2022 (6) TMI 533

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....2015-16. The substantive grounds of appeal raised by the assessee reads as under: "1. That having regard to the facts and in circumstances of the case, Ld. CIT(A) has erred in law in holding the transaction in 'currency derivatives' made by the assessee and 'Speculative in nature' and thereby not allowing set off of same against other business income and income from other sources. 2. Ld. CIT(A) has erred on facts and in law in binding decisions of courts and tribunals, and circular issued by SEBI and CBDT. 3. That the order dated 30.10.2018 passed by the CIT(A) is wrong, bad in law and illegal. 4. That the appellate craves the leave to add, modify, amend or delete any of the grounds of appeal at the time of hearing."....

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....r in terms of provisions of Section 73 of the Act and adjustable only against the speculative income in the subsequent assessment years. 3. Aggrieved, the assessee preferred appeal before the CIT(A) without any success. 4. Further aggrieved, the assessee preferred appeal before the Tribunal. 5. We have carefully considered the rival submissions and perused the assessment order as well as the order of the CIT(A) together with case laws cited and other documents referred to an relied upon as per Rule 18(6) of the Income Tax [Appellate Tribunal] Rules, 1963. 5.1. The solitary issue confronted in the present appeal is on treatment of loss arising from derivative transactions in currency segment in the matter of set off and carry forward. It....

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....ng from CDT being non-speculative, both the lower authorities have misdirected themselves in law in denying the relief towards set off and carry forward for loss arising from such non speculative transaction. 6. Section 43(5) of the Income Tax Act defines 'speculative transaction'. As per the Scheme of the Act, a transaction of speculative nature carries a differential treatment qua the non speculative transaction in the matter of set off and carry forward of losses arising therefrom. The proviso to Section 43(5) provides for certain exceptions in varied situation and where the transactions executed fall within any of such exceptions, profit/loss arising from such transactions will not be regarded as derived from speculative busine....

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....The relevant paragraph of the CBDT Instruction No. 03/2010 dated 23.03.2010 is reproduced hereunder: In a case where a loss on a forex-derivative transaction arises on actual settlement/conclusion of contract and is not a notional or marked to market book entry, a further question will arise as to whether such a loss is on account of a speculative transaction as contemplated in Section 43(5) of the Income tax Act. For determining whether loss from a transaction in respect of a forex-derivative is a speculation loss or not, the Assessing Officers may refer to Proviso (d) below sub-section (5) of Section 43 inserted by the Finance Act, 2005, with effect from 1.4.2006. It lays down that any 'eligible transaction' in respect of tradin....

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.... namely PEE AAR Securities Ltd. resulting in the impugned losses. 11. The definition of derivative under Securities Contract (Regulation) Act, 1956 reproduced hereinabove, defines the express 'derivative' in an inclusive manner and inter alia includes a security derived from a debt instrument, risk instrument and such other instruments as may be declared by the Central Government to be derivatives. The definition is thus very widely worded. The CBDT instruction no. 3/10 clearly provides in the context of proviso (d) below sub Section (5) of Section 43 inserted by Finance Act, 2005 w.e.f. 01.04.2006 relevant to Assessment Year 2006-07 onwards that any 'eligible transaction' in respect of trading in derivatives referred to in....