M/s. Lucas Estates Pvt. Ltd., Kolkata V. ITO, Ward-6(2), Kolkata, Kolkata

ITA 1836/KOL/2016

• Counselvise Citation: [2018] 126 COUNSELVISE.COM (IT) 1796 (ITAT-KOLKATA)
• Duration Of Justice: 1 year(s) 3 month(s) 23 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 12-01-2018
• Appeal Filed By: Assessee
• Order Result: Partly Allowed
• Bench Allotted: C
• Assessment Year: 2010-2011
• Appeal Filed On: 19-09-2016
• Result in Favour of: Partly Allowed
• Court: TRIBUNAL
• Department Lawyers: ARINDAM BHATTACHARJEE
• Assessee Lawyers: S M SURANA
• Keywords: Speculation loss
• Section: 143(3)

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL D BENCH : KOLKATA [BEFORE HONBLE SHRI M.BALAGANESH, AM & HONBLE S HRI S.S.VISWANETHRA RAVI, JM] I.T.A NO. 1836/KOL/20 16 ASSESSMENT YEAR : 2010-1 1 M/S LUCAS ESTATES PVT. LTD. -VS- ITO, W ARD-6(2), KOLKATA [PAN: AAACL 5860 A] (APPELLANT) (RESPONDENT) FOR THE APPELLANT : SHRI S.M. SURANA, ADVOCATE FOR THE RESPONDENT : SHRI ARINDAM BHATTACHARJ EE, ADDL. CIT DATE OF HEARING : 10.01.2018 DATE OF PRONOUNCEMENT : 12.01.2018 ORDER PER M.BALAGANESH, AM 1. THIS APPEAL BY THE ASSESSEE ARISES OUT OF THE O RDER OF THE LEARNED COMMISSIONER OF INCOME TAX(APPEALS)-2, KOLKATA [IN SHORT THE LD CIT(A)] IN APPEAL NO.899/CIT(A)-2/14-15 DATED 26.03.2013 AGAIN ST THE ORDER PASSED BY THE ITO, WARD-6(2), KOLKATA [ IN SHORT THE LD AO] UNDER SECTION 143(3) OF THE INCOME TAX ACT, 1961 (IN SHORT THE ACT) DATED 04 .03.2013 FOR THE ASSESSMENT YEAR 2010-11. 2. GROUND NOS. 1,5 AND 6 RAISED BY THE ASSESSEE AR E GENERAL IN NATURE AND DO NOT REQUIRE ANY SPECIFIC ADJUDICATION. 2 ITA NO.1836/KOL/2016 M/S LUCAS ESTATES PVT. LTD. A.YR. 2010-11 2 3. GROUND NOS. 2 AND 3 RAISED BY THE ASSESSEE WERE STATED TO BE NOT PRESSED BY THE LD. AR AT THE TIME OF HEARING. THE SAME IS RECKONED AS A STATEMENT FROM THE BAR AND ACCORDINGLY, GROUND NOS. 2 AND 3 RAISED BY THE ASSESSEE ARE DISMISSED AS NOT PRESSED. 4. THE ONLY ISSUE TO ADJUDICATED IN THIS APPEAL IS AS TO WHETHER THE LD. CIT(A) WAS JUSTIFIED IN NOT ADMITTING THE ADDITIONAL GROUN D FOR TREATMENT OF LOSS OF RS. 10.67 LACS AS THE CURRENCY LOSS, IN THE FACTS AND C IRCUMSTANCES OF THE CASE. 5. THE BRIEF FACTS OF THIS ISSUE IS THAT THE ASSESS EE IS A PRIVATE LIMITED COMPANY AND HAD FILED ITS RETURN OF INCOME FOR THE ASSESSMENT Y EAR 2010-11 ON 15.09.2010 DECLARING TOTAL INCOME OF RS. NIL. THE ASSESSEE IS A NON-BANKING FINANCE COMPANY. THE ASSESSEE IS ALSO ENGAGED IN THE BUSINE SS OF TRADING OF SHARES. THE LD. AO OBSERVED THAT THE ASSESSEE HAD CLAIMED A LOS S OF RS. 36,26,239/- ON ACCOUNT OF DERIVATIVE TRANSACTIONS AND HAD INCLUDED THE SAME UNDER THE HEAD PURCHASE OF SHARES IN SCHEDULE 11 TO THE PROFIT A ND LOSS ACCOUNT. THE LD. AO OBSERVED THAT THE SAID DERIVATIVE LOSS OF RS. 36,26 ,239/- INCLUDED A LOSS OF RS. 10,67, 396/- INCURRED BY THE ASSESSEE OUT OF CURRE NCY TRADING THROUGH MCX STOCK EXCHANGE. THIS LOSS OF RS. 10,67,396/- WAS TREATED BY THE LD. AO AS SPECULATION LOSS AND ACCORDINGLY, DID NOT ALLOW THE SAME TO BE SET OFF AGAINST BUSINESS PROFIT DECLARED BY THE ASSESSEE. 