Star Exports & Imports, Bangalore V. Add.C.I.T., Bangalore

ITA 997/BANG/2012

• Counselvise Citation: [2015] 120 COUNSELVISE.COM (IT) 8670 (ITAT-BANGALORE)
• Duration Of Justice: 2 year(s) 5 month(s) 28 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 06-02-2015
• Appeal Filed By: Assessee
• Order Result: Partly Allowed
• Bench Allotted: A
• Next Hearing Date: 28-01-2015
• Assessment Year: 2009-2010
• Appeal Filed On: 08-08-2012
• Result in Favour of: Partly Allowed
• Court: TRIBUNAL
• Department Lawyers: P DHIVAHAR
• Assessee Lawyers: H N KHINCHA
• Keywords: Speculation loss; Onus to prove; Revenue expenditure; Speculative transactions
• Section: 43(5); 15

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL BANGALORE A BENCH, BANGALORE BEFORE SHRI N.V.VASUDEVAN, JUDICIAL MEMBER AND SHRI ABRAHAM P GEORGE, ACCOUNTANT MEMBER ITA NO.997(BNG.)/2012 (ASSESSMENT YEAR : 2 009-10) STAR EXPORTS & IMPORTS NO.274/275, D.G.H M.K.PUTTALINGAIAH ROAD, PADMANABHANAGAR, BANGALORE-560 070 PAN NO.AALFS8337D APPELLANT VS THE ADDL. COMMISSIONER OF INCOME-TAX, RANGE-4, BANGALORE RESPONDENT ASSESSEE BY : SHRI H.N.KHINCHA, CA REVENUE BY : SHRI P.DHIVAHAR, JCIT DATE OF HEARING : 28-0 1-2015 DATE OF PRONOUNCEMENT : 06-02-2015 O R D E R PER SHRI ABRAHAM P GEORGE, AM; IN THIS APPEAL FILED BY THE ASSESSEE ITS GRIEVANCE THAT LOSS OF RS.1,52,81,124/- CLAIMED BY IT WAS NOT ALLOWED BY T HE LOWER AUTHORITIES CONSIDERING THE TRANSACTIONS GIVING RISE TO THE LOS S TO BE SPECULATIVE IN NATURE. 2. FACTS APROPOS ARE THAT ASSESSEE TRADING IN IRON ORE AND ALSO EXPORTING IRON ORE FINES HAD FILED RETURN FOR THE I MPUGNED ASSESSMENT 2 ITA NO.997(B)/12 YEAR DECLARING INCOME OF RS.7,10,44,222/-. FROM TH E PROFIT & LOSS ACCOUNT FILED BY THE ASSESSEE, THE AO FOUND AN AMOU NT OF RS.1,52,81,124/- WAS HARGED AS DOLLAR REALIZATION L OSS. ASSESSEE WAS REQUIRED TO EXPLAIN. DETAILS OF THE LOSS AS FURNIS HED BY THE ASSESSEE IS REPRODUCED HERE UNDER; DATE PARTICULARS VOUCHER TYPE DEBIT(RS.) CREDIT(RS. ) 08-04-2008 KARNATAKA BANK C/A(BEING DOLLAR AMOUNT REALIZED RATE DIFFERENCE) BANK RECEIPT 41,98,876 21-10-2008 KARNATAKA BANK C/A (BEING AMOUNT PAID TOWARDS DOLLAR REALIZATION CHARGES) KARNATAKA OVERSEAS BANK PAYMENT 1,94,80,000 CLOSING BALANCE DEBIT 1, 52,81,124 APART FROM THE ABOVE DETAILS THE ASSESSEE ALSO FILE D A LETTER FROM M/S KARNATAKA BANK LTD. WHICH STATED AS UNDER ; WE INVITE YOUR KIND ATTENTION TO THE CAPTIONED LETTER DATED 28 TH JULY 2011 REGARDING FORWARD PURCHASE CONTRACT DIFFERENCE EFFECTED ON 08-04-2008. PLEAS E MAKE A NOTE THAT AS PER EXISTING GUIDELINES AND FEDAI RU LE FORWARD CONTRACT PROFIT SHOULD BE CREDITED ON DUE D ATE NOT ON THE DAY OF CANCELLATION AND IF ANY LOSS OCCURRED WHILE CANCELLING THE CONTRACT THE LOSS SHOULD BE RECOVERE D ON 3 ITA NO.997(B)/12 THE SAME DAY. IN YOUR CASE THE CAPTIONED CONTRACT CANCELLED ON 31-03-2008 AND PROFIT SUPPOSED TO BE CREDITED ON 04-04-2008 (DELIVERY FROM 24-03-2008 TO 04- 04-2008). DUE TO TECHNICAL PROBLEM WE WERE UNABLE TO PASS THE PROFIT ON 04-04-2008 AND THE SAME WAS CRED ITED TO YOUR ACCOUNT ON 08-04-2008. ASSESSEE ALSO FILED A COPY OF THE LETTER DATED 20-0 8-2008 TO THE MANAGER OF M/S KARNATAKA BANK LTD. WHEREIN IT REQUESTED CAN CELLATION OF THE FORWARD PURCHASE CONTRACT. 3. WHEN THE AO SOUGHT WHY THE TRANSACTIONS SHOULD NOT BE CONSIDERED AS SPECULATIVE IN NATURE AND WHY THE LOS S SHOULD NOT BE CONSIDERED AS SPECULATION LOSS, ASSESSEE REPLIED IN DETAIL AND THE CRUX OF THE REPLY WAS UNDER; I) THE FOREIGN EXCHANGE CONTRACTS WERE ENTERED WIT H BANKER SO AS TO HEDGE AGAINST FOREIGN EXCHANGE FLUCTUATION II) IT WAS IN THE NATURE OF HEDGING CONTRACT TO GU ARD AGAINST POSSIBLE FINANCIAL LOSS. III) THE TRANSACTIONS WERE ENTERED IN THE NORMAL C OURSE OF BUSINESS. IV) THE FOREIGN EXCHANGE CANNOT BE CONSIDERED AS A COMMODITY FALLING WITHIN THE DEFINITION SPECULATIVE TRANSACTI ONS GIVEN IN