TaxTMI 
TaxTMI 
2016 (4) TMI 671
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....n business. The Assessing Officer on verification of the Profit & Loss Account found that the assessee has show a sum of Rs. 1,42,27,933/- towards et loss on trading in commodities inex futures. He asked the assessee to establish that such activities had nexus to its business operation. The assessee produced the ledger account showing the transactions trading in futures executed through Religare Commodities Ltd and Angel Commodities Broking (P) Ltd. These deposition showed that the assessee had business activity as it was executing contracts for various commodities such as crude oil, zinc, nickel etc besides gold and silver. The assessee subsequently explained that the transactions are 'hedging' in nature and therefore, cannot be treated as 'speculation'. The Assessing Officer further observed that the assessee is engaged in the business of purchase of old gold, bullion gold and convert these gold into jewellery. It sells the jewellery in the open market. For this purpose, it could execute futures contract for gold in commodities exchange to hedge its business position risk. The Assessing Officer stated that inasmuch as the assessee is a trader of gold ornaments and....
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....he Act because MCX Stock Exchange Ltd has been notified as a recognized stock exchange vide Notification dated 46/2009 dated 22.5.2009 with effect from the same date. Since the relevant transactions under consideration took place in the previous year prior to the date of notification, the assessee is not entitled for exception under this clause. However, he observed that the assessee is eligible for set off in respect of the transactions in commodities i.e gold and silver which has direct nexus with its business. The CIT(A) observed that only an amount of Rs. 37,31,630/- is relating to trading in gold and silver which could be considered as not speculative loss. Regarding the balance amount of Rs. 1,04,96,303/- relating to other commodities such as copper, natural gas, zinc, lead etc., these commodities have no nexus with the business of the assessee. Accordingly, the CIT(A) observed that this loss cannot be considered to be speculative loss. The Revenue is in appeal before us with regard to deletion of addition of Rs. 37,31,630/- considering it as business loss and not as a speculative loss. The assessee is in appeal before us with regard to the treatment of Rs. 1,04,96,303/- as s....
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....these transactions, there was no provisions in the statute to give the benefit to the Assessee in respect of transactions of commodities, which was ultimately settled otherwise then by actual delivery or transfer of the commodity as per Section 43(5) of the Act. Assessee was not entitled to claim the benefit of clause (e) of the proviso to Section 43(5) of the Act." 5. In view of the above order in the case of Varsha Corporation, we are inclined to uphold the order of the Assessing Officer that loss arising out of the commodities dealt with by the assessee i.e gold, silver, copper, zinc, natural gas, nickel etc are to be considered as speculation loss only and the assessee is not entitled to set off the same against business income of the assessee. Thus, the ground in Revenue's appeal is allowed and the ground in assessee's appeal is dismissed. 6. The next common ground in Revenue's appeals I.T.A.No.1491 and 1493/Mds/2012 for assessment year 2007-08 and I.T.A. No.1492/Mds/2012 for assessment year 2008-09 is with regard to deletion of addition made towards inflated purchase of gold. Rs. 1.06 crores and Rs. 75.40 lakhs in assessment year 2007-08 and Rs. 2.36 crores in a....
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....laced reliance on the common trade practice and acceptance of the assessee's sales by the Sales Tax Department, deleted the addition. In our opinion, the common practice in the jewellery business cannot prove genuineness of the purchases made by the assessee. Further, the Sales Tax Department is only concerned with the sales tax on the sales made by the assessee. They are not certifying the correctness of the local purchases made by the assessee. Being so, it cannot be considered as the evidence produced by the assessee is foolproof. Since the assessee has not produced all relevant records to prove the genuineness of the local purchases made by the assessee, the Assessing Officer is justified in disallowing the claim towards the local purchases of old gold jewellery made by the assessee. This ground raised by the Revenue is allowed. 10. The next ground in I.T.A.No.1491/Mds/2012 for assessment year 2007-08 is with regard to deletion of addition made u/s 68 towards sundry creditors to the extent of Rs. 2.10 crores representing chit collections of 1.86 crores, security deposit of Rs. 1.20 lakhs and purchases of Rs. 21.42 lakhs. The Assessing Officer stated that the assessee was n....