S.V. Mehrotra, Accountant Member. - The present Special Bench has been constituted under section 255(3) of the Income-tax Act, 1961.

2. The constitution of Special Bench resulted as under :

The assessee is a non-resident company carrying on banking business in India. It enters into forward contracts with its clients to buy or sell foreign exchange at an agreed price on a future date. On the date of maturity, the contract is executed which may result in the profits or losses to the assessee. There is no dispute between the parties in respect of losses arising on execution of the contracts within the same year. However, in some cases, the date of maturity of the contract falls beyond the end of the accounting period. In such cases, the assessee evaluates the unmatured forward contracts on the last day of the accounting period on the basis of rate of foreign exchange prevailing on that date and books the loss or profit, accordingly. This methodology was adopted keeping in view the guidelines laid down by the Reserve Bank of India as per rates notified by Foreign Exchange Dealers Association of India (FEDAI). The revenue’s stand is that in view of the decision of the Hon’ble Madras