AMOL CAPITAL MARKETS P.LTD, MUMBAI V. DCIT 4(1), MUMBAI

ITA 1974/MUM/2016

• Counselvise Citation: [2017] 127 COUNSELVISE.COM (IT) 0388 (ITAT-MUMBAI)
• Duration Of Justice: 1 year(s) 4 month(s) 23 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 21-08-2017
• Appeal Filed By: Assessee
• Order Result: Partly Allowed
• Bench Allotted: Not Allotted
• Assessment Year: 2012-2013
• Appeal Filed On: 29-03-2016
• Result in Favour of: Partly Allowed
• Court: TRIBUNAL
• Assessee Lawyers: VENUGOPAL NAIR
• Keywords: Business income; Depreciation; Search and seizure; Opportunity of being heard; Transactions in derivatives; Speculation loss
• Section: 143(3); 43(5); 28

Judgement Text

ITA NO. 1974/MUM/2016 M/S AMOL MARKETS PVT. LTD. 1 IN THE INCOME TAX APPELLATE TRIBUNAL A BENCH, MUMBAI BEFORE SHRI G.S. PANNU , AM AND SHRI RAVISH SOOD, JM ./ I.T.A. NO. 1974 /MUM/201 6 ( / ASSESSMENT YEAR: 201 2 - 1 3 ) M/S AMOL CAPITAL MARKETS PVT. LTD . MOTALIBAI WADI BLDG, IST FL OOR,22D, S.A BRLVI RD, FORT,MUMBAI - 400 001. / VS. DEPUTY COMMISSIONER OF INCOME - TAX, 4(1)(1), MUMBAI . ./ ./ PAN/GIR NO. AADCS8022N ( / APPELLANT ) : ( / RESPONDENT ) / ASSESSEE BY : SH. VENUGOPAL NAIR / REVENUE BY : SH. DURGA DUTT , D.R. / DATE OF HEARING : 23/05/2017 / DATE OF PRONOUNCEMENT : 21 /0 8 /2017 / O R D E R PER RAVISH SOOD, JUDICIAL MEMBER THE PRESENT APPEAL FILED BY THE ASSESSEE IS DIRECTED AGAINST THE ORDER PASSED BY THE CIT(A) - 9 , MUMBAI, DATED 28.12.2015 , FOR A.Y. 2012 - 1 3 , WHICH IN ITSELF ARISES FROM THE ORDER PASSED BY THE A.O U/S 143(3) OF THE INCOME - TAX ACT 1961 (FOR SHORT ACT), DATED ITA NO. 1974/MUM/2016 M/S AMOL MARKETS PVT. LTD. 2 27.01.2015 . THE ASSESSEE ASSAILING THE ORDER OF THE CIT(A) HAD RAISED THE FOLLOWING GROUNDS OF APPEAL BEFORE US: - 1. THE LEARNED CIT(A) ERRED IN FACTS AND CIRCUMSTANCES AND IN LAW IN CONFIRMING THE ACTION OF AO HOLDING ST CAPITAL LOSS AND LOSS ON F&O AS SPECULATIVE INVOKING EXPLANATION TO SECTION 73 . 2. THE LEARNED CIT(A) ERRED IN FACTS AND CIRCUMSTANCES AND IN LAW IN CONFIRMING THE ACTION OF AO DISALLOWING 50% OF EXPENSES DEBITED TO P&L ACCOUNT AS ATTRIBUTABLE TO SPECULATIVE BUSINESS . 3. REASONS GIVEN BY LEARNED CIT(A) IN CONFIRMING THE ACTION OF AO ARE WRONG, INSUFFICIENT AND CONTRARY TO FACTS AND EVIDENCE ON RECORD AND IN LAW. 4. THE APPELLANT CRAVES, LEAVE TO ADD, MODIFY, ALTER OR DELETE ALL OR ANY OF THE AFORESAID GROUNDS. . 2. BRIEFLY STATED, THE FACTS OF THE CASE ARE THAT THE ASSESSEE COMPANY WHICH IS A CORPORATE MEMBER OF BSE AND ENGAGED IN THE BUSINESS OF SHARE AND STOCK BROKER, INVESTMENT AND FINANCIAL CONSULTANT HAD FILED ITS RETURN OF INCOME FOR A.Y. 2012 - 13 ON 21.09.2012, DECLARING TOTAL LOSS OF RS. 67,32,666/ - . THE RETURN OF INC OME OF THE ASSESSEE WAS PROCESSED AS SUCH U/S 143(1) OF THE ACT. THE CASE OF THE ASSESSEE WAS THEREAFTER SELECTED FOR SCRUTINY ASSESSMENT U/S 143(2). 3. TH AT DURING THE COURSE OF THE ASSESSMENT PROCEEDINGS IT WAS OBSERVED BY THE A.O THAT THE ASSESSEE HA D IN ITS RETURN OF INCOME SHOWN THE FOLLOWING LOSSES : - S.NO. PARTICULARS AMOUNT 1. SHORT TERM CAPITAL LOSS O N SALE OF SHARES ( - ) RS. 36,45,751/ - 2. TRADING LOSS O N SALE OF SHARES ( - ) RS. 33,60,550/ - ITA NO. 1974/MUM/2016 M/S AMOL MARKETS PVT. LTD. 3 THE A.O DELIBERATING ON THE AFORESAID CLAIM OF THE ASSE SSEE, THEREIN OBSERVED AS UNDER : - I) SHORT TERM CAPITAL LOSS ON SALE OF SHARES : - THE A.O HOLDING A CONVICTION THAT AS THE ASSESSEE COMPANY HAD CLAIMED THE STCL ON THE SALE OF ITS INVESTMENT IN EQUITY SHARES, THEREFORE , AS PER THE EXPLANATION TO SECTION 73 OF THE ACT, THE LOSS ARISING FROM THE PURCHASE AND SALE OF SHARES BY THE ASSESSEE COMPANY WAS LIABLE TO BE ASSESSED AS A SPECULATION LOSS AND COULD NOT BE ACCEPTED AS A STCL AS CLAIMED BY THE ASSESSEE IN ITS RETURN OF INCOME. THE A.O IN ORDER TO DR IVE HOME HIS AFORESAID VIEW PLACED HEAVY RELIANCE ON THE JUDGMENT OF THE HONBLE HIGH COURT OF CALCUTTA IN THE CASE OF CIT VS. ARVIND INVESTMENTS LTD. 192 ITR 365 (CAL) . THE A.O THUS ON THE BASIS