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Income Tax Appellate Tribunal, “A” BENCH, MUMBAI
Before: SHRI NARENDRA KUMAR BILLAIYA, HONBLE & SHRI SANDEEP SINGH KARHAIL, HONBLE
आदेश/O R D E R
PER NARENDRA KUMAR BILLAIYA, AM:
This appeal by the assessee is preferred against the order of the ld. Addl./JCIT(A) - 1, Chandigarh [hereinafter “the ld. CIT(A)”] dated 17/02/2025 pertaining to AY 2014-15.
The solitary grievance of the assessee reads as under :- “1. On the facts and circumstances of the case and as well as in law, the Learned CIT(A) has erred in confirming the actions of the Learned Assessing Officer in making an addition of Rs. 25,73,307/ - by treating the Profit on Trading in Derivatives as alleged independent business activity, not related to the operation of ships, without considering the facts and circumstances of the case. 2. The appellant craves leave to add, amend, alter or delete the said ground of appeal
.”
3. Briefly stated the facts of the case are that the assessee filed its return of income on 21/11/2014 declaring total income at Rs.
2 35,01,680/-. The return was selected for scrutiny assessment and accordingly, notices were issued and served upon the assessee. The assessee is engaged in the business of running charter hires.
During the course of scrutiny assessment proceedings, the AO noticed that the assessee has offered income derived from operations of qualifying ships under the “Tonnage Scheme” at Rs. 24,10,460/- under the head profit and gains from business or profession and interest of Rs. 10,91,222/- under the head income from other sources.
On perusal of the audited statement of accounts and Note 16 to P&L Account, the AO noticed that the assessee has shown profits on trading in derivates at Rs. 25,73,307/-. The assessee claimed it to be part and parcel of business from operations of ships as it was gains on forex fluctuations. The assessee also explained the entire transactions of forex gains being earned on account of hedging of the forex risks on the charter hire charges receivable from foreign parties.
The AO dismissed the claim of the assessee simply on the nomenclature used in the accounts as “profit on trading in derivatives” without even examining the contract notes and the nature of forex gains.
We are of the considered view that when a business-man receives consideration in foreign exchange as a customary practice, he hedges the risk of forex fluctuations. There may be gains, there may be losses but in either situation the entire transactions is part and parcel of the business of the assessee.
We are of the considered view that since the documentary evidence/contract notes have not been examined at all by the AO, the AO should get a second opportunity to examine the same and decide the issue afresh in the light of the nature of business of the assessee and ignoring the heading given in the accounts in respect of the impugned transactions.
The issue is restored to the file of the AO for fresh verification after affording a reasonable and adequate opportunity of being heard to the assessee.