Cotton Blossom (India) P Ltd., CHENNAI V. JCIT, Tiruppur

ITA 583/CHNY/2014

• Counselvise Citation: [2015] 140 COUNSELVISE.COM (IT) 96673 (ITAT-CHENNAI)
• Duration Of Justice: 1 year(s) 9 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: 12-11-2015
• Assessment Year: 2009-2010
• Appeal Filed On: 10-03-2014
• Court: TRIBUNAL
• Department Lawyers: DR U ANJANEYULU
• Assessee Lawyers: R VIJAYARAGHAVAN
• Keywords: Business income; Business expenditure; Speculation loss; Revenue expenditure; Capital expenditure
• Section: 80C; 10(10D); 37(1); 43(5); 37; 28

Judgement Text

, , IN THE INCOME TAX APPELLATE TRIBUNAL A BENCH, CHENNAI , ! ' , # $% BEFORE SHRI CHANDRA POOJARI, ACCOUNTANT MEMBER AND SHRI CHALLA NAGENDRA PRASAD, JUDICIAL MEMBER ./ ITA NOS. 583/MDS/2014 & 1531/MDS/2015 / ASSESSMENT YEARS : 2009-10 & 2008-09 M/S. COTTON BLOSSOM (INDIA) P. LTD., NO.189, TEKIC TEA NAGAR, MUDA;O[ALAYAM, TIRUPUR- 641 606. PAN AACCC5046R ( /APPELLANT) VS THE JOINT COMMISSIONER OF INCOME-TAX, TIRUPUR RANGE/ THE DCIT, COM. CIR., TIRUPUR. ( /RESPONDENT) ./ ITA NO. 1604/MDS/2015 / ASSESSMENT YEAR : 2008-09 THE DEPUTY COMMISSIONER OF INCOME-TAX, CIRCLE-2, TIRUPUR 641 602. ( /APPELLANT) VS M/S.COTTON BLOSSOM (I) PVT. LTD., MUDALIPALAYAM, TIRUPUR, ( /RESPONDENT) ASSESSEE BY : SHRI R. VIJAYARAGHAVAN, ADVOCATE DEPARTMENT BY : DR. U. ANJANEYULU , CIT ! ' #$% / DATE OF HEARING : 12.11.2015 &' ' #$% / DATE OF PRONOUNCEMENT : 31.12.2015 - - ITA 583/14, 1531/15 ETC. 2 & / O R D E R PER CHANDRA POOJARI, ACCOUNTANT MEMBER THE APPEALS IN ITA NOS.583/MDS/2014 & 1531/MDS/2 015 ARE FILED BY THE ASSESSEE AND THE APPEAL IN ITA NO.1604/MDS/2015 IS FILED BY THE REVENUE. THEY ARE DIRECTED AGAINST DIFFERENT ORDERS OF THE COMMISSIONER OF INC OME- TAX(APPEALS) DATED 24.12.2013 AND 31.3.2015 FOR THE ASSESSMENT YEARS 2009-10 AND 2008-09 RESPECTIVELY. 2. THE ONLY COMMON ISSUE IN THE ASSESSEES APPEALS IS WITH REGARD TO DISALLOWANCE OF PREMIUM PAID TO LIC UNDER EMPLOYER- EMPLOYEE SCHEME FOR TREATING THE SAME AS CAPITAL EXPENDITURE. 3. THE FACTS AS NARRATED IN ASSESSMENT YEAR 2009-10 ARE THAT THE ASSESSEE COMPANY PAID PREMIUM TO LIFE INSU RANCE CORPORATION OF INDIA UNDER EMPLOYMENT-EMPLOYEE S CHEME OR LIC FOR THE FOLLOWING PERSONS: POLICY NUMBER NAME OF LIFE ASSURED PREMIUM PAID ( ` ) 765911607 MR. JOSEPH ANTHORY JOHN 20,00,000 765911608 MR. MILTON AMBROSE JOHN 15,00,000 COMING TO THE ARGUMENT OF THE ASSESSING OFFICER THA T IT IS A CLOSE ENDED FUND WITH A LOCK IN PERIOD OF 3 YEARS, THE ASSESSING OFFICER ' S ARGUMENTS LACK MERIT . IT MAY BE SEEN - - ITA 583/14, 1531/15 ETC. 3 THAT EVEN UNDER SECTION 80C , CONTRIBUTION TO ULLP POLICIES QUALIFIES FOR DEDUCTION IN THE OVERALL LIMIT . WHEN A PARTICULAR POLICY IS CONSIDERED ALLOWABLE FOR 80C DEDUCTION, I T IS NOT CLEAR AS TO HOW THE SAME POLICY MAY BE BARRED FROM CLAIMING DEDUCTION UNDER SECTION 37(1) OF THE INCOME TAX ACT , 1961 . THE ASSESSING OFFICER HAS ALSO FAILED TO NOTE THAT IN CASE THE POLICY IS SURRENDERED BEFORE THE EXPIRY OF THREE YE ARS, THEN , WHATEVER AMOUNT THAT IS RECEIVED BY THE ASSIGNEE, I T BECOMES TAXABLE IN HIS HANDS. HENCE THE ARGUMENTS O F THE A.O. FAILS ON THIS SCORE. 3.1 WITH RESPECT TO THE ASSESSING OFFICER ' S VIEW THAT THE PREMIUM PAID FOR SHARE HOLDERS , IT IS SUBMITTED THAT THE SAID PERSONS ON WHOSE BEHALF PREMIUM ARE PAID COME UNDER THE DEFINITION OF 'OFFICER ' AS ENSHRINED IN SECTION 2 (30) OF THE COMPANIES ACT , 1956 WHEREIN THE TERM ' OFFICER ' INCLUDES ANY DIRECTOR , MANAGER OR SECRETARY OR ANY PERSON IN ACCORDANCE WITH WHOSE DIRECTIONS OR INSTRUCTIONS THE BOARD OF DIRECTORS OR ANYONE OR MORE DIRECTORS IS OR ARE ACCUSTOMED TO AC T . 3.2 WITH REGARD TO THE OBSERVATIONS OF THE ASSESSIN G OFFICER THAT THE CLAIM IS NOT SUPPORTED BY ANY RULES, DIREC TIONS, - - ITA 583/14, 1531/15 ETC. 4 CIRCULARS, INSTRUCTIONS OF CBDT DECISIONS AND DIREC TIONS OF CBDT THE ASSESSEE WISHES TO STATE THAT THE ABOVE OBSERVA TIONS OF THE ASSESSING OFFICER HAS TO BE WEIGHED WITH RESPECT TO BASIC GENERAL PRINCIPLES GOVERNING ALLOWABILITY OR OTHERW ISE THE IMPUGNED EXPENDITURE WITH RESPECT TO THE AVAILABLE CASE LAWS OR SECTION 37 OF THE INCOME TAX ACT, 1961. AGGRIEVED, THE ASSESSEE WENT IN APPEAL BEFORE THE CIT(APPEALS). 