2016 (8) TMI 66 - AT - Income Tax

Tribunal Allows Speculation Loss Set Off, Dismisses Revenue's Appeal

The Tribunal upheld the Commissioner of Income Tax (Appeals)' decision, allowing the set off of speculation loss against business income and dismissing ... Business loss set off against other business income - Held that:- In the present case the assessee suffered share trading loss of ₹ 31,18,920/- on account of delivery and ₹ 6,24,653/- on non delivery totaling to ₹ 37,43,573/- and claimed to set off against the income from other business in the year under consideration, but, however, the AO denied the same on the ground that the income of assessee consists of many other heads of income and there was no gain in trading and allowed carry forward next year. We find that the Hon’ble Jurisdictional Calcutta High Court as held in the case of Sandune Trade Pvt. Ltd [2010 (7) TMI 1013 - CALCUTTA HIGH COURT ] that the brokerage income was earned and the activity of dealing in shares in the own account was to be treated as share trading business. The entire activity has to be treated as one. Respectfully following the same, we find no infirmity in the impugned order of the CIT(A) and we uphold the same. - Decided against revenue Disallowance of expenses being penal in nature - Held that:- The assessee paid penalty to National Stock Exchange conducting their business control under SEBI during the course of its business transactions, therefore, we are of the opinion that the National Stock Exchange is not a statutory body and any penalties or fines paid as the case may be under regulations and bye-laws can be considered as regulations for controlling the internal obligations and therefore, facts of aforesaid order applicable to the facts on hand. - Decided against revenue Issues:1. Whether speculation loss can be set off against business income.2. Whether expenses of Rs. 4,32,999/- should be disallowed.Analysis:Issue 1:The appeal involved the question of whether speculation loss of Rs. 37,43,573/- can be set off against business income. The Assessing Officer (AO) treated the amount as speculation loss and added it to the income of the assessee. However, the assessee contended that the income from brokerage and share trading should be considered as one composite business income. The assessee relied on decisions of the Calcutta High Court and Kolkata Tribunal to support their claim. The Commissioner of Income Tax (Appeals) held in favor of the assessee, allowing the set off of speculation loss against business income. The Tribunal upheld the CIT(A)'s decision, stating that the entire activity of purchase and sale of shares should be treated as one business. The Tribunal referred to relevant case laws and dismissed the revenue's appeal.Issue 2:The second issue involved the disallowance of expenses amounting to Rs. 4,32,999/- by the AO, considering it as penal in nature. The assessee argued before the CIT(A) that the rules of the National Stock Exchange should not be equated with statutory rules and regulations. The CIT(A) deleted the addition of expenses. The Tribunal examined the nature of the expenses and referred to previous cases where penalties paid for non-observance of internal regulations were not considered as violations of statutory laws. The Tribunal dismissed the revenue's appeal, stating that the penalties paid by the assessee were for internal regulations of the stock exchange and not statutory violations.In conclusion, the Tribunal upheld the CIT(A)'s decision in both issues, allowing the set off of speculation loss against business income and dismissing the disallowance of expenses. The appeal of the revenue was ultimately dismissed, and the order was pronounced on 08/07/2016.