43(5)(a)

Under the given clause..

As per sec 43(5)(a) of income tax act, a contract in respect of raw materials or merchandise entered into by a person in the course of his manufacturing or merchanting business to guard against loss through future price fluctuations in respect of his contracts for actual delivery of goods manufactured by him or merchandise sold by him.

if manufacturer enter into a contract of sale of commodity(cotton) later he could not deliver the goods on time..

On that he had to pay cancellation charges

(Charges- buyer purchased the same from other manufacturer and the amount he paid in excess of contracted value with original manufacturer.)

Such charges were debited by original manufacturer in RATE DIFFERENCE a/c..whether such rate difference shall be allowed as deduction?

Thanks.