TaxTMI 
TaxTMI 
2016 (12) TMI 407
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....ther on the facts and in the circumstances of the case the Learned Income Tax Appellate Tribunal, "B" Bench Kolkata erred in law in holding that the meaning of speculative transaction as contained in Section 43(5) of the Income Tax Act, 1961 is only for the purpose of Section 28 to 41 of the Income Tax Act, 1961 and it does not apply to the other sections of the Act? c) Whether on the facts and in the circumstances of the case the Learned Income Tax Appellate Tribunal, "B" Bench Kolkata erred in law in holding that the aggregation of the share trading loss and profit from derivative transactions should be done before the Explanation to Section 73 of the Income Tax Act, 1961 is applied? d) Whether the impugned order is bad, arbitrary, illegal perverse and the same is nothing but a total non-application of mind of the Income Tax Appellate Tribunal, Kolkata and the same is liable to be set aside and/or quashed?" The assessee earned a sum of Rs. 2,26,12,178/- from trading in derivatives (future and options). About Rs. 11 lakhs were also earned on account of share difference, interest on loan, interest on FDR and consultancy charges. The assessee incurred losses in ....
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....3 of the I.T. Act, 1961. After going through the assessment order, paper book and written submission filed by the A.R. it is noticed that the assessee company is a NBFC and had derivative trading income of Rs. 2,26,12,179/- in F & O Section and trading loss from share trading to the extent of Rs. 1,71,52,934/-. The assessee had contended that share trading and F & O are both inter dependent and identical business activities and he further contended that F & O has been entered into with a view to hedge the shares held by the company. The A.R. has relied upon the judgment of 128 TTJ Mumbai in case of Metropolitan Traders Pvt. Ltd. Vs. ITO while the A.O. referred to Sec.43(5) proviso (d) and treated the F & O income as business profits. This section came into existence w.e.f.01-04-2006. Therefore, this ITAT judgment is not applicable due to specific amendment u/s.43(5) of the I.T. Act, 1961 w.e.f. 01-04-2006 and F & O transaction is treated as business income which is different from trading of shares. Hence, ground no.4 is dismissed." The CIT (A), however, allowed the ground no.3 on the basis of the following reasoning:- "8. Regarding ground no.3 relates to disallowance of Rs....
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....ising out of such deemed business can be set off against the profit arising out of other business or businesses which may for clarity be called proper business. Under Section 70 of the Act, the assessee is entitled to have the loss set off against his income from any other source under the same head unless otherwise provided. Therefore answer to the question is that the assessee is entitled to have the loss arising out of deemed business set off against the income arising out of business proper unless otherwise provided. The question however remains whether the explanation to Sub-Section (4) of Section 73 relied upon by Mr. Lodh provides otherwise. A plain reading of the explanation quoted above cannot be said to have provided otherwise. In that case the irresistible conclusion is that the assessee is entitled to set off such loss arising out of deemed business against the income arising out of business proper. 12. The learned Tribunal has supported the contention of the revenue relying upon the judgement of the Delhi High Court quoted above. The views expressed by the Hon'ble Delhi High Court are contained in a part of the sentence, which is as follows:- "by all accoun....
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.... stated by the Privy Council in Rani Hemanta Kumari Debi v. Maharaja Jagadindra Nath Roy Bahadur [10 CWN 630: 8 Bom LR 400] wherein, while regarding the appellate judgment of the High Court of Judicature at Fort William as "careful and able", it was stated that it did not "come to close quarters with the judgment which it reviews, and indeed never discusses or even alludes to the reasoning of the Subordinate Judge". It is also elementary that the Appellate Court interferes not because the judgment is not right but because the judgment is wrong. If any authority is required, reference may be made to the judgment in the case of The Dollar Company, Madras -Vs- Collector of Madras reported in AIR 1975 SC 1670 wherein the following views were taken:- "At the outset, we must warn ourselves of the broad guideline that in an appeal from an award granting compensation this Court will not interfere unless there is something to show not merely that on the balance of evidence it is possible to reach a different conclusion but that the judgment cannot be supported by reason of a wrong application of principle or because some important point affecting valuation has been overlooked or....
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.... submitted that the whole idea of introduction of Explanation to section 73 and the object behind that would appear from Circular No.204 dated 24th July, 1976 issued by CBDT and which is also in conformity with the views of the Wanchoo Committee, which is as follows:- "19.2 The object of this provision is to curb the device sometimes resorted to by business houses controlling groups of companies to manipulate and reduce the taxable income of companies under their control." Mr. Khaitan submitted that before amendment of sub-section 5 of Section 43 by which dealings in derivatives including future and options were taken out of the category of speculative transactions, any profit or loss arising out of such operations could be set off against profit or loss arising out of dealings in shares. That no doubt was the case so long as the status of dealing in derivatives including future and options was not brought out of the category of speculation. The reasoning is that previously dealings in shares and dealings in derivatives were both speculative transactions but by virtue of amendment made in the year 2006, dealings in derivatives ceased to be speculative transaction ....