RAMU S. DEORA, MUMBAI V. ADDL CIT RG 12(3), MUMBAI

ITA 1292/MUM/2010

• Counselvise Citation: [2012] 119 COUNSELVISE.COM (IT) 9245 (ITAT-MUMBAI)
• Duration Of Justice: 2 year(s) 10 month(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 17-12-2012
• Appeal Filed By: Assessee
• Order Result: Allowed
• Bench Allotted: D
• Next Hearing Date: 17-12-2012
• Assessment Year: 2006-2007
• Appeal Filed On: 17-02-2010
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: A B KOLI
• Assessee Lawyers: ADITYA BHATT
• Keywords: Business income; Transactions in derivatives; Speculation loss; Futures and options; Speculative transactions
• Section: 43(5)

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL 'D' BENCH, MUMBAI BEFORE SHRI D. MANMOHAN, VICE PRESIDENT AND SHRI SANJAY ARORA, ACCOUNTANT MEMBER ITA NO. 1292/MUM/2010 (ASSESSMENT YEAR: 2006-07) SHRI RAMU S. DEORA ADDL. CIT, RANGE 12(3) SAMBHAV CHAMBERS, 4TH FLOOR MUMBAI SIR, P.M. ROAD, FORT VS. MUMBAI 400001 PAN - AAMPD 2141 H APPELLANT RESPONDENT APPELLANT BY: SHRI ADITYA BHATT RESPONDENT BY: SHRI A.B. KOLI DATE OF HEARING: 17.12.2012 DATE OF PRONOUNCEMENT: 17.12.2012 O R D E R PER D. MANM OHAN, V.P. THIS IS AN APPEAL FILED AT THE INSTANCE OF THE ASSE SSEE AND IT PERTAINS TO A.Y. 2006-07. THOUGH NUMBER OF GROUNDS WERE URGED B EFORE US, AT THE TIME OF HEARING THE LEARNED COUNSEL FOR THE ASSESSEE PRESSE D ONLY GROUND NO. 1; GROUNDS NO. 2 TO 7 ARE NOT PRESSED AND GROUND NO. 8 IS GENERAL IN NATURE. WE THEREFORE PROCEED TO DISPOSE OF GROUND NO. 1 AND DI SMISS REST OF THE GROUNDS. 2. THE FACTS IN SHORT ARE THAT DURING THE COURSE OF AS SESSMENT PROCEEDINGS THE AO NOTICED THAT THE ASSESSEE INCURRED A LOSS ON ` 4,98,654/- IN TRANSACTIONS OF FUTURES AND OPTIONS AND THE SAME WA S TREATED AS BUSINESS LOSS AND ADJUSTED AGAINST BUSINESS PROFITS ON SHARE TRAD ING. ACCORDING TO THE AO SECTION 43(5) DOES NOT PERMIT THE ASSESSEE TO CLAIM IT AS BUSINESS LOSS SINCE THE AMENDED PROVISION COME INTO EFFECT ONLY IN RESPECT OF RECOGNIZED STOCK EXCHANGES AND SINCE IT WAS ONLY ON 25.01.2006 THAT THE BSE AND NSE WERE NOTIFIED AS RECOGNISED STOCK EXCHANGES UNDER SECTIO N 43(5), THE LOSS ON FUTURES AND OPTIONS INCURRED BETWEEN 01.04.2005 AND 25.01.2 006 HAS TO BE TREATED AS SPECULATION LOSS AND NOT AS BUSINESS LOSS. THE LEAR NED CIT(A) AFFIRMED THE ACTION OF THE AO AND THUS THE ASSESSEE IS IN APPEAL BEFORE US. ITA NO. 1292/MUM/2010 SHRI RAMU S. DEORA 2 3. AT THE TIME OF HEARING THE LEARNED COUNSEL FOR THE ASSESSEE PLACED BEFORE US COPIES OF THE FOLLOWING ORDERS PASSED BY THE ITAT IN SUPPORT OF HIS CONTENTION THAT UNDER IDENTICAL CIRCUMSTANCES THE T RIBUNAL OBSERVED THAT THE TRANSACTIONS IN DERIVATIVES WOULD BE TREATED AS BUSINESS INCOME: - 1. MR. PRAVIN J. AGARWAL VS. ITO ITA NO. 2453/MUM/2010 DATED 09.03.2011. 2. ACIT VS. ARNAV AKSHAY MEHTA (2012) 53 SOT 581 (MUM) 4. IN THIS REGARD THE TRIBUNAL FURTHER OBSERVED THAT C LAUSE (D) OF SECTION 43(5) HAVING BEEN INSERTED BY THE FINANCE ACT, 2005 W.E.F. 1 ST APRIL 2006, TRANSACTIONS OF DERIVATIVES IN RECOGNISED STOCK EXC HANGES SHALL NOT BE DEEMED TO BE SPECULATIVE TRANSACTIONS W.E.F. 01.04. 2006. THE NATIONAL STOCK EXCHANGE AND THE BOMBAY STOCK EXCHANGES WERE RECOGN ISED AS STOCK EXCHANGES BY THE CBDT VIDE NOTIFICATION DATED 25.06 .2006 AND HENCE TRANSACTIONS CARRIED OUT IN THESE EXCHANGES UNDER T HE PROVISIONS OF SECTION 43(5)(D) COULD BE TREATED AS NON-SPECULATIVE TRANSA CTIONS W.E.F. 01.04.2006 AND HENCE ALL THE TRANSACTIONS CARRIED IN THE PREVI OUS YEAR RELEVANT A.Y. 2006-06 WOULD BE ELIGIBLE FOR THE BENEFIT OF SECTIO N 43(5)(D) OF THE ACT. 5. ON THE OTHER HAND, THE LEARNED D.R. RELIED UPON THE ORDERS PASSED BY THE TAX AUTHORITIES. 6. WE HAVE CAREFULLY GONE THROUGH THE SUBMISSIONS OF T HE LEARNED COUNSEL AND THE LEARNED D.R. ADMITTEDLY, THE ISSUE IN DISPUTE IS SQUARELY COVERED BY THE DECISIONS STATED ABOVE. NO CONTRARY DECISION WAS PLACED BY THE LEARNED D.R. UNDER THESE CIRCUMSTANCES, BY RESP ECTFULLY FOLLOWING THE DECISION CITED SUPRA, WE ACCEPT THE PLEA OF THE ASS ESSEE AND SET ASIDE THE ORDER OF THE CIT(A) AND AO AND DIRECT THE AO TO TRE AT THE LOSS INCURRED BY THE ASSESSEE AS BUSINESS LOSS. GROUND NO. 1 IS ACCO RDINGLY ALLOWED. 7. IN THE RESULT, APPEAL FILED BY THE ASSESSEE IS TREA TED AS PARTLY ALLOWED. ORDER PRONOUNCED IN THE OPEN COURT ON 17 TH DECEMBER, 2012. SD/- SD/- (SANJAY ARORA) (D. MANMOHAN) ACCOUNTANT MEMBER VICE PRESIDENT MUMBAI, DATED: 17 TH DECEMBER, 2012 ITA NO. 1292/MUM/2010 SHRI RAMU S. DEORA 3 COPY TO: 1. THE APPELLANT 2. THE RESPONDENT 3. THE CIT(A) 23, MUMBAI 4. THE CIT XII, MUMBAI CITY 5. THE DR, D BENCH, ITAT, MUMBAI BY ORDER //TRUE COPY// ASSISTANT REGISTRAR ITAT, MUMBAI BENCHES, MUMBAI N.P.