SEC.43(5) OF THE ACT. 4 ITA NO.997(B)/12 4. HOWEVER, THE AO WAS NOT IMPRESSED BY THE ABOVE R EPLY. ACCORDING TO HIM, THE COMMODITY INVOLVED WAS A FINA NCIAL ASSET WHICH ASSESSEE HAD AGREED TO SUPPLY THE BANK AT A PRE-DET ERMINED RATE. IT WAS A TYPE OF DERIVATIVE, SINCE ITS VALUE CHANGED IN ACCO RDANCE WITH THE RATE CHANGES. ASSESSEE AS PER THE LEARNED AO, COULD NOT BE SAVED BY PROVISO TO SEC.43(5) OF THE ACT, FOR THE REASON THAT CONTRA CT WAS NOT IN RESPECT OF RAW MATERIALS OR MERCHANDISE. FURTHER, AS PER THE LEARNED AR CO- ORDINATE BENCH IN THE CASE OF CIT VS M/S K. MOHAN & CO.(EXPORTS) PVT. LTD. 126 ITD 59(BANG) HAD HELD THAT FOREIGN EXCHANG E FORWARD CONTRACT TRANSACTIONS GIVING RISE TO LOSS OR GAINS WOULD BE SPECULATIVE IN NATURE. AGAIN AS PER THE AO, THE DECISION OF THE HONBLE CA LCUTTA HIGH COURT IN THE CASE OF CIT VS SOORAJMULL NAGAR MULL 129 ITR 16 9, RELIED ON BY THE ASSESSEE WAS DISTINGUISHABLE ON FACTS. HE THUS, HE LD THAT THE SPECULATIVE TRANSACTIONS RESULTED IN A SPECULATIVE LOSS WHICH C OULD NOT BE SET OFF AGAINST NORMAL PROFITS OF THE BUSINESS OF THE ASSES SEE. HE THUS MADE AND ADDITION OF RS.1,52,81,124/- AND COMPLETED THE ASSE SSMENT. 5. IN ITS APPEAL BEFORE THE CIT(A) ARGUMENT OF TH E ASSESSEE WAS THAT, THE AO HAD MISUNDERSTOOD THE NATURE OF THE TR ANSACTIONS. ACCORDING TO THE ASSESSEE FIRST CONTRACT WAS ENTERE D WITH M/S FORROMET INTERNATIONAL TRADING PTE LTD., (FITPL) ON 01-03-2008 FOR SUPPLY OF 5 ITA NO.997(B)/12 40,000/- METRIC TONNES OF IRON ORE FINES WITHIN THE PERIOD 01-03-2008 TO 15-03-2008. IN ORDER TO HEDGE THE PROBABLE FOREI GN CURRENCY FLUCTUATION, ASSESSEE HAD ENTERED INTO A CONTRACT W ITH M/S KARNATAKA BANK LTD. ON 07-03-2008 AND AS PER THIS CONTRACT AS SESSEE WAS TO DELIVER 70.00 LAKHS US DOLLARS TO THE BANK DURING T HE PERIOD 24-03-2008 AND 04-04-2008 FOR WHICH BANK WAS OBLIGED TO GIVE R S.40.84 PER DOLLAR AS PER THE ASSESSEE, THE FORWARD CONTRACT ENTERED W ITH M/S KARNATAKA BANK LTD. WAS BASED ON THE CONTRACT FOR SUPPLY OF I RON ORE FINES TO M/S FITPL. THERE WERE A NUMBER OF ADDENDUMS TO THE CONTRACT WI TH M/S FITPL EXTENDING THE TIME OF DELIVERY. HOWEVER, THE FORW ARD CONTRACT WITH BANK EXPIRED ON 04-04-2008 AND THE VALUE OF IN DIAN RUPEE HAVING GONE UP THERE WAS A PROFIT REALIZATION OF RS.41,98, 876-. AS PER THE ASSESSEE SIMILAR TO THIS THERE WAS ANOTHER CONTRACT ENTERED ON 28-08- 2008 WITH THE SAME BUYER M/S FITPL FOR SUPPLY OF 45 ,000 MT OF FINES AT US DOLLAR 105 PER MT. A FRESH FORWARD PURCHASE CO NTRACT WAS ENTERED WITH M/S KARNATAKA BANK LTD ON 02-09-2008. THE DE LIVERY PERIOD FOR DOLLARS WAS 01-10-2008 TO 15-10-2008, AS PER THE CO NTRACT WITH M/S KARNATAKA BANK LTD. FOR THIS SUPPLY ALSO ASSESSEE COULD NOT ADHERE TO THE TIME SCHEDULE, STIPULATED BY SELLER, DESPITE EX TENSIONS. THE BANK CANCELLED THE FORWARD PURCHASE CONTRACT AND DUE TO EXCHANGE RATE FLUCTUATION THERE WAS A LOSS OF RS.1,94,80,000/-. AS PER THE ASSESSEE 6 ITA NO.997(B)/12 ONLY DIFFERENCE BETWEEN TWO SETS OF TRANSACTIONS WA S THAT IN THE FIRST ONE, SUPPLY WAS EVENTUALLY MADE TO THE BUYER AND SALE PR OCEEDS RECEIVED ON 28-04-2008. THE SECOND THE CONTRACT DID NOT FRUCTI FY AT ALL, SINCE IT COULD NOT DELIVER THE IRON ORE FINES. ASSESSEE ALS O SUBMITTED BEFORE THE LEARNED CIT(A) THAT IT HAD STARTED THE BUSINESS IN IRON ORE FINES ONLY IN JUNE 2007, PRIOR TO WHICH IT WAS DOING TRADING IN R OUGH GRANITE BLOCKS. AS PER THE ASSESSEE, APART FROM THE ABOVE TWO CONTR ACTS FOR SUPPLY OF IRON ORE FINES TO M/S FITPL THERE WERE ONLY THREE L OCAL SALES OF IRON ORE FINES. IN FEBRUARY, 2009 AS PER THE ASSESSEE, IT HAD STOPPED ITS BUSINESS IN IRON ORE FINES. THUS, ACCORDING TO TH E ASSESSEE, THE LOSS DUE TO FOREIGN EXCHANGE FLUCTUATION ARISING OUT OF THE CANCELLATION OF THE FOREIGN EXCHANGE FORWARD CONTRACT WITH BANK WAS A P URE BUSINESS LOSS AND NOT THE RESULT OF ANY SPECULATIVE TRANSACTIONS. 