TaxTMI 
TaxTMI 
2025 (11) TMI 1298
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.... evidences before the learned AO from time to time. The learned AO observed that the assessee has debited Rs. 99,35,361/- to the Profit and Loss account out of which 93,38,052/- has been on account of speculative loss suffered by the assessee in future trading transactions in foreign exchange. According to the learned AO the said trading loss suffered in future trading transaction is a speculative loss and is not allowable and therefore the same is added to the total income of the assessee. 04. In the appellate proceedings, the learned CIT(A) dismissed the appeal of the assessee on the ground that the loss of Rs. 92,38,052/- was a speculative loss. 05. After hearing the rival contentions and perusing the materials available on record, we find that assessee has incurred loss from its business activity of derivative trading and commodity from foreign exchange. Now the issue before us is whether the said loss is a speculative loss or is covered under the exceptions as envisaged and provided u/s 43(5)(d) of the Act. The learned CIT(A) while dismissing the appeal of the assessee in Para no. 5.6 of the appellate order noted that assessee has not submitted documentary evidences in s....
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....ons stipulated in Section 43(5) read with proviso (d) thereto. The contract for Currency Derivative Transaction (CDT) executed through the registered share broker on the platform of the stock exchange (recognized Exchange by SEBI) was referred to on a sample basis to demonstrate that CDT executed by the assessee falls within the definition of 'eligible transaction' as per Explanation-1 appended below Section 43(5) of the Act. It was thus contended that the CDT being 'eligible transaction' falls within the exceptions carved out to Section 43(5) of the Act. The consequential effect would be that such CDT are outside the ambit of expression 'Speculative transaction' are thus non speculative in nature. Hence loss arising from such CDT being ordinary loss are eligible for set off against the profits arising from other non speculative business transactions, etc. in accordance with law. 5.2 It is contended on behalf of the assessee that clause (ac) of Section 2 of Securities Contracts (Regulation) Act, 1956 includes such transaction within the meaning of derivatives transaction and the transaction has been executed electronically on screen based systems through the stock broker r....
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....t 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 forexderivative 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 trading in derivatives referred to in clause (ac) of section 2 of the Securities Contracts (Regulation) Act, 1956, that has been carried out in a recognized stock exchange shall not be treated as a speculative transaction. Further, an 'eligible transaction' for this purpose would be one that fulfils the conditions laid down in Explanation to Section 43(5)(d). Any loss in a speculative transaction can be set off only against profit from speculative....
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....finition of 'derivatives' and consequently stands excluded from the ambits of speculative transactions defined under Section 43(5) of the Act owing to clause (d) of the proviso to Section 43(5) of the Act. Similar view has been taken by the Co-ordinate Bench in Kamal Kishore vs.ACIT in ITA No. 4592/Del/2016 order dated 13th February, 2017. 13. In essence, an 'eligible transaction' [as defined in Explanation-I to Section 43(5)] in respect of derivatives transaction [as defined in clause (ac) to Section 2 of Securities Contract (Regulation) Act, 1956] carried out on a recognized Stock Exchange shall not be deemed as Speculative Transaction having regard to exception provided in clause (d) to proviso to Section 43(5) of the Act. 14. In the light of the factual and legal submissions canvassed on behalf of the assessee we are of the considered view that the assessee in the instant case has complied with all the conditions of clause (d) and Explanation-1 to Section 43(5) of the Act cumulatively so as to treat such currency derivative transaction as eligible transaction for the purposes of exclusion from the ambit of speculative transaction defined under Section 43(5) of....