AI Drafter 
TaxTMI 
TaxTMI 
2018 (8) TMI 1260
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....e facts of the case and submission made before him. 02.] That on the facts and in the circumstances of the case the Learned CIT(A) erred in confirming the charging of interest u/s 234B and 234(' of the Act. The said amount of interest was charged excessively the same requires to be charged as per law. " 03] That during the course of hearing of above appeal following points were raised and put forth before the Hon'ble Bench :- 1. Loss from F&O transactions is a normal business loss as per provision of section 43(5)(d) of the Income Tax Act. 2. The income of the assessee first computed as per Chapter IV and if the resulting figure is a loss, in that case only provision as mentioned in the Expl. To section 74(4) of the Act is applicable. 3 The assessee placed reliance on the decision of the Hon'ble Calcutta High court wherein it was categorically stated that provision as mentioned in Explanation to Section 73[4] of the Act is not applicable in case of F & 0 transactions. For this preposition Decision of Hon'ble Delhi Bench of ITAT in the case of Mis Sucon India Limited [ITANo 45191 Dell 2013 dt 18-01-2017] was also relied up....
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....6 of the synopsis, Para 11 and 12 of the decision of the Hon'b1e Delhi High court in the case of DLF Commercial Developments Limited was discussed wherein it was held by the Hon'b1e High Court that where there was loss from F & 0 Business then provision of section 73[41 of the Act is applicable for carried forward of losses purpose only. 4.5 In the present appeal in hand, there was no loss under Chapter IV, section D rather huge profit was declared by the assessee. Hence, provision of section 73[41 of the Act is not applicable, rather the Para 7 & 8 of the decision of the Hon'b1e Delhi High Court is applicable which says that for calculating the business income, income has to be computed as per provisions of section 28 to 41 read with section 43[5][d1 of the Income Tax Act. 4.6 That in view of the above, it is submitted that Hon'ble Bench bas not decided the crucial aspect of this appeal which was argued in detailed and also mentioned in the written synopsis as filed before thc Hon'ble Bench. Hence, Hon'ble bencb is very kindly requested to recall its order and decide the issue afresh in light of the above discussion. 4. The Ld. Counsel ....
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....istake on record has cropped up in the order of Tribunal as the judgments and decisions favouring the assessee which were placed on record during the course of hearing, have not been considered by the Tribunal while adjudicating the issue. From perusal of Tribunal order dated 28.2.18 we find that the sole issue was regarding treatment of future and option loss of Rs. 96,67,872/- as to whether it is to be treated as speculation loss by virtue of section 73 of the Act or in the alternative the assessee is eligible to set off of this F&O loss against other business income of the assessee. 7. We find that while adjudicating the issue in detail we referred and relied to the judgment of Hon'ble High Court of Delhi in the case of CIT V/s DLF Commercial Dev. Ltd (supra) in coming to the conclusion that the transactions of future and options are based on stock and shares and the assessee is covered by the explanation to section 73 of the Act and therefore the alleged loss was held to be speculative loss not eligible for set off against other business income of the assessee. 8. We further observe from the perusal of paper book as well as the cases referred and relied by Ld. Counsel....
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....the relevant material on the record. In the grounds raised by the assessee, two issues emerge before us. The first issue is whether loss from dealing in derivative transaction can be set of against business income or not. Second issue before us is whether loss from the purchase and sale of shares can be set of against the business income in terms of section 73 of the Act. 3.7.1 Regarding the first issue, the assessee has shown loss on derivatives trading on NSE/BSE Rs. 17 ,27,16,630/- and claimed to set off the same against business income. The learned CIT(DR) submitted that issue in question is covered by the decision of the Hon'ble Delhi High Court in the case of CIT Vs. DLF Commercial Developers Ltd.(supra). We find that the Hon'ble High court referred to both Section 73 and Section 43 of the Income-tax Act and decisions available on the issue in dispute and held that loss from the derivative transactions was speculative for the purpose of section 73 of the Act and, therefore, could not be adjusted against business profit. The relevant finding of the Hon'ble High Court is reproduced as under: "6. Before a discussion on the merits of the app....