6. HOWEVER, THE LEARNED CIT(A) WAS NOT IMPRESSED. ACCORDING TO HIM, THE FOREIGN EXCHANGE FORWARD CONTRACT ENTERED BY THE ASSESSEE WITH THE BANK, WHICH WERE ULTIMATELY CANCELLED WAS NOT I N THE LINE OF BUSINESS OF THE ASSESSEE. AS PER THE LEARNED CIT(A) THE TR ANSACTIONS WERE SPECULATIVE IN NATURE, FALLING WITHIN THE DEFINITIO N OF SPECULATIVE TRANSACTIONS GIVEN IN SECTION 43(5) OF THE IT ACT. PROVISO TO SECTION DID NOT SAVE THE ASSESSEE. AGAIN AS PER THE LEARNED CI T(A), THE TWO 7 ITA NO.997(B)/12 SPECULATIVE TRANSACTIONS CONSTITUTED A SPECULATIVE BUSINESS, IN VIEW OF EXPLANATION 2 TO SECTION 28 OF THE ACT. ACCORDING TO HIM, THE TRANSACTION ENTERED WITH BANK WAS ON 0703-2008 FOR DELIVERING 70.00 LAKH US DOLLARS AT RS.40.54 PER DOLLAR DURING THE PERIOD 24 -03-2008 AND 04-04- 2008. AS AGAINST THIS, THE CONTRACT WITH M/S FITPL FOR SELLING 40,000/- MT OF IRON ORE FINES, AT THE RATE OF US DOLLAR 144/ - PER MT WAS ENTERED ON 01-03-2008 WITH DELIVERY SCHEDULE BETWEEN 01-03- 2008 & 15-03- 2008. THERE WAS A MODIFICATION OF THIS CONTRACT WH EREBY THE MT WAS INCREASED FROM 40,000/- TO 50,000/- ON 01-06-2008. ACCORDING TO LEARNED CIT(A) BY THE TIME THE FORWARD CONTRACT WIT H THE BANK WAS TO EXPIRE THE DELIVERY OF IRON ORE TO THE SUPPLIER SH OULD HAVE BEEN ALREADY COMPLETED. THIS, AS PER THE LEARNED CIT(A) PROVED THAT TRANSACTION WITH THE BANK WAS FOR MAKING A PROFIT BY TRADING IN FORE IGN EXCHANGE AND NOT LINKED TO THE EXPORT ORDER. VIS--VIS THE SECOND T RANSACTION THOUGH IT WAS OBSERVED BY THE LEARNED CIT(A) THAT THE DATE OF DEL IVERY AS PER IN THE SCHEDULE IN THE CONTRACT WITH THE SUPPLIER TALLIED WITH THAT MENTIONED IN THE FORWARD EXCHANGE CONTRACT, THIS ALSO ACCORDING TO HIM, COULD NOT BE LINKED TO THE REGULAR BUSINESS OF THE ASSESSEE. AC CORDING TO THE LEARNED CIT(A), IN VIEW OF THE DECISION OF THE CO-ORDINATE BENCH OF THIS TRIBUNAL IN THE CASE OF SRI K.MOHAN & CO.,(EXPORTS) (P)LTD. (SU PRA) THE TRANSACTIONS DID CONSTITUTE A SPECULATIVE BUSINESS. HENCE, AC CORDING TO HIM, LOSS WAS 8 ITA NO.997(B)/12 NOTHING BUT SPECULATIVE LOSS AND COULD NOT BE ALLOW ED FOR A SET OFF AGAIN REGULAR PROFITS OF THE BUSINESS OF THE ASSESSEE. TA KING THIS VIEW, THE LEARNED CIT(A) CONFIRMED THE ADDITION MADE BY THE A O. 7. NOW BEFORE US, LEARNED AR STRONGLY ASSAILING TH E ORDER OF THE LOWER AUTHORITIES SUBMITTED THAT THE FORWARD EXCHAN GE CONTRACTS ENTERED WITH THE BANK WERE ONLY TO PROTECT THE ASSESSEE AGA INST THE CHANGES IN EXCHANGE RATES WHICH COULD NOT BE PREDICTED. THESE WERE NOTHING BUT HEDGING AGAINST A FOREIGN CURRENCY EXPOSURE. AS PE R THE LEARNED AR, ASSESSEE COULD DELIVER THE GOODS WITH RESPECT TO TH E FIRST CONTRACT ONLY AFTER SCHEDULED DATE. THE DATE AS PER THE AGREEMEN T WITH M/S KARNATAKA BANK LTD HAD EXPIRED AND THE FORWARD CONTRACT WITH THE SAID BANK STOOD AUTOMATICALLY CANCELLED. DUE TO CURRENCY EXCHANGE RATE FLUCTUATION, THERE WAS A PROFIT WHICH WAS CREDITED TO THE ACCOUNT OF T HE ASSESSEE. AS PER THE LEARNED AR VIS--VIS THE SECOND CONTRACT, THE A SSESSEE COULD NOT DELIVER THE GOODS AT ALL. WHEN THE FORWARD EXCHANG E CONTRACT PERIOD WAS OVER, THE BANK CANCELLED THIS CONTRACT ALSO RESULTI NG IN A LOSS. AS PER THE LEARNED AR THE LOSS ON ACCOUNT OF FOREIGN CURRENCY CONTRACT SPRANG DIRECTLY FROM AND WAS INCIDENTAL TO THE BUSINESS OF THE ASSESSEE. THERE WAS A DIRECT AND PROXIMATE NEXUS. FURTHER, ACCORDI NG TO THE LEARNED AR FOREIGN CURRENCY WAS NOT A COMMODITY TO FALL WITHIN THE AMBIT OF SECTION 9 ITA NO.997(B)/12 43(5) OF THE ACT. AS PER THE LEARNED AR, THE TRAN SACTIONS WITH BANK WERE FOR HEDGING AGAINST FOREIGN EXCHANGE FLUCTUATIONS A ND NOT A SPECULATIVE IN NATURE. EVEN IF IT WAS CONSIDERED SPECULATIVE IN NATURE, IT WOULD NOT RESULT IN A SPECULATIVE BUSINESS. RELIANCE WAS PL ACED ON THE DECISION OF THE HONBLE BOMBAY HIGH COURT IN THE CASE OF CIT VS BADRIDAS GAURIDU (P)LTD 261 ITR 256 AND THAT OF HONBLE GUJARAT HIGH COURT IN CIT VS PANCHAMAHAL STEEL LTD (TAX APPEAL NO.131 OF 2013 DA TED 28-03-2013) AND CIT VS FRIENDS & FRIENDS SHIPPING PVT.LTD.