TaxTMI 
TaxTMI 
2014 (1) TMI 943
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....such did not allow the same to be set off against the normal business of the assessee by relying on the CBDT instruction No.3/2010 dated 23.3.2010. 3. Relevant facts are that the assessee is an individual and filed return declaring income of Rs.50,90,905/- for the Financial Year relevant to the assessment year under consideration. The AO observed on perusal of the broker ledger in respect of F & O segment that there was a debit balance of Rs.45,01,733/- as on 31.3.2008 which had not been settled at the end of the year. The AO has stated that there was not a single payment either in cheque or by way of the transfer of fund from cash market to the F & O segment. The AO asked the assessee to show cause as to why the said loss be not treated a....
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.... exchange through recognized broker Transparent Shares & Securities Private Limited. ii) In the trading of derivatives, the appellant had incurred loss of Rs. 49,66,586/-. In course of assessment complete details was filed along with copy of certificate in form 10 DB was filed before the Assessing Officer. In course of assessment, the AO had also made independent inquiry with the office of National Stock exchange also. The appellant understands that in course of inquiry with the National Stock Exchange also the transactions entered by our client were confirmed. iii) In course of assessment, the AO had asked to explain the details of payment made to broker. The AO asked to explain that why the said notional loss pertaining to F & 0 segment....
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....ce on pages 7 to 32 of the paper book. iv) From this it will be clear that the appellant had in fact made complete payment for loss incurred in F & 0 transactions. Therefore it cannot be held that the loss incurred was notional. The AO failed to appreciate that all the transactions were carried on the floor of the stock exchange through recognized broker by the appellant in its own name. The certificate in Form 10 DB was also filed before the AO which clearly showed that the transactions were incurred by the appellant. The AO had also made direct inquiry with the National Stock Exchange which had also confirmed that the transactions were entered by the appellant. Thus it can be seen that all the transactions were genuine and therefore loss....
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....ward". 5. The ld. CIT(A) after considering the above submissions has directed the AO to treat the same as business loss liable to be set off against business income vide paragraphs 4.2 and 4.2.1 of the impugned order which reads as under : "4.2 I have carefully considered the findings of the AO as well as the submissions of the appellant. After considering the rival submissions, I can not appreciate the findings of the AO primarily on the ground that in the assessment order the AO has not at all discussed and rebutted the submissions dated 15.12.2010 made by the assessee at the time of assessment, wherein it was pointed out that all the transactions in future and options were carried out through registered broker, which can be independent....
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.... transactions of the appellant, who has incurred actual loss in F&O transactions, which were duly settled by the appellant. Accordingly, the AO is directed to treat the same as business loss liable to be set off against business income. This ground of appeal is accordingly allowed. " Hence this appeal by the department. 6. Ld.DR while supporting the order of the AO submitted that CBDT Instruction No.3/2010 (supra) states that if the loss have arisen on account of actual settlement /conclusion of contract of derivative trading can only be allowed but if the said transactions are not settled at the end of the year then it is a notional loss and the same cannot be allowed. The ld. DR submitted that the assessee could not furnish any evidence....
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....gment was accounted for. The ld. AR submitted that in the relevant Financial Year, the assessee had also made payment of Rs.44,75,000/-. He submitted that all these details were placed before the AO and therefore, the observations of the AO that the assessee had not made any payment to the broker is not factually correct. He submitted that the assessee also submitted a copy of certificate in form 10 DB which gives details of STT paid on derivatives. He submitted that the assessee entered into derivative transactions through recognized broker and on the floor of the stock- exchange. The ld. AR also submitted that that the said CBDT instruction No.3/2010 does not apply to the F&O derivatives segment as it applies only in respect of foreign ex....