TaxTMI 
TaxTMI 
2018 (1) TMI 779
X X X X Extracts X X X X
X X X X Extracts X X X X
....ance company. In the course of assessment proceedings the AO noticed that the assessee during the previous year had incurred loss of Rs. 3,81,20,180/- on account of trading in derivative transactions. Under section 43(5)(d) of the Income Tax Act, 1961 (Act) which was inserted by Finance Act, w.e.f. 01.04.2006 applicable from AY 2005-06. transactions in respect of trading in derivatives carried out in the recognised stock exchange will not be regarded as speculative transaction. The notification u/s 43(5)(d) of the Act notifying which are the recognised stock exchanges where trading in derivatives carried out by an assessee will not be regarded as speculative transaction was issued only n 25.01.2006. Though the law came into force w.e.f. 1.4....
X X X X Extracts X X X X
X X X X Extracts X X X X
....T in the case of Arun Kumar Saraogi in ITA NO.2587/Kol/2009 dated 07.01.2011 took the view that all losses from trading in derivatives from 01.04.2005 should be regarded as normal business loss and not speculative loss. The following were the relevant observations of the Tribunal in this regard. "8. After hearing the rival submissions and on careful perusal of the materials available on record, we are of the considered view that the facts of the present case are akin to the facts of the case decided by the ITAT, Mumbai Bench in ITA No.6547/Mum/2009 whereas the facts of the issue decided by the Special Bench are not similar to the one in hand. We consider it to narrate the facts as well as the conclusion of the case decided by the ITAT, Mu....
X X X X Extracts X X X X
X X X X Extracts X X X X
....fulfils the requirements of being an eligible transaction in respect of trading in derivates. As for the requirement of stock exchange being recognized, as set out in Explanation (ii) to Section 43(5)(d), are that the stock exchange should , inter alia, 'notified by the Central Government for this purpose'. It is an accepted position that NSE and BSE have been granted recognition, for the purpose of Section 43(5)(d), vide notification dated 25th January 2006 issued by the Central Board of Direct Taxes, and the point of dispute is confined to the question whether this recognition will also affect the transactions entered into in the related stock exchange prior to the date of recognition." Conclusion : "7. We find that it is un....
X X X X Extracts X X X X
X X X X Extracts X X X X
....ers of the revenue authorities and direct the AO to treat the loss as speculative loss." 5. The CIT(A) agreed with the aforesaid submissions of the assessee and held that loss in derivatives incurred from 1.4.2005 should be regarded as speculative loss and not from 25.1.2006. 6. The CIT(A), however, found that the Hon'ble Delhi High Court in the case of DLF Commercial Developers Ltd. (2013) 35 taxmann 280 (Delhi) took the view that the definition of speculative transaction is applicable only in the context of section 28 to 41 dealing with computation of income and does not apply to section 73 which lays down the condition for set off of loss. Following the aforesaid decision the CIT(A) held that the claim of the assessee for set off of t....
X X X X Extracts X X X X
X X X X Extracts X X X X
....here were two contradictory judgements on the same issue. 3. For that on the facts and circumstances of the case the Ld AO erred in disallowing Rs. 9,52,230/ - as relatable to the speculation loss. 4. For that the assessee craves leave to add, alter or amend any around before or at the time of hearing." The figure of loss has been wrongly stated in the grounds of appeal raised by the assessee before the Tribunal. 9. We have considered the rival submissions. For proper adjudication of the issue raised by the assessee in its appeal it is necessary to look at the provisions of Explanation to section 73 of the Act which reads as follows :- "Explanation.-Where any part of the business of a company [other than a .company whose gross to....
X X X X Extracts X X X X
X X X X Extracts X X X X
....ncome consists predominantly of income from the four heads that are referred to therein. Obviously, in computing the gross total income the normal provisions of the Act must be applied and it is only thereafter, that it has to be determined as to whether the gross total income so computed consists mainly of income which is chargeable under the heads referred to in the explanation. 12. The aforesaid decision was followed by the Hon'ble Calcutta High Court in the case of CIT vs Middleton Investment & Trading Co. Ltd. 196 of 1999 judgment dated 15.01.2014. Applying the ratio laid down in the aforesaid decision, we find the following factual position in the case of the assessee : 1. The assessee is out of the purview of the said Explanation ....