Case Law Details
CIT Vs Quest Global Engineering Services Pvt. Ltd. (Karnataka High Court)
Conclusion: Loss sustained by assessee due to fluctuation in foreign exchange while implementing export contract was incidental to assessee’s course of business, therefore, such a loss was not a speculative loss but a business loss.
Held: Assessee had entered into forward contract with the bank to buy or sell foreign exchange at an agreed price at a specified future date in order to hedge against possible future financial loss due to fluctuation in the rate of foreign currency. AO made the additions on the ground that, provision for loss could not be allowed when the actual sales had not even taken place and maturity date of the derivatives contracts had not arisen and the notional loss or notional income and deduction of liabilities which were unascertained did not come within the purview of the IT Act. Tribunal had deleted the addition. It was held that the loss sustained by assessee due to fluctuation in foreign exchange while implementing export contract was incidental to assessee’s course of business, therefore, such a loss was not a speculative loss but a business loss.
FULL TEXT OF THE JUDGMENT/ORDER OF KARNATAKA HIGH COURT
This appeal under Section 260-A of the Income Tax Act, 1961 (hereinafter referred to as ‘the Act’, for short) has been filed by the revenue. The subject matter of the appeal pertains to the Assessment Year 2009-10. The appeal was admitted by a Bench of this Court vide order dated 09.02.2016 on the following substantial questions of law:
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