Anand Mathur, Kolkata V. ITO, Ward - 43(3), Kolkata , Kolkata

ITA 1287/KOL/2017

• Counselvise Citation: [2019] 117 COUNSELVISE.COM (IT) 5285 (ITAT-KOLKATA)
• Duration Of Justice: 1 year(s) 11 month(s) 27 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 29-05-2019
• Appeal Filed By: Assessee
• Order Result: Partly Allowed
• Bench Allotted: A
• Assessment Year: 2013-2014
• Appeal Filed On: 02-06-2017
• Result in Favour of: Partly Allowed
• Court: TRIBUNAL
• Department Lawyers: C J SINGH
• Assessee Lawyers: MANISH TIWARI
• Keywords: Business income; Transactions in derivatives; Speculation loss; Futures and options; Speculative transactions
• Section: 143(3); 43(5); 12

Judgement Text

I.T.A. NO. 1287/KOL/2017 (ASSESSMENT YEAR: 2013-2014) ANAND MAT HUR 1 IN THE INCOME TAX APPELLATE TRIBUNAL, KOLKATA A BENCH, KOLKATA BEFORE SHRI P.M. JAGTAP, VICE-PRESIDENT (KZ) AND SHRI S.S. VISWANETHRA RAVI, JUDICIAL MEMBER I.T.A. NO. 1287/KOL/2017 ASSESSMENT YEAR: 2013-2014 ANAND MATHUR,...................................... ..............................APPELLANT 14, NOORMAL LOHIA LANE, KOLKATA-700 007 [PAN: AKQPM 0648 G] -VS.- INCOME TAX OFFICER,................................ .....................................RESPONDENT WARD-43(3), KOLKATA, 3, GOVERNMENT PLACE, 2 ND FLOOR, ROOM NO. 2/34A, KOLKATA-700 001 APPEARANCES BY: SHRI MANISH TIWARI, FCA, FOR THE APPELLANT SHRI C.J. SINGH, JCIT, SR. D.R., FOR THE RESPONDENT DATE OF CONCLUDING THE HEARING : MARCH 27, 2019 DATE OF PRONOUNCING THE ORDER : MAY 29, 2019 O R D E R PER SHRI P.M. JAGTAP, VICE-PRESIDENT (KOLKATA ZONE) :- THIS APPEAL FILED BY THE ASSESSEE IS DIRECTED AGAI NST THE ORDER OF LD. COMMISSIONER OF INCOME TAX (APPEALS)-13, KOLKATA DA TED 16.01.2017. 2. GROUND NO. 1 RAISED BY THE ASSESSEE IN THIS APPE AL IS GENERAL, WHICH DOES NOT CALL FOR ANY SPECIFIC ADJUDICATION. 3. GROUND NO. 2 RAISED BY THE ASSESSEE INVOLVES THE ISSUE RELATING TO ADDITION OF RS.77190/- MADE BY THE ASSESSING OFFICE R AND CONFIRMED BY THE LD. CIT(APPEALS) ON ACCOUNT OF UNDISCLOSED INTE REST INCOME. ALTHOUGH THE LD. COUNSEL FOR THE ASSESSEE HAS MADE A SUBMISS ION IN SUPPORT OF THE ASSESSEES CASE ON THIS ISSUE, IT IS OBSERVED THAT THIS ISSUE WAS NOT I.T.A. NO. 1287/KOL/2017 (ASSESSMENT YEAR: 2013-2014) ANAND MAT HUR 2 PRESSED ON BEHALF OF THE ASSESSEE DURING THE COURSE OF APPELLATE PROCEEDINGS AND THE SAME ACCORDINGLY WAS DISMISSED AS NOT PRESSED BY THE LD. CIT(APPEALS). WE, THEREFORE, DO NOT ENTERTA IN THIS ISSUE NOW AND DISMISS GROUND NO. 2 OF THE ASSESSEES APPEAL. 