GRAPE MARKETING P.LTD,NEW DELHI vs. ITO, WARD-10(3), NEW DELHI

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ITA 2174/DEL/2019Status: DisposedITAT Delhi11 April 2023AY 2010-112 pages

In favour of the assessee: the assessee's appeal was allowed. From the AI summary of this appeal.

AI SummaryAllowed

What did the Tribunal hold?

The Tribunal held that the assessee was engaged in hedging transactions, which were not disputed by the Revenue. Therefore, no addition to the income was warranted.

What were the facts?

The assessee company, involved in importing and trading non-ferrous metals, engaged in hedging transactions to mitigate price fluctuations. These transactions resulted in a net loss of Rs. 10,99,398.35 from one broker and a net profit of Rs. 9,81,900 from another.

What were the issues?

The primary issue was whether the profit and loss from commodity hedging transactions should be treated as speculative business income or adjusted against each other, and if the net result was deductible.

AI-generated summary — verify with the full judgment below

Income Tax Appellate Tribunal, DELHI BENCH ‘C’, NEW DELHI

Before: Sh. C. M. GargDr. B. R. R. Kumar

Hearing: 16.02.2023Pronounced: 11.04.2023

Per Dr. B. R. R. Kumar, Accountant Member:

1.

The present appeal has been filed by assessee against the order of ld. CIT(A)-22, New Delhi dated 31.01.2019.

2.

Heard the arguments of both the parties and perused the material available on record.

3.

The assessee company is involved in the import of non- ferrous metals and its local trading. The prices of metal fluctuate daily on the basis of LME prices and the rates on the date of purchase agreement and the rate prevailing at the time of release of goods from the customs authorities are different. In order to avoid the effect of the said prices fluctuation, the assessed has made hedging transaction through M/s SSE Commodities Pvt. Ltd. and may be certain transactions of 2 Grape Marketing P. Ltd. speculative nature were also made through this commodity broker of MCX. There was a net loss of Rs. 10,99,398.35 from the transactions made through M/s SSE Commodities Pvt. Ltd. while there was a net profit of Rs. 9,81,900/- (987500 minus brokerage and TOT charges) from the transactions entered through M/s Revive Traders (P) Ltd. and the same has been properly accounted for in the books of accounts.

4.

The profit was adjusted against hedging loss of Rs.10,99,398/- resulting into net loss of Rs.1,17,497/- which has been shown as loss from commodity hedging business under the head administrative expenses. In the nutshell, the profit of Rs.9,87,500/- has been accounted for and there is no escapement of income.

5.

In view of the above facts, in the very peculiar circumstances of the instant case, the assessee is into hedging transaction which has not been disputed by the Revenue, we hold that no addition is called for.

6.

In the result, the appeal of the assessee is allowed. Order Pronounced in the Open Court on 11/04/2023.

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