COMMISSIONER OF INCOME TAX-16 Vs. VISHINDAS HOLARAM

JUDGEMENT

(1.) This appeal by the Revenue challenges the order passed by the Income Tax Appellate Tribunal dated 12th August, 2011. The assessment year in question is 2003-04. The revenue submits that there are two substantial questions of law which are formulated in the memo of appeal. Mr. Malhotra, learned counsel appearing on behalf of the revenue in support of this appeal submits that the assessment order passed in the case of the respondent-assessee dealt with the return of income filed by the assessee declaring total income of Rs. 44,21,26,090/-. The return of income was accompanied by the tax audit report. After the requisite procedure, what the Assessing Officer concluded is that the assessee firm is engaged in the business of manufacturing and trading/export of diamonds. The assessee disclosed the source of income, computation of gross profits and claimed deduction under section 80HHC of the Income-tax Act, 1961 ('the I.T. Act' for short).

(2.) The Assessing Officer arrived at the conclusion that the transactions which have been undertaken would fall within the purview of a speculative transaction. The assessee ultimately completed the transaction without effecting the delivery of the foreign currency for which it entered into a contract with the forward market. The forward contract was booked and cancelled on the maturity date of the booking. Thus, in these circumstances, when no evidence was adduced to prove that the cancellation of forward contract before the date of delivery was a hedging contract, therefore, it falls within the ambit of the definition of "speculative transaction", which would attract proviso (a) of section 43(5) of the I.T. Act.

(3.) Mr. Malhotra therefore, submits that the judgment of this Court in the case of CIT v. Badridas Gauridu (P.) Ltd., 2003 261 ITR 256 was rightly distinguished. When, the Tribunal confirmed such finding of the Commissioner of Income-tax (Appeals), the first question of law is substantial.