4. ON APPEAL, THE CIT(APPEALS) OBSERVED THAT THE FO LLOWING ITEMS LISTED BY THE ASSESSING OFFICER ARE CORRECT: A. THE INVESTMENT (EXPENDITURE) IS A CLOSE ENDED F UND WITH A LOCK IN PERIOD OF 3 YEARS WHEREBY AFTER THE EXPIRY OF 3 YEARS THE FUND MAY BE SURRENDERED AT THE PREVAILI NG NAV. B. IT IS NOT A TERM POLICY WHEREBY LIFE IS INSURED BY PAYING CHARGES AS PREMIUM FOR THE LIFE COVERAGE. IN SUCH POLICIES GENERALLY THERE WILL NO RETURN ON THE PREMIUM PAID. C. THE EXPENDITURE WAS INCURRED IN RESPECT OF SHAREHOLDERS OF THE COMPANY. NO EXPENDITURE WAS INCURRED ON EMPLOYEES OTHER THAN SHARE HOLDERS. D. NO SPECIFIC INSTRUCTION, CIRCULAR OR DIRECTION BY THE CBDT HAS BEEN CITED BY THE ASSESSEE IN SUPPORT OF SPECIFIC ALLOWABILITY AS REVENUE EXPENDITURE OTHER THAN THE STATED OPINION OF THE LIC. 4.1 THEREFORE, THE CIT(APPEALS) OBSERVED THAT THE ABOVE - - ITA 583/14, 1531/15 ETC. 5 POINTS WOULD CLEARLY INDICATE THAT THE ASSESSEE COM PANY HAS MADE CAPITAL INVESTMENT IN THE NAME OF DIRECTOR S OF THE COMPANY IN A CLOSE ENDED FUNDS OF LIC. ACCORD ING TO THE CIT(APPEALS), THE ASSESSEE HAS MISCHIEVOUSLY CL AIMED THE SAME AS REVENUE EXPENDITURE U/S. 37(1). NONE OF THE ARGUMENTS PUT FORWARD BY THE ASSESSEE AS THE AMOUNTS ARE PAID IN THE NAME OF DIRECTORS OF THE COMPANY WH ICH ARE IN THE NATURE OF CAPITAL INVESTMENT . BY NO STRETCH OF IMAGINATION CAN THIS INVESTMEN T BE TREATED AS AN INSURANCE POLICY COVERING THE LIFE OF DIRECTORS SO AS TO TREA T THEM AS KEYMAN INSURANCE. THE CIT(APPEALS), FURTHER OBSERVE D THAT THE ASSESSEE HAS USED A COLOURABLE DEVICE FOR AN INVESTMENT INSTRUMENT OF LIC TO CONFUSE WITH LIFE I NSURANCE POLICY TO CLAIM THE EXPENDITURE AS KEYMAN INSUTRANC E. ACCORDINGLY, THE CIT (APPEALS), CONFIRMED THE ADDIT ION MADE TO THE EXTENT OF ` 35,00,000/- IN THE HANDS OF THE ASSESSEE. AGAINST THIS, THE ASSESSEE IS IN APPEAL B EFORE US. 5. WE HAVE HEARD BOTH THE PARTIES AND PERUSED THE M ATERIAL ON RECORD. THE MAIN REASON FOR DISALLOWANCE BY THE - - ITA 583/14, 1531/15 ETC. 6 CIT(APPEALS) IS THAT THE PREMIUM PAID IN THE NAME O F THE DIRECTORS ARE NOT COVERED UNDER LIC AND IT CANNOT B E ALLOWED AS THEY ARE DIRECTORS OF THE COMPANY. IT IS TO BE NO TED THAT KEYMAN INSURANCE POLICY IS AN ALLOWABLE DEDUCTION A S PER THE PROVISIONS OF SEC.37(1) OF THE ACT. IN THIS REGARD , CBDT HAD ALSO ISSUED A CIRCULAR NO.762 DATED 18.2.1998. FURTHER, IT CANNOT BE SAID THAT THE DIRECTORS OF THE COMPANY ARE NOT EMPL OYEES OF THE COMPANY AND THE PREMIUM PAID IN THE NAME OF THE DIR ECTORS COULD BE ALLOWED UNDER THE SAID SCHEME. 6. WE ALSO FIND THAT WHILE DECIDING THE ISSUE OF AL LOWABILITY EXPENSES OF KEYMAN INSURANCE POLICY PREMIUM, ITAT B ILASPUR BENCH IN THE CASE OF SUNITA FINLEASE LTD. VS DCIT R EPORTED IN [2008] 118 TTJ (BILASPUR) 263 HAS HELD AS UNDER: 'THE POLICY KNOWN AS 'KEYMAN INSURANCE POLICY' PROVIDES FOR AN INSURANCE POLICY TAKEN BY A BUSINES S ORGANIZATION ON THE LIFE OF SOME IMPORTANT PERSONS IN THE ORGANIZATION, GENERALLY CALLED AS KEYMAN IN THE INSURANCE NOMENCLATURE. UNDER THE IT ACT , THIS CONCEPT OF KEYMAN INSURANCE POLICY IS FOR THE FIRST TIME INTRODUCED BY THE FINANCE (NO.2) ACT , 1996. SO, BEFORE THE AMENDMENT, THERE WAS NO PROVISION EXPLAINING TH E TREATMENT OF PREMIUM PAID, SUM RECEIVED ON MATURITY ETC. UNDER THE ACT. PREVIOUSLY, ONE SIDE, THE INSURANCE PREMIUM WAS DEDUCTED AS EXPENDITURE BUT ON THE OTHE R SIDE THE RECEIPTS ON MATURITY WERE CLAIMED AS EXEMP TED - - ITA 583/14, 1531/15 ETC. 7 FOR TAXATION UNDER THE PROVISIONS OF S. 10(10D) . TO CURB THIS PRACTICE, SOME AMENDMENTS WERE MADE BY THE AFORESAID AMENDMENT ACT. BUT AS USUAL, THE AMENDMEN T HAS CREATED MORE CONFUSION THAN THE SOLUTION OF THE PROBLEMS. WHILE THE ACT IS AMENDED IN MANY PLACES TO THE EFFECT THAT THE AMOUNT RECEIVED WILL BE TAXABLE , IT IS NOWHERE ACIT, CIR-5, AHMEDABAD VS N. K. PROTIENS