4. THE ISSUE INVOLVED IN GROUND NO. 3 RELATES TO TH E DISALLOWANCE OF RS.39,10,971/- MADE BY THE ASSESSING OFFICER AND CO NFIRMED BY THE LD. CIT(APPEALS) ON ACCOUNT OF ASSESSEES CLAIM FOR SET OFF OF LOSS ARISING FROM DERIVATIVE TRANSACTIONS IN COMMODITY FUTURE AN D OPTIONS AGAINST BUSINESS INCOME BY TREATING THE SAME AS SPECULATIVE LOSS. 5. THE ASSESSEE IN THE PRESENT CASE IS AN INDIV IDUAL, WHO FILED HIS RETURN OF INCOME FOR THE YEAR UNDER CONSIDERATION O N 30.07.2013 DECLARING TOTAL INCOME OF RS.7,97,120/-. IN THE SAI D RETURN, LOSS ON FUTURE TRADING OF RS.39,10,971/- ON ACCOUNT OF COMMODITY F UTURE AND OPTIONS WAS SET OFF BY THE ASSESSEE AGAINST PROFIT FROM NO N-SPECULATIVE BUSINESS. IN THIS REGARD, IT WAS EXPLAINED BY THE ASSESSEE BE FORE THE ASSESSING OFFICER DURING THE COURSE OF ASSESSMENT PROCEEDINGS THAT IN TERMS OF SECTION 43(5) OF THE ACT AND THE RELEVANT CIRCULAR, IF THE TRANSACTION OF FUTURE TRADING IS DONE THROUGH RECOGNIZED STOCK EXC HANGE, THE INCOME FROM DEALING IN SHARES/COMMODITIES THROUGH DERIVATI VES, I.E. FUTURES AND OPTIONS IS NOT TO BE CONSIDERED AS SPECULATION LOSS BUT IT IS TO BE TREATED AS BUSINESS INCOME. IT WAS SUBMITTED THAT ALL THE T RANSACTIONS RESULTING INTO THE LOSS OF RS.39,10,971/- IN QUESTION WERE DO NE THROUGH RECOGNIZED STOCK EXCHANGE AND, THEREFORE, SECTION 73(1) WAS NO T APPLICABLE. IN SUPPORT OF THIS CONTENTION, RELIANCE WAS PLACED BY THE ASSESSEE ON THE DECISION OF THE HONBLE DELHI BENCH OF THIS TRIBUNA L IN THE CASE OF ITO VS.- M/S. EMPEROR INTERNATIONAL LIMITED (ITA NO. 21 81/DEL./2012 FOR A.Y. 2007-08). THE CONTENTION RAISED ON BEHALF OF THE AS SESSEE WAS NOT FOUND TENABLE BY THE ASSESSING OFFICER. HE HELD THAT THE DECISION OF THE TRIBUNAL IN THE CASE OF M/S. EMPEROR INTERNATIONAL LIMITED ( SUPRA) CITED ON BEHALF OF THE ASSESSEE WAS DISTINGUISHABLE ON FACTS AS THE ASSESSEE IN THE SAID CASE HAD INCURRED LOSS FROM TRADING IN SHARE FUTURE S, WHEREAS IN THE I.T.A. NO. 1287/KOL/2017 (ASSESSMENT YEAR: 2013-2014) ANAND MAT HUR 3 ASSESSEES CASE, LOSS WAS SUFFERED FROM TRADING IN COMMODITY FUTURES. HE NOTED THAT AS PER THE DEFINITION GIVEN IN SECTION 4 3(5) OF THE ACT, SPECULATIVE TRANSACTION WAS DEFINED TO MEAN A TRANS ACTION IN WHICH A CONTRACT FOR THE PURCHASE AND SALE OF ANY COMMODITY , INCLUDING STOCKS AND SHARES, IS PERIODICALLY OR ULTIMATELY SETTLED OTHER WISE THAN BY ACTUAL DELIVERY OR TRANSFER OF THE COMMODITY OR SCRIPTS. H E ALSO