The assessee had entered into\u00a0Forward Contract\u00a0with the bank in order to hedge its foreign exchange risk.\u00a0Due to adverse foreign exchange movement, the\u00a0bank had\u00a0debited the loss to the assessee’s account. Thus, the loss debited by the bank in the assessee’s account had crystallized and was a realistic loss suffered by the assessee.\u00a0It was stated that only money changers and banks are allowed to trade in foreign currency and the assessee was neither a money changer nor a bank. Tribunal held that on perusal of the appellate order,\u00a0assessee had\u00a0submitted the details of the forward contracts entered into and the\u00a0CIT(A) had tabulated the same revealing that\u00a0the assessee has utilized the services of\u00a0various banks\u00a0in order to iron out the loss arising out of foreign currency fluctuation risk by entering into forex derivative contract.\u00a0It was found,\u00a0bank wise statement of deals executed by the assessee submitted before the\u00a0CIT(A) indicated\u00a0that the total export turnover of the assessee during the year was 13.9 million USD amounting to Rs.63 crores and there were 213 export invoices. On verification of the statement of bank wise deals executed for the year, the CIT(A) had\u00a0observed that all the derivative contracts executed were cancelled before the due date and even a single contract was\u00a0not\u00a0honoured. The number of contracts\u00a0was\u00a0very high\u00a0in number. The approximate value of derivative contracts for the year\u00a0was about 5 times the export turnover along and about 3.5 times the export and import turnover. Thus, the abnormally high figures indicated\u00a0that the assessee was trading much more than genuine requirement for hedging. Accordingly, the\u00a0AO was directed\u00a0to restrict the actual loss in lieu of actual export after verification of contract notes, etc. and the assessee was also directed to cooperate with the Department by producing all particulars.(AY. 2009-10, 2010-11, 2011-12)<\/p>\n","protected":false},"excerpt":{"rendered":"
S. 43(5) : Speculative transaction\u2013Hedge-Export business-Foreign currency derivate contracts are speculative in nature and loss arising out of the same has to be treated as speculative loss-The AO was directed to restrict the actual loss in lieu of actual export after verification of contract notes, etc. and the assessee was also directed to cooperate with the Department by producing all particulars.<\/p>\n","protected":false},"author":3,"featured_media":0,"comment_status":"open","ping_status":"open","sticky":false,"template":"","format":"standard","meta":{"_acf_changed":false,"jetpack_post_was_ever_published":false,"_jetpack_newsletter_access":"","_jetpack_dont_email_post_to_subs":false,"_jetpack_newsletter_tier_id":0,"_jetpack_memberships_contains_paywalled_content":false,"_jetpack_memberships_contains_paid_content":false,"footnotes":""},"categories":[1],"tags":[],"class_list":["post-11497","post","type-post","status-publish","format-standard","hentry","category-digest"],"acf":[],"jetpack_featured_media_url":"","jetpack_shortlink":"https:\/\/wp.me\/p9S2Rw-2Zr","jetpack-related-posts":[],"jetpack_sharing_enabled":true,"_links":{"self":[{"href":"https:\/\/itatonline.org\/digest\/wp-json\/wp\/v2\/posts\/11497","targetHints":{"allow":["GET"]}}],"collection":[{"href":"https:\/\/itatonline.org\/digest\/wp-json\/wp\/v2\/posts"}],"about":[{"href":"https:\/\/itatonline.org\/digest\/wp-json\/wp\/v2\/types\/post"}],"author":[{"embeddable":true,"href":"https:\/\/itatonline.org\/digest\/wp-json\/wp\/v2\/users\/3"}],"replies":[{"embeddable":true,"href":"https:\/\/itatonline.org\/digest\/wp-json\/wp\/v2\/comments?post=11497"}],"version-history":[{"count":1,"href":"https:\/\/itatonline.org\/digest\/wp-json\/wp\/v2\/posts\/11497\/revisions"}],"predecessor-version":[{"id":11498,"href":"https:\/\/itatonline.org\/digest\/wp-json\/wp\/v2\/posts\/11497\/revisions\/11498"}],"wp:attachment":[{"href":"https:\/\/itatonline.org\/digest\/wp-json\/wp\/v2\/media?parent=11497"}],"wp:term":[{"taxonomy":"category","embeddable":true,"href":"https:\/\/itatonline.org\/digest\/wp-json\/wp\/v2\/categories?post=11497"},{"taxonomy":"post_tag","embeddable":true,"href":"https:\/\/itatonline.org\/digest\/wp-json\/wp\/v2\/tags?post=11497"}],"curies":[{"name":"wp","href":"https:\/\/api.w.org\/{rel}","templated":true}]}}