Business loss on cancellation of matured forward contracts held allowable where linked to export activity.

Loss from cancellation of matured forward contracts, where the contracts were integral or incidental to diamond export business, was treated as allowable business loss. The Court noted that the issue was already covered by binding precedent in favour of the assessee, so the proposed question did not raise a substantial question of law under Section 260A of the Income-tax Act, 1961. The matter was answered in favour of the assessee and against the Revenue.

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Issues: Whether the loss arising from cancellation of matured forward contracts, said to be integral or incidental to the export of diamonds, was allowable as business loss notwithstanding that the assessee did not deal in foreign exchange and was engaged in diamond trade.

Analysis: The issue was treated as already concluded by the Court in earlier binding precedent in favour of the assessee. In view of that position, the proposed question did not raise any substantial question of law under Section 260A of the Income-tax Act, 1961.

Conclusion: The issue was answered in favour of the assessee and against the Revenue.

Ratio Decidendi: Loss arising from cancellation of matured forward contracts integral or incidental to an export business does not give rise to a substantial question of law and is allowable as business loss.

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