT IN THE YEAR 2009, THERE WAS A MAJOR TURMOIL IN INTERNATIONAL FOREX MARKET DUE TO SUB-PRIME SCAN IN USA DUE TO WHICH, THE PROTECTION STRUCTURE WAS BROKEN AND HUGE FOREX LIABILITY BEFALLEN TO THE ASSESSEE DUE TO WIDE FLUCTUATION IN EXCHANGE. IT WAS CONTENDED THAT THE CARDINAL OBJECTIVE OF THE TRANSACTION WAS TO SAVE ON INTEREST COSTS. FOR PROBABLE LOSS IN FOREX, THE PROTECTION STRUCTURE WAS ALSO TAKEN BUT HOWEVER DUE TO UNCONTROLLABLE OUTSIDE CIR CUMSTANCES, THE ASSESSEE SUFFERED LOSS IN THE AFORESAID TRANSACTION . THE TRANSACTION WAS EXPLAINED BEFORE THE AO AS UNDER: ITA NO.2379/AHD/15 [ACIT VS. M/S. MARK BIOSCIENCE LTD.] A.Y. 2010-11 - 3 - OBJECTIVE CONVERTING INR LOAN INTO CHF LOAN TO REDUCE INTEREST COST AMOUNT RS.6,00,00,000/- DATE OF CONTRACT JULY 16, 2007 INTEREST RATE 1.67% CHF/INR RATE RS.33.6941/I CHF CONVERTED CHF LOAN 17,80,726 CHF (USD 14,80,997) CONTRACT PERIOD JULY 10, 2009 CURRENCY STRIKE RATE SETTLEMENT RATE USD/CHF 1.2011 1.05 USD/INR 40.4700 45.20 CHF/INR 33.6941 43.0476 LOAN AMOUNT -17,80,726 CHF DIFFERENCE OF EXCHANGE RATE 9.3535 (DIFFERENCE OF S ETTLEMENT RATE STRIKE RATE I.E. RS.43.0476-RS. 33.6941) AMOUNT PAYABLE - RS.166.56 LACS LESS: INTEREST @ 1.67% - RS.20.02 LACS NET AMOUNT - RS.146.54 LACS HAD CHF REMAINED BELOW 1.07, THERE WAS A PROTECTION FOR RATE FLUCTUATION. 4. THE AO HOWEVER DISREGARDED THE CLAIM OF THE ASSE SSEE AS NOT BEING SATISFACTORY FOR THE REASON THAT RELEVANT DOC UMENTARY EVIDENCES WERE NOT PRODUCED TO CORROBORATE THE CLAIM. THE AO ACCORDINGLY DISALLOWED THE LOSS ON FOREX DERIVATIVES CLAIMED AS ABOVE. IT WAS FURTHER OBSERVED BY THE AO THAT ASSESSEE HAS SUFFER ED LOSSES ON ACCOUNT OF FOREX FLUCTUATION WHICH IS INCIDENTAL AN D ANCILLARY TO CAPITAL BORROWINGS AND ARE THEREFORE BE CONSTRUED T O BE CAPITAL IN NATURE AND COULD NOT BE ALLOWED UNDER S.37 OF THE A CT. 5. AGGRIEVED BY THE DENIAL OF CLAIM OF LOSS, THE AS SESSEE PREFERRED APPEAL BEFORE THE CIT(A). ITA NO.2379/AHD/15 [ACIT VS. M/S. MARK BIOSCIENCE LTD.] A.Y. 2010-11 - 4 - 6. THE CIT(A) TOOK NOTE OF SUBMISSIONS MADE BY THE ASSESSEE AS WELL AS ADMITTED AN ADDITIONAL EVIDENCE IN THE FORM OF A COPY OF SWAP CONFIRMATION LETTER ISSUED BY ICICI BANK LTD. INDIC ATING THE TRANSACTION IN CORROBORATION OF THE CLAIM. A REMAN D REPORT WAS CALLED BY THE CIT(A) AND AFTER TAKING NOTE OF REJOINDER TO THE REMAND REPORT, THE CIT(A) DECIDED THE ISSUE IN FAVOUR OF THE ASSES SEE. THE RELEVANT OPERATIVE PARA OF THE ORDER