LT D. PROVIDED THAT THE PREMIUM PAID ON THE KEYMAN INSURANCE POLICY IS ALLOWABLE AS BUSINESS EXPENDITU RE EXCEPT BY A CIRCULAR OF CBDT. THE CIRCULAR NO.762 D T. 18TH FEB., 1998, CLARIFYING WITH REGARD TO THE TREA TMENT OF THE PREMIUM PAID OF KEYMAN INSURANCE POLICY WHETHER IT SHOULD BE ALLOWED AS A CAPITAL EXPENDITURE OR A REV ENUE EXPENDITURE, THE BOARD HAS CLARIFIED THAT THE PREMI UM PAID ON THE KEYMAN INSURANCE POLICY BE ALLOWED AS BUSINESS EXPENDITURE. THIS CIRCULAR IS BINDING ON T HE REVENUE AUTHORITIES. IN VIEW OF THE ABOVE, THE PREM IUM PAID BY THE ASSESSEE ON THE KEYMAN INSURANCE POLICY IS ALLOWABLE AS BUSINESS EXPENDITURE. THE AO IS DIRECT ED TO ALLOW THE CLAIM OF THE ASSESSEE SUBJECT TO VERIFICA TION OF THE PREMIUM PAID BY THE ASSESSEE COMPANY.' 7. FURTHER, WE HAVE ALSO PERUSED THE CIRCULAR NO.76 2 DATED 18-02-1998 ISSUED BY THE CBDT, WHEREIN THE PREMIUM PAID TOWARDS KEYMAN INSURANCE POLICY IS DEALT WITH AND T HE SAME IS REPRODUCED AS UNDER: 'TAXATION OF A SUM RECEIVED UNDER THE KEYMAN INSURA NCE POLICY 14.1 A KEYMAN INSURANCE POLICY OF THE LIFE INSURANCE CORPORATION OF INDIA, ETC., PROVIDES FOR AN INSURANCE POLICY TAKEN BY A BUSINESS ORGANIZATION O R A PROFESSIONAL ORGANIZATION ON THE LIFE OF AN EMPLOYE E, IN ORDER TO PROTECT THE BUSINESS AGAINST THE FINANCIAL LOSS, - - ITA 583/14, 1531/15 ETC. 8 WHICH MAY OCCUR FROM THE EMPLOYEE'S PREMATURE DEATH . THE 'KEYMAN' IS AN EMPLOYEE OR A DIRECTOR, WHOSE SERVICES ARE PERCEIVED TO HAVE A SIGNIFICANT EFFECT ON THE PROFITABILITY OF THE BUSINESS. THE PREMIUM IS PAID BY THE EMPLOYER.' 7.1 IN OUR OPINION, THE PAYMENT OF PREMIUM MADE TO THE LIC IN THE NAME OF DIRECTORS ARE COVERED BY THE ABOVE C IRCULAR AND IT IS ALLOWED U/S.37(1) OF THE ACT. FURTHER, WE MA KE IT CLEAR THAT THE PREMIUM PAID BY THE ASSESSEE COMPANY IS TO BE C ONSIDERED AS PERQUISITE IN THE HANDS OF THE RECIPIENT. WITH THESE OBSERVATIONS, THE APPEALS OF THE ASSESSEE ARE ALLOW ED. 8. THE GROUND RAISED BY THE REVENUE IN ITS APPEAL I S THAT THE CIT (APPEALS) ERRED IN DELETING THE DISALLOWANCE OF SPECULATION LOSS OF ` 1,06,61,901/- ON ACCOUNT OF CANCELLATION OF FOREIGN CURRENCY FORWARD CONTRACT BY TREATING IT AS TRADING LOSS. 9. THE FACTS ARE THAT THE ASSESSEE COMPANY ENGAGED IN THE BUSINESS OF MANUFACTURING GARMENTS AND GENERATION O F WIND POWER FILED ITS RETURN OF INCOME FOR THE ASSESSMENT YEAR 2008-09 ON 10.9.2009 DECLARING AN INCOME OF ` 2,57,51,585/-. THE CASE WAS SELECTED FOR SCRUTINY AND THE ASSESSMENT WAS CO MPLETED AS UNDER : - - ITA 583/14, 1531/15 ETC. 9 RETURNED INCOME ` 2,57,51,585/- ADD: 1. DISALLOWANCE OF SET OFF OF LOSS IN SPECULATION BUSINESS LOSS IN FORWARD CONTRACT ` 2,04,96,437/- LESS: PROFIT ON FORWARD CONTRACT ` 80,01,016/- PROFIT ON OPTION ` 18,33,520/- ` 98,34,536/- ` 1,06,61,901/- 2. DISALLOWANCE OF EXPENSES CLAIMED AS EMPLOYER-EMPLOYEE INSURANCE ` 1,65,00,000/- ---------------------- ASSESSED INCOME ` 5,29,13,486/- AGGRIEVED BY THIS, THE ASSESSEE WENT IN APPEAL BEFO RE THE CIT(APPEALS). 10. ON APPEAL, THE CIT(APPEALS) FOLLOWED THE ORDER OF THE TRIBUNAL IN ASSESSEES OWN CASE IN ITA NO.2032/MDS/ 2012 DATED 21.2.2013 FOR THE ASSESSMENT YEAR 2006-07, WHEREIN THE TRIBUNAL HAS HELD AS UNDER: 9. WE HAVE HEARD BOTH SIDES. PERUSED THE MATERIALS ON RECORD AND THE ORDERS OF AUTHORITIES BELOW. THE ASSESSEE IS AN EXPORTER OF HOSIERY GARMENTS. THERE IS NO DISPUTE THAT THE ASSESSEE IS NOT A DEALER IN FOREIG N EXCHANGE. THE ASSESSEES FOREX TRANSACTIONS ARE REGULATED BY RBI. THE ASSESSEE IS CARRYING ON THE F OREX TRANSACTIONS ONLY IN THE COURSE OF ITS BUSINESS AND NOT AS A SEPARATE BUSINESS AS OBSERVED BY THE ASSESSING OFFICER BECAUSE THE ASSESSEE IS NOT A DEALER IN FOR EIGN EXCHANGE. THE HON'BLE BOMBAY HIGH COURT IN THE CASE OF CIT V. BADRIDAS GAURIDU (P) LTD (SUPRA) HELD THA T AN ASSESSEE WHO IS AN EXPORTER OF COTTON ENGAGED IN FORWARD CONTRACTS WITH BANKS IN FOREIGN EXCHANGE IS NOT A - - ITA 583/14, 1531/15 ETC. 10 SPECULATIVE TRANSACTION. IT WAS HELD THAT LOSS DEDU CTIBLE IS BUSINESS LOSS. WHILE HOLDING