(2013 ) 217 TAXMANN 267. AS PER THE LEARNED AR ALL THESE DECISION FOLLOW THE LAW LAID DOWN BY THE HONBLE MUMBAI HIGH COURT IN THE CASE OF SOORAJ MUL L NAGARMULL ( SUPRA) WHICH WAS BRUSHED ASIDE BY THE LOWER AUTHORITIES FO R NO REASON. RELIANCE WAS ALSO PLACED ON THE FOLLOWING TRIBUNAL DECISION/ BOARD CIRCULARS I) RUSHABH DIAMOND VS ACIT ITA NO.7217/MUM/2012 DT. 26-04-2013 ITR 95(ALL.) II) VOLTAS INTERNATIONAL LTD VS ACIT 126 TTJ 702(MU M) III) CBDT CIRCULAR NO.23D(XXXIX-4) (F.NO.412(4)60/T PL) IV) LONDON STAR DIAMOND CO.(I) PVT. LTD VS DCIT ITA NO.6169/M/2012 DATED 11-10-2013. 10 ITA NO.997(B)/12 8. PER CONTRA, LEARNED DR SUBMITTED THAT THE TRANS ACTIONS WITH THE BANK WERE NEVER SETTLED BY DELIVERY OF DOLLARS. I T WAS SETTLED BY ADJUSTING THE DIFFERENCE. FOREIGN CURRENCY TRANSACTIONS WOULD ALSO FALL WITHIN THE DEFINITION OF SPECULATIVE TRANSACTION, IF IT SATISF IED THE INGREDIENTS OF SECTION 43(5). AS PER THE LEARNED DR, IN THE CASE OF FIRST TRANSACTION M/S KARNATAKA BANK LTD. ITSELF IN ITS LETTER DATED 28-0 7-2008 HAD MENTIONED THAT ASSESSEE HAD REQUESTED FOR CANCELLATION OF THE FORWARD PURCHASE CONTRACT FOR DOLLARS. THUS, IT WAS A CLEAR CASE O F PROFITEERING ON FORWARD EXCHANGE WITHOUT DELIVERY. IN THE CASE OF THE SECO ND TRANSACTION THE CONTRACT WAS CANCELLED PRIOR TO THE SCHEDULED DATE OF DELIVERY OF DOLLARS VIZ. 04-04-2008. THE CANCELLATION WAS EFFECTED ON 3 1-03-2008 AS REQUIRED BY THE ASSESSEE. HENCE, AS PER THE LEARNED DR THE NATURE OF TRANSACTION WAS ONLY SPECULATIVE. FURTHER, AS PER THE LEARNED DR FOREIGN EXCHANGE WAS NOT THE GOODS MANUFACTURED BY THE ASSESSEE NOR GOODS SOLD BY IT. ASSESSEE WAS NOT DEALING IN FOREIGN EXCHANGE. IT C OULD NOT SAY THAT IT WAS A PART OF ITS REGULAR BUSINESS. THE FORWARD CONTRA CTS WERE SETTLED BY CANCELLATION AND NOT BY DELIVERY OF FOREIGN CURRENC Y. RELIANCE WAS PLACED ON THE DECISION OF MUMBAI BENCH IN THE CASE OF S.VI NOD KUMAR DIAMONDS PVT. LTD VS ITO (2013) 59 SOT 124 AND ALSO ON THE D ECISION OF CO- ORDINATE BENCH IN THE CASE OF K. MOHAN & CO(EXPORTS ) PVT. LTD (SUPRA). LEARNED DR ALSO PLACED RELIANCE ON THE DECISION OF BOMBAY HIGH COURT IN 11 ITA NO.997(B)/12 THE CASE OF CIT VS SRI BHARATH R RUIA(HUF) (2011) 3 37 ITR 452 IN SUPPORT OF HIS ARGUMENT THAT APPLICATION OF SECTION 43(5) WAS NOT RESTRICTED TO CONTRACTS WHICH ARE CAPABLE OF PERFOR MANCE BY ACTUAL DELIVERY AND THE TERM COMMODITY OCCURRING IN SECTI ON 43(5) OF THE ACT WOULD INCLUDE DERIVATIVES. 9. WE HAVE HEARD THE RIVAL CONTENTIONS AND PERUSED THE ORDERS. FIRST ASPECT TO DECIDE IS WHETHER THE TRANSACTIONS ENTERED BY THE ASSESSEE WITH M/S KARNATAKA BANK LTD WERE SPECULATIVE IN NAT URE. FOR DECIDING THIS QUESTION WE HAVE TO SEE WHETHER THE FORWARD EX CHANGE CONTRACT ENTERED BY THE ASSESSEE WERE IN FACT FOR HEDGING TH E SUPPLY CONTRACT ENTERED BY THE ASSESSEE WITH M/S FITPL. IT IS AN ADMITTED POSITION THAT THE FIRST CONTRACT WITH M/S FITPL WAS ENTERED ON 01 -03-2008 FOR SUPPLY OF 40,000 MT OF IRON ORE FINES DURING THE PERIOD 1 ST TO 15 TH MARCH, 2008. IT IS ALSO NOT DISPUTED THAT THERE WAS AN ADDENDUM DATED 06-03-2008 TO INCREASE THE QUANTITY FROM 40,000/-MT TO 50,000/- T ONES. THE PRICE AGREED WAS RS.144/-DOLLAR PER MT. THE REALIZABLE A MOUNT THEREFORE, CAME TO US DOLLARS 72.00 LAKHS. AS PER THE ASSESSE E THE FORWARD EXCHANGE CONTRACT DATED 07-03-2008 WITH M/S KARNA TAKA BANK LIMITED WAS FOR HEDGING THE ABOVE CONTRACT. A LOOK AT PAPE R BOOK PAGE NO.71 WHICH IS THE CONTRACT WITH M/S KARNATAKA BANK LIMITED SHOW 12 ITA NO.997(B)/12 THAT THE SAID BANK HAD CONFIRMED PURCHASE OF 70.00 LAKHS US DOLLAR FOR RS.28,37,80,000/- AND ASSESSEE HAD TO DELIVER THE D OLLARS WITHIN THE PERIOD 24-03-2008 TO 04-04-2008. NO DOUBT, THE D ELIVERY SCHEDULE FOR IRON ORE WAS ON 01-03-2008 TO 15-03-2008 