S.C : Issue of deduction under section 80HHC on gain on forward currency contract need consideration and decision by High Court

Supreme Court Of India

CIT vs. Mitsu (P.) Ltd.

Assessment Year : 2004-05

Section : 80HHC

H.L. Dattu And Jagdish Singh Khehar, JJ.

Civil Appeal No. 3934 Of 2013

April 17, 2013


1. Delay condoned.

2. Leave granted.

3. This appeal, by special leave, is directed against the judgment and order passed by the High Court of Judicature of Gujarat at Ahmedabad in Tax Appeal No. 658 of 2009, dated June 29, 2010. By the impugned judgment and order the High Court has observed that Question Nos. “B”and “C” would not fall for its consideration and decision on the ground that no question of law would arise on these questions.

4. This court, while entertaining the special leave petition, had issued a limited notice to the respondent inter alia., directing them to show cause as to why the matter should not be remitted back to the High Court for the framing of the aforesaid questions and decision of the matter in accordance with law.

5. The respondent has entered appearance pursuant to the notice issued by us.

6. Question Nos. “B” and “C” proposed by the appellant before the High Court read as under :

“B. Whether, on the facts of the case and in law, the Appellate Tribunal was justified in granting relief under section 80HHC of the Act to the assessee on the issue of gain on forward currency contract without appreciating the fact that the gain on exchange difference is nothing but speculation profit and not related to the business of the assessee ?

C. Whether, on the facts of the case and in law, the Appellate Tribunal was in justified in directing the Assessing Officer not to exclude this income from the profits eligible for deduction under section 80HHC without appreciating the fact that when the assessee enters into a forward contract, as in this case, the assessee stands to benefit by the fluctuations in foreign exchange irrespective of the fact whether the trade agreement exists or not ?”

7. We have considered the finding of the High Court on the aforesaid questions. In our opinion, those questions would certainly need consideration and decision by the High Court. Therefore, without expressing any opinion on those questions on the merits, we dispose of this appeal, remand the matter to the High Court with a request to the High Court to examine questions Nos. B and C as proposed by the appellant, while finally disposing of Tax Appeal No. 658 of 2009 filed under section 260A of the Income-tax Act, 1961.

8. It is needless to say that while examining these questions, the High Court shall give opportunity of hearing to both the parties. We clarify that we have not expressed any opinion on the merits of the aforesaid questions.

9. Ordered accordingly.

[Citation : 354 ITR 89]

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