AI Drafter 
TaxTMI 
TaxTMI 
2021 (6) TMI 814
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....ase of Nirshilp Securities Private Limited may be taken as the lead year in ITA No. 6321/Mum/2019 and the decision rendered thereon could be applied for other assessment years except variance in figures. The ld AR also fairly agreed for the said submission of the ld DR. Accordingly, the facts of Asst Year 2014-15 in the case of Nirshilp Securities Private Limited are taken up for adjudication and the decision rendered thereon would apply with equal force for other assessment years with respect to same assessee and also in the case of Dolat Investments Ltd in respect of identical issues, except with variance in figures. 2. The Ground No. 1 raised by the revenue is challenging the deletion of disallowance u/s 14A of the Act read with Rule 8D(2) of the Rules. 2.1. We have heard the rival submissions and perused the materials available on record. We find that the assessee had earned exempt income in the form of dividend to the tune of Rs. 2,03,57,802 /- and had made suo moto disallowance u/s 14A of the Act amounting to Rs. 20,35,780/-, being 10% of dividend income , while filing its return of income. The ld AO recomputed the disallowance u/s 14A of the Act by applying the computa....
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....ning of National Spot Exchange Ltd (NSEL) together with its profile in brief. NSEL is a national-level institutionalised, electronic, transparent spot trading platform for commodity. It commenced "Live" trading on October 15, 2008. It was operational in 16 states in India, providing delivery-based spot trading in around 52 commodities. NSEL provided the following functions for trading opportunities :- • Traders can trade and lock their returns • Trader has to buy in near settlement contract and sell in far settlement contract simultaneously • Price for both settlement available • Exchange Provides counterparty guarantee risk • No basis risk, No link with future contracts 3.1.1. The type of contracts stated above are loosely termed as 'paired contracts'. 3.2. We find that the assessee is a Private Limited Company engaged in the business of trading in shares, securities and commodities. We find that the assessee is a group concern of "DOLAT GROUP", also known as "SHAH FAMILY". The trading in shares, securities and commodities are carried out by the broking firms owned by the group namely,Nirpan Securities Pvt Ltd ....
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....rehouses approved, certified and designated by the NSEL as per Bye-Law 4.20(a) thereon. The circulars issued by the NSEL at the time of commencement of trading in each commodity contained specific details on the quantity, quality, warehouse, etc. These Circulars together with the risk management practices set out by the NSEL in its Bye-laws, confirmed that the warehouses, quantity and quality of goods were under the complete administration and control of the NSEL. 3.2.2. Further, as per the Bye-laws of the NSEL, it acts as the legal counter party in respect of transactions executed on the NSEL platform in accordance with its Bye-law No. 5.26. In any event, the NSEL also guarantees the settlement of net financial obligation. When a client trades on the anonymous order driven trading system on the NSEL, the buyer does not know the seller and in the same way the seller does not know the buyer, and the NSEL guarantees the settlement of trade executed in compliance with the Bye-laws as per Bye- Law Nos. 7.9.1., 7.9.2 and 9.6. thereon. 3.2.3. On 31.7.2013, the NSEL issued a circular suspending trading in one day forward contracts and deferring settlement to 15 days, stating that th....
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....l For CASTOILKLS 200 14,402,880.00 Total For CASTOLKL30 200 14,657,068.00 14,657,068.00 2,932.00 14,660,000.00 19/6/2013 Total For CASTOILKLS 200 14,362,872.00 Total For CASTOLKL30 200 14,615,076.40 14,615,076.40 2923.60 14,618,000.00 20/6/2013 Total For CASTOILKLS 200 14,322,864.00 Total For CASTOLKL30 200 14,573,084.80 14,573,084.80 2915.2 14,576,000.00 21/6/2013 25/6/2013 ....
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....20,100.00 Total For CWOILKD12 1450 89,018,800.20 Total For CWOILKDI25 1450 90,476,401.10 90,476,401.10 18,098.90 90,494,500.00 1/7/2013 Total For CWOILKD12 750 46,419,282.00 Total For CWOILKDI25 750 47,165,565.00 47,165,565.00 9,435.00 47,175,000.00 2/7/2013 Total For CASTOILKLS 100 7,189,437.60 Total For CASTOLKL30 100 7,315,536.60 7,315,536.60 1,463.40 7,317,000.00 Total For CWOILKD12 1550 95,002,996.80 Total For CWOILKDI25 1550 96,545,687.00 96,545,687.00 19,313.00 985,650.00 3/7/2013 470 33,508,300.32 &nb....