OF HIS AFORESAID VIEW ASSESSED THE LOSS OF RS. 36,45,751/ - A RISING ON THE SALE OF SHARES HELD BY THE ASSESSEE AS AN INVESTMENT , AS A SPECULATION LOSS. THE A.O THEREAFTER TAKING SUPPORT OF SEC. 73(1) OBSERVED THAT THE SPECULATION LOSS ON THE SALE OF SHARES COULD NOT BE SET OFF EXCEPT AGAINST THE PROFITS AND GAIN S, IF ANY, OF ANOTHER SPECULATION BUSINESS. THE A.O THUS ON THE BASIS OF HIS AFORESAID OBSERVATIONS CARRIED FORWARD THE SPECULATION LOSS OF RS. 36,45,751/ - (SUPRA) FOR BEING SET OFF AGAINST THE INCOME OF THE ASSESSEE UNDER THE HEAD SPECULATION INCOME IN THE SUCCEEDING YEARS. II) TRADING LOSS ON SALE OF SHARES : - THE A.O AGAIN BY TAKING SUPPORT OF THE EXPLANATION TO SEC. 73, THEREIN HELD THAT NOW WHEN THE BUSINESS OF THE COMPANY ITA NO. 1974/MUM/2016 M/S AMOL MARKETS PVT. LTD. 4 CONSISTED OF THE PURCHASE AND SALE OF SHARES, THEREFORE, THE LOSS FROM TRADING O F SHARES WAS LIABLE TO BE ASSESSED AS A SPECULATION LOSS. THE A.O PLACED HEAV Y RELIANCE ON THE JUDGMENT OF THE HONBLE HIGH COURT OF CALCUTTA IN THE CASE OF ARVIND INVESTMENTS LTD. (SUPRA). THE A.O THUS ON THE BASIS OF HIS AFORESAID CONVICTION ASSESSED THE LOSS ON SALE OF SHARE S OF RS. 33,60,550/ - (SUPRA) AS A SPECULATION LOSS , AS AGAINST THAT CLAIMED BY THE ASSESSEE AS A TRADING LOSS. THE A.O FURTHER REFERRING TO SEC. 73(1) THEREIN HELD THAT THE SAID SPECULATION LOSS C OULD ONLY BE SET OFF AGAINST THE SPECULATION PROFITS OF THE ASSE SSEE. III) ALLOCATION OF EXPENSES TOWARDS SPECULATION BUSINESS : - THE A.O DURING THE COURSE OF THE ASSESSMENT PROCEEDINGS AFTER CATEGORIZING THE LOSS REFLECTED BY THE ASSESSEE IN ITS RETURN OF IN COME, VIZ . STCL OF RS. 36,45,751/ - AND T RADING LOSS OF RS. 33,60,550/ - AS A SPECULATION LOSS, THEREIN REFERRING TO EXPLANATION 2 TO SECTION 28 HELD THAT THE PROPORTIONATE EXPENDITURE TOWARDS SPECULATION TRANSACTIONS WHICH WERE CLAIMED BY THE ASSESSEE AS AGAINST ITS NON - SPECULATION BUSINESS W ERE LIABLE TO BE DISALLOWED. THE A.O IN SUPPORT OF HIS AFORESAID CONVICTION RELIED ON THE JU DGMENT OF THE HONBLE HIGH COURT OF BOMBAY IN THE CASE SIND NATIONAL SUPER MILLS P. LTD. VS. CIT 121 ITR 742 (BOM) . THE A.O THUS REFERRING TO THE FOLLOWING EXPENSES WHICH WERE DEBITED BY THE ASSESSEE IN ITS PROFIT AND LOSS ACCOUNT : - S. NO. PARTICULARS AMOUNT 1. EMPLOYEE BENEFIT EXPENSE RS. 13,51,477/ - 2. FINANCIAL COST RS. 23,87,002/ - ITA NO. 1974/MUM/2016 M/S AMOL MARKETS PVT. LTD. 5 3. DEPRECIATION AND AMORTIZATION EXPENSES RS. 1,31,521/ - 4. OTHER EXPENSES RS. 10,40,644/ - TOTAL RS. 49,10,643/ - , THEREIN OBSERVED THAT AS THERE WAS NO BASIS FOR ALLOCATION OF THE AFORESAI D EXPENSES TO THE NON - SPECULATIVE TRANSACTIONS AND THE SPECULATIVE TRANSACTIONS, THEREFORE, 50% OF THE SAID EXPENSES COULD SAFELY BE RELATED TO THE SPECULATIVE TRANSACTIONS OF THE ASSESSEE. THE A.O THUS ON THE BASIS OF HIS AFORESA ID OBSERVATIONS DISALLOWED EXPENSES OF RS. 24,55,321/ - (I.E. 50 % OF RS. 49,10,643/ - ) IN THE HANDS OF THE ASSESSEE COMPANY. 4 . THE ASSESSEE BEING AGGRIEVED WITH THE ASSESSMENT ORDER CARRIED THE MATTER IN APPEAL BEFORE THE CIT(A). THE ASSESSEE SUBMITTED BEFORE THE CIT(A) THAT THE A.O HAD ERRED I N TREATING THE STCL OF RS. 36,45,751/ - AS A SPECULATION LOSS. THE ASSESSEE IN SUPPORT OF ITS AFORESAID CONTENTION PLACED RELIANCE ON THE JUDGMENT OF THE HIGH COURT OF GUJARAT IN THE CASE OF CIT VS. APOLLO VIKAS P. LTD. (2013) 32 TAXMANN.COM 329 (GUJ) . IT WAS AVERRED BY THE ASSESSEE BEFORE THE CIT(A) THAT THE HONBLE HIGH COURT IN THE AFORESAID CASE HAD HELD THAT SECTION 73 PERTAINS TO LOSSES IN SPECULATION BUSINESS AND THE EXPLANATION CONTEMPLATED THEREIN PROVIDED FOR A DEEMING FICTION IN CERTAIN CIRCUMSTANCES WHERE THE ASSESSEE WOULD BE DEEMED TO BE CARRYING ON A SPECULATION BUSINESS . IT WAS SUBMITTED BY THE ASSESSEE THAT THE HONBLE HIGH COURT HAD CLEARLY OBSERVED THAT THE DEEMING FICTION CONTEMPLATED IN SEC. 73 WOULD NOT ITA NO. 1974/MUM/2016 M/S AMOL MARKETS PVT. LTD. 6 APPLY IN A SITUATION NOT COVERED UNDER THE SAID STATUTORY PROVISIONS, AS