Principal Commissioner Of Income Tax-3, Coimbatore-18 v. M/S.cotton Blossom (India) P. Ltd.,Tirupur

In the High Court of Judicature at Madras Dated : 30.8.2019 Coram : The Honourable Mr.Justice T.S.SIVAGNANAM and The Honourable Mrs.Justice V.BHAVANI SUBBAROYANTax Case Appeal Nos.537 to 539 of 2016& CMP.Nos.10641 & 10642 of 2016 Principal Commissioner of Income Tax-3, Coimbatore-18....Appellant in all the appeals Vs M/s.Cotton Blossom (India) P. Ltd.,Tirupur-641606....Respondent in all the appeals APPEALS under Section 260A of the Income Tax Act, 1961against the common order dated 31.12.2015 made inITA.Nos.583/Mds/2014 and 1531 & 1604/Mds/2015 on the file of theIncome Tax Appellate Tribunal, Chennai 'A' Bench respectivelyfor the assessment years 2009-10, 2008-09 and 2008-09. Against the order dated 24/12/2013 and 31/03/2015 made in IT(A)No.228/11-12 & IT(A) No.144/2010-11 passed by the commissionerof Income Tax (Appeals)-II, Coimbatore and Commissioner ofIncome Tax(Appeals)-3, Coimbatore and against the order dated20/12/2010 & 21/12/2011 passed by the Assistant Commissioner ofIncome tax, company circle, Tirupur and Joint Commissioner ofIncome Tax, Tirupur Range, Tirupur respectively. For Appellant: Mr.T.R.Senthilkumar, SSC assisted by Ms.K.G.Usharani, SCFor Respondent:Mr.R.Venkatanarayanan for M/s.Subbaraya Aiyer Padmanabhan COMMON JUDGMENT (Judgment was delivered by T.S.Sivagnanam,J)We have heard Mr.T.R.Senthilkumar, learned Senior StandingCounsel assisted by Ms.K.G.Usharani, learned Standing Counsel https://hcservices.ecourts.gov.in/hcservices/ appearing for the appellant – Revenue and Mr.R.Venkatanarayanan,learned counsel appearing for the respondent – assessee. 2. These appeals, filed by the Revenue under Section 260A ofthe Income Tax Act, 1961, are directed against the common orderdated 31.12.2015 made in ITA.Nos.583/Mds/2014 and 1531 &1604/Mds/2015 on the file of the Income Tax Appellate Tribunal,Chennai 'A' Bench respectively for the assessment years 2009-10,2008-09 and 2008-09. 3. The Revenue has filed TCA.Nos.537 and 538 of 2016 byraising the following substantial questions of law : “i. Whether, on the facts and in thecircumstances of the case, the Tribunal isjustified in law in holding that the paymentmade under the employer employee insurancescheme is covered under Section 37(1) of theIncome Tax Act ? Andii. Whether, on the facts and in thecircumstances of the case, the Tribunal isjustified that the payments made under theemployer employee insurance scheme is akinto Keyman Insurance payments made when theconditions are not satisfied?”4. TCA.No.539 of 2016 was admitted on 16.8.2016 on thefollowing substantial questions of law :“i. Whether, on the facts and in thecircumstances of the case, the Tribunal isjustified in law in holding that the loss onderivative transactions is trading lossthereby ignoring the fact that when noactual delivery has taken place, thetransactions in question fall within thedefinition of speculative transaction as perSection 43(5) of the Income Tax Act ?ii. Whether, on the facts and in thecircumstances of the case, the Tribunal isjustified in law in holding that the forexderivative transactions of the assessee haveproximity to the export turnover therebyimpliedly ruling that the issue is coveredby Proviso (a) to Section 43(5), when theProviso clearly mandates that to becategorized as hedge, the transactionsshould only be in respect of goods ormerchandise manufactured or traded by theassessee ?iii. Whether, on the facts and in thecircumstances of the case, the Tribunal islegally correct by holding that the forex derivative transactions carried on by theassessee through a banker as over thecounter transactions (OTC) and not through arecognized stock exchange are also coveredby Proviso (d) to Section 43(5) when thepre-conditions laid by the Explanation tothe said Proviso are not satisfied toconstitute it as an eligible transaction ? iv. Whether, on the facts and in thecircumstances of the case, the Tribunal isright in law in following the ratio in thecase of CIT Vs. Concord Commercial (P) Ltd.[(2005) 95 ITD 117 (Mum.)(SB)] and CIT Vs.Baljit Securities [88 CCH 313 (Cal.)] when,admittedly, the factum of those cases relateto deemed speculation loss as perExplanation to Section 73(1), which isdistinguishablefromfactumoftheassessee's case which are governed bySection 43(5) read with Section 73 alone asthe transactions per se are speculative asper mandate of Section 43(5)?v. Whether, on the facts and in thecircumstances of the case, the Tribunal isjustified in law by deciding the issuesolely based on the principles laid down inthe relied upon cases rendered in thecontext of deeming provisions of Explanationto Section 73(1) alone? Andvi. Whether, on the facts and in thecircumstances of the case, the Tribunal isjustified in law by deciding that thetransactions instructuredderivativecontracts are incidental to the assessee'sbusiness when the correlation to specificexport bills and the correlation of maturityof the hedge and maturity of underlyingtransactions are not established?” 5. The learned Senior Standing Counsel for the appellantsubmits that the above appeals are not pursued by the Revenue onaccount of the low tax effect in terms of Circular No.17/2019dated 08.8.2019 issued by the Central Board of Direct Taxes. Bythe said Circular, the monetary limit for filing or pursuing anappeal before the High Court has been increased to Rs.1 Crore.It is further submitted that the tax effect in the respectivecases is less than the threshold limit. 6. In the light of the said submissions, the above tax caseappeals are dismissed on account of the low tax effect. Thesubstantial questions of law both raised and framed are left https://hcservices.ecourts.gov.in/hcservices/ open. In the event the tax effect in the respective cases isabove the threshold limit fixed in the said circular, liberty isgranted to the Revenue to make a mention to this Court torestore the appeals to be heard and decided on merits. No costs.Consequently, the connected CMPs are also dismissed. Sd/- Assistant Registrar(CS-VIII) //True Copy// Sub Assistant Registrar RSTo1.The Income Tax Appellate Tribunal, Chennai 'A' Bench, Chennai.2.The Director, Central Board of Direct Taxes, New Delhi. 3.The Commissioner of Income Tax(Appeals)II, Coimbatore.4.The Commissioner of Income Tax(Appeals)3, Coimbatore. 5.The Assistant Commissioner of Income Tax, Company Circle, Tirupur.6.The Joint Commissioner of Income-Tax, Tirupur Range, Tirupur. 7.The Assistant Registrar, Income Tax Appellate Tribunal, Besant Nagar, Chennai-90. +1cc to Mr.T.R.Senthilkumar, Advocate SR.75715 +1cc to M/s.Subbaraya Aiyer Padmanabhan, Advocate SR.75931 TCA.Nos.537 to 539 of 2016 &CMP.Nos.10641 & 10642/2016SAI(CO)CB(30/10/2019)