SO, THE HON'BLE BOM BAY HIGH COURT HELD AS UNDER :- THE ASSESSEE-COMPANY CARRIED ON BUSINESS AS EXPORT HOUSE. THE ASSESSEE-COMPANY IS AN EXPORTER OF COTTON. ON 30TH DEC., 1992, THE ASSESSEE FILED ITS RETURN OF INCOME SHOWING AN INCOME OF RS. 1,13,100. THE ASSESSEE HAD ENTERED INTO FORWARD CON TRACTS WITH THE BANKS IN RESPECT OF FOREIGN EXCHANGE. SOME OF THESE CONTRACTS COULD NOT BE HONOURED BY THE ASSESSEE FOR WHICH IT HAD TO PAY RS. 13.50 LAKHS, WHICH WAS DEBITED TO THE P&L A/C. THE ASSESSEE CLAIMED THE SAME AS BUSINESS LOSS BEING PAYMENT MAD E ON ACCOUNT OF CANCELLATION OF FORWARD BOOKING OF FOREI GN EXCHANGE WITH THE BANKS IN RESPECT OF EXPORT ORDERS. THE AO DISAL LOWED THE DEDUCTION ON THE GROUND THAT THE ASSESSEE HAD SHORT SOLD THE FOREIGN EXCHANGE AND THAT THE PAYMENTS MADE WERE NO T IN THE NATURE OF DAMAGES, BUT THEY WERE MADE TO SETTLE THE TRANSACTION WITHOUT DELIVERY AND, THEREFORE, THE SAID AMOUNT OF RS. 13.50 LAKHS WAS A SPECULATION LOSS, WHICH CAN ONLY BE ALLOWED T O BE CARRIED FORWARD AND SET OFF AGAINST SPECULATION PROFITS. BE ING AGGRIEVED, THE ASSESSEE CARRIED THE MATTER IN APPEAL TO THE CIT(A) . THE FIRST APPELLATE AUTHORITY CONFIRMED THE ASSESSMENT ORDER. BEING AGGRIEVED, THE ASSESSEE CARRIED THE MATTER IN APPEA L TO THE TRIBUNAL, WHICH TOOK THE VIEW THAT THE ASSESSEE WAS AN EXPORTER OF COTTON; THAT THE ASSESSEE WAS AN EXPORT HOUSE; THAT IT HAD ENTERED INTO TRANSACTIONS FOR EXPORT OF COTTON; THAT THE AS SESSEE WAS ENTITLED TO BOOK FOREIGN EXCHANGE AGAINST EXPORT ORDERS RECE IVED BY IT; THAT THE TRANSACTION WAS DONE WITH THE PERMISSION OF THE RESERVE BANK OF INDIA; THAT SUCH CONTRACTS WERE INCIDENTAL TO TH E ASSESSEE'S BUSINESS OF EXPORT OF COTTON; AND, THEREFORE, THEY DID NOT REPRESENT SPECULATIVE TRANSACTIONS. ACCORDINGLY, THE TRIBUNAL ALLOWED THE - - ITA 583/14, 1531/15 ETC. 11 APPEAL. BEING AGGRIEVED, THE DEPARTMENT HAS COME BY WAY OF APPEAL TO THIS COURT. FINDINGS THE ASSESSEE WAS NOT A DEALER IN FOREIGN EXCHANGE. THE ASSESSEE WAS A COTTON EXPORTER. THE ASSESSEE WAS AN EXPORT H OUSE. THEREFORE, FOREIGN EXCHANGE CONTRACTS WERE BOOKED O NLY AS INCIDENTAL TO THE ASSESSEE'S REGULAR COURSE OF BUSI NESS. THE TRIBUNAL HAS RECORDED A CATEGORICAL FINDING TO THIS EFFECT IN ITS ORDER. THE AO HAS NOT CONSIDERED THESE FACTS. 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 D ELIVERY OR TRANSFER OF SUCH COMMODITY. HOWEVER, AS STATED ABOV E, THE ASSESSEE WAS NOT A DEALER IN FOREIGN EXCHANGE. THE ASSESSEE WAS AN EXPORTER OF COTTON. IN ORDER TO HEDGE AGAINST LO SSES, THE ASSESSEE HAD BOOKED FOREIGN EXCHANGE IN THE FORWARD MARKET WITH THE BANK. HOWEVER, THE EXPORT CONTRACTS ENTERED INT O BY THE ASSESSEE FOR EXPORT OF COTTON IN SOME CASES FAILED. IN THE CIRCUMSTANCES, THE ASSESSEE WAS ENTITLED TO CLAIM D EDUCTION IN RESPECT OF RS. 13.50 LAKHS AS A BUSINESS LOSS. THIS MATTER IS SQUARELY COVERED BY THE JUDGMENT OF THE CALCUTTA HI GH COURT, WITH WHICH WE AGREE, IN THE CASE OF CIT VS. SOORAJMULL N AGARMULL (1981) 22 CTR (CAL) 8 : (1981) 129 ITR 169. IN THE CIRCUMSTANCES, THERE IS NO MERIT IN THE APPE AL. THE APPEAL FAILS AND THE SAME IS DISMISSED WITH NO ORDER AS TO COST. THE HON'BLE CALCUTTA HIGH COURT IN THE CASE OF CIT V. SOORAJMULL NAGARMULL (SUPRA) HAS ALSO TAKEN SIMILAR VIEW. THE DELHI BENCH OF THE TRIBUNAL IN THE CASE OF MUNJ AL SHOWA LTD V. DCIT (SUPRA) HELD THAT FOREIGN CURRENC Y OR ANY CURRENCY IS NEITHER COMMODITY NOR SHARES. IT WA S ALSO HELD THAT IN VIEW OF THE PROVISIONS OF FERA, IT IS LEGALLY IMPOSSIBLE TO ENTER INTO A SPECULATIVE TRANSACTION IN RESPECT OF FOREIGN CURRENCY AND SUCH A FORWARD CONT RACT IS EXCLUDED FROM THE AMBIT OF SPECULATIVE TRANSACTION BY PROVISO (C) TO SEC.43(5) OF THE I.T. ACT. RELEVANT PARAS ARE EXTRACTED BELOW :- 31. FOREIGN CURRENCY OR ANY CURRENCY IS NEITHER CO MMODITY NOR SHARES. THE SALE OF GOODS ACT, SPECIFICALLY EXC LUDES CASH FROM THE DEFINITION OF GOODS. BESIDES, NO PERS ON OTHER - - ITA 583/14, 1531/15 ETC. 12 THAN AUTHORIZED DEALERS AND MONEY CHANGERS ARE ALLO WED IN INDIA TO TRADE IN FOREIGN CURRENCY, MUCH LESS SPECU LATE. SEC.8 OF THE FOREIGN EXCHANGE REGULATIONS ACT, 1973 , PROVIDES THAT EXCEPT WITH PRIOR GENERAL OR SPECIAL PERMISSION OF THE RBI, NO PERSON OTHER THAN AN AUTHORIZED DEAL ER SHALL PURCHASE, ACQUIRE, BORROW OR SELL FOREIGN EXCHANGE. 