WHEREAS TH E DELIVERY SCHEDULE FOR US DOLLARS WITH THE BANK WAS 24-03-2008 TO 04-0 4-2008. THE ADDENDUM DATED 06-03-2008 HAD INCREASED THE QUANTIT Y FROM 40,000/- MT TO 50,000/-. THE SECOND ADDENDUM RESCHEDULING T HE DELIVERY PERIOD GIVING ASSESSEE TIME UPTO 05-04-2008 WAS DATED 12-0 3-2008. IN OTHER WORDS, THE EXTENSION OF DELIVERY TIME FOR IRON ORE WAS MADE AFTER THE FORWARD EXCHANGE CONTRACT WAS ENTERED WITH THE BANK ON 07-03-2008. DUE TO THIS INCONGRUITY THE LEARNED CIT(A) REACHED A CONCLUSION THAT THE FOREIGN EXCHANGE FORWARD CONTRACT ENTERED BY THE AS SESSEE WITH THE BANK WAS NOT FOR HEDGING THE SUPPLY CONTRACT WITH M/S FI TPL. HOWEVER, IN OUR OPINION, THIS CONCLUSION DOES NOT GEL WITH CERTAIN OTHER FACTS ON RECORD. NUMBER ONE IS THAT ASSESSEE HAD MADE AN APPLICATION ON 07-03-2008 WITH M/S KARNATAKA BANK LTD. FOR BOOKING A FORWARD CONTRACT. THE FORMAT ITSELF PROVIDES FOR THE COMMODITY TO BE MENT IONED. THE FORMAT FOR APPLYING FOR FORWARD PURCHASE CONTRACT FE2011 IS CL EARLY ONE WHICH HAS BEEN PRESCRIBED BY THE BANK AND NOT THE INVENTION O F THE ASSESSEE. THE SAID APPLICATION AS APPEARING P.B.PAGE-32 IS REPROD UCED HEREUNDER; 13 ITA NO.997(B)/12 APPLICATION FOR BOOK OF FORWARD PURCHASE CONTRACT-E XPORTS FE-2011. FROM M/S STAR EXPORTS & IMPORTS, NO.274/275, D.G.H M.K. PUTTALINGAIAH ROAD, PADMANABHANAGAR, BANGALORE-560 070 TO THE CHIEF/SENIOR BRANCH MANAGER, KARNATAKA BANK LTD. OVERSEAS BRANCH. DEAR SIR, BOOKING OF FORWARD EXCHANGE CONTRACT AGAINST EXPOR TS. WE REQUEST YOU TO LOOK FORWARD CONTRACTS/AT OUR RIS K AND RESPONSIBILITY TO COVER OUR EXPORTS AS PER THE FOLLOWING DETAILS. CURRENCY & DELIVERY PERIOD USAN CE COMMODITY AMOUNT USD 700,00,000 5 TH APRIL, 2008 IRON ORE FINES FOR M/S STAR EXPORTS & IMPORTS SD/- H.D.RAMAIAH, PARTNER IN THIS CONNECTION WE DECLARE AS UNDER; - OUR ACTUAL AVERAGE EXPORT SALES FOR THE PAST 2 YEAR S ARE RS. LAKHS - OUR ESTIMATED EXPORT SALES FOR THE CURRENT YEAR IS RS. LAKHS AND - PROJECTED EXPORT SALES FOR THE NEXT YEAR IS RS. LAKHS - OUR UNCOVERED EXPOSURE ON EXPORTS ARE RS. LAKHS FURTHER, WE CONFIRM THAT THE AGGREGATE OF THE LOCAL FORWARD PURCHASE CONTRACTS OUT STANDINGS ARE LESS THAN THE AVERAGE OF THE ACTUAL E XPORTS OF THE PRECEDING 2 YEARS. WE ALSO CONFIRM THAT THE EXPOSURE COVERED BY THE AB OVE CONTRACT HAVE NOT BEEN COVERED WITH ANY OTHER AUTHORIZED DEALER. IT IS UNDERSTOOD THAT THE CONTRACT IS SUBJECT TO FE DAI RULES AND WE AUTHORIZE YOU TO RECOVER CHARGES IF ANY, TO THE DEBIT OF OUR ACCO UNT. FURTHER, IF WE AIL TO UTILIZE THE CONTRACT OR GIE SUITABLE INSTRUCTIONS FOR CANCELLAT ION OR EXTENSION BEFORE DUE DATE WE CONFIRM THAT YOU HAVE THE RIGHT TO AUTOMATICALLY CANCEL THE CONTRACT ON THE 5 TH DAY FROM DUE DATE FOR DELIVERY AND DEBIT THE CHARGE S TO OUR ACCOUNT WITHOUT FURTHER REFERENCE TO US. WE ALSO UNDERSTAND THAT NO DELIVERIES WILL BE ACCEPTED 14 ITA NO.997(B)/12 AFTER DUE DATE AND BEFORE ITS AUTOMATIC CANCELLATIO N ON THE 15 TH DAY FROM THE DUE DATE. YOURS FAITHFULLY, FOR M/S STAR EXPORTS & IMPORTS SD/-H.D.RAMAIAH (STAMP & SIGNATURE OF THE APPLICANT) PLACE: BANGALORE DSATE:07-03-2008 GUIDELINES ON FOREIGN EXCHANGE DERIVATIVES AND HEDG ING COMMODITY PRICE RISK AND FREIGHT RISK OVERSEAS PRESCRIBED BY RBI VI DE ITS CIRCULAR DATED 29-10-2007 GIVES THE OPERATIONAL GUIDELINES FOR THE BANKS. THESE OPERATIONAL GUIDELINES STIPULATE THAT THE BANKS HAV E TO MAKE A THOROUGH VERIFICATION OF THE DOCUMENTARY EVIDENCE AND FULL P ARTICULARS OF CONTRACT SHOULD BE MARKED. IT IS CLEARLY STATED THAT NO HED GING FACILITY IS TO BE PROVIDED TO THE CLIENTS ON THE BASIS OF UNDERTAKING S, ALONE. FURTHER, MATURITY OF THE HEDGE AS PER THESE GUIDELINES COULD NOT EXCEED MATURITY OF THE UNDERLINE TRANSACTIONS. IN THE FACE OF SUCH G UIDELINES OF RBI THE CONCLUSION THAT THE BANK HAD GIVEN A FOREIGN EXCHA NGE COVERAGE CONTRACT ON A STAND ALONE BASIS, WITHOUT VERIFYING THE ASSES SEES AGREEMENT OF SUPPLY OF IRON ORE FINE TO M/S FITPL, CANNOT BE ACC EPTED. THE FLOW OF EVENTS DO SHOW THAT THE CONTRACT WITH THE BANK DATE D 07-03-2008 WAS ENTERED BY THE ASSESSEE ONLY BASED ON ITS SUPPLY OF CONTRACT WITH M/S FITPL. 