Priya Soparkar v. This View Has Been Consistently Followed By This Court In

Priya Soparkar IN THE HIGH COURT OF JUDICATURE AT BOMBAY ORDINARY ORIGINAL CIVIL JURISDICTION INCOME TAX APPEAL NO.979 OF 2016 Pr. Commissioner of Income Tax-5… Appellant V/s. R T Star Jewelry Pvt Ltd. … Respondent --- Mr.Ashok Kotangle with Ms.Padma Divakar for the Appellant.--- CORAM : AKIL KURESHI AND B.P.COLABAWALLA, JJ. DATE : JANUARY 08, 2019. P.C.:- 1.Revenue has filed this appeal against the judgment ofIncome Tax Appellate Tribunal (“Tribunal” for short) dated 5[th]October, 2015 raising following question for our consideration: “Whether on the facts and circumstances of thecase and in Law, the ITAT was justified indirecting the AO to allow foreign exchangeloss of Rs.1,46,94,250/- as business loss withoutappreciating the fact that the loss is notionalloss, which is on account of re-valuation ofoutstanding creditors and debtors which hasbeen worked out after considering exchangerate as on 31-03-2009?” 2. Learned counsel for the revenue candidly pointed out that similar case came up for consideration before this Court in Income Tax Appeal No.278 of 2014 in case of M/s D. Chetan & Company. The Court rejected the revenue's appeal making following observations:- “7. The impugned order of the Tribunal has, whileupholding the finding of the CIT (Appeals),independently come to the conclusion that thetransaction entered into by the Respondentassessee is not in the nature of speculativeactivities. Further the hedging transactions wereentered into so as to cover variation in foreignexchange rate which would impact its business ofimport and export of diamonds. These concurrentfinding of facts are not shown to be perverse in anymanner. In fact, the Assessing Officer also in theAssessment Order does not find that thetransaction entered into by the Respondentassessee was speculative in nature. It further holdsthat at no point of time did Revenue challenge theassertion of the Respondent assessee that theactivity of entering into forward contract was inthe regular course of its business only to safeguardagainst the loss on account of foreign exchangevariation. Even before the Tribunal, we find thatthere was no submission recorded on behalf of theRevenue that the Respondent assessee should becalled upon to explain the nature of itstransactions. Thus, the submission now being madeis without any foundation as the stand of theassessee on facts was never disputed. So far as thereliance on Accounting Standard11 is concerned, itwould not by itself determine whether the activitywas a part of the Respondentassessee's regularbusiness transaction or it was a speculativetransaction. On present facts, it was never the Revenue's contention that the transaction wasspeculative but only disallowed on the ground thatit was notional. Lastly, the reliance placed on thedecision in S. Vinodkumar (supra) in the Revenue'sfavour would not by itself govern the issues arisingherein. This is so as every decision is rendered inthe context of the facts which arise before theauthority for adjudication. Mere conclusion infavour of the Revenue in another case by itselfwould not entitle a party to have an identical reliefin this case. In fact, if the Revenue was of the viewthat the facts in S. Vinodkumar (supra) areidentical / similar to the present facts, thenreliance would have been placed by the Revenueupon it at the hearing before the Tribunal. Theimpugned order does not indicate any suchreliance. It appears that in S. Vinodkumar (supra),the Tribunal held the forward contract on factsbefore it to be speculative in nature in view ofSection 43(5) of the Act. However, it appears thatthe decision of this court in CIT vs. BadridasGauridas (P) Ltd.4 was not brought to the notice ofthe Tribunal when it rendered its decision in S.Vinodkumar (supra). In the above case, this courthas held that forward contract in foreign exchangewhen incidental to carrying on business of cottonexporter and done to cover up losses on account ofdifferences in foreign exchange valuations, wouldnot be speculative activity but a business activity.” 3.This view has been consistently followed by this Court in series of later cases. No question of law arises. Tax Appeal isdismissed. (B.P.COLABAWALLA,J.) (AKIL KURESHI,J.)