32. IN FACT, PRIOR TO THE LERMS, RESIDENTS IN INDIA WERE NOT EVEN PERMITTED TO CANCEL FORWARD CONTRACTS. THE PRESUMPTION OF ANY SPECULATIVE TRANSACTION IS, THER EFORE, DIRECTLY REBUTTED IN VIEW OF THE LEGAL IMPOSSIBILIT Y AND IN VIEW OF THE FACT THAT FOREIGN CURRENCY WAS NEITHER COMMO DITY NOR SHARES. 33. THE DEFINITION OF SPECULATIVE TRANSACTION, WI LL NOT APPLY TO A SITUATION WHERE THE PURPOSE OF ENTERING A FORW ARD CONTRACT WAS TO HEDGE/SAFEGUARD AGAINST ANY LOSS ON ACCOUNT OF REPAYMENT OF PRINCIPAL AMOUNT OF THE LOA N: CANCELLATION OF THE CONTRACT WAS IDENTICAL TO THAT OBJECT AND CONSEQUENTLY ANY LOSS/GAIN ARISING FROM SUCH CANCEL LATION IS DIRECTLY RELATED TO REPAYMENT OF THE LOAN. 34. FURTHER, ATTENTION IS ALSO DRAWN TO PROVISO (C) TO S.43(5) OF THE ACT, WHICH EXCLUDES A CONTRACT ENTERED INTO BY A MEMBER OF A FORWARD MARKET OR A STOCK EXCHANGE IN T HE COURSE OF ANY TRANSACTION IN THE NATURE OF JOBBING, ETC.TO GUARD AGAINST LOSS WHICH MAY ARISE IN THE ORDINARY COURSE OF HIS BUSINESS TO SUCH MEMBER FROM THE DEFINITION OF SPECULATIVE TRANSACTION. RESPECTFULLY FOLLOWING THE ABOVE DECISIONS, WE HOLD THAT FOREX CONTRACTS ENTERED INTO BY THE ASSESSEE W ILL NOT FALL UNDER THE DEFINITION OF SPECULATIVE TRANS ACTION. THE GROUNDS TAKEN BY THE ASSESSEE ON THIS ISSUE ARE ALLOWED. FOLLOWING THE AFORESAID ORDER OF THE TRIBUNAL, THE CIT (APPEALS) HELD THAT THE SPECULATION LOSS OF ` 1,06,61,901/- CLAIMED BY THE ASSESSEE WILL BE TREATED AS BUSINESS LOSS AND ALLOW ED THE - - ITA 583/14, 1531/15 ETC. 13 APPEAL OF THE ASSESSEE TO THIS EXTENT. AGAINST THI S, THE REVENUE IS IN APPEAL BEFORE US. 11. WE HAVE HEARD BOTH THE PARTIES AND PERUSED THE MATERIAL ON RECORD. ACCORDING TO THE LD. AR, THE ISSUE IS COVERED BY THE DECISION OF THE CO-ORDINATE BENCH OF THE TRIBUNAL I N THE ASSESSEES OWN CASE FOR THE ASSESSMENT YEAR 2006-07 . IN OUR OPINION, THIS ISSUE WAS COVERED BY THE ORDER OF THE CO-ORDINATE BENCH OF THE TRIBUNAL IN THE CASE OF DCIT V. ASVINI FISHERIES PVT LTD. IN ITA NO.2246/MDS/2014 AND THE TRIBUNAL VIDE ITS ORDER DATED 18.12.2015 HAS OBSERVED AS UNDER: 4. WE HAVE HEARD BOTH THE PARTIES AND PERUSED THE MATERIAL ON RECORD. SIMILAR ISSUE WAS CONSIDERED BY THIS TRIBU NAL WHERE ONE OF THE MEMBERS IS A PARTY, IN THE CASE OF M/S MAJES TIC EXPORTS VS THE JOINT CIT IN I.T.A.NOS.1336 AND 3072/MDS/2014, DATED 24.7.2015, WHEREIN IT HAS BEEN HELD AS UNDER: 7. WE HAVE HEARD BOTH THE PARTIES AND PERUSED THE MATERIAL ON RECORD. IN THIS CASE, THE ASSESSEE WAS ENGAGED IN T HE BUSINESS OF MANUFACTURING AND EXPORT OF HOSIERY GARMENTS. DURI NG THE COURSE OF EXPORT, THE ASSESSEE ENTERED INTO DERIVATIVE CON TRACT. THE ASSESSEE INCURRED LOSS IN THIS TRANSACTION. THE AS SESSEE CLAIMED IT AS BUSINESS LOSS. ACCORDING TO THE ASSESSING OFFICE R THIS LOSS WAS NOT BUSINESS LOSS AND IT IS A SPECULATIVE LOSS AND THIS TRANSACTION IS SPECULATIVE IN NATURE AS SUCH THE LOSS INCURRED ON THIS TRANSACTION CANNOT BE SET OFF AGAINST BUSINESS INCOME OF THE AS SESSEE. ACCORDING TO THE LD. AUTHORISED REPRESENTATIVE FOR ASSESSEE, THE DERIVATIVE TRANSACTION CANNOT FALL UNDER SEC.73. EXPLANATION TO SEC.73 CREATES A DEEMING FICTION BY WHICH AMONG THE ASSESSEE, WHO IS A COMPANY, AS INDICATED IN THE SAID EXPLANATION DEALING WITH THE TRANSACTION OF SHARE AND SUFFER LOSS, SUCH LOSS SHO ULD BE TREATED - - ITA 583/14, 1531/15 ETC. 14 TO BE SPECULATIVE TRANSACTION WITHIN THE MEANING OF SEC.73 OF THE ACT, NOTWITHSTANDING THE FACT THAT THE DEFINITION OF SPECULATIVE TRANSACTION MENTIONED IN SEC.43(5) OF THE ACT, THE TRANSACTION IS NOT OF THAT NATURE AS THERE HAS BEEN ACTUAL DELIVERY OF THE SCRIPS OF SHARE. AS PER THE DEFINITION OF SEC.43(5), TRAD ING OF SHARES WHICH IS DONE BY TAKING DELIVERY DOES NOT COME UNDE R THE PURVIEW OF THE