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Loss on account of premium paid to banks in order to be secure against Forex fluctuations isn't speculation loss

March 14, 2019[2019] 103 64 (Delhi - Trib.)/[2019] 175 ITD 477 (Delhi - Trib.)

IT: Where assessee having taken loan from its related concern located abroad, entered into hedging contracts with two banks in order to secure itself against loss on fluctuation in foreign currency rate and both banks undertook to pay interest at fixed rate of 1.7 per cent on loan amount to creditor in lieu of this, and both banks charged a fixed amount determined on basis of interest and premium for hedging risk, provisions of section 43(5) were not applicable and, thus, amount of premium and interest paid by assessee to banks was eligible for deduction

IT: Assessee was justified in spreading over amount payable under hedging over such period of hedging and claiming proportionate part of premium as deduction

IT: Where assessee engaged in production and sale of mosquito repellents, had three units out of which one unit manufacturing heaters was not eligible for deduction under section 80-IB, in view of fact that said unit supplied those heaters to other two eligible units engaged in production of refills at a particular excisable value, in absence of any other rational basis for allocating income for computation of amount eligible for deduction, ratio of excisable value of output of non-eligible unit vis-a-vis that of eligible units would constitute a good basis for bifurcation of income

IT: Where pursuant to merger of a company namely 'KAPL' with assessee, all investments in mutual funds as done by KAPL got transferred to assessee at book value and said mutual funds were shown as 'investment', profit earned on sale of said funds was liable to tax as 'capital gain'

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