TaxTMI 
TaxTMI 
TaxTMI 
2018 (1) TMI 657
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..... Act as the assessee has wrongly set off speculative loss against non speculative income." 3. "On the facts and in the circumstances of the case and in law, the Ld.CIT(A) erred in directing the AO to delete the addition made on account of deemed dividend by the Assessing officer in spite of the fact that in appeal the addition made in the case of Angel Broking, Angel Commodities Broking Pvt. Ltd. and Angel Securities Ltd. has been deleted by the appellant authority." 4. "The appellant craves leave to amend or alter any ground or add a new ground which may be necessary." 3. Grounds taken by assessee reads as under:- "1.1 Under the facts and the circumstances of the case, the Hon. CIT(A) has not justified in confirming the further disallowance amounting to Rs. 26,48,184/u/s 14A of the Income Tax act, made by the Ld. Assessing officer by applying Rule 8D, without correlating expenses to that extent, being incurred to earn the tax free dividend income by the appellant, inspite of the fact that the appellant itself has disallowed Rs. 13,64,963/- u/s. 14A of the Income Tax Act. 1.2 Under the facts and circumstances of the case, the Hon. CIT(A) has not justified in confirmin....
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....ade. viii) In the ultimate analysis, there is no revenue effect and it is only the timing of taxation of loss/profit. Based on the facts of the case & in view of the fact that the appellant is regularly trading in derivative contracts, the appellant prays that the unexpired derivative contracts are rightly held as stock in business and the loss on valuation of derivative contracts be allowed to the appellant., which even though is a notional loss, is allowable under the generally accepted accounting principles, unlike stocks & shares. Further, very similar loss disallowed by the assessing officer in the case of the appellant's own case for A. Y. 2008-09 has been allowed by the Hon. CIT(A). Copy of Appeal Order enclosed. (page 302 to 311) . Hence the appellant submits that, based on the same ratio as of A. Y. 2008-09, the mark to market loss should be allowed to the appellant. Thus, from the facts of the case and as per the above judicial decisions, the appellant prays your honour to kindly delete the additions/disallowances made by the AO." 7. Grievance of Revenue relates to deleting disallowance of loss mark to market loss on future contracts. 8. Learned DR fairly ....
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....pported by the following judicial decisions; f. In case of Arion Commercial Pvt Ltd, ITA No. 101 0/Ko1l2011, it is held that "trading of shares which is done by delivery transactions are not hit by Section 43(5) as speculation. Similarly, derivative transaction in shares profit/loss is also not hit by Section 43(5) of the Income Tax Act, which deals about speculation transaction. As such, both profit / loss from all the share delivery transactions & derivative transactions are having the same meaning, so far as, section 43(5) of the Income Tax Act is concerned. It is further held that, once the transactions done by delivery as well as the transactions of derivatives are not hit by Sec. 43(5) of the Act, the aggregation of the share trading loss and profit from derivative transactions should be done before the application of explanation to Sec. 73 of the I. T. Act is applicable. g. In case of Shree Capital Services Ltd Vs ACIT, ITA No. 1294(Kol) of 2008, the Hon. ITAT, Kolkata, has held that F & 0 shall be treated in same line with cash and vice versa. h. In case of DCIT vs Loknath Saraf Securities Ltd., ITA No.695/Kol/2008, the Hon. ITAT has held that different treatment o....
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....assessee comprises of loss from Business and positive income from other sources, even though the figure of loss from business is more than the figure of positive income, the explanation to Sec. 73 shall not apply'. d. In case of Cosy Merchantile Ltd Vs DCIT, ITA No. 3511/Mum/2001, the Hon. Mumbai ITAT is of the same opinion as above. e. CIT Vs Darshan Securities Pvt Ltd, ITA No. 2886 of 2009. f. ACIT Vs Concord Commercials Pvt Ltd, ITA No. 5220/Bom/1994. g. CIT Vs Hero textiles and Trading Ltd, ITA No. 296 of 2001. h. CIT Vs Maansi Trading Pvt Ltd, ITA No. 47 of 2001. i. CIT Vs HSBC Securities & Capital Markets India Pvt Ltd , ITA No. 657 of 2007. j. Starline Ispat and Alloys Ltd Vs DCIT, 108 TT J 321. ' 5.3.10. I find that out of the loss of Rs. 7,75,30,998/-, loss of Rs. 3,95,73,414/- is due to loss on valuation of closing stock. The Ld. Assessing officer did not comment on the details provided of the valuation loss of Rs. 3,95,73,414/- and just stated that as it is valuation loss, it is speculative in nature. I find that valuing the stock-in-trade as per the system regularly followed, a company. Ld. AO has no reasons to deviate from the system and....