SAID SECTION. SIMILARLY, AS PER CLAUSE (D) OF SEC.43(5), DERIVATIVE TRANSACTION IN SHARES IS ALSO NOT SPECUL ATION TRANSACTION AS DEFINED IN THE SAID SECTION. THEREFORE, BOTH PR OFIT/LOSS FROM ALL THE SHARE DELIVERY TRANSACTIONS AND DERIVATIVE TRANSACTIONS ARE HAVING THE SAME MEANING, SO FAR AS SEC.43(5) OF THE ACT IS CONCERNED. AGAIN, IN VIEW OF THE FACT THAT BOTH DE LIVERY TRANSACTIONS AND DERIVATIVE TRANSACTIONS ARE NON-SP ECULATIVE AS FAR AS SEC.43(5) IS CONCERNED, IT FOLLOWS THAT BOTH WIL L HAVE THE SAME TREATMENT AS FAR AS APPLICATION OF EXPLANATION TO S EC.73 IS CONCERNED. THEREFORE, AGGREGATION OF THE SHARE TRA DING PROFIT AND LOSS FROM DERIVATIVE TRANSACTIONS SHOULD BE DONE BE FORE THE EXPLANATION TO SEC.73 IS APPLIED. THE ABOVE VIEW H AS BEEN TAKEN BY SPECIAL BENCH OF THIS TRIBUNAL, MUMBAI BENCH, IN TH E CASE OF CIT V. CONCORD COMMERCIAL PVT. LTD. (2005) 95 ITD 117 ( MUM)(SB). IN THIS CASE, THE SPECIAL BENCH HELD THAT : BEFORE CONSIDERING WHETHER THE ASSESSEES CASE IS HIT BY THE DEEMING PROVISION OF EXPLANATION TO SEC. 73 OF THE ACT, THE AGGREGATE OF THE BUSINESS PROFIT / LOSS HAS TO BE W ORKED OUT BASED ON THE NON-SPECULATIVE PROFITS; EITHER IT IS FROM S HARE DELIVERY OR FROM SHARE DERIVATIVE . 8. FROM THE ABOVE, IT IS CONCLUDED THAT BOTH TRADING O F SHARES AND DERIVATIVE TRANSACTIONS ARE NOT COMING UNDER THE PU RVIEW OF SECTION 43(5) OF THE ACT WHICH PROVIDES DEFINITION OF SPECULATIVE TRANSACTION EXCLUSIVELY FOR PURPOSES OF SECTION 28 TO 41 OF THE ACT. AGAIN, THE FACT THAT BOTH DELIVERY BASED TRANS ACTION IN SHARES AND DERIVATIVE TRANSACTIONS ARE NON-SPECULATIVE AS FAR AS SECTION 43(5) IS CONCERNED GOES TO CONFIRM THAT BOTH WILL H AVE SAME TREATMENT AS REGARDS APPLICATION OF THE EXPLANATION TO SECTION 73 IS CONCERNED, WHICH CREATES A DEEMING FICTION. NOW, BEFORE APPLICATION OF THE SAID EXPLANATION, AGGREGATION OF THE BUSINESS - - ITA 583/14, 1531/15 ETC. 15 PROFIT/LOSS IS TO BE WORKED OUT IRRESPECTIVE OF THE FACT, WHETHER IT IS FROM SHARE DELIVERY TRANSACTION OR DERIVATIVE TRANSACTION. 8.1 NOW, THIS VIEW HAS BEEN TAKEN BY CO-ORDINATE, CHENNAI IN THE CASE M/S. AISHWARYA & CO P. LTD IN ITA NO.860/ MDS/2014, DATED 29.05.2015, WHEREIN THEY FOLLOWED THE JUDGMEN T OF THE CALCUTTA HIGH COURT IN THE CASE OF M/S. BALJIT SECU RITIES PVT. LTD. (88 CCH 313) WHEREIN HELD AS UNDER:- CLAUSE (D) OF SECTION 43(5) BECAME EFFECTIVE WITH EFFECT FROM 1ST APRIL, 2006. THEREFORE, PRIOR TO 1ST APRIL, 2006 AN Y TRANSACTION IN WHICH A CONTRACT FOR THE PURCHASE OR SALE OF ANY CO MMODITY INCLUDING STOCKS AND SHARES WAS PERIODICALLY OR ULT IMATELY SETTLED OTHERWISE THAN BY THE ACTUAL DELIVERY OR TRANSFER O F THE COMMODITY OR SCRIP WAS A SPECULATIVE TRANSACTION. SUB-SECTION 1 OF SECTION 73 PROVIDES AS FOLLOWS: (1) ANY LOSS, COMPUTED IN RESPECT OF A SPECULATIO N BUSINESS CARRIED ON BY THE ASSESSEE, SHALL NOT BE SET OFF EX CEPT AGAINST PROFITS AND GAINS, IF ANY, OF ANOTHER SPECULATION BUSINESS. THE RESULTANT EFFECT WAS THAT ANY LOSS ARISING OUT OF SPECULATIVE TRANSACTION COULD ONLY HAVE BEEN SET OFF AGAINST PR OFITS ARISING OUT OF SPECULATIVE TRANSACTION. IN THE PRESENT CASE, TH E ASSESSEE, AS ALREADY INDICATED, HAS BEEN DEALING IN SHARES WHERE DELIVERY WAS IN FACT TAKEN AND ALSO IN SHARES WHERE DELIVERY WAS NO T ULTIMATELY TAKEN. IN OTHER WORDS, THE ASSESSEE HAS BEEN DEALIN G IN ACTUAL SELLING AND BUYING OF SHARES AS ALSO DEALING IN SHA RES ONLY FOR THE PURPOSE OF SETTLING THE TRANSACTION OTHERWISE THAN BY ACTUAL DELIVERY. THE QUESTION ARISE WHETHER THE LOSSES ARI SING OUT OF THE DEALINGS AND TRANSACTION IN WHICH THE ASSESSEE DID NOT ULTIMATELY TAKE DELIVERY OF THE SHARES OR GIVE DELIVERY OF THE SHARES COULD BE SET OFF AGAINST THE INCOME ARISING OUT OF THE DEALI NGS AND TRANSACTIONS IN ACTUAL BUYING AND SELLING OF SHARES . AN ANSWER TO THIS QUESTION IS TO BE FOUND IN THE EXPLANATION APP ENDED TO SECTION 73 WHICH READS AS FOLLOWS: EXPLANATION: WHERE ANY PART OF THE BUSINESS OF A COMPANY OTHER THAN A COMPANY WHOSE GROSS TOTAL INCOME CONSISTS MA INLY