VINOD KUMAR RAMPURIA, Kolkata V. ITO, Ward - 7(2),Kolkata, Kolkata

ITA 1902/KOL/2009

• Counselvise Citation: [2010] 136 COUNSELVISE.COM (IT) 2454 (ITAT-KOLKATA)
• Duration Of Justice: 8 month(s) 3 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 16-07-2010
• Appeal Filed By: Assessee
• Bench Allotted: C
• Assessment Year: 2006-2007
• Appeal Filed On: 13-11-2009
• Court: TRIBUNAL
• Department Lawyers: JYOTI KUMARI
• Keywords: Business income; Transactions in derivatives; Speculation loss
• Section: 43(5)

Judgement Text

1 , C , , IN THE INCOME TAX APPELLATE TRIBUNAL, BENCH- C , KO LKATA [ . . . . . . . . , , , , . . . . . . . . !' !' !' !', , , , #$ ] [BEFORE SHRI G.D.AGRAWAL, V.P. & D.K. TYAGI, JUDICIAL MEMBER ] % % % % / ITA NO. 1902 (KOL) OF 2009 &'( )* / ASSESSMENT YEAR 2006-07 VINOD KUMAR RAMPURIA KOLKATA. (PAN-ACQPR5534A) INCOME-TAX OFFICER, WARD-7(2), KOLKATA. (-. / APPELLANT ) - ' - - VERSUS - (1!-./ RESPONDENT ) -. 2 3 / FOR THE APPELLANT: SRI SUBASH AGARWAL 1!-. 2 3 / FOR THE RESPONDENT: SMT. JYOTI KUMARI # 4 / ORDER ( . . . . . . . . !' !' !' !' ) , , , , #$ (D.K.TYAGI), JUDICIAL MEMBER : THIS APPEAL BY THE ASSESSEE IS DIRECTED AGAINST T HE ORDER DATED 22/9/2009 OF LD. C.I.T.(A)-VIII, KOLKATA FOR ASSESSMENT YEAR 2006-07 . THE ONLY GROUND RAISED IN THIS APPEAL BY THE ASSESSEE READS AS UNDER :- 1. THAT THE LD. A.O. AND THE LD. CIT( APPEALS) WERE GROSSLY ERRED IN TREATING LOSS OF RS.2,22,296/- INCURRED UPTO 24.01.06 ON DER IVATIVE TRANSACTION AS SPECULATION LOSS. 2. ON PERUSAL OF P/L ACCOUNT AND OTHER DETAILS, TH E A.O. FOUND THAT THE ASSESSEE CLAIMED LOSS OF RS.1,63,718/- ON DERIVATIVE TRANSAC TION, WHICH WAS ADJUSTED AGAINST THE INCOME FROM BUSINESS BY DIRECTLY DEBITING IN P/L AC COUNT. ACCORDING TO THE A.O., AS PER NOTIFICATION NO.2 DATED 25/1/2006, THE DERIVATI VE TRANSACTION UPTO 24/1/2006 IS TO BE CONSIDERED AS SPECULATION BUSINESS AND FROM 25/1/ 2006 TO 31/3/2006 THE SAID TRANSACTION IS TO BE CONSIDERED AS BUSINESS OTHER THAN SPECULATION, WHICH THE ASSESSEE DID NOT DO WHILE DRAWING P/L ACCOUNT. FROM THE DETA ILS FILED IN RESPECT OF DERIVATIVE SALES, THE A.O. FOUND THAT THERE WAS A LOSS OF RS.2 ,22,296/- UPTO 24/1/2006 AND THERE WAS A PROFIT OF RS.58,578/- FROM 25/1/2006 TO 31/3/ 2006. HE, THEREFORE, CONSIDERED THE LOSS OF RS.2,22,296/- AS SPECULATIVE LOSS AND THE PROFIT OF RS. 58,578/- AS BUSINESS 2 PROFIT. THE A.O. FURTHER HELD THAT AS THE LOSS PE RTAINING TO DERIVATIVES TRANSACTION IS IN THE NATURE OF SPECULATION LOSS, THE SAME IS NOT ALL OWED TO BE SET OFF AGAINST OTHER BUSINESS INCOME. HE, THEREFORE, ADDED THE SUM OF R S.2,22,296/- [RS.1,63,718 + RS.58,578] TO THE TOTAL INCOME OF THE ASSESSEE UNDE R THE HEAD BUSINESS. THE LD. C.I.T.