NOTED THAT AS PER THE PROVISO (D) TO SECTION 43(5) OF THE ACT, AN EL IGIBLE TRANSACTION IN DERIVATIVES REFERRED TO IN CLAUSE (AC) OF SECTION 2 OF THE SECURITIES CONTRACTS (REGULATION) ACT, 1956 CARRIED OUT IN A R ECOGNIZED STOCK EXCHANGE SHALL NOT BE DEEMED TO BE A SPECULATIVE TR ANSACTION. HE HELD THAT THE COMBINED READING OF SECTION 43(5) READ WIT H PROVISO (D) THERETO THUS MADE IT CLEAR THAT TRADING IN SHARE DERIVATIVE S SHALL BE TREATED AS NON-SPECULATIVE TRANSACTION, WHILE IN COMMODITY DER IVATIVES SHALL BE TREATED AS SPECULATIVE TRANSACTION. HE ACCORDINGLY TREATED THE LOSS OF RS.39,10,971/- SUFFERED BY THE ASSESSEE IN THE TRAN SACTIONS ON ACCOUNT OF COMMODITY FUTURES AND OPTIONS AS SPECULATIVE LOSS A ND DISALLOWED THE CLAIM OF THE ASSESSEE FOR SET OFF OF THE SAME AGAIN ST PROFIT FROM NON- SPECULATIVE BUSINESS IN THE ASSESSMENT COMPLETED UN DER SECTION 143(3) VIDE AN ORDER DATED 18.01.2016. 6. THE DISALLOWANCE MADE BY THE ASSESSING OFFICER O N ACCOUNT OF ITS CLAIM OF SET OFF OF LOSS FROM DERIVATIVES IN COMMOD ITY FUTURES AND OPTIONS AGAINST PROFIT FROM NON-SPECULATIVE BUSINES S WAS CHALLENGED BY THE ASSESSEE IN THE APPEAL FILED BEFORE THE LD. CIT (APPEALS). DURING THE COURSE OF APPELLATE PROCEEDINGS BEFORE THE LD. CIT( APPEALS), THE FOLLOWING SUBMISSIONS WERE MADE ON BEHALF OF THE ASSESSEE IN SUPPORT OF HIS CASE ON THIS ISSUE:- DURING THE YEAR THE APPELLANT INCURRED LOSS OF RS.39,10,971/- IN TRANSACTION OF COMMODITY FUTURE A ND ADJUSTED THE LOSS WITH THE PROFIT EARNED IN COMMISS ION BUSINESS. BUT THE ID ASSESSING OFFICER DISALLOWED T HE ADJUSTMENT OF LOSS FROM TRADING OF COMMODITY FUTURE WITH THE PROFIT OF COMMISSION BUSINESS STATING THAT THE LOSS ON TRADING OF COMMODITY FUTURE BEING SPECULATIVE LOSS AND HENCE CANNOT BE SET-OFF AGAINST THE PROFIT OF COMMI SSION BUSINESS. I.T.A. NO. 1287/KOL/2017 (ASSESSMENT YEAR: 2013-2014) ANAND MAT HUR 4 THE APPELLANT SUBMITS THAT THE APPELLANT IS ENGAGED IN THE BUSINESS OF SHARE AND COMMODITY TRADING BESIDES THE BUSINESS OF EARNING COMMISSION. DURING THE YEAR THE APPELLANT MADE SOME TRANSACTION IN COMMODITY FUTURE S THROUGH RECOGNIZED STOCK EXCHANGE AND INCURRED LOSS OF RS.39,10,971/-. IN THIS RESPECT YOUR KIND ATTENTION IS DRAWN TO THE PROVISIONS OF SECTION 43(5) OF THE IT ACT 19 61 WHICH IS AS UNDER:- SEC 43(5) SPECULATIVE TRANSACTION' MEANS A TRANSACTION IN WHICH A CONTRACT OR THE PURCHASE OR SALE OF ANY COMMODITY, INCLUDING STOCKS AND SHARES, IS PERIODICALLY OR ULTIMATELY SETTLED OTHERWISE