Shri Babubhai Ramanbhai Patel, Ahmedabad V. The Dy.CIT, Circle-1, Ahmedabad

ITA 1674/AHD/2014

• Counselvise Citation: [2017] 128 COUNSELVISE.COM (IT) 6135 (ITAT-AHMEDABAD)
• Duration Of Justice: 2 year(s) 10 month(s) 21 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 19-04-2017
• Appeal Filed By: Assessee
• Order Result: Allowed
• Bench Allotted: B
• Next Hearing Date: 13-04-2017
• Assessment Year: 2009-2010
• Appeal Filed On: 29-05-2014
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: PP A
• Keywords: Business income; Transactions in derivatives; Speculation loss
• Section: 234B; 14A; 43(5)

Judgement Text

, , IN THE INCOME TAX APPELLATE TRIBUNAL B BENCH, AHMEDABAD , , BEFORE SHRI PRADIP KUMAR KEDIA, ACCOUNTANT MEMBER AND SHRI MAHAVIR PRASAD, JUDICIAL MEMBER ./ I.T.A. NO.1674/AHD/2014 ( / ASSESSMENT YEAR : 2009-10) BABUBHAI RAMANLAL PATEL DARSHAK 14A SWASTIK SOCIETY PUNJABI HALL GALI NAVRANGPURA, AHMEDABAD- 380 009 / VS. THE DY.CIT CIRCLE-1 AHMEDABAD # ./ ./ PAN/GIR NO. : ABYPP 8048 A ( #& / APPELLANT ) .. ( '#& / RESPONDENT ) #&( / APPELLANT BY : SHRI HIMANSHU SHAH, AR '#& )( / RESPONDENT BY : SHRI JAMES KURIAN, SR.DR *+ ), / DATE OF HEARING 13/04/2017 -./0 ), / DATE OF PRONOUNCEMENT 19/ 04 /2017 / O R D E R PER PRADIP KUMAR KEDIA, AM: THE CAPTIONED APPEAL BY THE ASSESSEE IS DIRECTED AGAINST THE ORDER OF THE COMMISSIONER OF INCOME TAX(APPEALS)-6, AHMED ABAD [CIT(A) IN SHORT] DATED 11/03/2014 FOR THE ASSESSMENT YEAR (AY) 2009-10. ITA NO.1674/AHD /2014 BABUBHAI RAMANLAL PATEL VS. DCIT ASST.YEAR 2009-10 - 2 - 2. THE GROUNDS OF APPEAL RAISED BY THE ASSESSEE R EAD AS UNDER:- 1. IN LAW AND IN FACTS AND CIRCUMSTANCES OF THE APPEL LANTS CASE, THE LEARNED COMMISSIONER OF INCOME-TAX (APPEALS) HA S GROSSLY ERRED IN POINTS OF LAW AND ON FACTS. 2. IN LAW AND IN THE FACTS AND CIRCUMSTANCES OF THE AP PELLANTS CASE, THE LEARNED COMMISSIONER OF INCOME-TAX (APPEA LS) HAS GROSSLY ERRED IN CONFIRMING DISALLOWANCE OF LOSS ON DEALING IN SHARES AND SECURITIES IN F&O SEGMENT OF RS.23,48,02 7 AND COMPUTED UNDER THE HEAD AS SPECULATIVE LOSS. 3. IN LAW AND IN THE FACTS AND CIRCUMSTANCES OF THE AP PELLANTS CASE, THE LEARNED COMMISSIONER OF INCOME-TAX (APPEA LS) HAS GROSSLY ERRED IN CONFIRMING THAT LONG TERM CAPITAL GAIN OF RS.7,14,865 SHOULD BE ASSESSED AS BUSINESS INCOME. 4. IN LAW AND IN THE FACTS AND CIRCUMSTANCES OF THE AP PELLANTS CASE, THE LEARNED COMMISSIONER OF INCOME-TAX (APPEA LS) HAS GROSSLY ERRED IN CONFIRMING DISALLOWANCE OF INTERES T EXPENSES OF RS.14,54,978. 5. IN LAW AND IN THE FACTS AND CIRCUMSTANCES OF THE AP PELLANTS CASE, THE LD.COMMISSIONER OF INCOME-TAX (APPEALS) H AS GROSSLY ERRED IN DISMISSING APPELLANTS GROUND REGARDING IN ITIATION OF PENALTY PROCEEDINGS U/S.271(1)(C) OF INCOME-TAX ACT . 6. IN LAW AND IN THE FACTS AND CIRCUMSTANCES OF THE AP PELLANTS CASE, THE LD.COMMISSIONER OF INCOME-TAX (APPEALS) H AS GROSSLY ERRED IN HOLDING THAT CHARGING OF INTEREST U/SS.234 A, 234B AND 234B OF INCOME-TAX ACT IS CONSEQUENTIAL. 