OF THE CIT(A) READS AS UNDER: 3.3. DECISION: I HAVE CAREFULLY CONSIDERED THE FACTS OF THE CASE, THE ASSESSMENT ORDER AND THE WRITTEN SUBMISSION OF THE APPELLANT. THE AO HAS DISALLOWED LOSS OF RS. 1.46 CRORES CLAIMED BY THE APPELLANT TO WARDS LOSS ON DERIVATIVES IN THE PROFIT AND LOSS ACCOUNT. THE AO HELD THAT THE APPELLANT DID NOT FURNISH ANY RELEVANT DOCUMENTARY EVIDENCE S UCH AS AGREEMENT ENTERING INTO DERIVATIVE FOREIGN EXCHANGE TRANSACTI ON WITH 1CICI BANK LTD, PERMISSION GRANTED BY RB1, AGREEMENT REGARDING CONVERSION OF LOAN FOR TWO YEARS ETC. HE ACCORDINGLY DISALLOWED THE CL AIM OF THE APPELLANT. DURING THE COURSE OF APPELLATE PROCEEDINGS, THE APP ELLANT SUBMITTED RELEVANT DOCUMENTARY EVIDENCE DURING INFORMATION AB OUT THE DERIVATIVE TRANSACTION IN FOREIGN EXCHANGE WITH 1C1CI BANK LTD . SINCE, THE INFORMATION WAS NEW AND WAS NOT GIVEN BEFORE THE AO DURING THE COURSE OF ASSESSMENT PROCEEDINGS AND THE SAME WAS FORWARDED T O HIM FOR PERUSAL AND COMMENTS. THE COMMENTS OF THE AO HAVE BEEN MENT IONED IN THE PRECEDING DISCUSSION. IT HAS BEEN POINTED OUT BY TH E AO THAT THE TRANSACTION IS CAPITAL IN NATURE AND SHOULD NOT BE ALLOWED U/S 37 OF THE ACT. THE APPELLANT IN RESPONSE TO THE REMAND REPORT GIVEN BY THE AO HAS SUBMITTED THAT THE TRANSACTION WAS NOT INCIDENTAL A ND ANCILLARY TO CAPITAL BORROWING AND WAS THEREFORE NOT A CAPITAL EXPENDITU RE. IT HAS ALSO BEEN POINTED OUT BY THE APPELLANT THAT IN EARLIER ASSESS MENT YEARS I.E. A.Y. 2007-08 AND 2008-09 THE GAIN DUE TO FOREIGN EXCHANG E FLUCTUATION FROM THE VERY SAME DERIVATIVE TRANSACTIONS HAVE BEEN SHO WN AS REVENUE INCOME FORMING PART OF THE TAXABLE INCOME. ON A CAREFUL CONSIDERATION OF ENTIRE FACTS OF THE C ASE, IT IS NOTED THAT THE APPELLANT HAD TAKEN A TERM LOAN FROM CENTR AL BANK OF INDIA LOAN. THE APPELLANT ENTERED INTO A DERIVATIVE FOREIGN EXC HANGE TRANSACTION WITH ICICI BANK TAKING NOTIONAL PRINCIPAL AMOUNT OF RS. 600 LAKH INR. THE TRANSACTION WAS A NOTIONAL TRANSACTION AND THE LOAN AS SUCH WAS NOT CONVERTED INTO A FOREIGN EXCHANGE LOAN. THE APPELLA NT HAS ENTERED INTO A PROTECTION STRUCTURE FOR LOWERING THE EFFECTIVE INT EREST RATE PAID BY THE APPELLANT ON THE TERM LOAN OF RS. 600 LACS. IT IS N OTED THAT THE PROTECTION STRUCTURE IS THE NORMAL BUSINESS PRODUCT OFFERED BY VARIOUS BANKS IN WHICH A NOTIONAL LOAN AMOUNT IS GIVEN CONSIDERING THE RAT ES OF INTEREST APPLICABLE IN THAT COUNTRY AND THE POSITION OF THE RATE OF CURRENCY OF THAT