(A), ON APPEAL, CONFIRMED THE SAID ADDITION. HENCE THIS APPEAL BY THE ASSESSEE. 3. AT THE TIME OF HEARING BEFORE US, THE ASSESSEE S LEARNED COUNSEL REFERRING TO THE DECISION OF I.T.A.T., DELHI IN THE CASE OF G.K.ANAN D BROS. BUILDWELL (P) LTD. VS. ITO, REPORTED IN (2009) 34 SOT 439 (DELHI) SUBMITTED THA T THE ISSUE IN THIS APPEAL IS SQUARELY COVERED BY THE SAID DECISION OF TRIBUNAL. HE, THER EFORE, SUBMITTED THAT THE AUTHORITIES BELOW WERE NOT JUSTIFIED IN TREATING THE LOSS OF RS .2,22,296/- INCURRED UPTO 24/1/2006 ON DERIVATIVE TRANSACTION AS SPECULATION LOSS INSTEAD OF BUSINESS LOSS CLAIMED BY THE ASSESSEE. THE LD. DEPARTMENTAL REPRESENTATIVE, ON THE OTHER HAND, RELIED ON THE ORDERS OF THE AUTHORITIES BELOW. 4. WE HAVE HEARD THE PARTIES AND PERUSED THE MATER IAL PLACED BEFORE US. WE FIND THAT THE ISSUE IN QUESTION IS COVERED BY THE DECISI ON OF TRIBUNAL IN THE CASE OF G.K. ANAND BROS. BUILDWELL (P) LTD. (SUPRA), WHEREIN ON IDENTICAL FACTS AND CIRCUMSTANCES OF THE CASE AND CONSIDERING THE SPECIAL BENCH DECISION OF I.T.A.T. IN THE CASE OF SHREE CAPITAL SERVICES LTD. VS. ACIT, REPORTED IN 318 ITR (AT)1 (KOL-SB), THE TRIBUNAL TREATED THE LOSS INCURRED BY THE ASSESSEE ON DERIVA TIVE TRANSACTION AS BUSINESS LOSS. THE FINDING OF THE TRIBUNAL IN THE SAID CASE IS AS UNDE R :- SECTION 43(5) DEFINES SPECULATIVE TRANSACTION WHI CH MEANS A TRANSACTION IN WHICH A CONTRACT FOR THE PURCHASE OR SALE OF ANY CO MMODITY INCLUDING STOCKS AND SHARES IS PERIODICAL OR ULTIMATELY SETTLED OTHERWIS E THAN BY THE ACTUAL DELIVERY OR THE TRANSFER OF COMMODITY OR SCRIPS. PROVISO BELOW SECTION 43(5) CARVES OUT EXCEPTIONS TO SECTION 43(5). AS PER CLAUSE (D) OF T HE SAID PROVISO AN ELIGIBLE TRANSACTION IN RESPECT OF TRADING IN DERIVATIVES RE FERRED TO IN THE SECURITIES CONTRACTS (REGULATION) ACT, 1956 CARRIED OUT IN A R ECOGNIZED STOCK EXCHANGE SHALL NOT BE DEEMED TO BE A SPECULATIVE TRANSACTION . CLAUSE (D) IN THE PROVISO WAS INSERTED BY THE FINANCE ACT, 2005 WITH EFFECT F ROM 1-4-2006. THEREFORE, IF A TRANSACTION FALLS WITHIN CLAUSE (D) OF THE PROVISO IT WILL NOT BE DEEMED TO BE A SPECULATIVE TRANSACTION IN RESPECT OF TRANSACTION P ERTAINING TO THE ASSESSMENT YEAR 2006-07 UNDER CLAUSE (D) OF THE PROVISO, A TRA NSACTION IS NOT A SPECULATIVE 3 TRANSACTION PROVIDED IT IS AN ELIGIBLE TRANSACTION WITHIN THE MEANING OF CLAUSE (I) OF THE EXPLANATION AND IT IS CARRIED ON AT THE RECO GNIZED STOCK EXCHANGE AS EXPLAINED IN CLAUSE II) OF THE SAID