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....e assessee was given warehouse receipt after making payment for the purchase of commodities. Therefore, as stock of goods purchased was not found but following amounts would have been due and payable to assessee company by the NSEL on the various dates towards settlement of the trades had the goods were found in warehouse and sold by assessee in normal course of business. The details of scheduled payments for the sale transactions are as follows:- Sr. No. Scheduled Date of Settlement Total Amount payable to us by the NSEL on settlement 1 31/7/2013 Rs. 9,69,50,000/- 2 1/8/2013 Rs. 8,69,21,000/- 3 2/8/2013 Rs. 8,66,35,000/- 4 5/8/2013 Rs. 13,76,69,500/- 5 6/8/2013 Rs. 9,65,65,000/- 6 7/8/2013 Rs. 9,97,35,000/- 7 8/8/2013 Rs. 11,04,90,000/- 8 12/8/2013 Rs. 7,36,11,000/- 9 13/8/2013 Rs. 1,40,20,100/- 10 14/8/2013 Rs. 73,17,000/- 11 16/8/2013 Rs. 3,41,22,000/- 12 19/8/2013 Rs. 2,19,60,000/- 13 20/8/2013 Rs. 2,86,18,200/- Total Rs. 89,46,13,800/- 3.3.4. On 4.8.2013, the NSEL issued a press release proposing a settle....
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....orm , it was the legal obligation of the NSEL to settle the contracts. The NSEL has failed to pay the outstanding amounts under the contracts to the assessee company through its broker-member , due to which the assessee has suffered loss. Infact the NSEL has failed to honor / settle the contracts and for which the NSEL had issued allocation reports depicting the quantity and quality of specified commodities located in NSEL certified warehouses despite there being no commodities of stated quantity and quality at such NSEL certified warehouses. Since the assessee could not receive any sums from NSEL except the sum of Rs. 556 lakhs as stated above, the assessee company sought to write off the remaining sum as a regular trading loss arising in the course of its business and claim as deduction in the return of income. 3.3.9. It was stated that the assessee company has been trading on platform of NSEL since Asst Year 2011-12 and had been accounting for transaction as purchase on receipt of details of purchase parties with their bills and same were substantiated with delivery report which identifies warehouse where stock is delivered by NSEL who hold on behalf of assessee. Thereafte....
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....nge Limited is not a recognised stock exchange and thus the transaction carried out are speculative transactions. Thus as per section 73(2) of the Act, any losses carried out in a speculation business will be set off with speculation gains only of that year or it will be carried forward for the subsequent 4 assessment years. Thus the losses on transaction on NSEL will be speculation in nature and the same cannot be set off with normal business income. c) The assessee has received the delivery allocation report from NSEL which could be considered as actual delivery of commodities and hence assessee is not justified in claiming the loss on account of irrecoverability of dues from NSEL. d) The amounts paid to NSEL for purchase of commodities is to be construed as an investment and hence the loss arising therefrom is to be construed as capital loss and hence not allowable as deduction. e) The assessee had purchased castor oil, paddy and cotton wash seed oil which means that assessee has recognised the purchase as genuine. It is not in dispute that the transactions were actually paid by the assessee and the same is fictitious in nature. The Hon'ble Bombay High....
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....een recognised. Because assessee submitted that sales party name is received from NSEL within 7 days of booking. Further assessee could not produce any evidence of the fact that purchase of 3190 tons of castor oil , 10200 tons of cotton seed wash oil and 12000 tons of paddy was made before 24.7.2013. If the dates of sauda of these items are before 24.7.2013, then the name of sales party must have been communicated to the assessee before 31.7.2013. Thus there is no reason to treat these sales separately by the assessee. The assessee could not produce the date in which sale is recognised and compare it with date when sales party name is received by NSEL. Thus the contention of the assessee as to when sale is recognised could not be established. Further it is seen from VAT ledger submitted that the last VAT for castor oil is paid on 5.7.2013 which is 25 days before 31.7.2013. Hence the assessee was having name of parties to whom sales were made by NSEL. Assesseee is deliberately trying to present incorrect facts that it has no information for sales parties so that it can rationalise its non-recording of sales. Thus in essence, the assessee has recorded these sales and reversed them an....