THA N BY THE ACTUAL DELIVERY OR TRANSFER OF THE COMMODITY OR SCRAPS:- PROVIDED THAT FOR THE PURPOSES OF THIS CLAUSE- (A) A CONTRACT IN RESPECT OF RAW MATERIALS OR MERCHANDISE ENTERED IN TO BY A PERSON IN THE COURSE OF HIS MANUFACTURING OR MERCHANTING BUSINESS TO GUARD AGAINST LOSS THROUGH FUTURE PRICE FLUCTUATION S IN RESPECT OF HIS CONTRACTS FOR ACTUAL DELIVERY OF GOODS MANUFACTURED BY HIM OR MERCHANDISE SOLD BY HIM; OR (B) A CONTRACT IN RESPECT OF STOCKS AND SHARES ENTERED INTO BY A DEALER OR INVESTOR THEREIN TO GUARD AGAINST LOSS IN HIS HOLDINGS OF STOCKS AND SHARES THROUGH PRICE FLUCTUATIONS; OR (C) A CONTRACT ENTERED INTO BY A MEMBER OF A FORWARD MARKET OR A STOCK EXCHANGE IN THE COURSE OF ANY TRANSACTION IN THE NATURE OF JOBBING OR ARBITRAGE TO GUARD AGAINST LOSS WHICH MAY ARISE IN THE ORDINARY COURSE OF HIS BUSINESS AS SUCH MEMBER OR (D) AN ELIGIBLE TRANSACTION IN RESPECT OF TRADING I N DERIVATIVES REFERRED TO IN CLAUSE (AC) OF SECTION 0 2 OF THE SECURITIES CONTRACTS ACT 1956 (42 OF 1956) CARRIED OUT IN RECOGNIZED STOCK EXCHANGE. SHALL NOT BE DEEMED TO BE A SPECULATIVE TRANSACTION . (I) ELIGIBLE TRANSACTION MEANS ANY TRANSACTION:- (A) CARRIED OUT ELECTRONICALLY ON SCREEN BASED SYST EM THROUGH A STOCK BROKER OR SUB-BROKER OR SUCH OTHER INTERMEDIARY REGISTERED UNDER SECTION 12 OF THE SEC URITIES AND EXCHANGE BOARD OF INDIA ACT 1992 (15 OF 1992) I N ACCORDANCE WITH THE PROVISIONS OF THE SECURITIES CO NTRACTS REGULATION ACT 1956 (42 OF 1956) OR THE SECURITIES AND I.T.A. NO. 1287/KOL/2017 (ASSESSMENT YEAR: 2013-2014) ANAND MAT HUR 5 EXCHANGE BOARD OF INDIA ACT 1992 OR THE DEPOSITARIE S ACT 1996 (22 OF 1996) AND THE RULES, REGULATIONS OR BYE -LAWS MADE OR DIRECTIONS ISSUED UNDER THOSE ACTS OR BY BA NKS OR MUTUAL FUNDS ON A RECOGNIZED STOCK EXCHANGE AND: (B) WHICH IS SUPPORTED BY A TIME STAMPED CONTRACT N OTE ISSUED BY SUCH STOCK BROKER OR SUB-BROKER OR SUCH O THER INTERMEDIARY TO EVERY CLIENT INDICATING IN THE CONT RACT NOTE THE UNIQUE CLIENT IDENTIFY NUMBER ALLOTTED UND ER ANY ACT REFERRED TO IN SUB CLAUSE (A) AND PERMANENT ACC OUNT NUMBER ALLOTTED UNDER THIS ACT. (II) RECOGNIZED STOCK EXCHANGE MEANS A RECOGNIZED STOCK EXCHANGE AS REFERRED TO IN CLAUSE (F) OF SECTION 2 OF THE SECURITIES CONTRACTS REGULATION ACT 1956 (42 OF 1956) AND WHICH FULFILS SUCH CONDITIONS AS MAY BE PRESCRIBED AND NOTIFIED 23 BY THE CENTRAL GOVERNMENT FOR THIS PURPOSE IT IS RESPECTFULLY SUBMITTED THAT IN THE PRESENT CA SE THE APPELLANT MADE TRANSACTION OF