High Court affirms Tribunal decision on mark-to-market loss in forex contract for AY 2008-09

The High Court upheld the Tribunal's decision to delete the addition of mark to market loss on a foreign exchange forward contract for Assessment Year 2008-09. The Court found that the loss was not notional and could be allowed, based on precedent. The appeal was dismissed as it did not raise a substantial question of law, in line with a previous case ruling. The decision emphasized the importance of consistency in legal decisions and the need for substantial legal questions to be raised for appeal consideration.

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Issues:
Challenge to order of Income Tax Appellate Tribunal regarding addition of mark to market loss on foreign exchange forward contract for Assessment Year 2008-09.

Analysis:

1. The appellant filed an Appeal under Section 260A of the Income Tax Act, 1961, challenging the order dated 19th September, 2013 passed by the Income Tax Appellate Tribunal (the Tribunal) concerning the Assessment Year 2008-09. The main issue raised by the Revenue was whether the Tribunal was correct in deleting the addition of Rs. 59,90,341 made by the Assessing Officer on account of disallowance of mark to market loss on foreign exchange forward contract loss. The Revenue argued that the loss was notional and should not have been allowed.

2. The learned Counsel for the Revenue, Mr. Malhotra, acknowledged that the issue in question had already been decided against the Revenue in a previous case, Commissioner of Income Tax-16 Vs. M/s. D. Chetan & Co. The High Court had held in that case that the proposed question by the Revenue did not give rise to any substantial question of law. Therefore, the appeal was not entertained.

3. In line with the decision in the previous case, the High Court in this judgment also found that the question raised by the Revenue did not present any substantial question of law. Hence, the appeal was dismissed, and no costs were awarded. The Court's decision was based on the principle established in the earlier case, where it was determined that the mark to market loss on foreign exchange forward contract was not a notional loss and could be allowed.

4. Ultimately, the High Court upheld the decision of the Tribunal to delete the addition of the mark to market loss on the foreign exchange forward contract, as it was not considered a notional loss. The judgment highlighted the importance of precedent and consistency in legal decisions, reinforcing the principle that unless a substantial question of law is raised, the Court may not entertain an appeal.

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