COMMISSIONER OF INCOME TAX 3 vs. SP APPARELS LTD

T.C.A.No.245 of 2017 IN THE HIGH COURT OF JUDICATURE AT MADRAS DATED : 29.08.2019 CORAM THE HONOURABLE MR.JUSTICE T.S.SIVAGNANAM and THE HONOURABLE MRS.JUSTICE V.BHAVANI SUBBAROYAN Tax Case Appeal No.245 of 2017 Commissioner of Income Tax 3, No.63, Race Course Road, Coimbatore-641 018. .. Appellant -vs- M/s.SP Apparels Ltd., No.39-A, VOC Extension Street, Kaikattipudur, Avinashi-641 601. PAN: AAJ CS 4031 P .. Respondent Appeal under Section 260A of the Income-tax Act, 1961, against the order dated 30.09.2016, made in I.T.A.No.1465/Mds/2016 on the file of the Income Tax Appellate Tribunal 'B' Bench, Chennai for the assessment year 2010-11. For Appellant : Mr.T.R.Senthil Kumar, Senior Standing Counsel : assisted by Ms.K.G.Usharani, Standing Counsel For Respondent : Mr.N.V.Balaji ****** 1/5 http://www.judis.nic.in T.C.A.No.245 of 2017 JUDGMENT (Delivered by T.S.Sivagnanam, J.) This appeal filed by the Revenue under Section 260A of the Income-tax Act, 1961 is directed against the order dated 30.09.2016, made in I.T.A.No.1465/Mds/2016 on the file of the Income Tax Appellate Tribunal 'B' Bench, Chennai for the assessment year 2010-11. 2.The appeal has been filed raising the following substantial questions of law:- “(i) Whether on the facts and in the circumstances of the case, the Appellate Tribunal is correct in deleting the disallowance of forex derivative loss arising on account of loss on forex derivative transactions by treating it as a trading loss? (ii) Whether on the facts and in the circumstances of the case, the Tribunal is justified in law in holding that the loss on derivative transactions is trading loss thereby over viewing the fact that when no actual delivery has taken place, the transactions in question fall within the definition of speculative transaction as per Section 43(5) of the Income Tax Act?” (iii) Whether on the facts and in the circumstances of the case, the Tribunal is justified in law in holding that the 2/5 http://www.judis.nic.in T.C.A.No.245 of 2017 forex derivative transactions of the assessee have proximity to the export turnover thereby impliedly ruling that the issue is covered by proviso (a) to Section 43(5), when the proviso clearly mandates that to be categorised as hedge, the transactions should only be in respect of goods or merchandise manufactured or traded by the assessee? and (iv) Whether on the facts and in the circumstances of the case, the Tribunal is legally correct by holding that the forex derivative transactions carried on by the assessee through a Banker as Over the Counter Transactions (OTC) and not through a recognized stock exchange are also covered by proviso (d) to Section 43(5) when the pre- conditions laid by the Explanation to the said proviso is not satisfied to constitute it as an eligible transaction?” 3.Heard Mr.T.R.Senthil Kumar, learned Senior Standing Counsel assisted by Ms.K.G.Usharani, learned Standing Counsel for the appellant – and Mr.N.V.Balaji, learned counsel for the respondent. 4.The learned Senior Standing Counsel for the appellant submits that the above appeal is not pursued by the Revenue on account of the low tax effect in terms of Circular No.17/2019, dated 08.08.2019 issued by the Central Board of Direct Taxes. By the said Circular, the monetary limit for filing or pursuing an appeal before the High Court has been increased to Rs.1 3/5 http://www.judis.nic.in T.C.A.No.245 of 2017 Crore. It is further submitted that the tax effect in this case is less than the threshold limit. 5.In the light of the said submissions, the above tax case appeal is dismissed on account of the low tax effect. The substantial questions of law framed are left open. In the event the tax effect is above the threshold limit fixed in the said circular, liberty is granted to the Revenue to make a mention to this Court to restore the appeal to be heard and decided on merits. No costs. (T.S.S., J.) (V.B.S., J.) 29.08.2019 Index : Yes/No Speaking/Non-Speaking Order abr To 1.M/s.SP Apparels Ltd., No.39-A, VOC Extension Street, Kaikattipudur, Avinashi-641 601. 2.The Income Tax Appellate Tribunal 'B' Bench, Chennai. 4/5 http://www.judis.nic.in T.C.A.No.245 of 2017 T.S.Sivagnanam, J. and V.Bhavani Subbaroyan, J. (abr) T.C.A.No.245 of 2017 29.08.2019 5/5 http://www.judis.nic.in