FUTURE TRADING I.E. TRANSACTION MADE IN COMMODITY DERIVATIVES IN FUTURE AND OPTIONS THROUGH RECOGNIZED STOCK EXCHANGE AND INCURRED A LOSS OF RS.39,10,971/ - DURING THE YEAR. HENCE, THE LOSS INCURRED BY THE APPELLANT SHA LL BE CONSIDERED AS BUSINESS LOSS AND NOT AS SPECULATION LOSS. RELIANCE WAS ALSO PLACED BY THE ASSESSEE ON THE FOL LOWING JUDICIAL PRONOUNCEMENTS:- (I) G.K. ANAND BROS. BUILDWELL (P) LTD. VS.-ITO[34 SOT 439]; (II) SEEMA JAIN VS.- ACIT [6 ITR (TRIB.) 488 (DEL.)]; (III) RBK SECURITIES PVT. LIMITED VS.- ITO [118 TTJ (MUM ) 465]; (IV) DCIT VS.- SSKI INVESTORS SERVICES PVT. LTD. [113 T TJ (MUM) 511]. 7. THE LD. CIT(APPEALS) DID NOT FIND MERIT IN THE S UBMISSIONS MADE ON BEHALF OF THE ASSESSEE ON THIS ISSUE AND PROCEEDED TO CONFIRM THE ACTION OF THE ASSESSING OFFICER IN TREATING THE LOSS FROM DERIVATIVE TRANSACTIONS IN COMMODITY FUTURES AND OPTIONS AS SPECULATIVE LOS S FOR THE FOLLOWING REASONS GIVEN IN HIS IMPUGNED ORDER:- I HAVE PERUSED THE OBSERVATION OF THE AO AND THE A RGUMENT OF THE APPELLANT. IN THIS REGARD IT IS PERTINENT TO POINT OUT THAT THERE ARE SOME FUNDAMENTAL DIFFERENCES BETWEEN COMMODITY DERIVATIVES AND SECURITY DERIVATIVES. COM MODITY DERIVATIVES ARE TRADED ON COMMODITY EXCHANGES AND N OT ON I.T.A. NO. 1287/KOL/2017 (ASSESSMENT YEAR: 2013-2014) ANAND MAT HUR 6 STOCK EXCHANGES, TRANSACTIONS BEING ROUTED THROUGH COMMODITY BROKERS AND NOT THROUGH STOCK BROKERS AND REGULATED BY THE FORWARD MARKETS COMMISSION AND NOT BY THE SECURITIES AND EXCHANGE BOARD OF INDIA (SEBI). FURTHER, COMMODITY DERIVATIVES CAN BE SETTLED BY DELIVERY, U NLIKE SECURITY DERIVATIVES, WHICH COULD ONLY BE SETTLED B Y PAYMENT OR RECEIPT OF DIFFERENCES TILL RECENTLY. IF ONE LOO KS AT THE DEFINITION OF SPECULATIVE TRANSACTION, IT PROVIDES THAT ANY TRANSACTION IN WHICH A CONTRACT FOR THE PURCHASE OR SALE OF ANY COMMODITY (INCLUDING STOCKS AND SHARES) IS PERI ODICALLY OR ULTIMATELY SETTLED OTHERWISE THAN BY ACTUAL DELI VERY OR TRANSFER OF THE COMMODITY OR SCRIPTS. COMMODITY DER IVATIVES CONTRACTS ARE CERTAINLY CONTRACTS FOR THE PURCHASE OR SALE OF COMMODITIES AND, THEREFORE, WOULD CLEARLY BE COVERE D BY THIS DEFINITION IF THE TRANSACTION IS SQUARED OFF WITHOU T DELIVERY. THERE IS A SPECIFIC EXEMPTION FOR SECURITY DERIVATI VES, WHEREBY SUCH DERIVATIVES ARE NOT TO BE TREATED AS S PECULATIVE TRANSACTION. HOWEVER, THIS EXEMPTION ONLY APPLIES T O DERIVATIVES TRADED ON NOTIFIED STOCK EXCHANGES (BOM BAY STOCK EXCHANGE, NATIONAL STOCK EXCHANGE, AND