Speculative business

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Querist : Anonymous

Querist : Anonymous (Querist)

15 April 2015 sir,
we are a manufacturing co.and we took a loan of $50,000and to cover the loss due to exchange fluctuation we hegde in foreign currency, whether such hedging covers under speculative business or non speculative business under income tax act, 1961. plz guide me.

CA John Abraham Austin ACA

CA John Abraham Austin ACA (Expert)
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15 April 2015 No. Recently there is a change in the definition of 'Speculative Transaction' to exclude the transactions wherein ACTUAL DELIVERY takes place. Hence, it will not be considered as a 'Speculative Transaction'.

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Querist : Anonymous

Querist : Anonymous (Querist)

15 April 2015 Sir,
we did hedging through cross currency swap , by paying floating rate loan and recieving fixed rate loan on notional, whether it is non speculatiive.

CA John Abraham Austin ACA

CA John Abraham Austin ACA (Expert)
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16 April 2015 In my opinion,it is not a speculative transaction since it is to cover a loss with relation to a business activity carried out.

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Querist : Anonymous

Querist : Anonymous (Querist)

16 April 2015 Sir,
Plz refer any case law in support of your opinion.

Querist : Anonymous

Querist : Anonymous (Querist)

16 April 2015 Under which head it would be taxable, either under capital gain or under PGBP.