PRINCIPAL COMMISSIONER OF vs. M/S.S.P.APPARELS LTD,

T.C.A.No.45 of 2018 IN THE HIGH COURT OF JUDICATURE AT MADRAS DATED: 23.10.2024 CORAM THE HON'BLE MR.JUSTICE R.SURESH KUMAR AND THE HON'BLE MR.JUSTICE C.SARAVANAN Tax Case Appeal No.45 of 2018 Principal Commissioner of Income Tax No.63, Race Course Road, Coimbatore. .... Appellant Vs. M/s.S.P.Apparels Ltd., 39-A, Extension Street Kaikattipudur Avinashi-641 654 PAN : AAJ CS 4031 P .... Respondent ----- Tax Case Appeal filed under Section 260A of the Income Tax Act, 1961 against the order of the Income Tax Appellate Tribunal, 'B' Bench Chennai, dated 09.09.2016 in ITA.No.1699/MDS/2015. For Appellant : Mr.Karthik Ranganathan Senior Standing Counsel For Respondent : Mr.N.V.Balaji J U D G M E N T (Delivered by R.SURESH KUMAR, J.) This Tax Case Appeal has been filed by the Revenue calling in question the correctness of the order passed by the Income Tax Appellate Tribunal, Chennai by raising the following substantial questions of law: 1 of 5 https://www.mhc.tn.gov.in/judis T.C.A.No.45 of 2018 1. Whether on the facts and 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? 2. Whether on the facts and circumstances of the case, the Appellate 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? 3. Whether on the facts and circumstances of the case, the Appellate Tribunal is justified in law in holding that the 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? 4. 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 2 of 5 https://www.mhc.tn.gov.in/judis T.C.A.No.45 of 2018 the assessee through a Banker as Over the Counter Transactions (OTC) and not through a recognized stock exchange 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? 5. Whether the Tribunal is correct in law in following the ratio of the decisions in the cases of CIT Vs.Badrids Gauridu (P) Ltd (2003) 251 ITR 256 (Bom) and CIT Vs.Soorajmull Nagarmull (1981) [129 ITR 169 Cal)] when admittedly the factum of those cases is distinguishable from factum of the assessee's case? 6. Whether the Tribunal is right in law in allowing the Rs.12,23,87,167/- on account of cancellation of foreign currency forward contract, as ordinary business loss and not speculation loss when the forward contracts are not reliable to any export bills of the assessee? 2. It is brought to our notice by the learned Standing Counsel for the appellant Revenue that in the instant case, as per the CBDT's Circular No.9 of 2024 dated 17.09.2024 the tax effect is said to be less than the monetary limit imposed and therefore, the appeal can be disposed of, keeping the substantial questions of law raised in this appeal open for adjudication at a later point of time. 3 of 5 https://www.mhc.tn.gov.in/judis T.C.A.No.45 of 2018 4 of 5 https://www.mhc.tn.gov.in/judis T.C.A.No.45 of 2018 R.SURESH KUMAR, J. AND C.SARAVANAN, J. KST 3. Recording the aforesaid submission made by the learned Standing Counsel for the appellant Revenue, this Tax Case Appeal is dismissed for low tax effect, keeping open the substantial questions of law for adjudication at appropriate stage. No costs. (R.S.K.,J.) (C.S.N.,J.) 23.10.2024 NCS : Yes/No

KST To The Income Tax Appellate Tribunal 'B' Bench, Chennai. T.C.A.No.45 of 2018 5 of 5 https://www.mhc.tn.gov.in/judis