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.... 7. We find that the assessee had shown inventories held as stock in trade comprising of shares & securities and Commodities , both valued at the lower of cost or market value under the head 'Current Assets' in its Balance Sheet as on 31.3.2014. The assessee had duly shown purchase of traded goods comprising of castor oil, caster seed, cotton, cotton oil cake, cotton seed wash oil, gold, H R coil, paddy, raw wool, rubber, refined soya oil, silver, soyabean and steel totalling to Rs. 1725,81,18,744.73 in its profit and loss account. Similarly, it had shown trading sales of products to the tune of Rs. 1724,44,35,550.81 together with other operating revenue in the form of Mark to Market (MTM) on Hedged Commodities Futures amounting to Rs. 14,77,36,523.33 and receipts from NSEL amounting to Rs. 5,56,00,000.68 under the head 'Revenue from Operations' in its profit and loss account for the year ended 31.3.2014. The assessee had also disclosed the movement in opening and closing stock of traded goods as 'Changes in inventories of traded goods' amounting to Rs. 87,12,24,639.87 in its profit and loss account for the year ended 31.3.2014. 7.1. We find that the assessee in the significant....
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.....5. From the perusal of the financial statements of the assessee for the year ended 31.3.2014 together with the significant accounting policies and notes forming part of accounts and statutory audit report, we find that the assessee had actually made payment of Rs. 8793.87 lakhs towards cost of commodities for which no stock was received by the assessee. Hence the argument advanced by the ld DR that no payment was actually made by the assessee to NSEL, deserve to be dismissed. This trading transaction was admittedly done on NSEL platform through SEBI registered broker. The assessee was given only warehouse receipt, which is supposed to prove that the commodities are lying in the NSEL accredited warehouses. But the SGS Audit Report (independent auditor) had pointed out that the requisite stocks were not available in the NSEL accredited warehouses. Hence it could be safely concluded that the assessee had not got back any commodities for the actual payments made by it to NSEL through its registered broker. These payments were actually made by the assessee for cost of commodities purchased (but not delivered). We find that the assessee has been consistently showing the trading trans....
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....cious conclusion that the NSEL had in connivance with various brokers had resorted to cheat various traders such as assessee. All these information got triggered and concluded within the assessment year itself. Hence there is nothing wrong on the part of the assessee to write off the purchase cost of commodities in the same year in which payments were made as irrecoverable amounts and claim the same as regular business loss arising in normal course of its business u/s 28 of the Act. Hence the argument made by the ld DR on this count is dismissed. 7.7. We find that the ld CIT(A) had relied on his order passed in the case of sister concern of the assessee namely Dolat Investments Limited on identical facts and circumstances on the similar issue. It would be pertinent to address the relevant findings recorded by ld CIT(A) in the said order. 7.7.1. Analysis of findings of the CIT(A) in the case of Dolat Investments Limited a) The ld CIT(A), at the outset, discusses the working of the NSEL and specific facts of the case of the assessee therein (i.eDolat Investments Ltd) which is also similar to assessee before us herein. b) The ld CIT(A) in para 20 notes that the assessee co....
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.... that the amount paid by the assessee company towards the disputed purchases have been fully remitted by them to NSEL, on behalf of the assessee. Further, it had been informed by the Broker that the corresponding unsettled amount of sale receivable of Rs. 43,12,65,350/- could not be paid to the assessee company, as the same had not been received from NSEL. The ld CIT(A) then discusses another letter dated 25.09.2013 issued by the broker wherein the assessee company had been informed that they have just acted as a broker and intermediary. Hence, are not responsible for obtaining the goods for them or reimburse the same. It had been clearly intimated by the Broker that there are no goods lying at NSEL accredited warehouse, corresponding to the Delivery Allocation Report sent to the assessee company for the purchases of goods. Further, M/s. Purvag Commodities and Derivatives Pvt. Ltd. had also advised the assessee company that the non-recovery of goods may be treated as a business loss by them. Thus the ld CIT(A) holds that the Broker had totally abdicated its responsibility for the said loss and advised the assessee company to institute legal remedies available against NSEL or any ot....
