2019 (7) TMI 1217

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....red in not appreciating the fact that Explanation to section 73 of the I.T. Act can override the provision of section 43(5) of the LT. Act, which is clearly attracted in assessee's case." 2. Briefly stated the facts necessary for adjudication of the controversy at hand are : Assessee company is into the business of distribution of Alcoholic Liquor. Assessment was framed for AY 2009-10 at the loss of (-) Rs. 2,08,52,679/- on Future & Option (F&O) derivative transactions as speculative loss and disallowance of set off of such loss against business income of the assessee. Assessing Officer (AO) has treated trading in derivative as speculation in nature and loss of derivatives trading of Rs. 2,08,52,679/- has not allowed to be set off against the business income from the distribution of Alcoholic Liquor rather allowed the same to be carried forward for adjustment against speculative profit, if any derived in the subsequent years and thereby made an addition on account of speculation of loss in share trading at Rs. 2,08,52,679/-. 3. Assessee carried the matter by way of an appeal before the ld. CIT (A) who has partly allowed the appeal. Feeling aggrieved, the Revenue has co....

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....2.02.09 14,325 2,22,93,231   Total 1,53,975 28,41,82,218   1,53,975 26,34,10,031 8. In the backdrop of the aforesaid facts and circumstances of the case, arguments addressed by the ld. Authorized Representatives of the parties to the appeal, order passed by the Revenue authorities and case laws relied upon, the sole question arises for determination in this case is :- "as to whether transaction of F&O derivative trading are covered under clause (c) & (d) of section 43(5) of the Act and such transactions if carried out in recognised stock exchange are not to be treated as speculative transaction?" 9. It is the case of the assessee that assessee company has made trading of F&O derivatives through M/s. DB (International) Brokers Ltd., Gurgaon, a branch of National Stock Exchange for doing F&O transaction is covered under CBDT Circular No.2/2006 dated 25.01.2006. Assessee company has brought on record entire details and contract notes of transaction done in F&O derivative trading before AO along with copies of ledger accounts running with the brokers to supports its contentions. 10. Ld. CIT (A) decided the issue in question in favo....

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.... notified, the same will apply in respect of all eligible transactions carried out in relation to the financial year relevant to the assessment year 2006-07 and onwards. The notification dated 25.1.2006 is by way of a subordinated legislation but cannot override the principal legislation enacted by the Parliament. It only clarifies but will not override unless statutorily so prescribed. Since there was no dispute to the fact that the transactions, in the instant case, in future and option segment were the eligible transactions carried out in a recognized stock exchange, loss in such transactions could not be deemed to be loss in the speculation business. Therefore, the loss-inquestion was to be treated as a business loss and not as loss in speculation business." 11. In the case of R.B.K. Securities (P.) Ltd. vs. ITO 118 TTJ (Mum.) 465, coordinate Bench of the Tribunal also held that dealing in derivatives is a separate kind of transaction which does not involve purchase and sale of shares and as such loss on account of derivative trading cannot be treated as speculative loss to the assessee. 12. In case of Gajendra Kumar T. Agarwal vs. ITO (2011) 11 taxmann.com 231 (Mum.), co....

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....ject to fulfillment of other conditions in subsequent assessment years - Held, yes - Whether the said reasons assessee would be granted set off of brought forward losses from business of dealing in derivatives, incurred in assessment years prior to assessment year 2006-07 against profits of same business in assessment year 2006-07 and subsequent assessment years - Held, yes." 13. Coordinate Bench of the Tribunal in case of ITO vs. M/s. Emperor International Ltd. (supra) held the order passed by the ld. CIT (A) deciding the identical issue in favour of the assessee by returning following findings :- "9. In the present case, it is an admitted fact that the assessee was engaged in the business of dealing in shares & securities and have incurred loss from dealing in derivatives (shares futures). It is not the case of the AO that the share futures in which the assessee was dealing were not recorded in recognized Stock Exchange, the loss incurred by the assessee was also not disputed by the AO. We, therefore, by keeping in view the provisions contained in clause (d) to Subsection (5) of Section 43 of the Act, are of the view that the ld. CIT(A) was fully justified in directin....