THE SAID EXPLANATION WAS APPLICABLE TO SEC. 73 ONLY. THE CIT(A) HOWEVER DID NOT FIND FAVOR WITH THE AFORESAID CONTENTION OF THE ASSESSEE AND UPHELD THE ASSESSING OF THE LOSS OF RS. 3 6 , 45 , 751 / - CLAIMED BY THE ASSESSEE AS STCL ON SALE OF SHARES, AS A SPECULATION LOSS BY THE A.O. 5 . THE ASSESSEE ADVERTING TO THE LOSS FROM SALE OF SHARES OF RS. 33,60,550/ - CLAIMED BY IT AS A TRADING LOSS ON SALE OF SHARES, THEREIN SUBMITTED BEFORE THE CIT(A) THAT THE SAME WAS AN AGGREGATE OF TWO ITEMS, VIZ . PROFIT ON TRADING OF SHARES OF RS. 26,441/ - AND LOSS OF F&O FOR THE YEAR OF ( - ) RS. 33,86,990/ - . IT WAS SUBMITTED BY THE ASSESSEE THAT AS THE LOSS FROM TRADING IN DERIVATIVES WAS EXCLUDED FROM THE DEFINITION OF SPECULATIVE TRANSACTIONS AS PER THE POST AMENDED SEC. 43(5)(D) , T HEREFORE, THE LOSS FROM TRADING IN DERIVATIVES BEING A NORMAL BUSINESS LOSS COULD THUS BE SET OFF AGAINST INCOME UNDER ANY HEAD , EXCEPT SALARIES. IT WAS SUBMITTED THAT THE ASSESSEE HAD ACTED AS PER THE PROVISIONS OF LAW AND CLAIMED THE LOSS OF F&O OF ( - ) RS. 33,86,990/ - AS A NORMAL BUSINESS LOSS, WHICH WAS PARTLY SET OFF AGAINST THE PROFIT ON TRADING OF SHAR E S OF RS. 26,441/ - . THE CIT(A) AFTER DELIBERATING ON THE CONTENTION S OF THE ASSESSEE HOWEVER, DID NOT FIND FAVOR WITH THE SAME . THE CIT(A) RELYING UPON CERTAIN JUDICIAL PRONOUNCEMENTS CONCLUDED THAT THOUGH IT WAS AVERRED BY THE ASSESSEE THAT AFTER THE AMENDMENT BY THE FINANCE ACT, 2005, LOSSES IN F&O SEGMENT WERE TO BE TREATED AS A BUSINESS LOSS W.E.F F.Y. 2006 - 07, I.E. A.Y. 2007 - 08, BUT THE SAME WAS SUBJECT TO SATISFACTION OF CERTAIN C ONDITIONS PRESCRIBED IN THE EXPLANATION (1) BY THE ASSESSEE IN RESPECT OF THE SAID TRANSACTIONS. THE CIT(A) THUS REFERRING TO ITA NO. 1974/MUM/2016 M/S AMOL MARKETS PVT. LTD. 7 SEC.43(5)(D) , OB SERVED THAT THE SAME WAS APPLICABLE IN RESPECT OF AN ELIGIBLE TRANSACTION WHICH WAS DEFINED IN THE EXPLANATION 1 OF THE AFORESAID STATUTORY PROVISION. THE CIT(A) THUS CONCLUDED THAT THE MERE STATEMENT OF THE ASSESSEE COULD NOT BE TAKEN AS SACROSANCT AND THE ASSESSEE HAD FAILED TO DEMONSTRATE THAT THE LOSSES SHOWN BY IT UNDER THE F&O SEGMENT WERE FROM TRANSACTIONS DO NE THROUGH RECOGNIZED STOCK EXCHANGE AND WERE SCREEN BASED TRANSACTIONS HAVING STAMPED DATE, TIME AND DETAILS OF F&O TRANSACTIONS. THE CIT(A) THUS BEING OF THE VIEW THAT THE GENUINENESS OF F&O TRANSACTIONS WAS NOT ESTABLISHED, THEREFORE, THE LOSS CLAIMED BY THE ASSESSEE COULD NOT BE ALLOWED. THE CIT(A) THUS IN THE BACKDROP OF THE AFORESAID OBSERVATIONS UPHELD THE ASSESSING OF THE LOSS OF ( - ) RS. 33,86,990/ - AS A SPECULATION LOSS BY THE A.O. 6. THE CIT(A) FURTHER REFUSED TO ALLOW THE CLAIM OF THE ASSESSEE FOR SET OFF OF THE AMOUNT OF RS. 26,441/ - AS A PROFIT IN DELIVERY BASE D TRANSACTION AND ASSESSED THE SAME AS THE I NCOME OF THE ASSESSEE FROM OTHER SOURCES . THE CIT(A) THUS IN THE BACKDROP OF HIS AFORESAID OBSERVATIONS ENHANCED THE DISALLOWANCE BY RS. 26,441/ - . 7. THE CIT(A) FURTHER UPHELD THE DISALLOWANCE OF RS. 24,55,321/ - , VIZ. 50% OF THE EXPENSES WHICH WERE ATTRIBUTED BY THE A.O TO THE SPECULAT IVE TRANSACTION OF THE ASSESSEE . THE CIT(A) THUS ON THE BASIS OF HIS AFORES AID OBSERVATIONS DISMISSED THE APPEAL OF THE ASSESSEE, AS WELL AS MADE AN ENHANCEMENT IN THE HANDS OF THE ASSESSEE . ITA NO. 1974/MUM/2016 M/S AMOL MARKETS PVT. LTD. 8 8. THE ASSESSEE BEING AGGRIEVED WITH THE ORDER OF THE CIT(A) HAD CARRIED THE MATTER IN APPEAL BEFORE US. THAT THE LEARNED AUTHORIZED REPRESENTATIVE (FOR SHORT A.R) FOR THE ASSESSEE SUBMITTED THAT THE A.O HAD WRONGLY ASSESSED THE STCL OF RS. 36,45,751/ - AS CLAIMED BY THE ASSESSEE, AS A SPECULATION LOSS . IT WAS SUBMITTED BY THE LD. A.R THAT THE ASSESSEE HAD CLAIMED THE STCL ON THE SALE OF SHARE S HELD BY IT AS AN INVESTMENT . IT WAS FURTHER AVERRED BY THE LD. A.R THAT IN THE PRECEDING YEARS THE PROFIT ON THE SALE OF SHARES HAD BEEN CLAIMED BY THE ASSESSEE AND ACCEPTED BY THE REVENUE AS SHORT TERM CAPITAL GAIN (STCG). THE LD. A.R. IN SUPP ORT OF HIS