2013 (10) TMI 978

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....Tax Act, 1961 ('the Act' hereinafter) for the assessment year (A.Y.) 2008-09 vide order dated 30.11.2010. 2. We shall take up the assessee's appeal, being senior, first. Vide its first ground, the assessee challenges the enhancement of its income by Rs.4,90,512/- by making an addition in respect of mark to market profit of Rs.7,92,365/- in respect of derivative transactions outstanding as at the year-end. We tabulate the transactions and the profit and loss involved by marking it to market, so as to highlight the controversy under reference (PB pg.127):- Contract Qty Bought /Sold Difference Profit on the basis of Mark to Market Difference (Loss) on the basis of Mark to Market Chennai Petro 44100 Bought 6,93,012....

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.... distributing the loss as booked, so that the assessee's ground is incorrect to that extent, directed for the inclusion of the unrealized gain, resulting in an enhancement in income by Rs.7.92 lacs. Apart from inconsistency, the other factor that guided the decision by the ld. CIT(A) is that the loss of Rs.3.02 lacs had not crystallized, but was only notional, so that no allowance in its respect could be allowed. 3.2 Before us, like contentions were raised by either side; the respective cases of the parties being the same, with the assessee also relying, apart from the Guidance Note on Accounting for Equity Index and Equity Stock Futures and Options issued by the Institute of Chartered Accountants of India (PB pgs.96-117), also on the de....

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....h regard to the prudence, which, as aforesaid, is a fundamental accounting assumption/principle and, therefore, is to inform all accounting statements. We, accordingly, direct the deletion of the addition of Rs.7.92 lacs made by the ld. CIT(A). Needless to add, the said income would stand to be deleted, and the loss of Rs.3.02 lacs claimed and allowed to the assessee, adjusted against the income, speculative or non-speculative, as the case may be, under which the income from derivatives stands classified for the year of settlement. We decide accordingly. 4. The second issue arising in the instant case is in respect of the disallowance of the speculative loss claimed by the assessee. The Assessing Officer (A.O.) observed during the course....

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....e from the speculative business accordingly. There is no room for any arbitrary action, and the Revenue is obliged to take its objection, found reasonable by us in principle, to its logical end. We decide accordingly. 6. The third ground of the assessee's appeal raises a common issue with the Revenue's appeal per its sole ground. The A.O. in assessing the assessee's tax liability for the year computed the income-tax under the regular provisions (otherwise at Rs.84,00,360/-) after allowing rebate u/s.88E, so that the same came to be Nil, while computing the tax payable under the alternate method, i.e., on the book profit u/s.115JB of Rs.55,17,680/-, at Rs.5,51,768/-. The latter being higher, the demand for the same was raised. The assesse....