2020 (2) TMI 144

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.... that the ld. CIT(A) has erred in deleting the addition made towards hedging expenditure of Rs. 3,52,72,000/- while releasing premium for the forex cover. 2. Brief facts of the case are that the assessee has filed its return of income for the assessment year 2012-13 dated 28.09.2012 declaring loss of Rs. 22,90,55,703/-. Subsequently, a revised return was filed on 03.03.2014 admitting a loss of Rs. 23,07,13,703/-. The case of the assessee was selected for scrutiny. After considering the details furnished by the assessee against statutory notices and other submissions, the Assessing Officer completed the assessment under section 143(3) of the Act by determining the loss at Rs. 19,29,14,962/- after making various disallowances. 3. With reg....

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....ssee through Banker as Over the Counter Transactions (OTC) and not through a recognized stock exchange are also covered by proviso (d) to section 43(5) when the preconditions laid by the Explanation to the said proviso is not satisfied to constitute it as an eligible transaction and pleaded for reversing the findings of the ld. CIT(A). 5. Per contra, the ld. Counsel for the assessee has submitted that the assessee has entered into forex derivative transactions through its bankers and these transactions are not speculative nature because they are transacted in the normal course of business to hedge the loss from depreciation of rupee against purchase of raw materials under different contract in foreign currency, which is in accordance with....

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....erence between forward cover spot rate and the exchange rate at the time of import bill accounting. (ii) For outstanding import bills without forward cover, the difference between closing rate (exchange rate as on the last day of the financial year) and the exchange rate at the time of import bill accounting. Before the ld. CIT(A), the assessee has submitted that it has provided the breakup of its claim before the AO vide their submission dated 12.03.2015, which was not considered by the Assessing Officer before concluding the assessment and by ignoring the same the Assessing Officer disallowed the exchange loss on forward contract and exchange loss on outstanding import bills holding that the said amounts were spent towards premium in....

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.... the loss out of forex derivatives on actual settlement/ conclusion of contracts as allowable business loss. However, they have directed the Revenue to examine whether the transactions would fall under section 43(5)(d) of the Act, and if so to treat the same as non-speculative transaction. By the above directions, it appears that though the CBDT has recognized the loss arising out of forex derivatives on actual settlement of the contracts, directed the Revenue to treat the same as speculative transaction when they are transacted through nationalized banks and as not speculative, when these transactions are transacted through recognized stock exchange. Moreover, as per proviso (a) to sub-section 5 of section 43 of the Act, the legitimate con....