TaxTMI 
TaxTMI 
2022 (1) TMI 1325
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....f the enactment. Delay was attributable to the Central Board of Direct Taxes who had failed to issue necessary notification within time. 2. That on the facts and in the circumstances of the case the lower authorities grossly further erred in disallowing Rs,.38,000/- out of total expenses amounting to Rs.1,89,567/-, comprising of car expenses Rs.92,814/-, shop expenses Rs.34,267/-, Staff tea expenses Rs.34,121/- and telephone and mobile expenses Rs.28,365/- claimed by the assessee. 3. That the AO also erred in charging interest u/s 234A and 234B and the ld. CIT(A) erred in confirming the same. 2.1 Brief facts of the case are that the return of income declaring total income of Rs.2,234,410/- was filed on 28-11-2014 by the assessee. The case of the assessee was selected for scrutiny under CASS. Notice u/s 143(2) of the Act was issued to the assessee on 28-08-2015 which was served upon the assessee on 14-09-2015. Notices u/s 143(2) and 142(1) alongwith questionnaire was also sent to the assessee . The ld. AR of the assesee produced the books of account i.e. computer generated cash book & ledger, bills and voucher and also submitted the reply of the questionnaire wi....
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....ently, the transactions of the assessee prior to 27.11.2013 are not covered by the provisions of section 43(5)(e) and therefore the transactions carried out by the assessee prior to 27.11.2013 fall within the preview of speculative transaction only. The loss incurred by the assessee on the transactions prior to 27.11.2013 is Rs.39,88,783/- which is squarely the speculative loss of the assessee. Therefore considering the facts of the case and the position of law as provided in section 43(5)(e) of the IT Act, the loss to the extent of Rs. 39,88,783/- out of total loss claimed Rs.56,14,805/- which pertain to the period prior to 27.11.2013 is hereby treated as speculative in nature. Therefore the loss of Rs. 39,88,783/- is not allowed to be set off against the business of trading of physical commodities and is hereby disallowed. Therefore the amount of Rs. 39,88.783/- is added back to the total income of the assessee. '' 2.2 In first appeal, the ld. CIT(A) has confirmed the action of the AO by observing as under:- As regards Ground of appeal no 2, I have decided the issue against the appellant in the appeal no 57/16-17 for AY 2013-14 order dated 05/09/2017 A specul....
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....hether in relevant year assessee would not be entitled to claim benefit of said clause and, hence, loss from such transactions could not be treated as normal business loss- Held, yes Circulars & Notifications: Notification No. 46/09, dated 22-5-2009, Notification No. 51, dated 4-7-2013. Notification No. 92/2013, dated 29-11-2013. The ITAT held that- ..11. We have given our thoughtful consideration to the submissions advanced at the hands of the learned counsel for the assessee as well as learned DR for the department Admittedly, MCX, through which the assessee has carried out the transactions, is not a recognized stock exchange as under the provisions of Section 43(5)(d) of the Act. As it can be seen from the abovementioned Notification dated 29-11-2013, which has been relied upon by the learned AR, which has also been reproduced in the above part of this order, the MCX, through which the assessee has carried out the transactions, is notified as a recognized association for the purposes of clause (e) of proviso to clause 5 of Section 43 of the Act. Clause (e) of proviso to sub-section (5) of Section 43 has recently been inserted by the Finance Act, 2013 wef 1st Ap....
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....to no execution of the transaction as Physical Delivery. The A.O has already allowed the transactions post the recognition of the NCDEX Le after 23/11/2013 Thus in the absence of any physical delivery being involved for the earlier period and the opinion available, I am not inclined to accept his explanation that these transactions prior to 23/11/2013 were not speculative in nature. The claim of loss is accordingly treated as speculative to the extent of Rs.39,88,783/- but allowed to bet set off against the speculative profits in future as has been done by the AO,'' 2.3 During the course of hearing, the ld. AR of the assessee prayed that the ld. CIT(A) has erred in confirming the addition of Rs.39,88,783/- treating the claim of loss of the assessee as speculative loss but allowed to set off against the speculative profits in future as has been done by the AO. To this effect, the ld. AR of the assessee has filed the following written submission ''Ground No. 1 and 1.1 1. That on the facts and circumstances of the case, the loer authority grossly erred in disallowing the NCDEX trading loss in the amount of Rs 39.88,783/-out of total loss of Rs 56,14,805/-....