UNITED STOCK EXCHANGE) THROUGH STOCK BROKERS (I.E. SECURITY DERI VATIVES) AND DOES NOT APPLY TO COMMODITY DERIVATIVES WHICH A RE TRADED ON COMMODITY EXCHANGES. THEREFORE, CLEARLY COMMODITY DERIVATIVES TRANSACTIONS SQUARED UP WITHO UT DELIVERY WOULD AMOUNT TO SPECULATIVE TRANSACTIONS. DAY TRADING TRANSACTIONS IN SHARES, WHERE NO DELIVE RY IS TAKEN BUT THE TRANSACTIONS ARE SQUARED UP THE SA ME DAY, WOULD BE REGARDED AS SPECULATION BUSINESS AND IT WO ULD BE POSSIBLE TO SET OFF THE LOSS FROM SUCH COMMODITY DE RIVATIVES TRANSACTIONS AGAINST SUCH PROFITS FROM DAY TRADING IN SHARES. IT IS IMPORTANT TO NOTE THAT THE PROHIBITION ON SET OFF APPLIES ONLY TO LOSS OF A SPECULATION BUSINESS AND NOT TO S PECULATION LOSS IF THEY ARE CONSIDERED AS INCOME FROM OTHER SO URCES. IT IS ALSO A MATTER OF FACT THAT NCDEX TERMINAL IS NOT A RECOGNIZED STOCK EXCHANGE AS PER RULE 6DDB R.W.S 43 (5)(D) OF THE INCOME TAX ACT 1961. HE THEREFORE, RELYING ON T HE DECISION OF ITAT JAIPUR BENCH IN ITA NO.91/JP/2013 DATED 20.02.2013 SHRI PREM PRAKASH GUPTA VS ITO W-2(3), A LWAR IN CASE OF PREM PRAKASH UMA SHANKAR DISALLOWED THE LOS S BY HOLDING IT TO BE A SPECULATIVE LOSS. KEEPING IN VIEW OF THE AFORESAID FACT IT IS CLEAR T HAT THE INCOME FROM SHARE EARNED BY THE APPELLANT DURIN G THE YEAR UNDER THE CATEGORY OF NON SPECULATIVE TRANSACT IONS WHEREAS DERIVATIVE INCOME IS STILL UNDER THE CATEGO RY OF SPECULATIVE BUSINESS IN NATURE WHICH CAN BE SET OFF AGAINST ONLY SPECULATIVE INCOME. THEREFORE, THE ADDITION MA DE BY THE AO IS HERE BY UPHELD AND THE GROUND OF APPEAL IS DI SMISSED. I.T.A. NO. 1287/KOL/2017 (ASSESSMENT YEAR: 2013-2014) ANAND MAT HUR 7 8. WE HAVE HEARD THE ARGUMENTS OF BOTH THE SIDES AN D ALSO PERUSED THE RELEVANT MATERIAL AVAILABLE ON RECORD. ALTHOUGH THE LD. D.R. HAS STRONGLY RELIED ON THE ORDERS OF THE AUTHORITIES BELOW IN SU PPORT OF THE REVENUES CASE ON THIS ISSUE, IT IS OBSERVED THAT SIMILAR ISS UE HAS BEEN DECIDED IN FAVOUR OF THE ASSESSEE BY THE MUMBAI BENCH OF THIS TRIBUNAL IN THE CASE OF ACIT VS.- ARNOV AKSHAY MEHTA [53 SOT 581] CITED BY THE LD. COUNSEL FOR THE ASSESSEE VIDE PARAGRAPHS NO. 8 & 9 OF ITS ORDER , WHICH READ AS UNDER:- 8. WE HAVE CAREFULLY CONSIDERED THE RIVAL CONTENTI ONS OF THE PARTIES, PERUSED THE FINDINGS OF THE COMMISSIONER ( APPEALS) AS WELL AS OF THE ASSESSING OFFICER AND THE MATERIAL A VAILABLE ON RECORD. THE ASSESSEE WHO IS CARRYING OUT DERIVATIVE TRADING IN COMMODITY THROUGH MCX STOCK EXCHANGE HAS INCURRED A LOSS OF RS.77,63,237. THE