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Lal Mahal Ltd., New Delhi vs Assessee cites

Voltas Ltd, Mumbai vs Acit 8(3)(2), Mumbai on 30 June, 2020

In the case of Voltas International Ltd. (supra), the transactions in commodities and forward transactions in foreign exchange were of the same amounts and both the transactions were undertaken concurrently. Therefore, there was a direct linkage between the two transactions. In the case of Badridas Gauridu (P) Ltd., the court relied on the findings of the Tribunal that foreign exchange was booked against export order and, therefore, held that the transaction was in the nature of hedging against losses which may arise on account of fluctuation in rate of foreign exchange. In view of these two decisions, it becomes clear that it has to be proved as a matter of fact that the transactions of forward contracts were undertaken wholly and exclusively for the purpose of business in order to safeguard possible loss arising to the assessee on account of fluctuation in rate of foreign exchange. In order to do so, there should be generally a reasonable equivalence between the period of subsistence of two contracts and the amounts involved in the two contracts. In any case, where the amount involved in forward contract is more than the amount involved in export contract, such an equivalence 33 ITA No. 3804(Del)/2010 cannot be said to exist. In paragaraph no. 3.5 (supra), we have listed four features seen in the two contracts when compared with each other. The issue regarding reasonable equivalence in these two contracts has not been examined by any of the authorities. The ld. counsel has also not referred to any evidence which shows that the bank had entered into the forward contact on the strength of the sale agreement. If an equivalence exists, then, it can be said that the transactions were hedging transactions to safeguard future losses arising on account of fluctuation in rate of foreign exchange, otherwise not. Further, it is seen that a substantial number of forward transactions have been undertaken which can be held to be constituting an independent business as understood under Explanation 2 of section 28. As the facts have not been examined in proper perspective, as mentioned above, by the lower authorities, we think it fit to restore this matter also to the file of the AO for proper appreciation of facts and application of appropriate cases as relied upon by the ld. counsel and which may come to his notice in the course of de- novo proceedings.
Income Tax Appellate Tribunal - Mumbai Cites 36 - Cited by 24 - Full Document

S. A. Builders Ltd. .. Petitioner vs Commissioner Of Income Tax (Appeals) ... on 14 December, 2006

The investments in joint venture were sold in financial year 2008-09 for a total consideration of Rs. 3,59,42,445/- and thus profit of Rs. 1,39,72,491/- was earned. The company has not made any investment by way of cash or cheque in the joint venture. Therefore, there was no question of diversion of interest- 14 ITA No. 3804(Del)/2010 bearing borrowed funds. Further, the investment was made with a view to earn profit and, therefore, the decision in the case of S.A. Builders (supra) is applicable. Reliance was also placed on the decision reported in (2011) 51 DTR (Del) 98. It was submitted that the AO may verify these facts from the books of account. In the light of these facts, it was argued that no disallowance could have been made.
Supreme Court of India Cites 12 - Cited by 1104 - M Katju - Full Document

Commissioner Of Income Taxgujarat Iii, ... vs Kurji Jinabhai Kotecha on 18 February, 1977

3.12 Having considered the facts of the case, it is clear that the facts of the case are distinguishable from the facts of Kurji Jinabhai Kotecha, M.R. Dhawan and Shivlal Dhirajlal (supra) for the reason that the assessees in these cases had entered into speculation transactions in commodities in which they were dealing in the usual course of business. However, the assessee is a dealer in food grains, but it had entered into forward foreign exchange transactions.
Supreme Court of India Cites 15 - Cited by 5 - P K Goswami - Full Document

Commissioner Of Income-Tax vs Shivlal Dhirajlal on 26 June, 1991

3.11 In the case of Shivlal Dhirajlal (supra), the facts are that the firm of Tataram Ramjilal entered into a forward contract for purchase of 8000 tins of groundnut oil through the assessee-firm. The market price of groundnut oil was falling and, therefore, the assessee-firm tried to cover the transaction in order to reduce its losses. It drew hundis in favour of Tataram Ramjilal but the hundis were dishonoured. The assessee firm thereupon settled the transaction by selling 8000 tins of groundnut oil to avoid further losses. No delivery was given or taken. The assessee suffered loss of Rs. 27,035/- in the transaction. The Tribunal allowed the claim on the ground that it related to the business of the assessee firm. The Hon'ble Court mentioned that neither the AAC nor the Tribunal applied their minds to the question whether the loss arose from the same business, namely, illegal speculative business. It is mentioned that the 31 ITA No. 3804(Del)/2010 Tribunal was not right in holding that in order to claim the deduction in income-tax assessment of the assessee-firm, it was not concerned with the legality or illegality of the transactions and that the assessee was a commission agent and, as such, it was responsible for the obligation or debt of the constituents towards third party and was entitled to claim deduction of loss of Rs. 27,035/-. Coming to the issue whether the loss was speculation loss, it was mentioned that no evidence or material on record is there to point out to us which would indicate that the loss suffered in illegal speculative business could be set off against profits of the same speculative business. Such a question will arise only when the profit and loss arise from the same illegal business. The Tribunal was directed to dispose off the appeal accordingly.
Gujarat High Court Cites 23 - Cited by 3 - Full Document

Commissioner Of Income-Tax vs Badridas Gauridu (P.) Ltd. on 22 January, 2003

The Tribunal referred to the decision in the case of Badridas Gauridu (P) Ltd. (supra) to the effect that the assessee was an exporter of cotton and in order to hedge against the losses, it booked foreign exchange in forward market with the bank. Since the cotton-contract failed, the assessee had to pay Rs. 13.50 lakhs to the bank, which had been held to be a business loss. Relying on this decision, it was held that the loss incurred by the assessee was not speculation loss.
Bombay High Court Cites 3 - Cited by 102 - S H Kapadia - Full Document
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