COUNTRY VIZ-A-VIZ THE INDIAN RUPEE. ON THAT PRODUCT A NOTIONAL THE RATE IS CHARGED. THE PERIOD OF PROTECTION STRUCTURE IS 2 TO 3 YEARS AND AT THE END OF EACH YEAR THE VARIATION IN FOREIGN EXCHANGE RATE AND THE GAIN EARNED BY ITA NO.2379/AHD/15 [ACIT VS. M/S. MARK BIOSCIENCE LTD.] A.Y. 2010-11 - 5 - THE CUSTOMER AND THE NOTIONAL INTEREST ARE TAKEN IN TO ACCOUNT AND THE NET PAYMENT IS EITHER MADE TO THE CUSTOMER OR IF THERE IS A LOSS DUE TO WIDE FLUCTUATION IN FOREIGN CURRENCY THE CUSTOMER HAS TO PAY OR COMPENSATE THE BANK. IN THE CASE OF THE APPELLANT THE APPELLANT HA S TAKEN THIS STRUCTURE WITH REFERENCE TO THE SWISS FRANK (CHF). THE PRODUC T 1 WAS FOR THREE YEARS. IN FIRST TWO YEARS THE APPELLANT EARNED PROF IT WHICH WAS SHOWN BY IT IN THE INCOME TAX RETURN AS INCOME. HOWEVER, IN THA T THIRD YEAR I.E. THE YEAR UNDER CONSIDERATION, THERE WAS A LOSS IN THE D EAL AS THERE WAS WIDE FLUCTUATION IN THE FOREIGN CURRENCY MARKET IN INDIA DUE TO SEVERE DEPRECIATION OF THE INDIAN RUPEE. THE ISSUE WHICH IS NOW TO BE DECIDED IS THAT WHETHE R THE LOSS CLAIMED BY THE APPELLANT IS REVENUE OR CAPITAL IN N ATURE AND WHETHER IT IS ALLOWABLE AS BUSINESS LOSS. THE FACTS WHICH HAVE EM ERGED FROM VARIOUS DOCUMENTS AND THE DETAILS AVAILABLE ON RECORD ARE T HAT THE CONTRACT ENTERED BY THE APPELLANT WITH THE BANK IS IN ACCORD ANCE WITH THE RB1 APPROVAL AND IT IS LINKED TO THE TERM LOAN TAKEN BY THE APPELLANT FROM CENTRAL BANK OF INDIA. IT IS ALSO NOTED THAT THIS I S THE STANDARD PRODUCT WHICH IS OFFERED BY VARIOUS BANKS TO THE CUSTOMERS TO TAKE ADVANTAGE OF THE VARIATION IN FOREIGN EXCHANGE MARKET. THE APPEL LANT HAS NOT DONE ANY TRANSACTION ON THE STOCK EXCHANGE OR PURCHASE AND S ALE OF FOREIGN EXCHANGE SO THAT IT CAN BE TERMED AS SPECULATIVE TR ANSACTION. THE TRANSACTION IS IN THE NATURE OF HEDGING TRANSACTION AND WAS DONE AS DERIVATIVE FOREIGN EXCHANGE TRANSACTION WITH ICICI BANK LTD ON 16/07/2007. THE APPELLANT HAS CLAIMED THAT THE OBJE CTIVE OF TAKING THIS TRANSACTION WAS TO REDUCE INTEREST COST. IT HAS BEE N CLAIMED THAT THE INTEREST RATE OF RUPEE TERM LOAN WAS 11.50% AGAINST THIS THE INTEREST RATE OF CHF LOAN WAS 1 .67%. THEREFORE, BY CONVERTING IN DIAN RUPEE LOAN INTO CHF LOAN, THE APPELLANT CLAIMS, THAT THERE WOULD HA VE BEEN SAVING OF APPROXIMATELY 10% PROVIDED EXCHANGE RATE REMAINED T HE SAME. THE CLAIM OF THE APPELLANT THAT THE INTEREST RATE OF CHF LOAN WAS 1 .67% IS SUPPORTED BY THE DOCUMENTS OF THE ICICI