ASSESSING OFFICER HAS TREATED SUC H AS A LOSS AS SPECULATION LOSS MAINLY ON THE GROUND THAT NOTIFICA TION NUMBER 46 OF 2009, ISSUED BY THE CBDT, ON 22ND MAY 2009, R ECOGNIZING MCX AS RECOGNIZED STOCK EXCHANGE FOR THE PURPOSE OF SECTION 43(5), ONLY FROM THE SAID DATE AND HAS PROSPECTIVE EFFECT AND, THEREFORE, SUCH A DERIVATIVE TRADING IN COMMODITY T HROUGH MCX PRIOR TO THE SAID DATE WILL AMOUNT TO SPECULATION B USINESS. BY FINANCE ACT, 2005, CLAUSE (D) WAS INSERTED IN THE P ROVISO TO SUB-SECTION (5) OF SECTION 43 W.E.F. 1 ST APRIL 2006, WHICH PROVIDED THAT AN 'ELIGIBLE TRANSACTION IN RESPECT O F TRADING IN DERIVATIVE REFERRED TO IN CLAUSE (A) OF SECTION (2) OF SECURITIES CONTRACT (REGULATION) ACT, 1956, CARRIED OUT IN A R ECOGNIZED STOCK EXCHANGE' SHALL NOT BE DEEMED TO BE SPECULATI VE TRANSACTIONS. THUS, FROM 1 ST APRIL 2006, TRADING IN DERIVATIVE CARRIED THROUGH THE RECOGNIZED STOCK EXCHANGE WAS T REATED AS NON-SPECULATIVE TRANSACTIONS. FOR THE PURPOSE OF CL AUSE (D), RULE 6DDA AND 6DDB OF I.T. RULES, 1962, PROVIDED TH AT NOTIFICATION OF RECOGNIZED STOCK EXCHANGE HAS TO BE DONE BY THE CENTRAL GOVT. (CBDT). IN PURSUANCE TO THIS RULE, TH E CBDT HAS NOTIFIED THE MCX STOCK EXCHANGE LTD. BY S.O. 1327(E ) DATED 22ND MAY 2009. 9. NOW, THE ISSUE IS WHETHER SUCH A NOTIFICATION G IVEN ON 22ND MAY 2009, THROUGH WHICH MCX STOCK EXCHANGE HAS BEEN RECOGNIZED, CAN BE HELD TO BE APPLICABLE FOR THE TR ANSACTION UNDERTAKEN IN THE ASSESSMENT YEAR 2007-08 I.E., AFT ER 1 ST APRIL 2006. FROM THE COMBINED READING OF CLAUSE (D) OF PR OVISO TO SECTION 43(5), RULE 6DDA, 6DDB AND EXPLANATION (II) TO SECTION 43(5), IT WOULD BE SEEN THAT THE RULES WHICH HAS BE EN PRESCRIBED ARE ONLY PROCEDURAL IN NATURE, AS IT PRE SCRIBES THE METHOD AS TO HOW TO APPLY FOR NECESSARY RECOGNITION AND CONSEQUENT NOTIFICATION. HENCE, THESE ARE PURELY PR OCEDURAL MECHANISM. WHEN A RULE OR PROVISION DOES NOT EFFECT OR EMPOWER ANY RIGHT OR CREATE AN OBLIGATION BUT MEREL Y RELATES TO PROCEDURAL MECHANISM, THEN IT IS DEEMED TO BE RE TROSPECTIVE UNLESS SUCH AN INFERENCE IS LIKELY TO LEAD TO AN AB SURDITY. IF THE AMENDMENT IS MADE IN PROCEDURAL MECHANISM, IT WILL APPLY TO I.T.A. NO. 1287/KOL/2017 (ASSESSMENT YEAR: 2013-2014) ANAND MAT HUR 8 ALL THE PROCEEDINGS PENDING OR TO BE INITIATED. ONC E IN THE STATUTE, IT HAS BEEN PROVIDED THAT W.E.F. 1 ST APRIL 2006, AN ELIGIBLE TRANSACTION CARRIED OUT IN A RECOGNIZED ST OCK EXCHANGE WILL NOT BE TREATED AS SPECULATION TRANSACTION, THE N