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| The Tax Publishers2021 TaxPub(DT) 1428 (Karn-HC) INCOME TAX ACT, 1961
Section 37(1)
Forward contracts were entered to protect assessee from foreign exchange fluctuation in respect of consideration for export proceeds, therefore, 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 and was, therefore, deductible.
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Business loss - Market-to-market loss relating to forward exchange contract claimed as deduction - -
Assessee 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. It claimed market-to-market loss as relating to forward exchange contract as deduction. AO disallowed deduction treating the loss as speculative one. Held: It was not disputed by AO that forward contracts were entered to protect assessee from foreign exchange fluctuation in respect of consideration for export proceeds, therefore, 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 and was, therefore, deductible.
Relied:CIT v. Woodward Governor India (P) Ltd. (2009) 312 ITR 254 (SC) : 2009 TaxPub(DT) 1628 (SC).
REFERRED :
FAVOUR : In assessee's favour.
A.Y. : 2009-10
INCOME TAX ACT, 1961
Section 14A
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