Tribunal allows Mark-to-Market loss on forex contracts as business loss in AY 2009-10

The Tribunal upheld the CIT(A)'s decision allowing Mark-to-Market loss on forward exchange contracts as a business loss for the appellant in AY 2009-10. The Tribunal emphasized the regular business nature of the appellant's foreign exchange transactions and cited relevant judicial precedents supporting the allowance of such losses. Finding no conflicting judgments, the Tribunal dismissed the Revenue's appeal, affirming the treatment of the loss as a business expense.

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Issues:
1. Allowance of Mark-to-Market loss on valuation of forward exchange contracts as business loss for AY 2009-10.

Analysis:
The appeal before the Appellate Tribunal ITAT Mumbai concerned the Revenue's challenge against the CIT(A)'s decision allowing the Mark-to-Market loss on valuation of forward exchange contracts as a business loss for the relevant assessment year. The Revenue contested the allowance of the loss despite the assessee's reliance on binding judgments. The CIT(A) had granted relief, citing judicial decisions favoring the appellant on the issue. The Tribunal noted that the CIT(A) correctly relied on the Special Bench decision in the case of Bank of Bahrain and Kuwait as well as the Supreme Court judgment in Woodward Governor India (P) Ltd. The Tribunal emphasized that the appellant's transactions in foreign exchange were part of its regular business operations and consistent with accounting standards. The Tribunal highlighted that the nature of the business, not the type of stock involved, determined the treatment of forward contract transactions. The Tribunal also referenced a previous ITAT Mumbai bench decision supporting the allowance of such losses as business losses. Ultimately, the Tribunal upheld the CIT(A)'s decision, dismissing the Revenue's appeal.

In conclusion, the Tribunal affirmed that the Mark-to-Market loss on forward exchange contracts was an allowable business loss for the appellant. The Tribunal found no contradictory judgments presented by the Revenue and deemed the issue settled in favor of the appellant. As a result, the Tribunal dismissed the Revenue's appeal, upholding the CIT(A)'s decision.

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