AFORESAID CONTENTION SUBMITTED THAT UNLIKE THE FACTS WHICH WERE INVOLVED IN THE CASE OF ARVIND INVESTMENTS LTD. (SUPRA) WHEREIN THE MAJOR SALES WERE MADE OUT OF THE OPENING STOCK OF THE SHARES, IN THE CASE OF THE ASSESSEE ALL THE SALE TRANSACTIONS WERE RELATABLE TO THE SHARES WHICH WERE PURCHASED BY THE ASSESSEE DURI NG THE YEAR UNDER CONSIDERATION. THE LD. A.R IN ORDER TO S UPPORT HIS AFORESAID CONTENTION TOOK US TO PAGE 93 OF THE APB. THE LD. A.R. IN ORDER TO DRI VE HOME HIS CONTENTION THAT THE STCL ON THE SALE OF SHARES COULD NOT BE ASSESSED AS A SPECULATION LOSS, RELIED ON THE JUDGMENT OF THE HONBLE HIGH COURT OF GUJARAT IN THE CASE OF CIT VS. APOLLO VIKAS (P) LTD. (2013) 32 TAXMANN.COM 329 (GUJ) . PER CONTRA, THE LD. D.R. SUPPORTED THE ORDER OF THE CIT(A) AND SUBMITTED THAT THE LATTER HAD RIGHTLY HELD THAT LOSS ON THE SALE OF SHARE S OF ( - ) RS. 36,45,751/ - C LAIMED BY THE ASSESSEE AS STCL WAS LIABLE TO BE ASSESSED AS A SPECULATION LOSS. THE LD D.R. TOOK US T HROUGH THE RELEVANT OBSERVATIONS OF THE CIT(A) RECORDED AT PAGE 27 OF HIS ORDER. THE LD A.R. FURTHER SUBMITTED THAT THE ITA NO. 1974/MUM/2016 M/S AMOL MARKETS PVT. LTD. 9 CIT(A) HAD WRONGLY ASSESSED THE TRADING LOSS OF RS. 33,60,540/ - , WHICH COMPRISED OF PROFIT ON TRADING OF SHARES OF RS. 26,441/ - AND LO SS ON F&O FOR THE YEAR OF RS. 33,86,990/ - , AS A SPECULATION LOSS. THE LD A.R IN SUPPORT OF HIS CONTENTION RELIED ON THE ORDER OF A COORDINATE BENCH OF THE TRIBUNAL PASSED IN THE CASE OF DCIT VS. SSKI INVESTORS SERVICES (P) LTD. (2008) 113 TTJ (MUM) 511 . IT WAS SUBMITTED BY THE LD A.R THAT THE TRIBUNAL IN THE AFORESAID ORDER HAD CONCLUDED THAT AS DERIVATIVE TRADING DOES NOT INVOLVE ANY PURCHASE AND SALE OF SHARES, THEREFORE, THE LOSS ON ACCOUNT OF DERIVATIVE S CANNOT BE TREATED AS A SPECULATION LOSS . PER CONTRA , THE LD D.R PLACED RELIANCE ON THE ORDER OF THE CIT(A) AND SUBMITTED THAT THE LATTER HAD RIGHTLY OBSERVED THAT AS THE ASSESSEE HAD FAILED TO SATISFY THE CONDITIONS CONTEMPLATED IN EXPLANATION 1 OF SEC. 43(5)(D), THEREFORE, ITS CLAIM COULD NOT BE ACCEPTED. THE LD D.R DREW OUR ATTENTION TO THE OBSERVATIONS OF THE CIT(A) RECORDED AT PAGE 28 OF HIS ORDER. 9. WE HAVE HEARD THE AUTHORIZED REPRESENTATIVE S FOR BOTH THE PARTIES, PERUSED THE ORDERS OF THE LOWER AUTHORITIES AND THE MATERIAL AVAILABLE ON RECORD. WE HAVE GIVEN A THOUGHTFUL CONSIDE RATION TO THE ISSUES BEFORE US AND AFTER DELIBERATING ON THE CONT ENTIONS RAISED BY THE AUTHORIZED REPRESENTATIVES FOR BOTH THE PARTIES, ARE OF THE CONSIDERED VIEW AS UNDER : - (A). STCL ON SALE OF SHARES : WE FIND THAT THE A.O WHILE REJECTING THE CLAIM OF THE ASSESSEE AND ASSESSING THE LOSS ON SALE OF SHARES HELD BY THE ASSESSEE AS INVESTMENTS HAD P LACED RELIANCE ON EXPLANATION TO SEC. 73 ITA NO. 1974/MUM/2016 M/S AMOL MARKETS PVT. LTD. 10 OF THE ACT, WHICH READS AS UNDER : - WHERE ANY PART OF THE BUSINESS OF A COMPANY [OTHER THAN A COMPANY WHOSE GROSS TOTAL INCOME CONSISTS MAINLY OF INCOME WHICH IS CHARGEABLE UNDER THE HEADS INTEREST ON SECURITIES, INCOME FROM HOUSE PROPERTY, CAPITAL GAINS AND INCOME FROM OTHER SOURCES] OR A COMPANY THE PRINCIPAL BUSINESS OF WHICH IS THE BUSINESS OF BANKING OR THE GRANTING OF LOANS AND ADVANCES) CONSISTS IN THE PURCHASE AND SALE OF SHARES OF OTHER COMPANIES, SUCH COMPANY SHALL, FOR THE PURPOSES OF THIS SECTION, BE DEEMED TO BE CARRYING ON A SPECULATION B USINESS TO THE EXTENT TO WHICH THE BUSINESS CONSISTS OF THE PURCHASE AND SALE OF SUCH SHARES. THE LD. A.R HAD ON THE OTHER HAND RELIED BEFORE US ON THE JUDGMENT OF THE HONBLE HIGH COURT OF GUJARAT IN THE CASE OF CIT VS. APOLLO VIKAS (P) LTD. (2013) 32 T AXMANN.COM 329 (GUJ). THE LD. A.R HAD PLACED RELIANCE ON PARA 7 OF THE AFORESAID JUDGMENT OF THE HONBLE HIGH COURT, WHEREIN IT WAS HELD AS UNDER: - 7. TO OUR MIND, THE ASSESSING OFFICER COMMITTED AN ERROR IN RESORTING TO EXPLANATION TO SECTION 73 OF THE ACT. THE ISSUE BEFORE HIM WAS WHETHER THE INCOME EARNED BY THE ASSESSEE THROUGH SALE OF SHARES SHOULD BE TAXED AS BUSINESS INCOME