6. THE ASSESSEE DID NOT RAISE ANY GROUND OF APPEAL WITH REGARD TO THIS ISSUE IN THE ORIGINAL GROUNDS OF APPEAL BEFORE THE LD. CIT(A). A T THE TIME OF HEARING BEFORE THE LD CITA, THE ASSESSEE RAISED AN ADDITIONAL GROU ND DISPUTING THE TREATMENT OF DERIVATIVE LOSS OF RS. 10,67,397/- AS SPECULATION L OSS BY THE LD. AO. THE LD. 3 ITA NO.1836/KOL/2016 M/S LUCAS ESTATES PVT. LTD. A.YR. 2010-11 3 CIT(A) DID NOT ADMIT THIS ADDITIONAL GROUND RAISED BEFORE HIM BY OBSERVING THAT IT IS NOT LEGAL IN NATURE AND REQUIRES VERIFICATION OF FRESH FACTS. ACCORDINGLY, HE DISMISSED THE ADDITIONAL GROUND RAISED BY THE ASSE SSEE BEFORE HIM. AGGRIEVED, THE ASSESSEE IS IN APPEAL BEFORE US ON THE FOLLOWIN G GROUNDS: 4. FOR THAT THE LD. CIT(A) ERRED IN NOT ADMITTING T HE ADDITIONAL GROUND FOR TREATMENT OF LOSS OF RS. 10.67 LAKHS AS COMMODITY L OSS WITHOUT ANY VALID REASON WHEN THE SAID LOSS WAS IN CURRENCY TRANSACTI ON THROUGH MCX WHICH WAS ALLOWABLE AS TRADING LOSS. 7. WE HAVE HEARD THE RIVAL SUBMISSIONS. AT THE OUTS ET, WE FIND THAT THE ISSUE OF INCURRENCE OF DERIVATIVE LOSS OF RS. 10.67 LACS HAD NOT BEEN ADJUDICATED ON MERITS. THE ADDITIONAL GROUND RAISED BY THE ASSESSEE BEFOR E THE LD. CIT(A) HAD NOT BEEN ADMITTED AT ALL ON THE GROUND THAT THE ISSUE REQUIR ES VERIFICATION OF FRESH FACTS. BUT WE FIND THAT THE LD. AO HAD ALREADY OBSERVED ON VER IFICATION OF THE CONTRACT NOTES FILED BY THE ASSESSEE IN THIS REGARD, WHICH IS CLE ARLY MENTIONED IN THE ASSESSMENT ORDER, HAD TREATED THE LOSS INCURRED ON CURRENCY T RANSACTION AS SPECULATION LOSS. HENCE, WE ARE CONVINCED THAT THERE IS NO REQUIREMEN T OF VERIFICATION OF FRESH FACTS AS STATED BY THE LD. CIT(A). ACCORDINGLY, WE ARE NO T IN AGREEMENT WITH THE ACTION OF THE LD. CIT(A) IN THIS REGARD. HOWEVER, WE FIND THAT THE LD. AO HAD NOT GIVEN ANY FINDING IN HIS ASSESSMENT ORDER AFTER THE PERUS AL OF THE CONTRACT NOTES, AS TO WHETHER: I) THE SAID LOSS HAS BEEN INCURRED ON ACCOUNT OF CU RRENCY TRANSACTION; II) WHETHER THE SAID TRANSACTION WAS CARRIED OUT TH ROUGH RECOGNIZED MCX STOCK EXCHANGE; III) WHETHER THE ASSESSEE HAD TAKEN DELIVERY OF THE SUBJECT MENTIONED TRANSACTION WHILE MAKING PURCHASE THEREON; 4 ITA NO.1836/KOL/2016 M/S LUCAS ESTATES PVT. LTD. A.YR. 2010-11 4 IN OUR OPINION, FINDING IN RESPECT OF AFORESAID THR EE ITEMS WOULD BE CRUCIAL AND RELEVANT FOR DETERMINING