AI OCR 
TaxTMI 
TaxTMI 
TaxTMI 
2019 (10) TMI 1061
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....y ignoring the submission of assessee that such contracts were entered into by assessee to hedge against the fluctuation in the price of gold and silver. Appellant prays that profit or loss as the case may be arising due to fluctuation in prices is directly related to the business of assessee and deserves to be considered as "Business profit" for computing deduction u/s 10AA. 1.2 That, ld.CIT(A) erred in confirming the action of ld.AO in not allowing deduction u/s 10AA in respect of Interest from RSEB to the tune of Rs. 17,622/- by grossly ignoring the submission of the assessee that such deposit is made in normal course of business and thus interest received therefrom is in the nature of Business Receipt and eligible for deduction u/s 10AA. 1.3 That, Id. C(T(A) erred in confirming the action of Id.A0 in not allowing deduction u/s 10AA in respect of Miscellaneous income amounting to Rs. 883/- by grossly ignoring the fact that such income was incidental to the business and thus deduction u/s 10AA deserves to be allowed on the same. 2. That the appellant craves the right to add, delete, amend or abandon any of the grounds of appeal either before or at the time of hearing of app....
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..... The ld AR has submitted that the said finding of the ld. CIT(A) is slightly misplaced as speculative transaction has been defined U/s 43(5) subject to the exception in explanation to the said provision and therefore, once the contract has been entered into by the assessee to guard against the loss through future price fluctuation in respect of his contract for actual delivery of goods or goods manufactured or merchandise sold by him, the same cannot be treated as speculative transaction. In support of his contention, the ld AR has relied upon the ruling of authority for advance ruling in the case of Sopropha S.A. (2004) reported in 268 ITR 37. He has then submitted that authority for advance ruling has relied upon the decision of Full Bench of the Hon'ble Gujarat High Court in the case of Pankaj Oil Mills Vs. CIT 115 ITR 824. Thus, the ld AR has submitted that the assessee has entered into forward contract for purchase as well as sale of goods. The contracts were against the orders in hand as the assessee received orders in advance at least 3-4 months. He has referred to the details of forward contract and submitted that on a particular date outstanding hedging contract of gold a....
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....act in respect of stocks and shares entered into by a dealer or investor therein to guard against loss in his holdings of stocks and shares through price fluctuations; or (c) a contract entered into by a member of a forward market or a stock exchange in the course of any transaction in the nature of jobbing or arbitrage to guard against loss which may arise in the ordinary course of his business as such member; [or] [(d) an eligible transaction in respect of trading in derivatives referred to in clause [(ac)] of section 2 of the Securities Contracts (Regulation) Act, 1956 (42 of 1956) carried out in a recognised stock exchange; [or]] [(e) an eligible transaction in respect of trading in commodity derivatives carried out in a recognised association [,which is chargeable to commodities transaction tax under Chapter VII of the Finance Act, 2013 (17 of 2013),]] shall not be deemed to be a speculative transaction. Following second proviso shall be inserted after the existing proviso to clause (5) of section 43 by the Finance Act, 2018, w.e.f. 1-4-2019 : Provided further that for the purposes of clause (e) of the first proviso, in respect of trading in agricultural commodity ....
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.... by these contracts was limited to the extent of actual exposure in respect of purchase of raw material and export of finished goods. The assessee has claimed that the total quantity under the forward contract during the year never exceeds the quantity of export or purchases made by the assessee. Though it appears that the assessee has entered into the forward contracts for purchase as well as sale of gold and silver, however, the exact details are required to be verified which has not been considered either by the A.O. or by the ld. CIT(A) but the deduction U/s 10AA has been denied by the authorities below only on the observation that the assessee has failed to demonstrate that the transactions which have yielded profit were hedging transactions. It is the duty of the A.O. to first ascertain whether the forward contracts are only in respect of covering the actual transaction of purchase and sale and not beyond actual transaction of purchase and sale then such forward contracts would be regarded as hedging transaction and cannot be treated as speculative transaction. Accordingly, the rulling relied upon by the ld. AR of the assessee is not in dispute as far as the principle laid do....
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....authorities below. 11. We have considered the rival submissions as well as relevant material on record. There is no dispute that the interest was earned by the assessee from the security deposits with JVVNL for getting the electricity connection, therefore, the said interest income is integral part of the business of the assessee for availing the electricity connection for its manufacturing activity. Hence, the interest received on security deposit with JVVNL will be included in the business profits of undertaking for the purpose of computing the deduction U/s 10AA of the Act in terms of sub-Section (7) of the said provision. Consequently, the deduction will be computed as per the formulae given in sub-Secdtion (7) of Section 10AA of the Act and the profits of the business undertaking includes said interest income and the profits derived from the export of the articles or things of services shall be computed in proportionate to the export turnover to total turnover. This amount will be part of the business profits undertaking but shall not be part of the export turnover. The A.O. is directed to recompute the deduction as per the formulae given in sub-section (7) of Section 10AA of....