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2018 (12) TMI 1339 - HC - Income TaxEntitlement for deduction u/s 80IB - hedging profit derived from industrial activity - whether hedging activity of Mentha Oil has a direct nexus with the manufacturing activity? - Held that:- In the present case what we find is that the assessee needed high quantity of steady supply of the raw material, which would go into manufacturing its final product. If the assessee did not enter into hedging contract, it would be exposed to wide fluctuation of costs in procuring such material. This would expose the assessee to possible losses since while undertaking contracts for production and sale of the final product, the assessee would have taken into account the procurement price of the raw material at the prevailing rate. In order to avoid such uncertainties, the assessee would enter into hedging contracts. Essentially, the entire exercise was for the purpose of making the profit out of its manufacturing activity more predictable. If the assessee had not entered into such contract and relied on the spot purchase of the product, surely the resultant loss or profit as a case may be, would be part of the assessee's manufacturing activity and thereby, in any case qualify for deduction under Section 80IB or eligible for carrying forward loss if otherwise permissible under the Act. No difference in the situation merely because such gain or loss were pursuant to hedging contract of the assessee. - Decided against revenue
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