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Ltd.,, for the proposition that it was the intention of the Government of India to o consider currency as part of SSecurities ecurities for all practical and legal purposes. He relied on the judgment of the Hon'ble Madras High Court in the case of Rajshree Sugars & Chemicals Ltd. v. AXIS Bank 8 MLJ 261 (Mad.) (Mad.),, wherein the term derivative has been defined to include foreign currency as underlying derivative for securities. He further relied on the judgment of the Agra Bench of the ITAT in the case of Nand Nandan Agarwal vs. DCIT reported in [2018] 90 taxmann.com 3 (Agra - Trib.) and the judgment in the case of M/s. IVF Advisors vs. ACIT (2015) 39 ITR (T) 541 (Mumbai Trib.), in support of his contentions. He also referred to CBDT Instruction No. 3/2010 dt. 23/03/2010, wherein it was decided that the loss on forex derivative transactions arising from actual settlement/conclusions of contract should not be considered as speculative transactions.

7.2 It would be pertinent to consider the decision of Hon'ble Madras High Court in the case of Rajshree Sugar & Chemicals Ltd. vs. Axis Bank Ltd., AIR 2011 (Mad) 144, wherein the term derivative has been defined to include foreign currency as an underlying security of the derivative. The relevant extract of the case is quoted below:

"What are these derivatives which have gained such a great deal of notoriety? In simple terms, derivatives are financial instruments whose values depend on the value of other underlying financial instruments. The International Accounting Standard (IAS) 39, defines "derivatives" as follows: - "A derivative is a financial instrument: (a) whose value cchanges hanges in response to the change in a specified interest rate, security price, commodity price, foreign exchange rate, index of prices or rates, a credit rating or credit index, or similar variable (sometimes called the 'underlying'); (b) that requires no initial net investment or little initial net investment relative to other types of contracts that have a similar response to changes in market conditions; and (c) that is settled at a future date." Actually, derivatives are assets, whose values are derived from values of underlying assets. These underlying assets can be commodities, metals, energy resources, and financial assets such as shares, bonds, and foreign currencies."

15. The third condition is 'trading in derivatives' referred to in clause (ac) of section 2 of the Securities Contract (Regulation) Act, 1956 (42 of 1956). In the case of IVF Advisors (P.) Ltd. v. Asstt. CIT CIT[2015] 55 taxmann.com 469 (Mum.-Trib Trib.) (APB 272 -

277), the Mumbai Tribunal, has referred to the definition of derivatives as contained in clause (ac) of section 2 of the Securities Contract (Regulation) Act, 1956, referred to by the Hon'ble Madras High Court in its decision in the case of Raj Rajshree Sugar & Chemicals Ltd. v. Axis Bank Ltd. AIR 2011 Mad 144, where the term 'derivatives' has been defined to include foreign currency as underlying security of derivatives, also referred to FAQ available on the SEBI website and the fact that the SEBI permitted exchange traded currency derivatives in August, 2008 and came to the conclusion that (para 7.5, APB 276) derivatives include foreign currency and call option/put option, are transactions of derivative markets. Thus, as rightly submitted, the trad trading of currency derivatives made by the assessee is covered by the definition of 'derivatives' as contained in clause (d) of the proviso to section 43(5) of the IT Act. This position also stands accepted by the CBDT in its Instruction no. 3/2010 (APB 342 -343). Thus, the assessee fully complies with the conditions prescribed under clause (d) of Proviso to section 43(5) of the Act, read with the explanation thereto.

2. That the contract for derivatives in foreign currency are commodity as defined u/s 43(5) of the Act, the underlying asset being foreign currency and are hence entitled for exemption from being treated as speculative provided all other conditions as stipula stipulated u/s 43(5) are complied with.

3. A binding obligation accrued against the assessee the minute it entered into contract for derivative in foreign currency