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....of the scam. Its main argument & contention before the Hon'ble High Court were - it is not central counterparty; - if it is a counterparty then such guarantee is limited to the Settlement Guarantee Fund; - that NSEL has the authority to withdraw itself as a counterparty from the transactions which are financial transactions or structured deals or transactions designed to defraud the Settlement Guarantee Fund. i) In para 27, the ld CIT(A) discusses the financial strength of the NSEL and how NSEL does not have the requisite capacity to pay the huge liability. The ld CIT(A), then, counters the argument of the ld AO by stating that the ld AO had completely failed to take note of the fact that NSEL doesn't have the financial capacity to pay for the liabilities arising out of the scam. Not only this, NSEL gone further ahead to clearly state in its Audited Financial Accounts that they are not liable to pay the amount of Rs. 4905.60 Crore to the non-defaulting members. In these facts and circumstances, the ldAO had wrongly concluded that the amount payable to the assessee company by NSEL is recoverable and the same is guaranteed by NSEL. j) In para 28, the ....
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....ated as irrecoverable. The ldCIT(A) holds that the ld AO had erred in holding that the business loss is recoverable, ignoring the vital fact that no worthwhile assets of NSEL are under attachment and the assets of the holding company are too meagre to make good of the money lost in the scam. m) In para 31, the ldCIT(A) discusses the report of SGS (Auditors) wherein the physical inspection by SGS of 16 warehouses had revealed that as against stock of Rs. 2389.36 crores, stock worth only Rs. 358 crores was available. SGS had also reported that they were physically prevented from inspecting 22 warehouses, although they had been engaged by NSEL to inspect its own stock supposed to have been lying in its own warehouses. As such, the ldCIT(A) observes that the assesseecompany, though had duly made the payments for purchase of the commodities but the goods/commodities were not found at certified warehouses / centres, the assessee company had rightly quantified the loss at Rs. 42,61,89,780/-, being the cost of goods purchased. n) In para 32, the ld CIT(A) observes that the entries passed by the assessee company are in accordance with the Accounting Standards. He counters the observat....
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....ne qua non before treating any transaction to be speculative in nature. He further, holds that the impugned contracts for purchase & sale of commodities that took place on floor of the NSEL platform and wherefrom loss had arisen to the assessee were not 'settled' at all. Both the purchase and sale trades of the paired contract could not be executed, as the underlying asset viz. the goods lying in the accredited warehouse / centres were found to be missing. Hence, there was a breach of contracts rather than settlement of contracts in the present case at hand. Accordingly, if there is no settlement of the purchase and sale contracts, then there cannot be any speculative transaction, as per the provisions of section 43(5) of the Act. For this proposition, he relies on the decision of Supreme Court in the case of Commissioner of Income-tax v. Shantilal (P) Ltd reported in 144 ITR 57 (SC), wherein it was observed that a contract can be settled if, instead of effecting the delivery or transfer of the commodity envisaged by the contract, the promisee, in terms of section 63 of the Contract Act, accepts instead of it any satisfaction which he thinks fit. Where, instead of such performan....
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....bsequent recoveries from NSEL as business income which has been accepted by the revenue as such. Then how the loss arising out of irrecoverability of cost of commodities purchased which were not delivered at all, would alone become speculative loss. Hence the argument of the ld DR on this account deserve to be dismissed. p) In para 34, the ld CIT(A) dismisses the observations of the ld AO that impugned transactions are derivative trades as "too far-fetched and needs to be rejected outrightly". He holds that since the mandatory condition stipulated in the main section 43(5) of the Act is not satisfied, there is no occasion before the ld AO to go to the proviso to the main section and read between the lines the exclusions contained in clause (a) to(e) thereon. q) In para 35, the ld CIT(A) has held that reliance of the ld AO on Judgment of the Hon'ble Jurisdictional High Court on the Bail application of Shri Jignesh Shah, Promoter Director of NSEL is misplaced inasmuch as Bail application of Shri Jignesh Shah is on an entirely different issue, though it had emanated from the same NSEL Scam. r) In para 36, the ldCIT(A) observes that the claim of the business loss by the assess....
