2018 (10) TMI 1102 - AT - Income Tax

Derivative Loss Not Speculative, Setoff Allowed Under Section 73

The Tribunal allowed the appeal filed by M/s. Sucon India Ltd., holding that the loss incurred on derivative transactions was not speculative and could be ... Denying the claim of set off of loss of share business allegedly in view of Explanation to section – 73 - Held that:- Following decision of the co-ordinate bench in assessee’s own case for AY 2008-09 [2017 (2) TMI 723 - ITAT DELHI] which is squarely applicable to the issue in controversy, loss suffered by assessee on derivative transaction is not speculative loss and as such eligible to be adjusted against business income and Explanation 73 of the Income Tax Act is not attracted. So the addition made by AO and affirmed by Ld. CIT(A) is ordered to be deleted. Consequently present appeal is allowed in favour of assessee. Issues Involved:1. Disallowance of set off of loss of share business under section 73 of the Income Tax Act, 1961.2. Adequate opportunity of being heard not provided by the Assessing Officer.Analysis:Issue 1: Disallowance of set off of loss of share business under section 73 of the Income Tax Act, 1961:The case involved the appellant, M/s. Sucon India Ltd., challenging the addition of Rs. 29,84,052 by the Assessing Officer (AO) for denying the claim of set off of loss of share business under section 73 of the Income Tax Act, 1961. The AO assessed the total income at Rs. 4,09,25,082 after disallowing the claim made by the assessee. The appellant contended that the action of the AO and the Commissioner of Income Tax (Appeals) in confirming the addition was against the facts and circumstances of the case. The appellant relied on a decision by a co-ordinate bench of the Tribunal in their own case for the assessment year 2009-10, where the issue was decided in favor of the assessee. The Tribunal referred to a judgment of the Hon'ble Calcutta High Court, disagreeing with the decision of the Hon'ble Delhi High Court, and held that the loss arising out of deemed business can be set off against the income arising out of other businesses unless otherwise provided. The Tribunal, following the decision of the Hon'ble Calcutta High Court, allowed the claim of set off of loss of share business, concluding that the loss suffered by the assessee on derivative transactions was not speculative and could be adjusted against business income. Therefore, the addition made by the AO and affirmed by the Commissioner of Income Tax (Appeals) was ordered to be deleted, and the appeal was allowed.Issue 2: Adequate opportunity of being heard not provided by the Assessing Officer:The appellant also raised the issue that the Assessing Officer passed the impugned order without giving adequate opportunity of being heard. However, the Tribunal primarily focused on the substantive issue of disallowance of set off of loss of share business under section 73 of the Income Tax Act, 1961, and the decision was rendered in favor of the appellant based on the legal interpretation and precedents discussed above.In conclusion, the Tribunal allowed the appeal, holding that the loss incurred on derivative transactions was not speculative and could be adjusted against business income. The addition made by the Assessing Officer was deleted, and the appellant's contentions were upheld based on the legal interpretations and precedents cited during the proceedings.