2022 (1) TMI 1325 - AT - Income Tax

ITAT Jaipur: NCDEX trading loss not speculative, can offset business income. Disallowed expenses upheld.

M/s. Ramavtar Krishanavtar Versus The ITO Ward 1 (3) Kota

The ITAT Jaipur Bench allowed the appeal, ruling that the NCDEX trading loss should not be treated as speculative and could be set off against business ... NCDEX Trading Loss - Speculation Loss - addition treating the claim of loss of the assessee as speculative loss but allowed to set off against the speculative profits in future as has been done by the AO - HELD THAT:- In this case, it is noted that the AO during the course of assessment proceedings treated the transaction made prior to the notification out of total transaction as speculation by giving prospective effects to the said notification dated 27-11-2013 which has been confirmed by the ld. CIT(A). It is not imperative to repeat the facts as narrated by the ld.CIT(A) in his appellate order but the Bench noted that the issue in question is directly covered by the decision in the case of P.D. Sekharia Trading Company Pvt. Ltd.[2019 (3) TMI 2011 - ITAT AMRITSAR] Bench has also been apprised that Revenue has not challenged the order of ITAT Amritsar Bench (supra) at higher forum and even no material has been placed on record by the Revenue to counter the said fact. Hence, in view of the above decision of ITAT Amritsar Bench dated 19-03-2019, the Bench does not concur with the findings of the ld. CIT(A) and thus the ground of appeal No. 1 of the assessee is allowed. Disallowance of total expenses comprising of car expenses, shop expenses, Staff tea expenses and telephone and mobile expenses claimed by the assessee - HELD THAT:- During the course of hearing, the ld.AR of the assessee has not filed any written submission controverting the findings of the ld. CIT(A). Hence, Ground No. 2 of the assessee is dismissed. Issues Involved:1. Disallowance of NCDEX Trading Loss as Speculation Loss.2. Disallowance of certain business expenses.3. Charging of interest under sections 234A and 234B of the Income Tax Act.Issue-wise Detailed Analysis:1. Disallowance of NCDEX Trading Loss as Speculation Loss:The primary issue was whether the NCDEX trading loss of Rs. 39,88,783/- should be treated as a speculative loss. The assessee argued that the proviso (e) to clause 5 of section 43 of the Income Tax Act, which exempts certain transactions from being considered speculative, should apply retrospectively from 01-04-2013. The delay in notifying NCDEX as a recognized exchange was attributed to the Central Board of Direct Taxes (CBDT) and should not nullify the legislative intent.The Assessing Officer (AO) and the Commissioner of Income Tax (Appeals) [CIT(A)] had treated the transactions prior to 27-11-2013 as speculative since NCDEX was recognized only from that date. The CIT(A) relied on previous judgments, including ITAT Mumbai Bench in Varsha Corporation Ltd. and the jurisdictional ITAT Jaipur Bench in Shri Prem Prakash Gupta, which held that transactions prior to the notification date were speculative.However, the ITAT Jaipur Bench referred to the decision of ITAT Amritsar in P.D. Sekharia Trading Company Pvt. Ltd. vs DCIT, which held that the notification should be given retrospective effect to align with the legislative mandate. The Bench noted that the delay in notification was procedural and should not penalize the assessee. The ITAT Amritsar decision emphasized that agricultural commodity derivatives were exempt from Commodity Transaction Tax (CTT), and the second proviso to Section 43(5) inserted by the Finance Act 2018 was curative and retrospective.In conclusion, the ITAT Jaipur Bench allowed the appeal, holding that the NCDEX trading loss should not be treated as speculative and should be set off against business income.2. Disallowance of Certain Business Expenses:The second issue involved the disallowance of Rs. 38,000/- out of total expenses amounting to Rs. 1,89,567/-, which included car expenses, shop expenses, staff tea expenses, and telephone and mobile expenses. The assessee did not provide any written submission to counter the findings of the CIT(A). Consequently, the ITAT dismissed the ground of appeal related to the disallowance of these expenses.3. Charging of Interest under Sections 234A and 234B:The third issue pertained to the charging of interest under sections 234A and 234B of the Income Tax Act. This issue was deemed consequential in nature, dependent on the outcomes of the other issues.Conclusion:The appeal was partly allowed. The ITAT ruled in favor of the assessee regarding the treatment of NCDEX trading loss, allowing it to be set off against business income. However, the disallowance of certain business expenses was upheld, and the issue of interest under sections 234A and 234B was noted as consequential. The order was pronounced in the open court on 05/01/2023.