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.... claim for expenses and losses are to be viewed from the businessman's perspective and so long they are for the purpose of the business or incidental to carrying on business, the same are to be allowed. The ld AO cannot sit in chair of the businessman and decide how and when loss is to be claimed, when the fact of incurring the loss in the normal course of the business is not doubted. For this, he placed reliance on the decision of Hon'ble Supreme Court in the case of S A Builders reported in 288 ITR 1(SC) and Hon'ble Delhi High Court in the case of Dalmia Cement reported in 254 ITR 377 (Del). w) In para 41, the ldCIT(A) relies on the decision of Mumbai Tribunal in the case of Conwest (P) Ltd. vs. First ITO reported in 7 ITD 314 and holds that the business loss appearing in the audited accounts needs to be allowed. x) In para 43, the ld CIT(A) takes note of the fact that the assessee company had offered the amount recovered from NSEL as and when it is recovered. The said amount has been offered as business income under section 41(1)/ 41(4) of the Act. The ld CIT(A) then holds that this may result in double taxation which is not permissible. y) In para 44, the ld CIT(A) con....
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....d) an eligible transaction in respect of trading in derivatives referred to in clause [(ac)] of section 2 of the Securities Contracts (Regulation) Act, 1956 (42 of 1956) carried out in a recognised stock exchange; [or]] The following clause (e) shall be inserted in proviso to clause (5) of section 43 by the Finance Act, 2013, w.e.f. 1-4-2014 : (e) an eligible transaction in respect of trading in commodity derivatives carried out in a recognised association, shall not be deemed to be a speculative transaction. [Explanation].-For the purposes of [this clause], the expressions- (i) "eligible transaction" means any transaction,- (A) carried out electronically on screen-based systems through a stock broker or sub-broker or such other intermediary registered under section 12 of the Securities and Exchange Board of India Act, 1992 (15 of 1992) in accordance with the provisions of the Securities Contracts (Regulation) Act, 1956 (42 of 1956) or the Securities and Exchange Board of India Act, 1992 (15 of 1992) or the Depositories Act, 1996 (22 of 1996) and the rules, regulations or bye-laws made or directions issued under those Acts or by....
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....g to computation of "Income from Business & Profession" and hence it is to be read strictly as it begins with the word 'means' while defining the term 'speculative transaction' and it is not to be considered as definition of explanatory nature. The ld AO treated the impugned transactions as speculative transaction as there was no actual delivery of the goods. In our considered opinion, he erred in applying the test of 'actual delivery' without first satisfying whether a contract for purchase and sale falls within the ambit of a contract envisaged under law. We find that the definition of 'speculative transaction' covers only those transactions arising from a contract of purchase or sale of goods which is periodically or ultimately settled. The 'settlement' of a contract is sine qua non before considering it with other conditions stipulated in the definition. If therefore, a contract of sale or purchase is not settled, then no further condition can be tested to determine transaction as speculative or non-speculative. If it meets the condition of 'settlement' then only further condition of actual delivery or transfer of commodity or scrip need to be tested. Secondly, 'settlement' ref....
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....above decision, their Lordships have also distinguished the decision in case of Davenport & Co. (P) Ltd. v. CIT [1975] 100 ITR 715 which was heavily relied upon by the ld AO in the present case. 7.9. Further we find that the ld AO in para 6.13 of his order erred in treating the impugned transaction of purchase and sale (which never fructified) as 'commodity derivative' transactions and hence he treated it as speculative transaction as, in his opinion, it does not fit into exception provided in clause (e) of proviso to Section 43(5) of the Act. He erred in interpreting the proviso enacted to give different meaning for certain types of contracts listed in clauses (a) to (e) which otherwise would be treated as 'speculative transaction' in terms of section 43(5) of the Act.We find that the proviso to section 43(5) of the Act is meant to exclude certain types of transactions from the definition of 'speculative transaction' by treating them as non speculative. It therefore follows that for any transaction to be treated as deemed/non deemed speculative transaction, it has to first fit into the definition of 'speculative transaction'defined in section 43(5)of the Act before proviso. As ....
