THE COMMISSIONER OF INCOME-TAX vs. M/S. QUEST GLOBAL ENGINEERING SERVICES PVT. LTD.,

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ITA/185/2015HC KarnatakaKAHC01017322201515 February 2021Bench: ALOK ARADHE,R. NATARAJ3 pages
AI SummaryDismissed

What did the High Court hold?

The High Court, following a previous judgment, answered the substantial questions of law against the revenue and in favor of the assessee. The court found no merit in the appeal.

What were the facts?

The Revenue appealed against an ITAT order for AY 2008-09 concerning disallowances on provision for loss on derivative contracts. The disallowances were made by the AO, citing that actual sales had not occurred and maturity dates had not arisen.

What were the issues?

Whether a provision for loss on derivative contracts is allowable when the actual sale has not taken place and the maturity date has not arisen, and whether such provisions are speculative in nature.

Which sections of the Income-tax Act were involved?

Section 260-A

AI-generated summary — verify with the full judgment below

1 IN THE HIGH COURT OF KARNATAKA AT BENGALURU DATED THIS THE 15TH DAY OF FEBRUARY 2021 PRESENT THE HON’BLE MR. JUSTICE ALOK ARADHE AND THE HON’BLE MR. JUSTICE NATARAJ RANGASWAMY I.T.A. NO.185 OF 2015 BETWEEN: 1. THE COMMISSIONER OF INCOME-TAX

C.R. BUILDING, QUEENS ROAD

BANGALORE. 2. THE DEPUTY COMMISSIONER OF INCOME-TAX

CIRCLE-12(2), RASHTROTHANA BHAVAN

NRUPATHUNGA ROAD

BANGALORE-560001. .... APPELLANTS (BY MR. K.V. ARAVIND, ADV.,) AND: M/S. QUEST GLOBAL ENGINEERING SERVICES PVT. LTD., SECOND FLOOR, PRIMOSE 7B EMBASSEY TECH VILLAGE SARJAPURA-MARATHAHALLI OUTER RING ROAD DEVARABEESANA HALLI VARTHUR HOBLI, BANGALORE-560103. ... RESPONDENT (BY MR. CHYTHANYA K.K. ADV.,) - - - THIS I.T.A. IS FILED UNDER SEC. 260-A OF INCOME TAX ACT 1961, ARISING OUT OF ORDER DATED 12.12.2014 PASSED IN ITA NO.600/BANG/2013 FOR THE ASSESSMENT YEAR 2008-09, PRAYING TO:

2 (i) FORMULATE THE SUBSTANTIAL QUESTIONS OF LAW STATED ABOVE. (ii) ALLOW THE APPEAL AND SET ASIDE THE ORDER PASSED BY THE ITAT, BANGALORE IN ITA NO.600/BANG/2013 DATED 12.12.2014 AND CONFIRM THE ORDER OF THE APPELLATE COMMISSIONER CONFIRMING THE ORDER PASSED BY THE DEPUTY COMMISSIONER OF INCOME TAX, CIRCLE-12(2), BANGALORE. THIS I.T.A. COMING ON FOR HEARING, THIS DAY, ALOK ARADHE J., DELIVERED THE FOLLOWING: JUDGMENT This appeal under Section 260-A of the Income Tax Act, 1961 (hereinafter referred to as ‘the Act’, for short) has been filed by the revenue. The subject matter of the appeal pertains to the Assessment Year 2008-09. The appeal was admitted by a Bench of this Court vide order dated 19.02.2016 on the following substantial questions of law:

"1. Whether the Tribunal was correct in deleting the disallowances made by the AO on provision of loss on derivative contracts without appreciating that the provision for loss cannot be allowed when the actual sales had not even taken place and maturity date of the derivates contracts has not arisen?

2.

Whether the Tribunal was correct in deleting the disallowances of provision of loss on derivative contracts made by the AO without appreciating that the assessing officer

3 relied on the board's instruction No.3/2010 and held that the provision claimed in speculative transaction in nature and hence not allowable?" 2. For the reasons assigned by us in the judgment passed today in I.T.A.No.133/2013, the substantial questions of law are answered against the revenue and in favour of the assessee. In the result, we don to find any merit in this appeal, the same fails and is hereby dismissed. Sd/- JUDGE Sd/- JUDGE RV/SS

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