BANK GIVEN DURING THE COURSE OF PROCEEDINGS. IT IS CLEAR FROM THE EVIDENCES GIVEN BY THE APPELLA NT AND VARIOUS WRITTEN SUBMISSION GIVEN BY HIM THAT THE LOAN AMOUN T OF RS. 600 LACS HAS NOT BEEN CONVERTED INTO FOREIGN CURRENCY AND THE AP PELLANT HAS ONLY TAKEN A FOREIGN EXCHANGE DERIVATIVE TRANSACTIONS OF THE S AME AMOUNT HOPING THAT THE FOREIGN EXCHANGE FLUCTUATION WOULD BE IN ITS FA VOUR AND IT CAN EARN SOME GAIN ON THAT ACCOUNT. IN FIRST TWO YEARS OF TH E TRANSACTION THE APPELLANT EARNED SOMETHING HOWEVER IN THE PRESENT Y EAR THE FLUCTUATION WAS NOT IN ITS FAVOUR AND THE APPELLANT HAS INCURRE D HUGE LOSSES. IN VIEW OF THE ABOVE DISCUSSION IT IS SEEN THAT THE TRANSACTION IS LINKED TO THE TERM LOAN TAKEN BY THE APPELLANT AND THE SAME HAS BEEN ENTERED IN ORDER TO REDUCE THE INTEREST BURDEN. THE NATURE OF THIS TRANSACTION IS, THEREFORE, SHOULD BE OF REVENUE NAT URE AS IT IS LINKED TO THE INTEREST COST BEING INCURRED BY THE APPELLANT AND T HE DIFFERENCE IS SETTLED ON A YEARLY BASIS BY TAKING INTO ACCOUNT THE NOTION AL INTEREST AND THE FOREIGN EXCHANGE FLUCTUATION DIFFERENCE. THEREFORE THE OBJECTION OF THE AO THAT IT IS IN THE NATURE OF CAPITAL IS NOT ACCEPTAB LE. THERE IS NO DOUBT THAT THIS IS NOT A TRADITIONAL INSTRUMENT WHICH CAN BE S TRAIGHTAWAY CLASSIFIED AS CAPITAL OR REVENUE OR SPECULATIVE. IN THE PRESEN T BUSINESS SCENARIO WHERE THE BANKS AND THE TAXPAYERS ARE EXPOSED TO GL OBAL TRADING PRACTICES, THESE KIND OF PRODUCTS APPEAR TO BE VERY ATTRACTIVE AND OFFERS A ITA NO.2379/AHD/15 [ACIT VS. M/S. MARK BIOSCIENCE LTD.] A.Y. 2010-11 - 6 - GOOD BUSINESS SOLUTION TO THE TAXPAYER FOR REDUCING THE COST OF FINANCING. THE COST OF FINANCING I.E THE INTEREST IS CLEARLY R EVENUE EXPENDITURE AND THE INTEREST IS ALLOWABLE AS DEDUCTION FROM INCOME AS PRODUCTION HAS COMMENCED. IT IS FURTHER NOTED THAT THE TRANSACTION HAS BEEN E NTERED BY THE APPELLANT IN ORDER TO SAVE INTEREST ON THE LOAN TAK EN BY IT IN INDIAN CURRENCY. HOWEVER, DUE TO EXCHANGE RATE VARIATION I N THAT PERIOD, THE APPELLANT INCURRED A LOSS ON THE TRANSACTION AND TH ERE WAS EFFECTIVELY NO SAVING OF INTEREST IN THIS ASSESSMENT YEAR. THERE I S NO DOUBT THAT THE ENTIRE AGREEMENT WAS FOR THE PURPOSE OF BUSINESS AN D ANY PROFIT AND LOSS ARISING IN THIS TRANSACTION HAS TO BE TREATED AS RE VENUE ITEM. THE PROTECTION STRUCTURE TAKEN BY THE APPELLANT IS DIRE CTLY LINKED WITH THE TERM LOAN TAKEN BY THE APPELLANT COMPANY. THE EXPENDITUR E IS THEREFORE