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....ed for past years since the Asst Year 2012-13 onwards when such transactions were carried out regularly by the assessee. 7.11. With regard to valuation of stock in respect of cost of commodities not received by assessee from NSEL at Rs Nil , the same has been done as per method of valuation of closing stock at lower of cost or market price by the assessee. Admittedly, this method has been consistently followed by the assessee year on year, which has been accepted by the revenue in the past. The assessee's plea is that having paid monies for the purchase cost of commodities, the assessee got cheated by NSEL by not having the delivery of goods and which fact is also confirmed by SGS audit report wherein it has been categorically stated that the requisite quantity of commodities were not lying in the NSEL accredited warehouses, thereby making the warehouse receipt issued by NSEL as scrap paper, it had no other option to value the stocks not received at Nil. We find that stock of commodities are held as stock-in-trade under current assets which are valued at cost or market value, whichever is lower on FIFO basis. When theft, burglary etc. occurs, the goods are to be written off by v....
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....cognition should be postponed. 11. In a transaction involving the sale of goods, performance should be regarded as being achieved when the following conditions have been fulfilled: (i) the seller of goods has transferred to the buyer the property in the goods for a price or all significant risks and rewards of ownership have been transferred to the buyer and the seller retains no effective control of the goods transferred to a degree usually associated with ownership; and (ii) no significant uncertainty exists regarding the amount of the consideration that will be derived from the sale of the goods." 7.12.1. Going by the above accounting standard and accounting policy followed by the assessee, the contract for sale cannot be recognized as revenue, as transfer of property in goods is not transferred to the buyer on a date when it was supposed to have been transferred. This is because by the time the date for transfer of goods to buyer arrived, it had already come to light that there are no stock of goods in the warehouse of NSEL. The sale transactions therefore, do not qualify to be accounted as revenue as per the accounting standard published by Institute of Chartere....
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.... and it does not carry any precedential as well as evidentiary value. The ld AO while relying upon the decision overlooked the observation of the Hon'ble Bombay High Court which conveyed in no uncertain terms that their decision is based on investigation carried out so far and judging by the broad probabilities of the case as should be done at the stage of bail. Hence reliance placed on the decision of Hon'ble Bombay High Court in respect of Bail application of Jignesh Shah , does not advance the case of the revenue. 7.15. We also find that the assessee had not taken any VAT registration under any state in India and had conducted commodities transactions through its brokers namely Purvag Commodites & Derivatives Pvt Ltd and Jigar Commodities Pvt Ltd and hence assessee is not required to file any VAT returns for its commodity transactions. We find that the assessee had even sought to explain the quantity difference between its books and VAT returns filed by the brokers by stating that except Castor oil and Cotton seed wash oil, all transactions as per balance sheet are matching with the VAT returns. In case of Castor oil and Cotton seed wash oil, agent of assessee had filed it....
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....r business and offered for taxation u/s 28. There has been no dispute on these facts since FY 2011-12 and tax department has always accepted the same. 6. In the instant AY 2015-16, the AO noticed that the Appellant has claimed loss of Rs. 5,56,24,659/- in relation to trade over NSEL counter owing to non-recovery of the amounts from the brokers as the operations of NSEL were closed. Per the AO, NSEL was formed to be engaged in SPOT Trading but NSEL was carrying out futures contract which was specifically prohibited. Thus, the AO challenged the basic premise about the operations of NSEL. The AO held that the NSEL is SPOT exchange and only SPOT contracts can be executed through NSEL, therefore, the contract has to be necessarily settled by delivery within a period not exceeding 11 days from the date of the trade. Any contract that does not get settled by delivery within 11 days ceases to be a SPOT contract and not covered by Forwards Contracts Regulation Act. The AO has not disputed that the assessee has invested in NSEL through two brokers M/s Anand Rathi Commodities Pvt. Ltd. and M/s Phillip Commodities Pvt. Ltd. The assessee company traded on the exchange during F.Y. 2011-....