OR SHOULD BE TREATED AS CAPITAL GAIN. SUCH ISSUE HAD TO BE DECIDED ON THE BASIS OF THE QUESTION WHETHER THE ASSESSEE IS INVOLV ED IN ANY BUSINESS OF BUYING AND SELLING SHARES OF HAD PURCHASED AND SOLD THE SHARES BY WAY OF INVESTMENT. UNFORTUNATELY, THE ASSESSING OFFICER WENT COMPLETELY IN A WRONG DIRECTION AND RELIED ON THE EXPLANATION TO SECTION 73 OF THE ACT. WE MAY RECALL THAT SECTION 73 OF THE ACT PERTAINS TO LOSSES IN SPECULATION BUSINESS. SUB - SECTION (1) THEREOF PROVIDES THAT ANY LOSS COMPUTED IN RESPECT OF SPECULATION BUSINESS CARRIED ON BY THE ASSESSEE SHALL NOT BE SET OFF EXCEPT AGAINST PROFITS AND GAINS OF ANOTHER SPECU LATION BUSINESS. SUB - SECTION (2) OF SECTION 73, LIKEWISE, PUTS CERTAIN RESTRICTIONS ON CARRYING FORWARD THE SPECULATIVE LOSSES. SUB - SECTION (4) FURTHER PROVIDES THAT NO LOSS SHALL BE CARRIED FORWARD UNDER THAT SECTION FOR MORE THAN FOUR ASSESSMENT YEARS. T HUS THE ENTIRE SECTION HAS APPLICAT ION WHEN THE ASSESSEE HAS INCURRED LOSS OR ITA NO. 1974/MUM/2016 M/S AMOL MARKETS PVT. LTD. 11 INTENDS TO CARRY FORWARD NON - ABSORBED LOSS. EXPLANATION TO SECTION 73 READS AS UNDER : - EXPLANATION WHERE ANY PART OF THE BUSINESS OF A COMPANY (OTHER THAN A COMPANY WHOSE GROSS TOTAL INCOME CONSISTS MAINLY OF INCOME WHICH IS CHARGEABLE UNDER THE HEADS INTEREST ON SECURITIES, INCOME FROM HOUSE PROPERTY, CAPITAL GAINS AND INCOME FROM OTHER SOURCES OR A COMPANY THE PRINCIPAL BUSINESS OF WHICH IS THE BUSINESS OF BANKING OR THE GRANTING OF LOANS AND ADVANCES) CONSISTS IN THE PURCHASE AND SALE OF SHARES OF OTHER COMPANIES, SUCH COMPANY SHALL, FOR THE PURPOSES OF THIS SECTION, BE DEEMED TO BE CARRYING ON A SPECULATION BUSINESS TO THE EXTENT TO WHICH THE BUSINESS CONSISTS OF THE PURCHASE AND SALE OF SHARES . THE EXPLANATION ONLY PROVIDES FOR A DEEMING FICTION IN CERTAIN CIRCUMSTANCES WHERE THE ASSESSEE WOULD BE DEEMED TO BE CARRYING ON A SPECULATION BUSINESS. SUCH DEEMING FICTION WOULD NOT BE APPLY IN SITUATIONS NOT COVERED U NDER SECTION 73 SINCE SUCH EXPLANATION IS APPLICABLE TO SECTION 73 ONLY. THE LD. A.R IN THE BACKDROP OF THE AFORESAID OBSERVATIONS OF THE HONBLE HIGH COURT, HAD TRIED TO IMPRESS UPON US THAT THE SALE OF SHARES HELD BY THE ASSESSEE COMPANY COULD NOT CATEGORIZED AS A SPECULATIVE TRANSACTION, AND THUS NO INFIRMITY COULD BE ATTR IBUTED TO THE CLAIM OF THE STCL RAISED BY THE ASSESSEE ON THE SALE OF SHARES IN ITS RETURN OF INCOME. 10. WE HAVE GIVEN A THOUGHTFUL CONSIDERATION TO THE FACTS OF THE CASE AND ARE NOT PERSUADED TO ACCEPT THE CONTENTION OF THE LD. A.R. WE HAVE PERUSED THE J UDGMENT OF THE HONBLE HIGH COURT OF GUJARAT ON WHICH HEAVY RELIANCE HAD BEEN PLACED BY THE ASSESSEE IN ORDER TO DRIVE HOME HIS CONTENTION THAT THE SALE OF THE SHARES HELD BY THE ASSESSEE COMPANY AS AN INVESTMENT COULD NOT BE CHARACTERIZED AS A SPECULATIVE ITA NO. 1974/MUM/2016 M/S AMOL MARKETS PVT. LTD. 12 TRANSACTION, AND RATHER CLEARLY BEING IN THE NATURE OF A STCL HAD RIGHTLY BEEN REFLECTED AS SUCH IN ITS RETURN OF INCOME. WE ARE OF THE CONSIDERED VIEW THAT THE RELIANCE PLACED BY THE LD. A.R ON THE JUDGMENT OF THE HONBLE HIGH COURT OF GUJARAT IN THE CASE OF CIT VS. APOLLO VIKAS (P) LTD. (2013) 32 TAXMANN.COM 329 (GUJ) , HAD NOT BEEN APPRECIATED BY THE LD. A.R IN THE BACKDROP OF THE ISSUE BEFORE THE HONBLE HIGH COURT, THEREFORE THE SAME CAN SAFELY BE HELD TO BE MISCONCEIVED BY HIM. WE FIND THAT THE FACTS INVOLVED IN THE CASE BEFORE THE HONBLE HIGH COURT WERE THAT THE ASSESSEE HAD EARNED CERTAIN INCOME DURING THE YEAR UNDER CONSIDERATION FROM SALE OF SHARES. THE A.O APPLIED THE EXPLANATION TO SEC. 73 AND HELD THAT AS THE INCOME AROSE OUT OF THE SPECULATIVE BUSINESS OF THE ASSESSEE, THEREFORE, THE SAME COULD NOT BE ASSESSED AS CAPITAL GAIN AS CLAIMED BY THE ASSESSEE. THE CIT(A) AND THE TRIBUNAL HELD THAT AS SEC. 73 WAS APPLICABLE ONLY IN CASE OF LOSSES, THEREFORE, THE INCOME EARNED BY THE ASSESSEE ON THE SALE OF SHARES WOULD NOT BE REGULATED BY THE AFORESAID STATUTORY PROVISION. THAT IT WAS IN THE BACKDROP OF THE