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....n course of financial year, for purpose of considering loss and profit for that year. Therefore, loss or profit on account of valuation of stock-in-trade of shares would amount to revenue loss or revenue receipt. However, in the instant case, since I have held that Expln.to Sec. 73 is not applicable to the facts of the appellant, the decision as relied upon by the AO has no application. 5.3.11 Without prejudice to my above stated findings that arbitrage / jobbing transactions are non-speculative transactions and Sec. 73 is not applicable to the case of the appellant as well as provisions of Explanation to section 73 are not applicable to the appellant case in view of finings of the Hon'ble jurisdictional High Court in the case of Darshan Securities( Supra), even if it is held that the transaction are speculative than also profit of the F&O transaction are to be adjusted against the losses of cash transactions in view of decision of Arion Commercial Pvt Ltd. (supra) wherein it was held that trading of shares which is done by delivery transactions are not hit by Section 43(5) as speculation. Similarly, derivative transaction in shares profit/loss is also not hit by Section 43(....
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....(5) of the I.T Act, which deals about speculation transaction. As such, both profit/loss from all the share delivery transactions and derivative transactions are having the same meaning, so far as Sec.43(5) of the I.T Act is concerned. * When once we held that the transactions done by delivery as well as the transactions of derivatives are not hit by Sec. 43(5) of the Act it is in our considered view that the aggregation of the share trading loss and profit from derivative transactions should be done before the application of the Explanation to Sec. 73 of the I. T Act is applicable." Thus, Hon'ble ITAT in this case has held that aggregation of share trading loss and profit from derivative transaction should be done before the application of Explanation to Section 73 of the I. T. Act is applicable. This position is further supported by the Hon'ble Delhi High Court's Judgement in the case of CIT v/s DLF Commercial Developers Ltd. [ITA No. 94/2013 vide order dated 11.07.2013J wherein it has been held that Derivatives which derive their value from the underlying shares & securities cannot be exempted from the mischief of Explanation to Section 73 and are therefore ....
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....erm 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. In The Vanguard Fire & General Insurance Co. Ltd., Madras v. MIS. Fraser And Ross & Anr AIR 1960 SC 971 it was held that: "lt is well settled that all statutory definitions or abbreviations must be read subject to the qualification variously expressed in the definition clauses which created them and it may be that even where the definition is exhaustive inasmuch as the word defined is said to mean a certain thing, it is possible for the word to have a somewhat different meaning in different sections of the Act depending upon the subject or the context. That is why all definitions in statutes generally begin with the qualifying words similar to the words used in the present case, namely, unless there is anything repugnant in the subject or context. Therefore in finding out the meaning of the word " insurer " in various sections of the Act, the meaning to be ordinarily give....
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...., therefore, allowed; there shall be no order as to .. " Therefore, the Hon'ble Delhi High Court has categorically observed that the provisions of Section 73 of the Act would be applicable even in the case of derivatives to the extent they are backed by stock and shares. Therefore, if the AO invoked the provision of the explanation of Sec. 73, the entire transaction of the appellant become speculative for this purpose as per Delhi High Court and the appellant is entitled for the set off which will make the addition nullified as made by the AO. 5.3.12. In view of the foregoing discussion wherein in both circumstances of treating the transactions as speculative or non speculative, the set off has to be allowed, the addition made by the Ld. AO cannot be sustained both on facts and circumstances of the appellant's case, the same are accordingly deleted. This ground of appeal is allowed. 14. Against the above order of CIT(A), revenue is in further appeal before us. 15. We have considered rival contentions and deliberated on the judicial pronouncements referred by lower authorities in their respective orders as well as cited by learned AR and DR during the course of hear....