2015 (8) TMI 1158

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.... 01.04.2006. 2. On the facts and circumstances of the case and in law, the Ld. CIT(A) erred in directing the Assessing Officer to allow set off of loss from trading in shares against profit earned upto 25.01.2006 without appreciating the fact that provisions of section, 43(5)(d) was inserted w.e.f. 01.04.2006 and hence set off of loss from shares against the income, is not allowable. 3. On the facts and in the circumstances of the case and in law, the Ld. CIT(A) erred in directing the Assessing Officer to allow credit of Security Transaction Tax(STT) in computing rebate u/s.88E without appreciating the fact that the assessee's income/loss from share transactions was held as speculative within the meaning of explanation to subsection 4 of section 73 of the Incometax Act, 1961." 3. Briefly stated the facts of the case are that the assessee is dealing in share and security. While scrutinizing the return of income, the Assessing Officer noticed that the assessee has incurred loss from trading in securities /shares as under: Profit on sale of shares Rs. 24,25,505/- Loss on fall in value of shares Rs. (92,46,676) Net figure (-) Rs. 68,21,171/-        ....

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.... to be set off against profit of derivative transaction vide section 73 of I.T. Act. 1961. Without prejudice to above submission, we may also submit that as stated there in above in Para 1, there is also profit on sale of shares, of Rs. 24,25,505/which is also in nature of speculation profit, which has to be set off against the loss in fail in value of shares:" 5. After considering the detailed submission made by the assessee, the AO observed that the NSE and BSE were notified w.e.f. 24.01.2006 vide notification No. 2 of 2006 for the purpose of S. 43(5) proviso(d), according to which the profit/loss on derivative transaction upto 24.1.2006 is to be treated as speculative profit/loss therefore, the proviso(d) to Sec. 43(5) is inserted w.e.f. 1.4.2006 and is applicable from A.Y. 2007-08. Since the assessee's case is for A.Y. 2006-07, therefore, is not covered by this proviso. The AO further declined to entertain the claim of the assessee to set off loss against profit on sale of shares as it was not claimed by way of a revised return. The AO further proceeded by considering the explanation to Sec. 73 of the Act and held that the assessee is carrying on business of trading in shares....

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....department is trying to improve upon the findings of the AO, which is against the settled decision of law. Referring to the decision of the Tribunal in the case of ACIT Vs Ms. Aishwarya K. Rai, 127 ITD 204, the Ld. Counsel pointed out the observations of the Tribunal, wherein the Tribunal has held as under: " It is no doubt true that the Ld. DR can make any arguments in support of the stand taken by the Assessing Officer but there are certain inherent limits of his arguments inasmuch as he cannot transgress the boundaries made by the AO. In other words, the Ld. DR can support the action of the AO with any arguments, he can rely on any case law in support of the Assessing Officer's case, but he cannot make out altogether a new case which was not the subject matter of consideration by the Assessing Officer or the Learned First Appellate authority." 11. The Ld. Counsel pointed out that a similar view was taken by the Tribunal, Pune Bench in the case of ITO Vs Anant Y. Chavan 126 TTJ 984. Referring to the Special Bench decision of the Tribunal, Mumbai in the case of Mahindra & Mahindra 313 ITR (Trib.) 263 particular page 322 the Ld. Counsel pointed out to the observations of the Spec....

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...." is confined in its application. Parliamentary intendment that such transactions are also excluded from the mischief of Explanation to Section 73 (4), however, is not borne out. It is no doubt, tempting to hold that since the expression "derivatives" is defined only in Section 43 (5) and since it excludes such transactions from the odium of speculative transactions, and further that since that has not been excluded from Section 73, yet, the Court would be doing violence to Parliamentary intendment. This is because a definition enacted for only a restricted purpose or objective should not be applied to achieve other ends or purposes. Doing so would be contrary to the statute. Thus contextual application of a definition or term is stressed; wherever the context and setting of a provision indicates an intention that an expression defined in some other place in the enactment, cannot be applied, that intent prevails, regardless of whether standard exclusionary terms (such as "unless the context otherwise requires") are used - Vanguard Fire & General Insurance Co. Ltd., v. Fraser & Ross & Anr AIR 1960 SC 971 and N.K. Jain & Ors Vs C.K. Shah & Ors. AIR 1991 SC 1289 applied." 11.4. The f....