7. YOUR APPELLANT RESERVES THE RIGHT TO ADD, ALTER, AM END ALL OR ANY OF THE ABOVE GROUNDS OF APPEAL AS MAY BE ADVISE D FROM TIME TO TIME. 3. GROUND NO.1 IS GENERAL IN NATURE AND THEREFORE D OES NOT CALL FOR ANY ADJUDICATION. ITA NO.1674/AHD /2014 BABUBHAI RAMANLAL PATEL VS. DCIT ASST.YEAR 2009-10 - 3 - 4. GROUND NO.2 RELATES TO DISALLOWANCE OF LOSS ON D EALING IN SHARES AND SECURITIES IN FUTURE & OPTIONS (DERIVATIVE) SEG MENT. THE LOSS ARISING FROM TRANSACTIONS IN RESPECT OF TRADING AND DERIVAT IVES AMOUNTING TO RS.23,48,027/- WAS TREATED AS SPECULATIVE LOSS BY THE ASSESSING OFFICER (AO). 4.1. IN FIRST APPEAL, THE CIT(A) CONFIRMED THE ACT ION OF THE AO ON THE GROUND THAT THE AFORESAID LOSS ARISING FROM F&O BUS INESS WAS DECLARED BY THE ASSESSEE HIMSELF AS SPECULATIVE LOSS IN THE RETURN OF INCOME FILED BY HIM. 4.2. WE FIND THAT THE LOSS FROM F&O BUSINESS CARRI ED OUT THROUGH RECOGNIZED STOCK EXCHANGE CANNOT BE TREATED AS SPEC ULATIVE LOSS IN VIEW OF THE EXCEPTIONS CARRIED OUT UNDER S.43(5) OF THE ACT. AS PER CLAUSE(D) OF FIRST PROVISO TO SECTION 43(5) OF THE ACT INSERT ED BY THE FINANCE ACT, 2005 WITH EFFECT FROM 01/04/2006, TRADING IN DERIVA TIVES CARRIED OUT THROUGH RECOGNIZED STOCK EXCHANGE WILL NOT BE DEEME D TO BE A SPECULATIVE TRANSACTION FOR THE PURPOSES OF SECTION 43(5) OF THE ACT. THUS, THE LOSS ARISING FROM TRADING IN DERIVATIVES OUGHT TO BE TREATED AS ORDINARY BUSINESS LOSS. THUS, THE RESTRICTIONS APP LICABLE FOR ELIGIBILITY OF SET OFF OF LOSS OF SPECULATIVE NATURE WILL NOT APPL Y TO THE LOSS ARISING FROM F&O TRANSACTION. ITA NO.1674/AHD /2014 BABUBHAI RAMANLAL PATEL VS. DCIT ASST.YEAR 2009-10 - 4 - 4.3. HAVING HELD THAT THE LOSS ARISING FROM F&O TR ANSACTIONS ARE NOT SPECULATIVE AND ARE AT PAR WITH ORDINARY BUSINESS L OSS, WE ALSO OBSERVE THAT THE ACTION OF THE CIT(A) IN DENYING THE RELIEF CLAIMED BY THE ASSESSEE ON THE GROUND THAT THE RETURN OF INCOME ITSELF DECL ARES THE LOSS AS SPECULATIVE LOSS DO NOT RESONATE WITH THE DECISIO N OF THE HONBLE BOMBAY HIGH COURT IN THE CASE OF CIT VS. PRUTHVI BR OKERS AND SHAREHOLDERS PVT.LTD. 349 ITR 336 (BOM). THE HONB LE BOMBAY HIGH COURT NOTED THAT ASSESSEE IS ENTITLED TO RAISE NOT MERELY ADDITIONAL SUBMISSIONS BEFORE THE APPELLATE AUTHORITIES BUT IS ALSO ENTITLED TO RAISE ADDITIONAL CLAIMS BEFORE THEM. THE HONBLE HIGH CO URT HELD THAT THE JURISDICTION OF THE APPELLATE AUTHORITIES TO ENTERT AIN SUCH CLAIM HAS NOT BEEN NEGATED BY THE HONBLE SUPREME COURT IN THE CA SE OF GOETZE INDIA LTD. 284 ITR 323 (SC). IN THIS VIEW OF THE MATTER, THE ACTION OF THE ASSESSEE IN SEEKING SHELTER OF EXCEPTIONS PROVIDED UNDER S.43(5) AT THE TIME OF PROCEEDINGS BEFORE THE FIRST APPELLATE AUT HORITY IS NOT BAD IN LAW. 4.4. AS WE HAVE HELD THAT CLAIM OF THE ASSESSEE ME RITS ACCEPTANCE IN VIEW OF THE EXPRESS STATUTORY PROVISION, GROUND NO. 2 OF THE ASSESSEES APPEAL STANDS ALLOWED. 