FOR THE PURPOSE OF BUSINESS. THE INSTRUMENT AND CONTRACT SI GNED BY THE APPELLANT WITH ICICI BONK IS NOT IN THE NATURE OF SPECULATION AND IS AN AUTHORISED DERIVATIVE TRANSACTION WHICH IS APPROVED BY THE RBI . THE UNDERLYING TRANSACTION WAS THE TRANSACTION OF TERM LOAN WHICH HAS BEEN TAKEN BY THE APPELLANT COMPANY FROM BANK AND IT IS FOR THIS TRAN SACTION THE DERIVATIVE TRANSACTIONS HAS BEEN UNDERTAKEN BY THE APPELLANT W ITH THE ICICI BANK. SINCE, THE APPELLANT HAS ITSELF NOT DONE ANY TRADIN G IN THE MARKET THE TRANSACTION IS NOT IN THE NATURE OF THE SPECULATIVE TRANSACTION SPECIFIED IN SECTION 43(5). THE LOSS WHICH HAS OCCURRED IN THIS YEAR SHOULD ACCORDINGLY BE ALLOWED AS DEDUCTION FROM THE INCOME AND THE SAM E HAS RIGHTLY BEEN CLAIMED BY THE APPELLANT IN THE RETURN. IT IS FURTH ER NOTED THAT THE GAIN ON SIMILAR ARRANGEMENT HAS BEEN OFFERED TO TAX BY THE APPELLANT IN THE YEAR 2007-08 AND 2008-09. THE SAME HAS ALSO BEEN ACCEPTE D AND TAXED BY THE ASSESSING OFFICER IN THOSE YEARS. IN VIEW OF THE ABOVE DISCUSSION, 1 AM OF THE CONSID ERED OPINION THAT THE APPELLANT'S CLAIM ON LOSS ON DERIVATIVES IS AN ALLOWABLE DEDUCTION. THE DISALLOWANCE MADE BY THE AO IS, THEREFORE, DIRECTED TO BE DELETED. THE GROUND OF APPEAL IS ACCORDINGLY, ALLOWED . 7. AGGRIEVED BY THE RELIEF GRANTED BY THE CIT(A), T HE REVENUE HAS PREFERRED APPEAL BEFORE THE TRIBUNAL. 8. THE LEARNED DR RELIED UPON THE ORDER OF THE AO. 9. THE LEARNED AR FOR THE ASSESSEE, ON THE OTHER HA ND, RELIED UPON THE ORDER OF THE CIT(A). IN FURTHERANCE, THE LEARN ED AR POINTED OUT THAT THE SOLITARY OBJECTIVE OF THE DERIVATIVE FOREI GN EXCHANGE TRANSACTION WITH ICICI BANK LTD. WAS TO SAVE ON INT EREST COSTS OF BORROWED FUNDS BY WAY OF TERM LOAN FROM CENTRAL BAN K OF INDIA IN INDIAN RUPEE. THE LEARNED AR ALSO OBSERVED THAT TH E PROTECTION ITA NO.2379/AHD/15 [ACIT VS. M/S. MARK BIOSCIENCE LTD.] A.Y. 2010-11 - 7 - STRUCTURE IN FOREIGN EXCHANGE WAS TAKEN FROM ICICI BANK LTD. FOR A NOTIONAL AMOUNT OF RS.6CRORE INR WITH A VIEW TO HED GE THE BORROWED FUNDS IN INDIAN RUPEE. THE LEARNED AR POINTED OUT THAT BY ADOPTION OF SUCH STRUCTURE, ASSESSEE HAS IN FACT EARNED PROF ITS IN THE FIRST TWO YEARS, WHICH WAS SHOWN BY IT IN THE INCOME TAX RETU RN AS INCOME. HOWEVER, IN THE THIRD YEAR I.E. YEAR UNDER CONSIDER ATION, THERE WAS A LOSS IN THE DEAL HAVING REGARD TO THE MASSIVE GLOBA L TURMOIL RESULTING IN SEVER FALL IN THE VALUE OF THE INDIAN CURRENCY. THE LEARNED AR