TaxTMI 
TaxTMI 
TaxTMI 
2018 (3) TMI 1513
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....und was not pressed by the Ld. AR and accordingly is dismissed as not pressed. 3. The next ground is with regard to rejection of loss of Rs. 8.03 crores by treating the same as speculative loss. 4. The facts of this case are that the assessee is a property developer. The assessee was also dealing in huge volume of speculative share transaction amounting to Rs. 199028.81 lakhs out of the total share transaction amounting to Rs. 202816.73 lakhs. The assessee has netted off the loss of 803.03 lakhs with the other business income of the assessee. The Assessing Officer treated the loss of Rs. 803.03 lakhs as speculative loss and disallowed by setting off against the business income of the assessee. 5. Against this, the assessee carried the matter in appeal before the CIT(A). The CIT(A) confirmed the order of the Assessing Officer. 6. Aggrieved by the order of the CIT(A), the assessee is in appeal before us. The ld. AR submitted that the sum of Rs. 8,03,03,000/- consists of loss from futures and options amounting to Rs. 519.82 lakhs and loss from cash market transaction amounting to Rs. 283.21 lakhs. The Ld. AR submitted that the break up of the transaction showed that the loss from ....
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....action is defined in Explanation 1A. 6.2 According to the Ld. AR an option is a type of derivative instrument whereby a person gets right to buy or sell at an agreed amount an underlying asset on or before the specified future date. It was submitted that "Futures and Options" are both standardized derivative instruments traded on a stock exchange. Futures and Options are also derivatives, i.e., the instrument whose value depends on an underlying source or asset. 6.3 The Ld. AR relied on the decision of the ITAT, 'C' Bench, Chennai in the case of DCIT vs. Aiswarya & Co. Pvt. Ltd. wherein it was held that explanation to sec. 73 cannot apply to derivatives but only to purchase and sale of simplicitor. Moreover, a speculative transaction as per sec. 43(5) means a transaction in which the contract for the purchase and sale of any commodity, including stocks, shares is periodically or ultimately settled., otherwise than by way of actual delivery of transfer of commodity or scrips. The Tribunal also relied on the following decisions to hold that the transactions in derivatives are treated as regular business transactions and not speculative transactions: (i) M/s. Shree Capital Service....
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....n 43(5) of the Act w.e.f. 01-04-2006 by Finance Act 2005. In the present case of assessee, according to the Ld. AR, the assessment year involved is 2007-08, hence it is fully covered by the amended clause (d) of Section 43(5) of Act. 6.6 The Ld. AR relied on the decision of the Kolkata Bench of the ITAT in Madanlal Ltd. Kolkata vs. Department of Income Tax on 04-05-2012 wherein it was held that the explanation to Section 73 of the Act refers to the business of purchase and sale of shares and not the business of derivatives transactions carried out through recognized stock exchange by the assessee. The Ld. AR further relied on the Hon'ble Supreme Court in Appllo Tyres Ltd. vs. CIT (2002) 255 ITR 273 wherein it was held that units of UTI are not shares as contemplated in Explanation to Section 73. According to the Apex Court "if the legislative had contemplated making the units also a deemed share then it could have stated so. In the absence of any such specific deeming provisions in regard to the units as share it would be erroneous to extend the provision of Section 32(3) of the UTI Act to the units of UTI for the purpose of holding that the unit is a share". By the same analo....
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..... CIT (1994) 208 ITR 1023 (Cal). Thus it was submitted that derivatives of the kind and nature traded by the assessee were relatable to stocks and shares and accordingly, the assessee was not entitled to the benefit of section 73 of the Act. 7.2 The Ld. DR relied on the judgment of the Delhi High Court in the case of DLF Commercial Developers Ltd., 261 CTR 127 wherein it was held as under: " The term 'speculative transaction' has been defined only in Section 43(5) of the Act and it is qualified i.e. that the scope of the definition is restricted in its application to working out the mandate of Sections 28 to 41 of the Act. In terms of the Explanation to Section 73 of the Act, in case of a company, business of purchase and sale of shares is deemed to be speculation business. The taxpayer's contention that the Parliament intended that such transactions are also excluded from the mischief of Explanation to Section 73 of the Act, is not substantiated. Though the expression 'derivatives' is defined only in Section 43(5) of the Act and it excludes such transactions from the scope of speculative transactions, derivative has not been excluded from Section 73 of....
