Case Law Details
DCIT Vs Acalmar Oils & Fats Ltd. (ITAT Ahmedabad)
Conclusion: Forward contracts in the nature of hedging transactions in course of normal import export activities to cover up losses on account of foreign exchange valuation difference results in business losses and not speculative one.
Held: Assessee in order to hedge against the foreign currency liability had entered a foreign option contract with ICIC Bank in July, 2007. Due to sudden and unexpected fall in the value of USD Vs. Swiss currency in the math of March 2008, assessee had incurred foreign exchange loss. AO disallowed the claim of deduction for loss arising from foreign exchange fluctuation in respect of a hedging contract to cover foreign exchange credit provided by ICIC Bank for payment for the purpose of imported raw material upon accounting of the outstanding hedging contract on market to marked basis at the end of the year. CIT(A) had allowed the claim of deduction of the assessee. It was held that forward contracts in the nature of hedging transactions in course of normal import export activities to cover up losses on account of foreign exchange valuation difference resulted in business losses and not speculative one.
FULL TEXT OF THE ITAT JUDGEMENT
These two appeals filed by revenue and two cross objections filed by assessee for A.Y. 2008-09 & 2010-11, arise from order of the CIT(A)-10, Ahmedabad dated 28-08-2015, in proceedings under section 143(3) & 143(3) r.w.s. 92CA & 144C of the Income Tax Act, 1961; in short “the Act”.
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