TaxTMI 
TaxTMI 
2022 (7) TMI 267
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....IT has erred in invoking the provision of sec. 263 merely because she wants to take a view different from the one taken by the Assessing Officer and thereby changing the opinion of the Assessing Officer by his opinion. b. In the facts of the case and in law, the learned PCIT has erred in holding that the Assessing Officer failed to treat loss from Futures amounting to Rs. 74,43,978/- as non-speculative and thereby allowing the set-off against other business income. c. In the facts of the case and in law, the learned PCIT has erred in applying explanation to section 73 in respect of losses from Futures by disregarding specific section 43(5)(d) while exercising powers u/s 263. d. In the facts of the case and in law, the learned PCIT has erred in passing the order u/s 263 by disregarding several case laws cited in the reply to show cause notice and thereby passing the order not tenable in law. 2. Brief facts of the case are that the assessee is a trader in land and also derived income from derivative business and also earns income from interest. The case of the assessee was assessed u/s. 143(3) on 26.11.2018 determining income Rs. 4,32,470/-. Thereafter t....
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....nd held that the order passed by the AO on 26.11.2018 was erroneous and prejudicial in the interest of the revenue. Accordingly the order of the AO was set aside by the PCIT and directed the AO to pass necessary order after giving opportunity of being heard to the assessee. Thus the revision process u/s. 263 was concluded on 25.3.2021. 3. Aggrieved by the above said order of the ld. PCIT the assessee filed present appeal before the Hon'ble Bench. 4. Before us, the ld. Counsel for the assessee submitted in this regard that the assessee is deriving income from currency, derivative and sale of land held as stock in trade and no share trading was done by the assessee and therefore explanation to section 73 does not apply to the fact of the case. This fact is also fortified from the Profit & Loss account where no trading in shares is appearing. Attention of the Hon'ble Bench is invited to page no 8 of the paper book where Note no. 11 forming part of the accounts is as under: 11. REVENUE FROM OPERATIONS Particulars As at 31^st March, 2016 As at 31^st March, 2015 Income from Currency 368753.99 0.00 Loss from futures (7443978.58) 0.00 Sale of Stock in....
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....t is also proposed to amend sub-section (4) of section 73 so as to reduce the period of carry forward of speculation losses from eight assessment years to four assessment years. These amendments will take effect from 1st April, 2006 and will, accordingly, apply in relation to assessment year 2006-07 and subsequent years. [Clauses 14 and 20]" In view of above amendment, it is submitted that derivative transactions are non speculative from AY 2006-07 and therefore revision made by the ld. PCIT Jaipur is against the statutory provisions of law. The Hon'ble 'C' Bench of Ahemdabad ITAT under similar facts in the case of Magic Share Traders Ltd. I.T.A. No. 770/Ahd/2016 has held as under : "9. We have carefully considered the rival submissions and perused the respective orders of the AO and CIT(A) . The substantive question that arises for adjudication is whether loss incur red in eligible transactions i.e. derivative transactions within the meaning of Proviso (d) to Section 43(5) of the Act not involving any purchase or sale of shares per se can be regarded as speculative loss for the purposes of set off in view of Explanation to Section 73 or not. The controversy in....
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....the assessee company has entered in the derivative transactions of Nifty and currency (F & O) in which net loss of Rs. 1,71,953/- was incurred. The derivatives i.e. Future and Option transactions were taken place in the recognized stock exchange i.e. National Stock exchanged and MCS in various scripts and currencies. The detailed broker note along with contract notes/invoices were submitted during the course of assessment proceedings. The assessing officer has treated the aforesaid loss as speculation loss and stated that as per section 73(1) of the Act the same cannot be set off against other normal business loss. In this regard, we have gone through the provision of section 43(5) of the Act pertaining to speculation transaction reproduced as under:- (5) 1 " speculative transaction" means a transaction in which a contract for the purchase or 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 manufact....
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....ot involving any purchase or sale of shares per se can be regarded as speculative loss for the purposes of set off in view of Explanation to Section 73 or not. The controversy involved in the present case is thus essentially legal in nature. 9.1 In the present appeal, the assessee seeks set off of losses arising from derivative losses as non-speculative business loss. In contrast, the Revenue has labeled the loss arising from derivative transactions as 'speculative loss' and has consequently denied set off of such losses from regular income of non-speculative nature etc. by applying Explanation to Section 73 of the Act. 9.2 We first advert to the pivotal contention on behalf of the assessee that Explanation to Section 73 of the Act cannot apply to loss arising from derivative transactions which are categorically excluded from being regarded as speculative business as defined under s.43(5) of the Act read with proviso (d) thereto. Identical issue arose before the Hon'ble Calcutta High Court in the case of Asian Financial Services (supra) relied upon. The Hon'ble Calcutta High Court held that once it is deemed to be a normal business loss on the basi....
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....Ltd. 96 taxmann.com 539 - Lohia Securities Ltd. [157 ITD 265 Kolkata - Trib.] Further, Hon'ble Supreme Court in the case of Vegetable Products Ltd. (88 ITR 192 SC) has categorically held that where there are two different views possible, one favourable to the assessee must be followed. In the case of Ivory Consultants Pvt. Ltd. (96 Taxman.com 539), under similar facts, the Calcutta High Court held as under: "Section 43(5), read with sections 73 and 263, of the Income-tax Act, 1961 - Speculative transactions (Derivatives) - Assessment year 2011-12 - In course of assessment, Assessing Officer made sufficient inquiries on derivative loss claimed as a business loss by assessee - After said inquiries Assessing Officer completed assessment holding that loss from derivative's was a genuine loss and had to be allowed as a normal business loss - However, Commissioner (Appeals) passed an order under section 263 setting aside assessment order on ground that no proper inquiry was made - Tribunal, however, found on facts that inquiry was conducted in a proper manner and thus, Tribunal confirmed order passed by Assessing Officer - Whether on facts, impugned order passed ....