AFORESAID FACTS INVOLVED IN THE CASE BEFORE IT THAT THE HIGH COURT HELD THAT AS SEC. 73 PERTAINS TO LOSSES IN SPEC ULATION BUSINESS , TH EREFORE, THE SAME IS APPLICABLE ONLY IN A CASE WHERE THE ASSESSEE HAS INCURRED LOSS OR INTENDS TO CARRY FORWARD UNABSORBED LOSS. THE HIGH COURT FURTHER HELD THAT AS THE EXPLANATION ONLY PROVIDES FOR A DEEMING FICTION IN CERTAIN CIRCUMS TANCES WHERE THE ASSESSEE WOULD BE DEEMED TO BE CARRYING ON A SPECULATION BUSINESS , THEREFORE, THE SAME WOULD NOT APPLY IN SITUATIONS NOT COVERED UNDER SECTION 73 , SINCE SUCH EXPLANATION IS APPLICABLE TO SECTION 73 ONLY. WE ARE OF THE ITA NO. 1974/MUM/2016 M/S AMOL MARKETS PVT. LTD. 13 CONSIDERED VIEW THAT THE LD. A.R BY DIVORCING FEW LINES OF THE AFORESAID JUDGMENT OF THE HONBLE HIGH COURT FROM THE CONTEXT IN WHICH THEY WERE USED, HAD THUS MIS DIRECTED HIMSELF. WE ARE AFRAID THAT THE LD. A.R HAD ABSOLUTELY LOST SIGHT OF THE FACT THAT THE ADJUDICATION BY THE HONBLE HIGH COURT WAS IN CONTEXT OF THE ISSUE , AS TO WHETHER INCOME EARNED BY AN ASSESSEE ON THE SALE OF SHARES WOULD FALL WITHIN THE REALM OF THE EXPLANATION OF SEC. 73, OR NOT. WE ARE THUS IN THE BACKDROP OF OUR AFORESAID OBSERVATIONS OF THE CONSIDERED VIEW THAT THE RELIANCE PLACED BY THE LD. A.R ON THE JUDGMENT OF THE HONBLE HIGH COURT OF GUJARAT IN THE CASE OF APOLLO VIKAS (P) LTD. (SUPRA), BEING DISTINGUISH ABLE ON FACTS , AND NOT IN CONTEXT OF THE ISSUE BEFORE US, WOULD THUS NOT BE OF ANY ASSISTANCE TO THE ASSESSEE. 11. WE HAVE GIVEN A THOUGHTFUL CONSIDERATION TO THE FACTS OF THE CASE AND ARE UNABLE TO FIND OURSELVES AS BEING IN AGREEMENT WITH THE CONTENTIONS RAISED BY THE LD. A.R BEFORE US. WE ARE UNABLE TO PERSUADE OURSELVES TO ACCEPT THE CONTENTION OF THE LD. A.R THAT THE LOSS ON SALE OF SHARES HELD BY THE ASSESSEE AS INVESTMENTS WERE NOT LIABLE TO BE ASSESSED AS A SPECULATIVE LOSS , AND HAD RIGHTLY BEEN REFLECTED AS STCL IN THE RETURN OF INCOME. WE ARE OF THE CONSIDERED VIEW THAT THE PROVISIONS OF EXPLANATION TO SE C. 73 ARE CLEARLY ATTRACTED IN THE PRESENT CASE, IN AS MUCH AS THE ASSESSEE IS NOT COVERED BY EXCLUSIONS CONTEMPLATED THEREIN. THUS , IN THE BACKDROP OF THE AFORESAID FACTUAL POSITION, THE ASSESSEE COMPANY SHALL BE DEEMED TO BE CARRYING ON A SPECULATIVE BUS INESS TO THE EXTENT TO WHICH THE ASSESSEES BUSINESS CONSISTS OF THE PURCHASE AND SALE OF THE SHARES OF OTHER COMPANIES. WE ARE FURTHER OF THE VIEW THAT IN ORDER TO APPLY THE EXPLANATION TO SEC. 73, IT IS NOT NECESSARY THAT THE ASSESSEE MUST HAVE ACTUAL SP ECULATION LOSS, OTHER THAN THE LOSS DEEMED TO BE SPECULATIVE WITHIN ITA NO. 1974/MUM/2016 M/S AMOL MARKETS PVT. LTD. 14 THE MEANING OF EXPLANATION TO SEC. 73 OF THE ACT . WE HAVE DELIBERATED ON THE FACTS OF THE CASE AND THE RELEVANT PROVISIONS OF LAW AND FIND THAT THE ASSESSEE COMPANY IS A SHARE BROKER EXC LUSIVEL Y DEALING IN PURCHASE/SALE OF SHARES. THE ASSESSEE COMPANY HAD SUFFERED A LOSS OF RS.36,45,751/ - ON SALE OF SHARES HELD BY IT AS AN INVESTMENT. THE AO BEING OF THE VIEW THAT THE SAID LOSS FROM SALE OF SHARES WAS A DEEMED SPECULATIVE LOSS , AS THE ASSESSEE WAS TO BE DEEMED TO BE CARRYING ON A SPECULATIVE BUSINESS OF PURCHASE AND SALE OF SHARES OF OTHER COMPANIES AS PER THE PROVISIONS OF EXPLANATION TO SEC . 73 OF THE ACT . THE LD. A.R HAD AVERRED BEFORE US THAT AS SEC. 73 IS NOT APPLICABLE TO THE CASE OF THE ASSESSEE, THEREFORE, THE QUESTION OF APPLYING THE EXPLANATION THERETO DOES NOT ARISE. WE HAVE GIVEN A THOUGHTFUL CONSIDERATION TO THE FACTS OF THE CASE AND ARE OF THE CONSIDERED VIEW THAT A BARE PERUSAL OF THE EXPLANATION TO SEC. 73 REVEAL S THAT WHERE ANY PART OF THE BUSINESS OF A COMPANY (OTHER THAN THE COMPANY EXCLUDED BY THE EXPLANATION ) CONSISTS OF THE PURCHASE AND SALE OF SHARES OF OTHER COMPANIES, SUCH COMPANY SHALL, FOR THE PURPOSE OF SEC . 