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TMI Blog2014 (2) TMI 365X X X X Extracts X X X X X X X X Extracts X X X X ..... ock, anticipated profit in the shape of appreciated value of the closing stock is not brought into account, as not prudent trader would care to show increased profits before actual realization – thus, mark to market losses on account of trading in derivative transactions are allowable deductions – Decided in favor of Assessee. Deduction u/s 80-IB of the Act – Interest received on FDRs – Held that:- The decision in Pandian Chemicals Ltd. Versus Commissioner of Income-Tax [2003 (4) TMI 3 - SUPREME Court] followed - interest income is not directly flowing from the Industrial Undertaking as such deduction for the same is not allowable - the words 'derived from' in Section 80HH must be understood as something which has direct or immediate nex ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ement of such transaction". 2. At the outset, the ld. A.R. has submitted that the issue is squarely covered in favour of the assessee by the judgment of the co-ordinate bench of the Tribunal (incidentally constituted by both of us) in the case of M/s. Indsec Securities Finance Ltd. in ITA No.4236/M/2012 vide order dated 06.09.13. While dealing with the identical issue, the following observations were made by the bench: "8. Ground No.2 of the appeal relates to the confirmation of disallowance of mark-to-market loss of Rs.83,655/- treating it as contingent in nature. 9. The issue is squarely covered in favour of the assessee by the judgment of the co-ordinate bench of this Tribunal dated 03.05.13 passed in ITA No.1502/M/12 (assessment ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... daily basis and the margins are settled accordingly. Such type of contracts are not purely contingent in nature rather loss or profit is somewhat ascertainable in view of constant watch on daily market value and even the quantum of profit or loss though not actually ascertainable, can be anticipated in view of the trends of the market. The difference between the predetermined price and market price is settled daily on mark-to-market basis. In such type of contracts, it is not the stock value which is subject matter of the contract rather the contract itself is the stock in trade which is purchased by paying/depositing the initial margins on percentage basis to the broker taking into consideration maximum anticipated rise or fall in the pri ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... year's account in a continuing business are not brought to the charge as a matter of practice, though, as stated above, loss due to fall in the price below cost is allowed even though such loss has not been realized actually. Accounts regularly maintained in the course of business are to be taken as correct unless there are strong and sufficient reasons to indicate that they are unreliable. The co-ordinate bench of this Tribunal further relying upon the judgment of another co-ordinate bench of the Tribunal dated 10.11.10 passed in ITA No.5324/Mum/2007 for A.Y. 2004-05 in the case of Edelweiss Capital Ltd. further held that it is not only the actual stock but derivatives can also be held as stock in trade and the principle "cost or market pr ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... me is not directly flowing from the Industrial Undertaking as such deduction for the same is not allowable in view of the Hon'ble Supreme Court in the case of Pandian Chemicals Ltd. (262 ITR 178)(SC) (2003)". 4. At the outset, the ld. D.R. has contended that the issue is squarely covered against the assessee and in favour of the Revenue by the judgment of the Hon'ble Supreme Court in the case of Pandian Chemicals Ltd. (2003) 262 ITR 278) (SC) wherein the Hon'ble Supreme Court while dealing with the identical issue has held that the words 'derived from' in Section 80HH must be understood as something which has direct or immediate nexus with the appellant's industrial undertaking. Although electricity may be required for the purposes of the ..... X X X X Extracts X X X X X X X X Extracts X X X X
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