TaxTMI 
TaxTMI 
2008 (7) TMI 463
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.... business income shown in P&L a/c of Kapoor Press, a proprietary concern of the assessee. The Assessing Officer also did not accept the contention of the assessee that newly inserted provision under section 43(5)(d) vide Finance Bill, 2005 was clarificatory in nature and therefore, it has retrospective operation. In support, the assessee had referred the newly inserted provisions under section 43(5)(d) along with purpose and intention for introducing the said clause as explained in memorandum explaining the provisions of Finance Bill, 2005. The Assessing Officer accordingly arrived at a conclusion that the loss claimed was speculative loss which cannot be allowed set off against the other business income. He also treated the share script advice expenses to the extent of Rs. 3,34,500 as related to speculative transactions and therefore, disallowed the same while computing the business income for other than loss from speculative transactions. The learned CIT(A) has upheld the same. 4. Considering the arguments advanced by the parties we however, find substance in the contention of the learned Authorised Representative that dealing in derivatives was not speculative and the newly ins....
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....ts delivery can be effected. This right is to be settled at a specific date. The precondition for a transaction to be held as speculative is that it should be capable of delivery/transfer but the same is not done and settled otherwise. But where there is a transaction in which delivery/transfer itself is not possible, the same cannot be held as speculative transaction. The fact that these transactions have no physical form and their physical delivery is not possible has been accepted by the Assessing Officer at page Nos. 7 to 9 of the assessment order. Now only question before us is as to whether insertion of clause (d) in section 43(5) with effect from 1-4-2006, i.e., assessment year 2006-07 that an eligible transaction carried out in respect of trading in derivatives in a recognized stock exchange shall not be deemed to be a speculative transaction would mean that before 1-4-2006 the transaction in respect of trading in derivatives was a speculative transaction. In other words as to whether the inserted clause (d) in section 43(5) is clarificatory in nature to be operative with retrospective effect to mitigate the hardship of assessee's dealing in such trading in derivatives.....
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....o established a transparent system of trading with adequate safeguard for audit trail. Hence I propose to amend the Income-tax Act, to provide that trading in derivatives in specified stock exchanges will not be treated as 'speculative transactions' for the purpose of the Income-tax Act." 7. In view of the above, we find substance in the submissions of learned Authorised Representative that the trading in derivatives are not speculation and for that reason the law has been clarified to make it in consonance with the nature of transaction. The memorandum has further clarified that restriction under section 43(5) is essentially designed an anti-evasion measure to prevent claim of artificially generated losses. Thus normal loss in derivatives can't be considered speculative. In fact, the concept of transaction in derivatives was introduced in the Securities Contracts (Regulation) Act, 1956, with effect from 22-2-2000. Therefore to remove the unintended misinterpretation where dealing in derivatives may be considered as speculative transaction, the amendment is made in section 43(5) to clarify that derivative transactions are not speculative. Hence, the provisions so intro....
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....t case, however, the rate of tax in case of block assessment at 60 per cent was prescribed by section 113 but the year of the Finance Act imposing surcharge was not stipulated. This resulted in the ambiguities. Therefore, clarification was needed. The proviso was curative in nature. Hence, the proviso inserted in section 113 merely clarifies that out of the above four dates, the relevant date for applicability of the Finance Act would be the year in which the search stood initiated under section 158BC." In deciding this case the earlier decision of Hon'ble Supreme Court in Allied Motors (P.) Ltd.'s case (supra) was relied upon. CIT v. Vegetable Products Ltd. [1973] 88 ITR 192 (SC) Concession provision should be liberally construed so as to subserve the purpose for which it is intended. 10. The observation of the Assessing Officer that insertion of clause (d) in proviso to section 43(5) with effect from 1-4-2006 shows that prior to this date the derivative transactions are speculative transactions is incorrect as this provision has been inserted only to clarify the doubt as is evident from the memorandum explaining the proviso. Hence, in the absence of any specific provi....