73, BE DEEMED TO BE CARRYING ON A SPECULATIO N BUSINESS TO THE EXTENT TO WHICH IT CONSISTS OF PURCHASE AND SALE OF SHARES. WE MAY A T THIS STAGE REFER TO THE JUDGMENT OF THE OF HONBLE HIGH COURT OF CALCUTTA IN THE CASE OF CIT VS. ARVIND INVESTMENTS LTD. (1991) 192 ITR 365 (CAL) , ON WHIC H HEAVY RELIANCE HAD BEEN PLACED BY THE ASSESSEE. WE FIND THAT T HE HONBLE HIGH COURT OF CALCUTTA IN THE SAID CASE OF ARVIND INVESTMENTS LTD. (SUPRA) HA D OBSERVED THAT SUB - S. (2) OF S. 73 OF THE IT ACT, 1961, RESTRICTS THE SCOPE OF S. 72 WHICH PROVIDES FOR CARRYING FORWARD AND SETTING OFF OF BUSINESS LOSSES. IF ANY LOSS COMPUTED IN RESPECT OF A SPECULATION BUSINESS HAS NOT BEEN WHOLLY SET OFF, SUCH LOSS MAY BE CARRIED FORWARD AND SET OFF AGAINST PROFITS AND GAINS OF ANY SPECULATION BUSINESS IN THE FOLLOWING ASSESSMENT YEARS. THE EXPLANATION TO SEC. 73 INTRODUCES A LEGAL ITA NO. 1974/MUM/2016 M/S AMOL MARKETS PVT. LTD. 15 FICTION. THE EXPLANATION ALSO DOES NOT APPLY TO AN INVESTMENT COMPANY OR A COMPANY WHOSE PRINCIPAL BUSINESS IS BANKING OR MONEY - LENDING. IF THE BUSINESS OF A COMPANY WHICH DOES NOT FALL WITHIN THE EXCLUDED CATEGORIES CONSISTS OF PURCHASE AND SALE OF SHARES OF OTHER COMPANIES, THEN SUCH A COMPANY SHALL BE DEEMED TO BE CARRYING ON SPECULATION BUSINESS FOR THE PURPOSE OF SEC. 73 , TO THE EXTENT TO WHICH THE BUSINESS CONSISTS OF THE PURCHASES AND SA LE OF SUCH SHARES. THE PROVISIONS OF THE EXPLANATION TO SEC. 73 HAVE TO BE CONTRASTED WITH THE PROVISION S OF SEC. 43(5), WHICH DEFINES SPECULATIVE TRANSACTION TO MEAN A TRANSACTION IN WHICH A CONTRACT FOR THE PURCHASE OR SALE OF ANY COMMODITY, INCLUDING ANY STOCKS AND SHARES, IS PERIODICALLY OR ULTIMATELY SETTLED OTHERWISE THAN BY THE ACTUAL DELIVERY OR TRANSFER OF THE COMMODITY OR SCRIPS. THE EXPLANATION TO SEC. 73 TREATS ANY PURCHASE AND/OR SALE OF SHARES BY CERTAIN COMPANIES TO BE SPECULATIVE FOR THE PURPOSE OF S. 73 ONLY . FOR THE PURPOSE OF SETTING OFF AND CARRYING FORWARD OF LOSS, THE BUYING AND SELLING OF SHARE S BY CERTAIN COMPANIES ARE REGARDED BY THE STATUTE AS SPECULATION BUSINESS, EVEN THOUGH THE TRANSACTION OF PURCHASE AND SALE WAS FOLLOWED UP BY DELIVERY OF SCRIPS , AND AS SUCH CANNOT BE TREATED AS SPECULATIVE TRANSACTION AS DEFINED IN S. 43(5). THE OPENI NG WORDS OF THE EXPLANATION TO SEC. 73 ARE WHERE ANY PART OF THE BUSINESS OF A COMPANY. ANY IS A WORD WHICH EXCLUDES LIMITATION OR QUALIFICATION. A RESTRICTED MEANING SHOULD NOT BE GIVEN TO THE PHRAS E ANY PART OF THE BUSINESS. WE ARE OF THE CONSIDERE D VIEW THAT THE OBJECT OF CIRCULAR NO. 204, DT. 24TH JULY, 1976 ISSUED BY THE CBDT , IS TO CURB DEVICES TO MANIPULATE AND REDUCE THE TAXABLE INCOME OF A COMPANY UNDER THE MANAGEMENT OF A CONTROLLING GROUP OF PERSONS. BUT THE CIRCULAR HAS CLEARLY STATED IN P ARA 19.1 THAT THE BUSINESS OF PURCHASE AND SALE OF SHARES BY COMPANIES WHICH ARE NOT INVESTMENT OR BANKING COMPANIES OR COMPANIES CARRYING ON BUSINESS OF GRANTING LOANS AND ADVANCES , ITA NO. 1974/MUM/2016 M/S AMOL MARKETS PVT. LTD. 16 WILL BE TREATED ON THE SAME FOOTING AS SPECULATION BUSINESS. 1 2 . WE FIND THAT THE HONBLE HIGH COURT OF CALCUTTA IN THE AFORE SAID CASE OF ARVIND INVESTMENTS LTD. (SUPRA) HAS HELD THAT EXPLANATION TO SEC. 73 APPLIES TO THE CASE OF THE ASSESSEE WHOSE BUSINESS CONSISTED OF DEALING IN SHARES. IN REACHING THIS CONCLUSION, CB DT CIRCULAR NO. 204 WAS ALSO CONSIDERED, WHERE IT HAS BEEN CLARIFIED IN P ARA 19.1 THAT THE BUSINESS OF PURCHASE AND SALE OF SHARES BY COMPANIES (OTHER THAN EXCLUDED CATEGORY OF COMPANIES) WILL BE TREATED ON THE SAME FOOTING AS SPECULATION BUSINESS. WE HAVE PERUSED THE EXPLANATION TO SEC. 73 OF THE ACT AND ARE OF THE CONSIDERED VIEW THAT THE EXPLANATION WAS INSERTED FOR THE PURPOSE OF SEC. 73 OF THE ACT . THE OBJECT OF AN EXPLANATION TO A STATUTORY PROVISION IS NOT ONLY TO CLARIFY THE DOUBT , BUT ALSO TO PROVIDE AN ADDITIONAL SUPPORT TO THE DOMINANT OBJECT OF THE ACT AND TO MAKE IT MEANINGFUL AND PURPOSEFUL. WE ARE OF THE CONSIDERED VIEW THAT A N EXPLANATION IS INTENDED TO EITHER EXPLAIN THE MEANING OF CERTAIN PHRASES AND EXPRESSIONS CONTAINE D IN A STATUTORY PROVISION , OR DEPENDING UPON ITS LANGUAGE IT MIGHT SUPPLY OR TAKE AWAY SOMETHING FROM THE CONTEXT OF A