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....t from 1.04.2006 and prior to that Rule 6 DDA and Rule DB were notified on 1.07.2005 and subsequently the two-stock exchange i.e. National Stock Exchange and Bombay Stock Exchange notifies for the purpose of proviso (d) to the clause 5 of the section 43 of the Income tax Act vide notification No. 2/2006 dated 25.01.2006. viii. That issue arise before the Hon'ble Delhi High Court that whether the transaction carried out u's 43(5xd) of the Income tax act is to be assessed from the point of view of notification recognition Stock Exchange or from the applicability of the amended provision u/s 43(5) of the Income tax Act. The Hon'ble Court held that: "The factual position is not in dispute. Notification No.2/2006 dated 25th January, 2006, issued by the Central Board of Direct Taxes does not specify any particular date and simply notifies the National Stock Exchange India Ltd. and Bombay Stock Exchange, Mumbai under proviso (d) to clause (5) to Section 43 of the Act. The said proviso had become applicable with effect from 1st April, 2006. Issue of notification obviously had to take some time as it involved processing and examination of applications etc. This....
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....nd the effect of the notification dated 27-11-2013 should be given retrospective effect and disallowance made by the AO and confirmed by the ld. CIT(A) may kindly be deleted. '' The ld. AR of the assesee has filed the copy of following Notifications concerning the issue in question 1. CBDT Notification No. 90/2013 dated 27-11-2013 2. Notification No. 2/2006 Income Tax dated 25-01-2006, Further, the ld. AR of the assessee has relied on following decisions 1. DCIT vs Jaroli Vincome Pvt. Ltd m 2015 (12) TMI 1117-ITAT Kolkata 2. M/s. P.D. Sekharia Trading Company Pvt. Ltd. vs DCIT (ITA No. 331/ASR/2019 dawted 19-03-2019) 2.4 On the other hand, the ld. DR relied upon the order of the ld. CIT(A) and also relied upon the following decisions. 1. Premier Industries (India) Pvt. Ltd. vs. CIT, Range-1, Indore Tribunal datred 19-11-2018 2. Commercial Motors Ltd. vs DCIT (2013) 36 taxmann.com 528 (Allahabad) 3. CIT vs Asian Financial Services Ltd. (2016) 75 taxmann.com 68 (SC) 4. Araska Diamond (P) Ltd. vs ACIT (2014) 52 taxmann. Com 238 (Mumbai- Trib) 5. Shri Prem Prakash Gupta vs ITO (ITA No. 599/JP/2013....
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....e, etc. which is settled otherwise than by actual delivery. 55. However, certain exceptions have been provided in the first proviso of the said section itself. By virtue of this proviso, the transactions described in the proviso even when settled otherwise than by actual delivery, the same are treated as non-speculative. The Clause (e) of the said proviso as inserted w.e.f. 01.04.2014 reads as under: "Explanation 2. - For the purposes of clause (e), the expression- (i) "commodity derivative" shall have the meaning as assigned to it in Chapter VII of the Finance Act,2013; (ii) "eligible transaction means any transaction,- (A) carried out electronically on screen-based systems through member or any 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, (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 cl....
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....hould be given retrospective effect. Notification was procedural and necessary adjunct to the Section enforced with effect from 1stApril, 2006. The rule and notification issued in the present case effectuate the statutory and the legislative mandate. There is no good ground or reason why the notification in question should not be given effect from 1stApril, 2006. No reason or ground is alleged or argued to contend that National Stock Exchange India Ltd. could not and should not have been notified from 1stApril, 2006." 58. A perusal of notification dated 27.11.2013 notifying NCDEX as recognized association, the language employed therein was similar to the language employed in notification dated 25.01.2006 whereby National Stock Exchange of India Ltd., Bombay and Bombay Stock Exchange Ltd., Bombay where notified as recognized stock exchange for the purpose of clause (d). Therefore, respectfully following the above decision of the Hon'ble Delhi High Court, we hold that the notification will take effect during the entire previous year 2013-14 relating to assessment year 2014-15. 59. The next issue raised by the Id. DR was that no Commodity Transaction Tax (CTT) pa....
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....cultural commodity derivatives transactions as nonspeculative transaction. 64. However, a condition was imposed in the section that all being treated as nonspeculative transaction amongst several other transactions like time stamped contract note, distinctive trade number, transaction in a recognized association etc. was chargeable to CTT. However, CTT was not chargeable in respect of agricultural commodity derivatives. Thus, it transpires that an uninitiated consequence followed. That an otherwise eligible transaction in agricultural commodity derivative which satisfies all other substantial provisions of clause (5) of First proviso to Section 43(5) of the Act was still to be treated as speculative transaction because it was not subjected to CTT and as per the provision of law was not possible because CTT was not leviable In respect of agricultural commodity derivatives. To remove this unintended consequence, Second proviso to Section 43(5) of the Act was inserted which has already been quoted above. As per the Second proviso trading in agricultural commodity derivative that satisfies all other conditions specified in clause (5) will not be treated as speculative merely b....