THE NATURE OF THE TRANSACT ION WHICH IN TURN WOULD BE RELEVANT FOR DECIDING WHETHER IT IS A SPECULATIVE T RANSACTION OR A NORMAL BUSINESS TRANSACTION. THE LD. AR PLACED BEFORE US THE COPY O F THE CBDT INSTRUCTION NO. 03/2010 DATED 23.03.2010 ON THE CAPTION CLARIFICAT ION REGARDING ALLOWING LOSSES ON ACCOUNT OF FOREX DERIVATIVES. IN THE SAI D INSTRUCTION DATED 23.03.2010, CBDT HAD GIVEN A CATEGORICAL GUIDANCE WHEREIN MARKE D TO MARKET LOSSES ARE TO BE TREATED AS SPECULATIVE TRANSACTION AND TREATMEN T OF LOSS FROM ACTUAL TRANSACTION ARISING ON ACTUAL SETTLEMENT/CONCLUSION OF CONTRACT AS A REGULAR BUSINESS TRANSACTION. THE LD. AR ALSO PLACED ON RECORD THE DECISION OF CO-ORDINATE BENCH OF MUMBAI TRIBUNAL IN THE CASE OF IVF ADVISORS PVT. LTD. VS. ACIT IN I.T.A. NO. 4798/MUM/2012 FOR ASSESSMENT YEAR 2009-10 DATED 13. 02.2015 IN SUPPORT OF ITS CONTENTION OF CLAIMING THE LOSS ON ACCOUNT OF FOREX DERIVATIVE AS A REGULAR BUSINESS LOSS IN THE SUM OF RS. 10,67,396/-. 8. WE HAD ALREADY STATED HEREINABOVE THAT THE LD. A O HAD NOT GIVEN A CATEGORICAL FINDING WITH RESPECT TO AFORESAID THREE ASPECTS STA TED HEREINABOVE SO AS TO DECIDE WHETHER THE SUBJECT MENTIONED TRANSACTION IS A SPEC ULATIVE TRANSACTION OR A REGULAR BUSINESS TRANSACTION. HENCE, WE DEEM IT FIT AND APPROPRIATE, IN THE INTEREST OF JUSTICE AND FAIR PLAY, TO DIRECT THE LD. AO TO G IVE A CLEAR FINDING AS TO WHETHER THE SUBJECT MENTIONED LOSS ON ACCOUNT OF DERIVATIVE HAD OCCURRED ON ACCOUNT OF CURRENCY TRANSACTION OR NOT. WE FURTHER DIRECT THAT IF THE SAID LOSS WAS INCURRED ON ACCOUNT OF CURRENCY TRANSACTION AND WHERE DELIVERY HAD BEEN TAKEN BY THE ASSESSEE AND WHERE THE SAID TRANSACTION HAS BEEN CA RRIED OUT THROUGH MCX STOCK EXCHANGE, THEN THE SAME SHOULD BE TREATED ONLY AS A REGULAR TRADING LOSS INCURRED BY THE ASSESSEE AND NOT AS SPECULATION LOSS, BY PLA CING RELIANCE ON CBDT 5 ITA NO.1836/KOL/2016 M/S LUCAS ESTATES PVT. LTD. A.YR. 2010-11 5 INSTRUCTION NO. 3/2010 DATED 23.03.2010 (SUPRA). AC CORDINGLY, GROUND NO. 4 RAISED BY THE ASSESSEE IS ALLOWED FOR STATISTICAL PURPOSES. 9. IN THE RESULT, THE APPEAL OF THE ASSESSEE IS PAR TLY ALLOWED FOR STATISTICAL PURPOSES SUBJECT TO DIRECTIONS GIVEN HEREINABOVE. ORDER PRONOUNCED IN THE COURT ON 12.01.2018 SD/- SD/- [S.S. VISWANETHRA RAVI] [ M.BAL AGANESH ] JUDICIAL MEMBER ACCOUNTANT MEM BER DATED : 12.01.2018 SB, SR. PS COPY OF THE ORDER FORWARDED TO: 1. M/S LUCAS ESTATES PVT. LTD., 21E, B.R.B. BASU RO AD, 3 RD FLOOR, KOLKATA-700001 2. ITO, WARD-6(2), KOLKATA, P-7, CHOWRINGHEE SQUARE , KOLKATA-700069. 3..C.I.T.- 4. C.I.T.- KOLKATA. 5. CIT(DR), KOLKATA BENCHES, KOLKATA. TRUE COPY BY ORDER SENIOR PRIVAT E SECRETARY HEAD OF OFFICE/D.D.O., ITAT, KOLKATA BENCHE S