15 ITA NO.997(B)/12 10. IF WE TAKE THE SECOND SET OF TRANSACTIONS THERE IS AN APPLICATION DATED 02-09-2008 FROM THE ASSESSEE TO THE BANK WHER EIN IT REQUIRES FORWARD EXCHANGE FOR US DOLLARS OF RS.40.00 LAKHS A GAINST IRON ORE FINES. THE PERIOD MENTIONED IS 01-10-2008 TO 15-10-2008. THE FORMAT IS VERY SAME AND THE APPLICATION PLACED AT PAPER BOOK PAGE NO.43 CARRIES THE STAMP OF THE BANK AS WELL. THE SECOND CONTRACT WIT H M/S FITPL ALSO MENTIONS DELIVERY SCHEDULE AS 1 ST TO 15 TH OCTOBER, 2008 WHICH PERFECTLY TALLIES WITH THE PERIOD MENTIONED IN THE FORWARD EX CHANGE CONTRACT. IT MIGHT BE TRUE THAT THE ASSESSEE HAD CANCELLED THE S ECOND CONTRACT PRIOR TO THE LAST DATE MENTIONED IN THE CONTRACT WITH THE BANK, AND THE ASSESSEE NEVER MADE ANY SUPPLY TO M/S FITPL. AS A PRUDENT BUSINESSMAN WHEN IT FOUND THAT SUPPLY OF IRON ORE F INES MAY NOT BE POSSIBLE, ASSESSEE COULD HAVE THOUGHT THAT IT WOULD BE NOT WISE TO CONTINUE WITH FORWARD EXCHANGE CONTRACT. WE CANNO T FAULT THE ASSESSEE FOR FORECLOSING THE FORWARD EXCHANGE CONTRACT. I N SUCH CIRCUMSTANCES, THE FACTS IN OUR OPINION SHOW THAT THE FORWARD CONT RACTS WERE ALL PURSUANT TO OR INCIDENTAL TO THE BUSINESS CONTRACTS FOR THE SUPPLY OF IRON ORE. LOWER AUTHORITIES IN OUR OPINION, FELL IN ER ROR IN VIEWING THIS TRANSACTION INDEPENDENTLY, DIVORCED FROM EACH OTHER . NO DOUBT, CO- ORDINATE BENCH OF THIS TRIBUNAL IN THE CASE OF SRI K.MOHAN & CO (EXPORTS)(P)LTD. (SUPRA) HAD HELD THAT PROFIT FROM FORWARD CONTRACT WERE TO 16 ITA NO.997(B)/12 BE ASSESSED AS PROFIT FROM SPECULATIVE BUSINESS. H OWEVER, IN THE SAID CASE, THERE WERE LARGE NUMBER OF SUCH TRANSACTION A ND FORWARD CONTRACTS WERE TAKEN IN RESPECT OF 46% OF THE EXPORT TURNOVER . IT WAS NO DOUBT HELD THAT FORWARD CONTRACTS WHICH WERE SETTLED WITH OUT ACTUAL DELIVERY OF FOREIGN EXCHANGE WERE TO BE CONSIDERED AS SPECULATI VE TRANSACTIONS. HOWEVER, WE FIND THAT HONBLE GUJARAT HIGH COURT IN THE CASE OF CIT VS FRIENDS & FRIENDS SHIPPING CO.(SUPRA) HAD FOLLOWED THE DECISION OF HONBLE CALCUTTA HIGH COURT IN THE CASE OF SOORAJMU LL NAGARMULL (SUPRA) AND HAD HELD THAT FOREIGN EXCHANGE CONTRACTS WHEN I NCIDENTAL TO THE REGULAR COURSE OF ASSESSEES BUSINESS, LOSS ARISING THERE FROM WOULD NOT BE SPECULATIVE LOSS, BUT INCIDENTAL LOSS TO ASSESSE ES BUSINESS. RELEVANT PART OF THE JUDGMENT OF THE HONBLE GUJARAT HIGH CO URT IS REPRODUCED HERE UNDER; REVENUE IS IN APPEAL AGAINST THE JUDGMENT OF THE T RIBUNAL DATED 29.5.2009 RAISING FOLLOWING QUESTIONS FOR OUR CONSI DERATION : 'WHETHER THE APPELLATE TRIBUNAL IS RIGHT IN LAW AND ON FACTS IN REVERSING THE ORDER PASSED BY CIT(A) AND THEREBY DELETING THE DIS ALLOWANCE OF RS.15,04,910/- MADE ON ACCOUNT OF FOREIGN EXCHANGE DIFFERENCE ?' FROM THE RECORD, IT EMERGES THAT THE ASSESSEE WHO I S AN EXPORTER HAD ENTERED INTO FORWARD CONTRACTS WITH THE BANKERS TO HEDGE AG AINST ANY LOSS ARISING OUT OF FLUCTUATION IN FOREIGN CURRENCY. FROM THE ORDER PASSED BY THE CIT(A), WE GATHER THAT THE CONTRACT BETWEEN THE ASSESSEE AND T HE BANK PROVIDED THAT THE 17 ITA NO.997(B)/12 ASSESSEE WOULD BUY SOME QUANTITY OF DOLLARS AT A PA RTICULAR RATE TO COVER EXPORT BILL PAYMENT. THE CONTRACT GAVE DELIVERY OPT ION DATES. THE ASSESSEE HAD TO TAKE THE DELIVERY WITHIN THE PERIOD INDICATED IN THE CONTRACT AND IF FOR SOME REASON IT WAS NOT POSSIBLE TO DO SO, THE ASSESSEE H AD TO GIVE INSTRUCTIONS TO THE BANK FOR CANCELLATION OF THE CONTRACT. SINCE ON SOME OCCASIONS, THE ASSESSEE WAS REQUIRED TO GIVE INSTRUCTIONS FOR CANC ELLATION OF FORWARD CONTRACT, THE ASSESSEE HAD TO PAY AGREED CHARGES TO THE BANK. IN THE PROCESS THE ASSESSEE SUFFERED LOSS OF RS.15 LACS. THE ASSESSING OFFICER DISALLOWED