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.... (5) "Speculative transaction" means a transaction in which a contract for the purchase of sale of any commodity, including stocks and shares, is periodically or ultimately settled otherwise than by the actual delivery or transfer of the commodity or scrips: Provided that for the purposes of this clause - (a) A contract in respect of raw materials or merchandise entered into by a person in the course of his manufacturing or merchandise business to guard against loss through future price fluctuations in respect of his contracts for actual delivery of goods manufactured by him or merchandise sold by him; or (b) a contract in respect of stocks and shares entered into by a dealer or investor therein to guard against loss in his holdings of stocks and shares through price fluctuations; or (c) a contract entered into by a member of a forward market or a stock exchange in the course of any transaction in the nature of jobbing or arbitrage to guard against loss which may arise in the ordinary course of his business as such member (or) (d) An eligible transaction in respect of trading in derivatives referred to in clause {(a c)} of section ....
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....ll in Chapter IV, in Section 0, which deal with computation of business income. The said provisions provide for matter relating to computation of such income, rent taxes, insurance of buildings, repairs of plant and machinery, depreciation, reserves for shipping business, rehabilitation fund, expenditure on certain eligible objects or schemes, deductions, amounts not deductible, profits chargeable to tax, etc. The assessee is no doubt correct in contending that the only definition of derivatives is to be found in Section 43(5); yet the Court cannot ignore or overlook that the definition - to the extent, it excludes such transactions from the mischief of the expression "speculative transactions" is confined in its application. Parliamentary intendment that such transactions are also excluded from the mischief of Explanation to Section 73 (4), however, is not borne out. In this context, it would be instructive to notice that in Rajshree Sugars and Chemicals Ltd (supra), the Madras High Court noticed, rather dramatically, that that "..'Derivatives are time bombs and financial weapons of mass destruction' said Warren Buffett, one of the world's greatest investors, ....
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.... Fraser And Ross & Anr AIR 1960 SC 971 it was held that: "It 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 given to it is that given in the definition clause. But this is not inflexible and there may be sections in the Act where the meaning may have to be departed from on account of the subject or context in which the word has been used and that will be giving effect to the opening sentence in the definition section, namely, unless there is anything repugnant in the subject ....
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....on the true and proper interpretation of the Explanation to section 73 of the Income-tax Act, 1961, the Tribunal was justified in law in holding that loss of Rs. 3,24,76,185/- incurred in eligible transaction within the meaning of proviso (d) to section 43(5) not involving any purchase/sale of shares as such was speculation loss? 3.7.3 The Hon'ble High Court of Calcutta disagreed with the decision of the Hon'ble Delhi High Court and held as under: "It would appear that the activities appearing in Clauses (a) to (e) are not to be deemed to be speculative transactions. Therefore, this comes within the category of deemed business which is however distinct and separate from any other business. Now, the question is, whether loss arising 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 dee....
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.... give effect to the same. If the language is plain, the fact that the consequence of giving effect to it may lead to some absurd result is not a factor to be taken into account in interpreting a provision. It is for the legislature to step in and remove the absurdity. On the other hand, if two reasonable constructions of a taxing provision are possible, that construction which favours the assessee must be adopted. This is a well- accepted rule of construction recognized by this Court in several of its decisions. Hence, all that we have to see is, what is the true effect of the language employed in s. 271 (1)(a) (i). If we find that language to be ambiguous or capable of more meanings than one, then we have to adopt that interpretation which favours the assessee, more particularly so because the provision relates to imposition of penalty." 3.7.6 Respectfully following the above decision of the Hon'ble Supreme Court in the case of Vegetable Product Ltd. (supra), we are inclined to follow the decision of the Hon'ble Calcutta High Court on the issue in dispute. Accordingly, we hold that the loss incurred on derivative transaction was not a speculative loss and is allow....