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....annot be treated as speculative loss in view of the special provision of section 43(5)(d) of the Act. The assessee is also dealing in buying and selling of shares. It incurred loss of Rs. 803.03 lakhs in dealing of shares and claimed it as business loss to be set off against the business income of the assessee. The Assessing Officer treated the same as speculative loss. Before us, the contention of the Ld. AR is that section 73 of the I.T. Act has no application. As per section 43(5), trading in derivatives of shares which is not done by taking delivery does not come into the purview of speculative transactions. Similarly, as per clause (d) of sec. 43(5), derivative transaction in shares is not a speculative transaction as defined in the said section. Therefore, both the profit and loss from share delivery transactions and derivative transactions are having the same meaning, as far as section 43(5) of the Act is concerned. In view of the fact that both delivery transactions and derivative transactions are non speculative as far as section 43(5) is concerned, it follows that both will have same treatment as per application of Explanation to section 73 of the Act. Therefore, aggregat....
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.... where delivery was not ultimately taken. In other words, the assessee has been dealing in actual selling and buying of shares as also dealing in shares only for the purpose of settling the transaction otherwise than by actual delivery. The question arise whether the losses arising out of the dealings and transaction in which the assessee did not ultimately take delivery of the shares or give delivery of the shares could be set off against the income arising out of the dealings and transactions in actual buying and selling of shares. An answer to this question is to be found in the explanation appended to Section 73 which reads as follows: 'Explanation: where any part of the business of a company other than a company whose gross total income consists mainly of income which is chargeable under the heads "interest on securities", or a company the principal business of which is the business of banking or the granting of loans and advances) consists in the purchase and sale of shares of other companies, such company shall, for the purposes of this section, be deemed to be carrying on a speculation business to the extent to which the business consists of the purchase. In order to res....
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....year 2007-08. However, there is every chance to incur certain administrative expenditure. Accordingly, we direct the AO to disallow 2% of the exempt income as expenditure incurred for the purpose of earning exempt income. This ground of appeal of the assessee is partly allowed. Thus the appeal in ITA No. 150/Coch/2014 is partly allowed for statistical purposes.. 10. In the assessee's appeal in I.T.A. No. 151/Coch/2014, the only ground is with regard to treatment of income of Rs. 4,04,11,610/- as income from other sources. 10.1 The facts of the case are that the Assessing Officer made an addition of Rs. 4,04,11,610/- as this amount was received as interest from Goshree Island Development Authority (GIDA) on cancellation of auctioned plots to the assessee under the direction of Supreme Court. The Assessing Officer treated the interest paid by the GIDA on cancelled plots apart from the value of land as income from other sources. 10.2 On appeal, the CIT(A) confirmed the addition made by the Assessing Officer by observing that the provisions of the I.T Act are very clear. The CIT(A) observed that there are specific heads for charging various kinds of income and the "income from other....
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....s for letting out plant and machinery through contractors, interest on account of advances made to the contractors by the assessee and royalty received from them for excavation of stones etc. are all inextricably connected with the construction activity and capital receipts should be deducted from the cost of capital assets. In the present case, interest was received by the assessee from GIDA on cancellation of auction plots to the assessee under the direction of the Supreme Court. GIDA paid interest to the assessee apart from the value of land on cancellation of the plots allotted to the assessee. According to the ld. AR the interest received by the assessee on cancellation of plots allotted is to be treated as business income of the assessee as the purchase of plots is the business activity of the assessee and the income derived from the said transaction is also business income of the assessee. In our opinion, the plot allotted to the assessee is the business asset of the assessee. However, interest received on cancellation of the plots is a step removed from the business activities of the assessee. The derivation of interest from GIDA cannot be said that it is emanating from the....