Assessee has taken loan from its related concern located abroad, entered into hedging contracts with two banks in order to secure itself against loss on fluctuation in foreign currency rate and both banks undertook to pay interest at fixed rate of 1.7 per cent on loan amount to creditor in lieu of this, and both banks charged a fixed amount determined on basis of interest and premium for hedging risk. AO held that the payment is  speculative in nature and loss  was not allowable. Alternatively as the tax was not deducted the payment is not allowable in view of S. 40(a)(ia) read with section 195 of the Act. CIT(A)  deleted the addition after getting the remand report and the tax was deducted in respect of interest. As regards the  premium he has held that the said amount is not speculative however allowable in next year which is the year of maturity. Allowing the appeal of the assessee the Tribunal held that on premium there is no liability to deduct tax at source and the assese has rightly claimed the premium on proportionate basis. (AY. 2007-08, 2008-09)