OF INCOME WHICH IS CHARGEABLE UNDER THE HEADS INTERES T ON SECURITIES, OR A COMPANY THE PRINCIPAL BUSINESS OF WHICH IS THE BU9SINESS OF BANKING OR THE GRANTING OF LOANS AND A DVANCES) CONSISTS IN THE PURCHASE AND SALE OF SHARES OF OTHE R COMPANIES, SUCH COMPANY SHALL, FOR THE PURPOSES OF THIS SECTIO N, BE DEEMED TO BE CARRYING ON A SPECULATION BUSINESS TO THE EXTENT TO WHICH THE - - ITA 583/14, 1531/15 ETC. 16 BUSINESS CONSISTS OF THE PURCHASE. IN ORDER TO RES OLVE THE ISSUE BEFORE US, THE SECTION HAS TO BE READ IN THE MANNER AS FOLLOWS: EXPLANATION : WHERE ANY PART OF THE BUSINESS OF A COMPANY ( . . . .. .. .. .. .. .. .. . .. .. . ) CONSIST IN THE PURC HASE AND SALE OF SHARES OF OTHER COMPANIES, SUCH COMPANY SHA LL, FOR THE PURPOSES OF THIS SECTION, BE DEEMED TO BE CARRYING ON A SPECULATION BUSINESS TO THE EXTENT TO WHICH THE BUSINESS CONSIS TS OF THE PURCHASE AND SALE OF SUCH SHARES. IT WOULD, THUS, APPEAR THAT WHERE AN ASSESSEE, BEIN G THE COMPANY, BESIDES DEALING IN OTHER THINGS ALSO DEALS IN PURCH ASE AND SALE OF SHARES OF OTHER COMPANIES, THE ASSESSEE SHALL BE DE EMED TO BE CARRYING ON A SPECULATION BUSINESS. THE ASSESSEE, I N THE PRESENT CASE, PRINCIPALLY IS A SHARE BROKER, AS ALREADY IND ICATED. THE ASSESSEE IS ALSO IN THE BUSINESS OF BUYING AND SELL ING OF SHARES FOR SELF WHERE ACTUAL DELIVERY IS TAKEN AND GIVEN AND A LSO IN BUYING AND SELLING OF SHARES WHERE ACTUAL DELIVERY WAS NOT INT ENDED TO BE TAKEN OR GIVEN. THEREFORE, THE ENTIRE TRANSACTION CARRIED OUT BY THE ASSESSEE, INDICATED ABOVE, WAS WITHIN THE UMBRELLA OF SPECULATIVE TRANSACTION. THERE WAS, AS SUCH, NO BAR IN SETTING OFF THE LOSS ARISING OUT OF DERIVATIVES FROM THE INCOME ARISING OUT OF BUYING AND SELLING OF SHARES. THIS IS WHAT THE LEARNED TRIBUNA L HAS DONE. 9. FROM THE ABOVE DECISION OF THE CALCUTTA HIGH COURT IN THE CASE OF BALJIT SECURITIES PVT. LTD. CITED SUPRA, THE ISS UE STANDS COVERED IN FAVOUR OF THE ASSESSEE. HOWEVER, WE MAKE IT CLEA R THAT TOTAL TRANSACTION CONSIDERED FOR DETERMINING THIS BUSINE SS LOSS FROM DERIVATIVE TRANSACTIONS CANNOT BE MORE THAN THE TO TAL EXPORT TURNOVER OF THE ASSESSEE FOR THE ASSESSMENT YEAR UN DER CONSIDERATION AND IF THE DERIVATIVE TRANSACTION IS IN EXCESS OF EXPORT TURNOVER, THEN THAT LOSS SUFFERED IN RESPEC T OF THAT PORTION OF EXCESS TRANSACTIONS TO BE CONSIDERED AS SPECULATIVE LOSS ONLY AS THAT EXCESS DERIVATIVE TRANSACTION HAS NO P ROXIMITY WITH EXPORT TURNOVER AND THE ASSESSING OFFICER IS DIRECT ED TO COMPUTE ACCORDINGLY. THIS GROUND IS ALLOWED AS INDICATED AB OVE . 5. FURTHER, THE MUMBAI BENCH OF ITAT IN THE CASE OF A RASKA DIAMOND P. LTD VS ACIT, 152 ITD 203, HAS HELD AS U NDER: TOTAL SALES DURING THE YEAR AMOUNTED TO ` 27.78 CRORES, THAT THE AO AND THE FAA HAD HELD SUCH TRANSACTION WERE SPECU LATIVE IN - - ITA 583/14, 1531/15 ETC. 17 NATURE AND HAD DISALLOWED THE CLAIM MADE BY THE AS SESSEE, THAT THE ASSESSEE WAS OF THE OPINION THAT TRANSACTIONS ENTERED INTO BY IT WERE NOT SPECULATIVE TRANSACTIONS. ITAT FOUND T HAT THE AMOUNT INVOLVED IN THE FORWARD CONTRACT (FC) WAS MORE THAN 100% OF THE TURNOVER OF THE ASSESSEE, THAT FC WERE NOT RELA TABLE TO SPECIFIC BILLS, THAT THE ASSESSEE HAD NOT RELATED A NY SINGLE BILL TO ANY OF THE CONTRACT AND HAD NOT PROVIDED AN Y PURCHASE ORDER DURING THE ASSESSMENT OR APPELLATE PROCEEDINGS. ITAT FOUND THAT IN THE CASE UNDER CONSIDERATION ASSESSEE WAS NOT DEALING IN FOREIGN E XCHANGE, THEREFORE TRANSACTIONS ENTERED INTO BY IT IN FOREIG N EXCHANGE CANNOT BE HELD TO BE HEDGING TRANSACTIONS. AS THE ASSESSEE WAS DEALING IN DIAMON DS AND FC ENTERED INTO ONLY FOR DIAMONDS WOULD HAVE BEEN C OVERED BY THE PROVISO (A) TO THE SECTION 43(5)OF THE ACT. AS HELD BY THE HON'BLE HIGH COURT OF CALCUTTA IN THE MATTER OF GOUREPORE CO. LTD ,ONUS WAS ON THE ASSESSEE TO PROV E THAT THE TRANSACTIONS IN QUESTION WERE NOT OF A SPECULAT IVE NATURE. ITAT WAS OF THE OPINION THAT IT HAD FAILED TO DISCHARGE THE ONUS CAST UPON HIM BY THE STATUTE. IT WAS ALSO NOT ABLE TO CONTRADICT THE FINDING OF FACT THAT BOO KING