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.... Commodities Pvt. Ltd. for conducting of their business. 12. It is also undisputed fact that the monies given above have not been received by the assessee. 13. The loss arrived out of the non-receipt of the amount from the brokers is claimed to be a business loss by the assessee which has been rejected by the AO. 14. The assessee has also not disputed that the transactions are under paired transactions. 13. The ld. AR argued, reiterating the modus operandi the stockists of the commodities first deposited the commodity with the Exchange accredited warehouse and received a warehouse receipt which was deposited with NSEL for the purpose of transactions under the control and supervision of NSEL. The transactions in NSEL are made through members of NSEL, who are authorized brokers. The assessee has made the transactions under paired contracts. Under the paired contract, generally the purchases were made at T+2 cycle and sales were made at T+25 or T+35 cycle. Under these transactions, the assessee company made full payment for purchase immediately and delivery of the commodity lying in the warehouse was assigned to it. The transactions were subjected t....
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....ract for delivery of goods which is not a ready delivery contract; or (ii) a contract for differences which derives its value from prices or indices of prices- (A) of such underlying goods; or (B) of related services and rights, such as warehousing and freight; or (C) with reference to weather and similar events and activities. 20. The "eligible transactions" means: (A) carried out electronically on screen-based systems through member or an intermediary, registered under the bye-laws, rules and regulations of the recognized association for trading in commodity derivative in accordance with the provisions of the Forward Contracts (Regulation) Act, 1952 (74 of 1952) and the rules, regulations or bye-laws made or directions issued under that Act on a recognized association; and (B) which is supported by a time stamped contract note issued by such member or intermediary to every client indicating in the contract note, the unique client identity number allotted under the Act, rules, regulations or bye-laws referred to in sub-clause (A), unique trade number and permanent account number allotted under this Act; 21. Th....
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....speculation losses from eight assessment years to four assessment years. These amendments will take effect from 1st April, 2006and will, accordingly, apply in relation to assessment year 2006-07 and subsequent years. 24. The revenue has clearly held that the assessee is in the trading of commodity derivatives. Revenue, having said that failed to give the benefit of provisions of Section 43(5)(e). Hence, the transactions done by the assessee shall not be deemed to be a speculative transaction in terms of the provisions of the Act. 25. We have also gone through the accounts of assessee for the earlier years. The amount kept with M/s Anand Rathi Commodities Pvt. Ltd. was Rs. 1.30 crores for the year ending 31-3-2014 and Rs. 4.60 crores for the ending 31-3-2013 and Rs. 2.95 crores for the year ending 31.03.3012. Similarly, the amount kept with M/s Philips Commodities India Pvt. Ltd. was Rs. 4.33 crores for the year ending 31-3-2014 and Rs. 14.95 crores for the ending 31-3-2013. During the year, the assessee could not recover the amounts from these two brokers owing to suspension of operations by the NSEL which was given as a part of the business tran....
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....nvolving failure on the part of assessee to establish that the debt is irrecoverable. 2. Direct Tax Laws (Amendment) Act, 1987 amended the provisions of sections 36(1)(vii) and 36(2) of the Income-tax Act 1961, (hereafter referred to as the Act) to rationalize the provisions regarding allowability of bad debt with effect from the April, 1989. 3. The legislative intention behind the amendment was to eliminate litigation on the issue of the allowability of the bad debt by doing away with the requirement for the assessee to establish that the debt, has in fact, become irrecoverable. However, despite the amendment, disputes on the issue of allowability continue, mostly for the reason that the debt has not been established to be irrecoverable. The Hon'ble Supreme Court in the case of TRF Ltd. in CA Nos. 5292 to 5294 of 2003 vide judgment dated 9-2-2010, has stated that the position of law is well settled. "After 1-4-1989, for allowing deduction for the amount of any bad debt or part thereof under section 36(1)(vii) of the Act, it is not necessary for assessee to establish that the debt, in fact has become irrecoverable; it is enough if bad debt is written off as ir....