THE LOSS HOLDING IT AS SPECULATIVE IN NATURE AND THEREFORE COVERED UNDER SUB-SECTION (5) OF SECTION 43 OF THE ACT. IN FURTHER APPEAL, CI T(A) CONFIRMED THE ORDER OF THE ASSESSING OFFICER RELYING ON THE DECISION OF TH E ANDHRA PRADESH HIGH COURT IN THE CASE OF M.G.BROTHERS V. CIT, (1985) 154 ITR 695 AND ALSO IN THE CASE OF COMMISSIONER OF INCOME TAX V. JOSEPH JOHN, 67 ITR 7 4. ON FURTHER APPEAL, THE TRIBUNAL DELETED THE DISALLOWANCE RELYING ON THE DE CISION OF THE BOMBAY HIGH COURT IN THE CASE OF CIT V. BADRIDASGAURIDU (P) LTD ., 261 ITR 256. WE MAY NOTICE THAT THE BOMBAY HIGH COURT IN THE SAID DECIS ION HAD RELIED ON A DECISION OF THE CALCUTTA HIGH COURT IN THE CASE OF CIT V. SO ORAJMULL NAGARMULL, 129 ITR 169 (CAL.) COUNSEL FOR THE REVENUE VEHEMENTLY CONTENDED THAT T HE ASSESSING OFFICER AS WELL AS THE CIT (APPEALS) HAD EXAMINED THE ISSUE TH READBARE. IT WAS FOUND THAT THERE WAS NO DIRECT CONNECTION BETWEEN THE EXP ORT CONTRACT AND THE BOOKING OF DOLLARS BY THE ASSESSEE. THE ENTIRE TRANSACTION WAS THUS IN THE NATURE OF SPECULATION. ON THE OTHER HAND, LEARNED COUNSEL SHRI THAKER APPE ARING ON BEHALF OF THE ASSESSEE CONTENDED THAT THE ISSUE IS SQUARELY COVER ED BY THE DECISION OF THE BOMBAY HIGH COURT IN THE CASE OF BADRIDAS GAURIDU ( P) LTD. (SUPRA). THE ASSESSEE IS ADMITTEDLY NOT A DEALER IN FOREIGN EXCH ANGE. THE CHARGES THAT THE ASSESSEE HAD TO PAY TO THE BANK WERE IN THE NATURE OF REVENUE EXPENDITURE IN THE COURSE OF BUSINESS. COUNSEL FURTHER SUBMITTED T HAT THE RESERVE BANK OF INDIA'S GUIDELINES WOULD NOT PERMIT THE BANK TO ENT ER INTO A FORWARD CONTRACT 18 ITA NO.997(B)/12 WITH RESPECT TO FOREIGN CURRENCY UNLESS THE ASSESSE E HAD EXPORT CONTRACT ON HAND. HAVING THUS HEARD THE LEARNED ADVOCATES FOR THE PAR TIES AND HAVING PERUSED THE DOCUMENTS ON RECORD, WE FIND THAT THE ISSUE IS COVERED BY THE DECISIONS OF THE BOMBAY HIGH COURT IN THE CASE OF BADRIDAS GAURI DA (P) LTD. AND THE CALCUTTA HIGH COURT IN THE CASE OF SOORAJMULL NAGAR MULL (SUPRA). IN THE DECISION OF THE BOMBAY HIGH COURT, THE ASSES SEE WAS IN THE BUSINESS OF EXPORT OF COTTON. THE ASSESSEE HAD ENTERED INTO FOR WARD CONTRACT WITH BANKS IN RESPECT OF FOREIGN EXCHANGE. SOME OF THESE CONTRACT S COULD NOT BE HONOURED FOR WHICH THE ASSESSEE HAD TO PAY RS.13.50 LACS WHI CH WAS DEBITED TO THE PROFIT AND LOSS ACCOUNT. THE ASSESSEE CLAIMED THE S UM AS BUSINESS LOSS. REVENUE WAS OF THE OPINION THAT THE LOSS WAS SPECULATIVE IN NATURE. BOMBAY HIGH COURT FOLLOWING THE DECISION OF THE CALCUTTA H IGH COURT IN THE CASE OF SOORAJMULL NAGARMULL (SUPRA) HELD THAT THE EXPENDIT URE WOULD NOT BE COVERED UNDER SECTION 43(5) OF THE ACT AS SPECULATIVE TRANSACTION . IT WAS OBSERVED AS UNDER: 'THE ASSESSEE WAS NOT A DEALER IN FOREIGN EXCHANGE. THE ASSESSEE WAS A COTTON EXPORTER. THE ASSESSEE WAS AN EXPORT HOUSE. THEREFORE, FOREIGN EXCHANGE CONTRACTS WERE BOOKED ONLY AS INCIDENTAL T O THE ASSESSEE'S REGULAR COURSE OF BUSINESS. THE TRIBUNAL HAS RECORDED A CAT EGORICAL FINDING TO THIS EFFECT IN ITS ORDER. THE ASSESSING OFFICER HAS NOT CONSIDERED THESE FACTS. UNDER SECTION 43(5) OF THE INCOME-TAX ACT, ' SPECULATIVE TRANSACTION ' HAS BEEN DEFINED TO MEAN A TRANSACTION IN WHICH A CONTRACT FOR THE PURCHASE OR SALE OF COMMODITY IS SETTLED OTHERWISE THAN BY THE ACTUAL D ELIVERY OR TRANSFER OF SUCH COMMODITY. HOWEVER, AS STATE ABOVE, THE ASSESSEE WA S NOT A DEALER IN FOREIGN EXCHANGE. THE ASSESSEE WAS AN EXPORTER OF COTTON. I N ORDER TO HEDGE AGAINST LOSSES, 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 CAES FAILED. IN THE CIRCUM STANCES, THE ASSESSEE WAS 19 ITA NO.997(B)/12 ENTITLED TO CLAIM DEDUCTION IN RESPECT OF RS.13.50 LAKHS AS A BUSINESS LOSS. THIS MATTER IS SQUARELY COVERED BY THE JDUGMENT OF THE C ALCUTTA HIGH COURT, WITH WHICH WE AGREE, IN THE CASE OF CIT V.SOORAJMULL NAG URMULL(1981) 129 ITR 169.' BEFORE THE CALCUTTA HIGH COURT, THE ASSESSEE WAS A