EXPLANATION BEL OW PROVISO TO SECTION 43(5)(D). THE RECOGNIZED STOCK EXCHANGE MEANS A RECOGNIZED ST OCK EXCHANGE AS NOTIFIED BY THE CENTRAL GOVERNMENT FOR THIS PURPOSE. THEREFORE, EVEN IF THE NOTIFICATION IS FROM 25-1-2006 AS PER CLAUSE (D) INSERTED, THE SAME WILL APPLY TO ALL THE TRANSACTIONS IN RELATION TO THE ASSESSMENT YEAR 200 6-07 AND ONWARDS. CLAUSE (D) DOES NOT MENTION THAT UNLESS THE RECOGNIZED STOCK E XCHANGE IS NOTIFIED, THE TRANSACTION WILL NOT BE DEEMED TO BE A SPECULATIVE TRANSACTION. THE POWER TO NOTIFY THE STOCK EXCHANGE IS GRANTED UNDER THE STAT UTE AND HENCE, ONCE THE RECOGNIZED STOCK EXCHANGE IS NOTIFIED, THE SAME WIL L APPLY RESPECT OF ALL ELIGIBLE TRANSACTIONS CARRIED OUT IN RELATION TO THE FINANCI AL YEAR RELEVANT TO THE ASSESSMENT YEAR2006-07 AND ONWARDS. THE NOTIFICATIO N DATED 25-1-2006 IS BY WAY OF A SUBORDINATED LEGISLATION BUT CANNOT OVERRI DE THE PRINCIPAL LEGISLATION ENACTED BY THE PARLIAMENT. IT ONLY CLARIFIES BUT WI LL NOT OVERRIDE UNLESS STATUTORILY SO PRESCRIBED. SINCE THERE WAS NO DISPU TE TO THE FACT THAT THE TRANSACTIONS, IN THE INSTANT CASE, IN FUTURE AND OP TION SEGMENT WERE THE ELIGIBLE TRANSACTIONS CARRIED OUT IN A RECOGNIZED STOCK EXCH ANGE, LOSS IN SUCH TRANSACTIONS COULD NOT BE DEEMED TO BE LOSS IN THE SPECULATION BUSINESS. THEREFORE, THE LOSS-IN-QUESTION WAS TO BE TREATED A S A BUSINESS LOSS AND NOT AS LOSS IN SPECULATION BUSINESS. IN VIEW OF THE ABOVE AND RESPECTFULLY FOLLOWING THE AFORESAID DECISION OF TRIBUNAL IN THE CASE OF G.K. ANAND BROS. BUILDWELL (P) LTD. (SUPRA) , WE HOLD THAT THE AUTHORITIES BELOW WERE NOT JUSTIFIED IN TREATING THE LOSS OF RS.2,22, 296/- INCURRED UPTO 24/1/2006 ON DERIVATIVE TRANSACTION AS SPECULATION LOSS INSTEA D OF BUSINESS LOSS AS CLAIMED BY THE ASSESSEE. THEREFORE, THE ADDITION MADE OF THE SAID AMOUNT TO THE ASSESSEES TOTAL INCOME IS DELETED. WE ORDER ACCORDINGLY. 5. IN THE RESULT, THE ASSESSEES APPEAL IS ALLOWED . 5 # 4 67 8 7' ' 59 THIS ORDER IS PRONOUNCED IN OPEN COURT ON 16/7/10. SD/- SD/- ( . . . . . . . . ), ( (( ( . . . . . . . . !' !' !' !') )) ), , , , #$ (G.D.AGRAWAL), VICE-PRESIDENT (D.K.TYAGI), JUDICIAL MEMBER ( (( (6 6 6 6) )) ) DATE: 16-07-2010 4 % % % % / ITA NO. 1902 (KOL) OF 2009 # 4 2 1&&: :);- COPY OF THE ORDER FORWARDED TO: 1. -. / THE APPELLANT : VINOD KR. RAMPURIA, 3-A, SHAKESPEARE SARANI, KOLKATA-700 071 2 1!-. / THE RESPONDENT : I.T.O., WARD-7(2), KOLKATA. 3. &4' () : THE CIT(A)-VIII, KOLKATA. 4. &4'/ THE CIT, KOL- 4. @&' 1&' / DR, ITAT, KOLKATA BENCHES, KOLKATA 5. GUARD FILE . !: 1&/ TRUE COPY, # 4'7/ BY ORDER, (DKP) / DEPUTY REGISTRAR .