Madras High Court
Principal Commissioner Of Income Tax vs M/S.S.P.Apparels Ltd on 23 October, 2024
Author: R.Suresh Kumar
Bench: R.Suresh Kumar, C.Saravanan
T.C.A.No.45 of 2018
IN THE HIGH COURT OF JUDICATURE AT MADRAS
DATED: 23.10.2024
CORAM
THE HON'BLE MR.JUSTICE R.SURESH KUMAR
AND
THE HON'BLE MR.JUSTICE C.SARAVANAN
Tax Case Appeal No.45 of 2018
Principal Commissioner of Income Tax
No.63, Race Course Road, Coimbatore. .... Appellant
Vs.
M/s.S.P.Apparels Ltd.,
39-A, Extension Street
Kaikattipudur
Avinashi-641 654
PAN : AAJ CS 4031 P .... Respondent
-----
Tax Case Appeal filed under Section 260A of the Income Tax Act, 1961
against the order of the Income Tax Appellate Tribunal, 'B' Bench Chennai,
dated 09.09.2016 in ITA.No.1699/MDS/2015.
For Appellant : Mr.Karthik Ranganathan
Senior Standing Counsel
For Respondent : Mr.N.V.Balaji
JUDGMENT
(Delivered by R.SURESH KUMAR, J.)
This Tax Case Appeal has been filed by the Revenue calling in question
the correctness of the order passed by the Income Tax Appellate Tribunal,
Chennai by raising the following substantial questions of law:
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1. Whether on the facts and circumstances of the case,
the Appellate Tribunal is correct in deleting the
disallowance of forex derivative loss arising on
account of loss on forex derivative transactions by
treating it as a trading loss?
2. Whether on the facts and circumstances of the case,
the Appellate Tribunal is justified in law in holding
that the loss on derivative transactions is trading loss
thereby over viewing the fact that when no actual
delivery has taken place, the transactions in question
fall within the definition of speculative transaction as
per Section 43(5) of the Income Tax Act?
3. Whether on the facts and circumstances of the case,
the Appellate Tribunal is justified in law in holding
that the forex derivative transactions of the assessee
have proximity to the export turnover thereby
impliedly ruling that the issue is covered by proviso
(a) to Section 43(5), when the proviso clearly
mandates that to be categorised as hedge, the
transactions should only be in respect of goods or
merchandise manufactured or traded by the
assessee?
4. Whether, on the facts and in the circumstances of
the case, the Tribunal is legally correct by holding
that the forex derivative transactions carried on by
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the assessee through a Banker as Over the Counter
Transactions (OTC) and not through a recognized
stock exchange also covered by proviso (d) to
Section 43(5) when the pre-conditions laid by the
Explanation to the said proviso is not satisfied to
constitute it as an eligible transaction?
5. Whether the Tribunal is correct in law in following
the ratio of the decisions in the cases of CIT
Vs.Badrids Gauridu (P) Ltd (2003) 251 ITR 256 (Bom)
and CIT Vs.Soorajmull Nagarmull (1981) [129 ITR
169 Cal)] when admittedly the factum of those cases
is distinguishable from factum of the assessee's
case?
6. Whether the Tribunal is right in law in allowing the
Rs.12,23,87,167/- on account of cancellation of
foreign currency forward contract, as ordinary
business loss and not speculation loss when the
forward contracts are not reliable to any export bills
of the assessee?
2. It is brought to our notice by the learned Standing Counsel for the
appellant Revenue that in the instant case, as per the CBDT's Circular No.9 of
2024 dated 17.09.2024 the tax effect is said to be less than the monetary limit
imposed and therefore, the appeal can be disposed of, keeping the substantial
questions of law raised in this appeal open for adjudication at a later point of
time.
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R.SURESH KUMAR, J.
AND
C.SARAVANAN, J.
KST
3. Recording the aforesaid submission made by the learned Standing
Counsel for the appellant Revenue, this Tax Case Appeal is dismissed for low
tax effect, keeping open the substantial questions of law for adjudication at
appropriate stage. No costs.
(R.S.K.,J.) (C.S.N.,J.)
23.10.2024
NCS : Yes/No
KST
To
The Income Tax Appellate Tribunal
'B' Bench, Chennai.
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