FIRM ENGAGED IN THE BUSINESS OF IMPORT AND EXPORT OF JUTE. IN COURSE OF BUSINESS, THE ASSESSEE WOULD ENTER INTO FORWARD CONTRACT IN FOREIGN EXCHAN GE IN ORDER TO COVER THE LOSS WHICH MAY ARISE DUE TO DIFFERENCE IN FOREIGN E XCHANGE VALUATION. IN ONE SUCH CONTRACT, THE ASSESSEE HAD TO PAY TO THE BANK DIFFERENCE OF RS.80,491/- WHICH WAS CLAIMED BY THE ASSESSEE AS REVENUE EXPEND ITURE. THE ASSESSING OFFICER DISALLOWED THE CLAIM. THE HIGH COURT HELD T HAT THE ASSESSEE WAS NOT A DEALER IN FOREIGN EXCHANGE AND THE FOREIGN EXCHANGE S WERE ONLY INCIDENTAL TO THE ASSESSEE'S REGULAR COURSE OF BUSINESS AND THE L OSS WAS THUS NOT A SPECULATIVE LOSS BUT INCIDENTAL TO THE ASSESSEE'S BUSINESS AND ALLOWABLE AS SUCH. FACTS IN THE PRESENT CASE ARE VERY SIMILAR. A DMITTEDLY, THE ASSESSEE IS NOT A DEALER IN FOREIGN EXCHANGE. FOR THE PURPOSE O F HEDGING THE LOSS DUE TO FLUCTUATION IN FOREIGN EXCHANGE WHILE IMPLEMENTING THE EXPORT CONTRACTS, THE ASSESSEE HAD ENTERED INTO FORWARD CONTRACT WITH THE BANKS. IN SOME CASES, THE EXPORT COULD NOT BE EXECUTED AND THE ASSESSEE HAD T O PAY CERTAIN CHARGES TO THE BANK AND THEREBY INCURRED CERTAIN EXPENSES. THE SE EXPENSES THE ASSESSEE CLAIMED BY WAY OF EXPENDITURE TOWARDS BUSINESS. WE DO NOT FIND THAT THE TRANSACTION CAN BE STATED TO BE IN SPECULATION AS TO COVER UND ER SUB-SECTION (5) OF SECTION 43 OF THE ACT. IT IS TRUE THAT THE CIT(APPEALS) HAS MADE SOME OBSE RVATIONS WHICH WOULD PRIMA FACIE SUGGEST THAT THERE WAS NO DIRECT CO-REL ATION BETWEEN THE EXCHANGE DOCUMENT AND THE PRECISE EXPORT CONTRACT. HOWEVER, SUCH OBSERVATIONS CANNOT BESEEN IN ISOLATION. CIT(APPEALS) HIMSELF HAS NOTED THAT THE ASSESSEE HA D ENTERED INTO SEVEN SEPARATE CONTRACTS WITH THE BANKERS. IN THE CASE OF M.G.BROTHERS (SUPRA), THE 20 ITA NO.997(B)/12 ANDHRA PRADESH HIGH COURT WAS CONCERNED WITH A CASE WHERE THE ASSESSEE WAS QCARRYING ON BUSINESS OF GROUNDNUT OIL AND THE ASSE SSEE ENTERED INTO FORWARD TRANSACTION S IN NEEM OIL AND COTTON SEED OIL. IN THAT VIEW OF THE MATTER, THE COURT HELD THAT IT WAS NOT A HEDGING TRANSACTION SINCE THERE WAS NO EVIDENCE THAT THE ASSESSEE HAD ADEQUATE STOCK OF RAW MATERIA LS TO THE EXTENT OF HEDGING TRANSACTION S. IN THE CASE OF JOSEPH JOHN (SUPRA) , THE APEX COURT OBSERVED THAT THE BURDEN OF PROOF IS UPON THE ASSESSEE TO SHOW THAT THE TRANSACTION IS NOT SPECULATIVE TRANSACTION BUT A HEDGING TRANSACTION AND FURTHER THAT THE FINDING OF THE TRIBUNAL THAT THE TRANSACTION CARRIED OUT BY THE ASSESSEE IS SPECULATIVE IN NATURE AND NOT HEDGING TRANSACTION S IS ESSENTIALLY A FINDING ON A QUESTION OF FACT. THE ABOVE NOTED DECISIONS DO NOT DIRECTLY TOUCH THE CONTROVERSY ARISING IN THE PRESENT APPEAL. WE FIND THAT THE DECISIONS OF THE B OMBAY HIGH COURT AND THE CALCUTTA HIGH COURT NOTED ABOVE WOULD COVER THE SIT UATION. TAX APPEAL IS THEREFORE DISMISSED. IN VIEW OF THE ABOVE DECISION OF THE HONBLE GUJARA T HIGH COURT WE ARE OF THE OPINION THAT THE DECISIONS RELIED ON BY THE REV ENUE WHICH ARE OF VARIOUS TRIBUNAL BENCHES PALE INTO INSIGNIFICANCE. JUDICIAL DISCIPLINE REQUIRES US TO FOLLOW JUDGMENT OF HIGH COURT UNLESS AND UNTIL A CO NTRARY JUDGMENT OF JURISDICTIONAL HIGH COURT IS SHOWS BY THE PARTIES T O THE LITIGATION. EVEN IF THERE IS A CONFLICT OF OPINION BETWEEN VARIOUS H IGH COURTS, UNLESS AND UNTIL, THERE IS A JURISDICTIONAL HIGH COURT DEC ISION, ONE 21 ITA NO.997(B)/12 WAY OR THE OTHER, AN ASSESSEE CAN RIGHTLY SUBMIT TH AT THE ONE IN ITS FAVOUR SHOULD BE FOLLOWED. WE ARE THEREFORE, OF THE OPINIO N THAT THE ASSESSEE HAS TO SUCCEED IN THIS APPEAL. 11. APPEAL OF THE ASSESSEE IS ALLOWED. ORDER PRONOUNCED IN THE OPEN COURT ON THE 6 TH FEBRUARY, 2015. SD/- SD/- (N.V.VASUDEVAN) (ABRAHAM P GEORGE) JUDICIAL MEMER ACCOUNTANT MEMBER BANGALORE: D A T E D : 06-02-2015 AM COPY TO : APPELLANT RESPONDENT CIT(A)-IV, BANGALORE. CIT DR, ITAT, BANGALORE. GUARD FILE (1+1) ASST. REGISTRAR ITAT, BANGALORE