5. AS PER GROUND NO.3, THE ASSESSEE IS AGGRIEVED BY THE ACTION OF THE REVENUE IN TREATING LONG TERM CAPITAL GAINS OF RS.7 ,14,865/- AS BUSINESS INCOME OF THE ASSESSEE. WE FIND THAT THE ISSUE IS SQUARELY COVERED IN ITA NO.1674/AHD /2014 BABUBHAI RAMANLAL PATEL VS. DCIT ASST.YEAR 2009-10 - 5 - AFFIRMATIVE BY ASSESSEES OWN CASE IN ITA NOS.1355 & 1719/AHD/2009 & ORS. ORDER DATED 29/08/2016. THE FACTS BEING BRO ADLY SIMILAR AS STATED, WE DO NOT FIND ANY REASON TO DEPART FROM THE VIEW T AKEN EARLIER BY THE COORDINATE BENCH OF THE TRIBUNAL. ACCORDINGLY, GRO UND NO.3 OF THE ASSESSEES APPEAL IS ALLOWED. 6. GROUND NO.4 RELATES TO DISALLOWANCE OF INTEREST EXPENDITURE. THE AO HELD THAT THE INTEREST PAYMENTS WERE RELATED TO SPECULATIVE BUSINESS AND THEREFORE CANNOT BE ALLOWED AGAINST OTHER SOURC ES OF INCOME. THIS VIEW OF THE AO WAS ENDORSED BY THE CIT(A). 7. AS NOTED EARLIER, THE LOSS ARISING FROM DEAL ING IN SHARES AND SECURITIES IN F&O SEGMENT IS HELD TO BE ORDINARY BU SINESS LOSS IN VIEW OF THE EXCEPTION PROVIDED TO SECTION 43(5) OF THE ACT. IT IS NOT IN DISPUTE THAT INTEREST OUTLAY IS ATTRIBUTABLE TO F&O ACTIVIT IES WHICH IS HELD TO BE NON-SPECULATIVE BUSINESS ACTIVITY. IN THE LIGHT OF THE AFORESAID OBSERVATIONS, THE EXPENSES TOWARDS INTEREST WOULD L EAD TO INCREASE IN NON-SPECULATIVE BUSINESS LOSS. CONSEQUENTLY, IT IS ENTITLED TO SET OFF IN THE SAME MANNER AT PAR WITH LOSS ARISING FROM BUSIN ESS TRANSACTIONS. GROUND NO.4 OF THE ASSESSEES APPEAL IS ALLOWED. 8. GROUND NOS.5, 6 & 7 EITHER PREMATURE OR CONSEQU ENTIAL OR GENERAL IN NATURE AND DO NOT CALL FOR ANY SEPARATE ADJUDICATIO N. ITA NO.1674/AHD /2014 BABUBHAI RAMANLAL PATEL VS. DCIT ASST.YEAR 2009-10 - 6 - 9. IN THE RESULT, APPEAL OF THE ASSESSEE IS ALLOWED . THIS ORDER PRONOUNCED IN OPEN COURT ON 19/ 04 /2017 SD/- SD/- ( ) ( ) ( MAHAVIR PRASAD ) ( PRADIP KUMAR KEDIA ) JUDICIAL MEMBER ACCOUNTANT MEMBER AHMEDABAD; DATED 19/ 04 /2017 4..*,.*../ T.C. NAIR, SR. PS !'#$#! / COPY OF THE ORDER FORWARDED TO : 1. #& / THE APPELLANT 2. '#& / THE RESPONDENT. 3. 567, 8, / CONCERNED CIT 4. 8, ( ) / THE CIT(A)-6, AHMEDABAD 5. 9:;,*67 , 67 0 , 5 / DR, ITAT, AHMEDABAD 6. ;<+ / GUARD FILE. / BY ORDER, '9,, //TRUE COPY// / ( DY./ASSTT.REGISTRAR) , / ITAT, AHMEDABAD 1. DATE OF DICTATION .. 17.4.17 (DICTATION-PAD 10- PAGES ATTACHED AT THE END OF THIS APPEAL-FILE) 2. DATE ON WHICH THE TYPED DRAFT IS PLACED BEFORE THE DICTATING MEMBER 17.4.17 3. OTHER MEMBER 4. DATE ON WHICH THE APPROVED DRAFT COMES TO THE SR.P. S./P.S.. 5. DATE ON WHICH THE FAIR ORDER IS PLACED BEFORE THE D ICTATING MEMBER FOR PRONOUNCEMENT 6. DATE ON WHICH THE FAIR ORDER COMES BACK TO THE SR.P .S./P.S.19.4.17 7. DATE ON WHICH THE FILE GOES TO THE BENCH CLERK 19.4.17 8. DATE ON WHICH THE FILE GOES TO THE HEAD CLERK ... 9. THE DATE ON WHICH THE FILE GOES TO THE ASSISTANT RE GISTRAR FOR SIGNATURE ON THE ORDER.. 10. DATE OF DESPATCH OF THE ORDER