AND CANCELLATION OF FC OF FOREIGN EXCHANGE WERE NOT IN RESPECT OF SPECIFIED EXPORT OR IMPORT. BESIDES, FINDING OF FACT GIVEN BY THE REVENUE AUTHORITIES REMAINED UN-CONTRAVENED THAT LOSS IN QUESTION, SHOWN BY IT PERTAINED TO THOSE FC TRANSACTIONS, AGAINST WHICH NO ACTUAL DELIVERY OF F OREIGN EXCHANGE WAS MADE. ON APPRECIATION OF THE FACTS SURROUNDING THE TRANSACTION ITAT HAD REACHED AT THE CONCLUSION THAT TRANSACTIONS ENTERED IN TO BY THE A SSESSEE WERE SPECULATIVE IN NATURE AND THE CASE OF THE ASSE SSEE IS NOT COVERED BY PROVISO(A) OF THE SECTION 43(5) OF THE ACT. DISPUTED TRANSACTIONS WERE SPECULATIVE AND NOT HEDGI NG TRANSACTION, THAT THE ASSESSEE COULD NOT RELATE ANY SINGLE BILL TO ANY OF THE CONTRACT AND IT HAD NOT PROVIDED DETAIL OF ANY PURCHASE ORDER RELATABLE TO SPECIFIC TRANSACTIO N, DURING THE ASSESSMENT OR APPELLATE PROCEEDINGS. THUS, THE TRANSACTIONS UNDERTAKEN BY IT HAVE TO BE TAKEN AS - - ITA 583/14, 1531/15 ETC. 18 TRANSACTIONS RELATABLE TO FOREIGN EXCHANGE. ITAT WA S OF THE OPINION THAT THE ORDER OF THE FAA DOES NOT SUFF ER FROM ANY LEGAL OR FACTUAL INFIRMITY. THEREFORE, CONSIDER ING THE PECULIAR FACTS AND CIRCUMSTANCES OF THE CASE, ITAT CONFIRMED HIS ORDER FAA AND DECIDE EFFECTIVE GROUND AGAINST THE ASSESSEE. 6. IN VIEW OF THE ABOVE ORDERS OF THE TRIBUNAL, WE ARE OF THE OPINION THAT THE ASSESSING OFFICER HAS TO CONSIDER THE FOREIGN EXCHANGE DERIVATIVE IN PROPORTION TO EXPORT TURNOVE R AS REGULAR BUSINESS TRANSACTION OF THE ASSESSEE. IF THE DERI VATIVE TRANSACTION UNDERTAKEN BY THE ASSESSEE IS IN EXCES S OF EXPORT TURNOVER THEN THAT LOSS SUFFERED IN RESPECT OF THAT PORTION OF EXCESS TRANSACTION HAS TO BE CONSIDERED AS SPECULAT IVE LOSS ONLY AND THAT EXCESS DERIVATIVE TRANSACTION HAS NO PROX IMITY 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 CONT RACT OF FOREIGN EXCHANGE AND THAT TRANSACTION SHOULD BE TAK EN OUT FOR THE PURPOSE OF CONSIDERING THE BUSINESS LOSS AND ON LY THE TRANSACTIONS WHICH ARE COMPLETED TO BE CONSIDERED F OR THE PURPOSE OF DETERMINING THE BUSINESS LOSS FROM THES E FOREIGN EXCHANGE FORWARD CONTRACT. WITH THIS OBSERVATION, WE REMAND THIS ISSUE TO THE FILE OF THE ASSESSING OFFICER FOR FRESH CONSIDERATION. 7. BEFORE US, THE LD. REPRESENTATIVE RELIED ON THE JUDGMENT OF GUJARAT HIGH COURT IN CIT VS FRIENDS AND FRIENDS SH IPPING P. LTD, [2013] 217 TAXMAN 267, FOR THE PROPOSITION THAT IF THE ASSESSEE FAILED TO TAKE DELIVERY WITHIN THE PERIOD INDICATED IN CONTRACT AND THE ASSESSEE HAD GIVEN INSTRUCTIONS TO BANK FOR CA NCELLATION OF CONTRACT ON PAYMENT OF AGREED CHARGES TO THE BANK T HESE TRANSACTIONS CANNOT BE CONSIDERED AS SPECULATIVE TR ANSACTION. HOWEVER, THERE IS NO FINDING IN THIS JUDGMENT TOWAR DS THIS EFFECT AND THE RELIANCE PLACED BY THE ASSESSEE IS MISPLAC ED. MORE SO, THIS ISSUE WAS CONSIDERED BY THE MUMBAI TRIBUNAL WH ILE DELIVERING THE DECISION IN THE CASE OF ARASKA DIAMO ND P. LTD, 152 ITD 203, AND AFTER FOLLOWING THE JUDGMENTS OF CALCU TTA HIGH COURT IN THE CASE OF BENGAL & ASSAM CO. LTD VS CIT 227 CTR 399, AND BOMBAY HIGH COURT JUDGMENT IN THE CASE OF CIT VS BADRIDAS GAURIDU P. LTD 261 ITR 256, THE TRIBUNAL C AME TO THE - - ITA 583/14, 1531/15 ETC. 19 CONCLUSION THAT THE TRANSACTIONS, WHICH WERE PREMAT URELY CANCELLED, CANNOT BE CONSIDERED AS BUSINESS TRANSAC TION AND IT IS TO BE CONSIDERED AS SPECULATIVE TRANSACTION. IN VIEW OF THE ABOVE, WE ARE INCLINED TO REMIT THE ISSUE BACK TO THE FILE OF THE ASSESSING OFFICER FOR FRESH CONSIDE RATION. 12 . IN THE RESULT, THE APPEALS OF THE ASSESSEE IN ITA NOS. 583/MDS/2014 & 1531/MDS/2015 ARE ALLOWED AND THE AP PEAL OF THE REVENUE IN ITA NO. 1604/MDS/2015 IS ALLOWED FOR STATISTICAL PURPOSES. ORDER PRONOUNCED ON THURSDAY, THE 31 ST OF DEC., 2015 AT CHENNAI. SD/- SD/- ( () *+,- . ) ( ( - / 0$ ) (CHALLA NAGENDRA PRASAD) (CHANDRA POOJAR I) , .> /JUDICIAL MEMBER +% .>/ACCOUNTANT MEMBER (+, ! /CHENNAI, E. /DATED, THE 31 ST DEC., 2015. MPO* .+F ' #GH I+H# /COPY TO: 1. /APPELLANT 2. /RESPONDENT 3. J# () /CIT(A) 4. J# /CIT 5. HK* # L /DR 6. *M N! /GF.