2008 (7) TMI 949 - AT - Income Tax

ITAT Mumbai rules in favor of assessee on F&O transactions & expenses in assessment year 2003-04

The appeal by the assessee against the CIT(A) order for the assessment year 2003-04 was allowed by the ITAT Mumbai. The Tribunal ruled in favor of the ... - Issues involved: Appeal against CIT(A) order for asst. yr. 2003-04 regarding treatment of loss on F&O transactions and ad hoc disallowance of expenses on speculative share trading.Loss on F&O Transactions:The assessee appealed against the CIT(A)'s decision to treat the loss claimed on F&O transactions as a speculation loss instead of a business loss. The counsel for the assessee argued that previous tribunal decisions supported their position that derivative trading is distinct from share trading and loss on derivatives should not be considered speculative. The Departmental Representative contended that since the transaction settlement did not involve share delivery, it constituted speculation loss. The Tribunal referred to precedents where it was held that derivative dealings do not involve share purchase/sale and loss on derivatives is not speculative. The issue was decided in favor of the assessee based on the tribunal decisions, allowing the appeal on this ground.Ad Hoc Disallowance of Expenses:The second ground of appeal concerned the CIT(A)'s confirmation of a 1% ad hoc disallowance of total expenses claimed for speculative share trading transactions. Following the decision in favor of the assessee on the first ground, the Tribunal ruled that the disallowance of 1% of total expenses was unwarranted. Consequently, the disallowance was deleted, and the appeal on this ground was allowed.In conclusion, the appeal by the assessee against the CIT(A) order for the assessment year 2003-04 was allowed by the ITAT Mumbai.