SIMPLY BECAUSE PROCEDURAL MECHANISM HAS TAKEN A LONG TIME TO RECOGNIZE THE STOCK EXCHANGE, IT WILL NOT LEAD TO A N INFERENCE THAT THE SAME WOULD BE APPLICABLE FROM THE DATE WHE N THE STOCK EXCHANGE HAS BEEN RECOGNIZED BY THE CENTRAL G OVT. THE NOTIFICATION ISSUED UNDER RULE 6DDB, DOES NOT EMPOW ER ANY RIGHT OR CREATE OBLIGATION BUT ONLY RECOGNIZES WHAT IS ALREADY PROVIDED IN STATUTE. THUS, THE TRANSACTIONS CARRIED OUT THROUGH MCX STOCK EXCHANGE AFTER 1 ST APRIL 2006, WOULD BE ELIGIBLE FOR BEING TREATED AS NON-SPECULATION WITHIN THE MEANING OF CLAUSE (D) OF PROVISO TO SECTION 43(5). VARIOUS CASE LAWS, AS HAVE BEEN RELIED UPON BY THE LEARNED COUNSEL ALSO, SUPPORT TH IS VIEW THAT RECOGNITION BY THE CENTRAL GOVT. OF THE STOCK EXCHA NGE FROM A LATER DATE WILL NOT DEBAR THE TRANSACTION AS NON-SP ECULATION, ESPECIALLY AFTER 1 ST APRIL 2006. THEREFORE, IN OUR OPINION, THE ASSESSEE'S DERIVATIVE TRADING THROUGH MCX STOCK EXC HANGE IN THE ASSESSMENT YEAR 2007-08 IS NON-SPECULATION TRAN SACTION AND, THEREFORE, THE LOSS INCURRED IN SUCH TRANSACTI ONS IS TO BE TREATED AS NORMAL BUSINESS LOSS AND, ACCORDINGLY, T HE FINDINGS OF THE COMMISSIONER (APPEALS), TO THIS EXTENT, IS U PHELD. ACCORDINGLY THE GROUND RAISED BY THE REVENUE IS DIS MISSED. AS THE ISSUE INVOLVED IN THE PRESENT CASE AS WELL A S ALL THE MATERIAL FACTS RELEVANT THERETO ARE SIMILAR TO THE CASE OF ARNOV A KSHAY MEHTA (SUPRA), WE RESPECTFULLY FOLLOW THE DECISION OF THE COORDINA TE BENCH OF THIS TRIBUNAL AND DIRECT THE ASSESSING OFFICER TO ALLOW THE CLAIM OF THE ASSESSEE FOR SET OFF OF LOSS IN QUESTION INCURRED B Y THE ASSESSEE IN COMMODITY FUTURES AND OPTIONS AGAINST PROFIT FROM N ON-SPECULATION BUSINESS AS CLAIMED. GROUND NO.3 OF THE ASSESSEES APPEAL IS ACCORDINGLY ALLOWED. 9. IN THE RESULT, THE APPEAL OF THE ASSESSEE IS PAR TLY ALLOWED. ORDER PRONOUNCED IN THE OPEN COURT ON MAY 29, 2019. SD/- SD/- (S.S. VISWANETHRA RAVI) (P.M. JAGTAP) JUDICIAL MEMBER VICE -PRESIDENT (KZ) KOLKATA, THE 29 TH DAY OF MAY, 2019 I.T.A. NO. 1287/KOL/2017 (ASSESSMENT YEAR: 2013-2014) ANAND MAT HUR 9 COPIES TO : (1) ANAND MATHUR, 14, NOORMAL LOHIA LANE, KOLKATA-700 007 (2) INCOME TAX OFFICER, WARD-43(3), KOLKATA, 3, GOVERNMENT PLACE, 2 ND FLOOR, ROOM NO. 2/34A, KOLKATA-700 001 (3) COMMISSIONER OF INCOME TAX (APPEALS)-13, KOLKAT A, (4) COMMISSIONER OF INCOME TAX- , (5) THE DEPARTMENTAL REPRESENTATIVE (6) GUARD FILE BY ORDER ASSISTANT REGISTRAR, INCOME TAX APPELLATE TRIBUNAL, KOLKATA BENCHES, KOLKATA LAHA/SR. P.S.