ALSO REFERRED TO JUDICIAL PRECEDENTS BOTH FOR ENTITLEMEN T OF THE CIT(A) TO TAKE NOTE OF ADDITIONAL EVIDENCES AS WELL AS FOR EL IGIBILITY OF FOREIGN CURRENCY LOSS OWING TO EXPOSURE TAKEN BY THE ASSESS EE. THE LEARNED AR ACCORDINGLY SUBMITTED THAT NO INTERFERENCE WITH THE ORDER OF THE CIT(A) IS CALLED FOR. 10. WE HAVE CAREFULLY CONSIDERED THE RIVAL SUBMISSI ONS. THE ELIGIBILITY OF LOSS ARISING TO THE ASSESSEE ON ACCO UNT OF EXPOSURE TAKEN BY THE ASSESSEE IN DERIVATIVE FOREIGN EXCHANGE TRAN SACTION IS SUBJECT MATTER OF DISPUTE. THE REASONS RECORDED BY THE CIT (A) FOR REVERSING THE ACTION OF THE AO AND ALLOWING THE CLAIM OF LOSS OF THE ASSESSEE IS SELF-EXPLANATORY. THE CIT(A) HAS DISCUSSED IN LENG TH THE RELEVANT FACTS AND OBSERVED THAT THE TRANSACTION UNDERTAKEN BY THE ASSESSEE WERE HEDGING TRANSACTION TO AVAIL LOWER RATE OF INT EREST AND TO IMPROVE THE PROFITABILITY OF THE COMPANY. THE ASSESSEE HAS ACTUALLY EARNED PROFITS IN TWO ASSESSMENT YEARS WHICH WAS SUBJECTED TO TAXATION. THE CIT(A) HAS RECOGNIZED THAT THE LOSS WAS CAUSED TO T HE ASSESSEE IN THIS YEAR DUE TO UNFORESEEN AND UNPREDICTABLE GLOBAL MEL T DOWN IN FOREX MARKET OWING TO WHICH THE DERIVATIVE TRANSACTION UN DERTAKEN WAS SETTLED AT A VERY HIGH PRICE OWING TO FALL AND WEAK ING OF RUPEE. THE BENEFIT OF LOWER INTEREST WAS THUS NOT ONLY ERODED, THE ASSESSEE ENDED UP PAYING FOR THE ADDITIONAL LOSS DUE TO UNPRECEDEN TED FALL IN STRENGTH OF RUPEE. THE LOSS OF SUCH NATURE HAS BEEN RIGHTLY RECORDED TO BE ITA NO.2379/AHD/15 [ACIT VS. M/S. MARK BIOSCIENCE LTD.] A.Y. 2010-11 - 8 - REVENUE IN NATURE BY THE CIT(A). THE EXPENDITURE, IN OUR VIEW, IS CLEARLY FOR THE PURPOSES OF BUSINESS WHEN THE TEST OF COMMERCIAL EXPEDIENCY AND PRINCIPLES OF ORDINARY COMMERCIAL TR ADING ARE APPLIED. THE EXPENDITURE HAS BEEN INCURRED TO FACILITATE THE CARRYING ON OF THE BUSINESS AND IS SUPPORTED BY COMMERCIAL EXPEDIENCY. WE THUS SEE NO INFIRMITY IN THE CONCLUSION DRAWN BY THE CIT(A). W E ACCORDINGLY DECLINE TO INTERFERE THERE WITH. 11. IN THE RESULT, APPEAL OF THE REVENUE IS DISMISS ED IN TOTO . SD/- SD/- (MAHAVIR PRASAD) (PRADIP KUMA R KEDIA) JUDICIAL MEMBER ACCOUNTANT MEMBER AHMEDABAD: DATED 29/03/2019 TRUE COPY S. K. SINHA !'#' / COPY OF ORDER FORWARDED TO:- &. / REVENUE 2. / ASSESSEE (. )*+ , / CONCERNED CIT 4. ,- / CIT (A) /. 012 33*+4 *+#4 56) / DR, ITAT, AHMEDABAD 7. 289 : / GUARD FILE. BY ORDER / 4 /5 *+#4 56) THIS ORDER PRONOUNCED IN OPEN COURT ON 29/03/2019