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....assessee was purportedly in possession of the goods purchased. The issue before us is clear on this aspect. 31. The matter before us deals with the non-recovery of the advances given to the brokers. The AO, for the instant year held that the assessee is dealing in speculative transactions and invoked provisions Section 43(5) of the Act. The AO has also held that the assessee has been carrying trade in commodity derivatives. Section 43(5)(e) considers an eligible transaction in respect of trading in commodity derivatives carried out in a recognized association shall not be deemed to be a speculative transaction. Hence, we hold that the transactions of the assessee shall not be deemed to be speculative transactions. Chapter VII of the Finance Act, 2013 w.e.f. 1-4-2014, details as to what is a commodity derivative in the Commodities Transaction Tax (CTT). As per the CTT commodity derivative means a contract for delivery of goods which is not a ready delivery contract or a contract for differences which derives its value from the prices of such underlying goods. Thus, we find that the assessee is in the business of commodity derivatives but not in the speculation transaction a....
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.... for this assessee also , except with variance in figures. 10. In the result, the appeal of the revenue in ITA No. 6318/Mum/2019 is dismissed. ITA No.6322/Mum/2019 (A.Y.2016-17) (Nirshilp Securities Pvt. Ltd.,) 11. This appeal in ITA No. 6322/Mum/2019 for A.Y. 2016-17 arises out of the order by the ld. Commissioner of Income Tax (Appeals)-50, Mumbai in appeal No. CIT(A)-50/10214/2018-19 dated 16/07/2019 (ld. CIT(A) in short) against the order of assessment passed u/s.143(3) of the Income Tax Act, 1961 (hereinafter referred to as Act) dated 10/12/2018 by the ld. Asst. Commissioner of Income Tax-10(3)(1) / Dy. Commissioner of income Tax-Central Circle 8(1), Mumbai (hereinafter referred to as ld. AO). 12. The first issue to be decided in this appeal of the revenue is as to whether the ld CITA was justified in deleting the addition of Rs. 1,34,86,279/- made by the ld AO on account of treating interest income on fixed deposits under the head Income from other sources as against the assessee's claim to be taxed under the head Income from Business. 13. We have heard the rival submissions and perused the materials available on record. We find that the ld CITA had observed th....
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....l High Court in the case of CIT vs Lok Holdings reported in 189 Taxman 452 (Bom) 13.1. We find that the ld CITA duly appreciated all the contentions of the assessee together with the various case laws relied upon including the decisions of Hon'ble Jursidictional High Court as stated supra. Apart from that, the ld CITA also relied on the following decisions to grant relief to the assessee:- a) Decision of Hon'ble Supreme Court in the case of S G Mercantile Corporation P Ltd vs CIT reported in 83 ITR 700 (SC) b) Decision of Hon'ble Supreme Court in the case of CIT vs D P Sandu Bros, Chembur (P) Ltd reported in 273 ITR 1 (SC) 13.2. We find that the ld CITA had categorically given a finding that the investment in fixed deposit made with ICICI Bank has got an inextricable link with the business activity of the assessee and hence the interest income thereon is required to be taxed only as business income. Moreover, the ld CITA also recorded the fact that the ld AO himself had accepted this fact in Asst Year 2015-16 u/s 143(3) of the Act. With regard to resjudicata in income tax proceedings, we find that the ld CITA had stated though the principle of resjudicata....
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....nce it was pleaded that no borrowed funds were utilised for making investment from which exempt income was derived. Reliance in this regard was placed on the decision of Hon'ble Jurisdictional High Court in the case of HDFC Bank Ltd reported in 383 ITR 529 (Bom). It was pleaded before the ld CITA that none of the factual and legal submissions made by the assessee were considered by the ld AO with regard to the impugned issue. We find that the ld CITA gave a categorical finding that the interest free funds available with the assessee company are much more than the value of investments that had actually yielded exempt income to the assessee and hence there cannot be any disallowance of interest under second limb of Rule 8D(2) of the Rules. This factual finding was not controverted by the revenue before us. Hence we do not deem it fit to interfere with the said finding of the ld CITA. 14.3. Moreover, we find that the ld CITA had also recorded a categorical finding that the ld AO had not recorded any objective satisfaction having regard to the books of accounts of the assessee, as to why the claim made by the assessee that no expenditure has been incurred other than Rs. ....