PROVISION AND AT TIMES, BY WAY OF ABUNDANT CAUTION, TO CLEAR ANY MENTAL COBWEBS SURROUNDING THE MEANING OF A STATUTORY PROVISION SPUN BY INTERPRETATIVE PROCESS TO MAKE THE POSITIVE BEYOND CONTROVERSY OR DOUBT. IN THE LIGHT OF THE LANGUAGE USED BY THE LEGISLATURE IN THE EXPLANATION TO SEC. 73 OF THE ACT , IT IS CLEAR THAT THE SAME W AS INSERTED WITH A VIEW TO SUPPLY THE MEANING OF SPECULATI ON BUSINESS CARRIED ON BY A COMPANY, WHOSE ANY PART OF BUSINESS CONSISTS OF PURCHASE AND SALE OF SHARES OF OTHER COMPANIES FOR THE PURPOSE OF SEC. 73 OF THE ACT , I.E., FOR THE PURPOSE OF SET OFF OF LOSSES IN SPECULATION BUSINESS CARRIED ON BY THE ASSESSEE . 1 3 . WE HAVE DELIBERATED ON THE ISSUE UNDER CONSIDERATION , AND IN THE BACKDROP OF OUR AFORESAID OBSERVATIONS ARE OF THE CONSIDERED VIEW ITA NO. 1974/MUM/2016 M/S AMOL MARKETS PVT. LTD. 17 THAT LOSS SUFFERED BY THE ASSESSEE ON SALE OF SHARES HELD BY IT AS INVESTMENTS IS TO BE TREATED AS SPECULATION LOSS , AND THE ASSESSEE WAS TO BE DEEMED TO HAVE BEEN CARRYING ON SPECULATION BUSINESS , TO THE EXTENT OF BUSINESS OF PURCHASE AND SALE OF SHARES OF OTHER COMPANIES WITHIN THE MEANING OF EXPLANATION TO SEC. 73 OF THE ACT . THUS, THE LOSS SO SUFFERED BY THE ASSESSE E WOULD BE ELIGIBLE TO BE SET OFF AGAINST THE SPECULATION PROFIT , AS PER PROVISIONS CONTAINED IN S. 73 OF THE ACT . WE THUS UPHOLD T HE ORDER OF THE CIT(A) ON THIS ASPECT OF THE MATTER , WHICH AS OBSERVED BY US HEREINABOVE IS CLEARLY SUPPORTED BY THE JUDGME NT OF THE HONBLE HIGH COURT OF CALCUTTA IN THE CASE OF ARVIND INVESTMENTS LTD. (SUPRA). THE GROUND OF APPEAL NO. 1 , TO THE EXTENT THE SAME IS RELATABLE TO THE ISSUE OF LOSS SUFFERED BY THE ASSESSEE ON SALE OF SHARES HELD BY IT AS INVESTMENT , IS DISMISSED IN TERMS OF OUR AFORESAID OBSERVATIONS. 14 WE NOW ADVERT TO THE ISSUE PERTAINING TO THE ASSESSING OF THE TRADING LOSS OF ( - ) RS. 33,60,540/ - CLAIMED BY THE ASSESSEE, AS A SPECULATION LOSS BY THE A.O. WE FIND THAT THE TRADING LOSS OF ( - ) RS. 33,60,540/ - COMPRISED OF PROFIT ON TRADING OF SHARES OF RS. 26,441/ - AND LOSS ON F&O FOR THE YEAR OF RS. 33,86,990/ - . WE ARE OF THE CONSIDERED VIEW THAT THE HONBLE HIGH COURT OF BOMBAY IN THE CASE OF CIT VS. BHARAT R. RUIA (HUF) REPORTED AS 199 TAXMA NN 87 (BOM) HA D OBSERVED THAT FUTURES & OPTIONS (F&O) ARE SUB CATEGORIES OF DERIVATIVES. WE FURTHER FIND THAT THE CBDT VIDE ITS CIRCULAR NO. 3 OF 2006 , WHILE DELIBERATING ON THE SCOPE OF THE POST AMENDED SEC. 43(5)(D) HAD REFERRED TO THE EXPLANATORY NOTES ON THE PROVISIONS OF THE FINANCE ACT, 2005 , AND THEREIN OBSERVED THAT TRADING IN DERIVATIVES HAD BEEN EXCLUDED FROM THE AMBIT OF SPECULATIVE TRANSACTIONS WITH PROSPECTIVE EFFECT FROM A.Y. 2006 - 07 ONWARDS . THUS IN ITA NO. 1974/MUM/2016 M/S AMOL MARKETS PVT. LTD. 18 THE BACKDROP OF THE AFORESAID FACTS, IT CA N SAFELY BE CONCLUDED THAT AS F&O TRANSACTIONS ARE A PART OF TRADING IN DERIVATIVES, THEREFORE, PURSUANT TO THE AMENDMENT MADE AVAILABLE TO SEC. 43(5)(D) W.E.F. A.Y. 2006 - 07, THE SAME CAN SAFELY BE HELD TO HAVE BEEN EXCLUDED FROM THE AMBIT OF SPECULATIVE TRANSACTIONS . WE FURTHER FIND THAT THE AFORESAID ISSUE HAD ALSO BEEN DELIBERATED UPON BY THE COORDINATE BENCH OF THE TRIBUNAL IN THE CASE OF DCIT VS. SSKI INVESTORS SERVICES (P) LTD. (2008) 113 TTJ (MUM) 511 , WHEREIN IT WAS HELD THAT AS DERIVATIVE TRADING DOES NOT INVOLVE ANY PURCHASE AND SALE OF SHARE S , THEREFORE, THE LOSS ON ACCOUNT OF DERIVATIVE S CANNOT BE TREATED AS A SPECULATION LOSS. WE FURTHER FIND THAT A SIMILAR VIEW HAD BEEN TAKEN BY THE COORDINATE BENCH OF ITAT , MUMBAI IN THE CASE OF PRADEEP KUMAR HARLALKA VS. ACIT, REPORTED AS 47 SOT 204 (MUM) . 15. WE FIND OURSELVES TO BE IN AGREEMENT WITH THE CONTENTIONS RAISED BEFORE US BY THE LD A.R. THAT F&O TRANSACTIONS CANNOT BE CATEGORIZED AS SPECULATIVE TRANSACTI ONS IN LIGHT OF POST AMENDED SEC. 45(5)(D) . HOWEVER, WE FIND SUBSTANTIAL FORCE IN THE VIEW ARRIVED AT BY THE CIT(A) THAT AS CLAUSE (D) OF SEC. 43(5) R.W. EXPLANATION1 (I) CONTEMPLATES AN ELIGIBLE TRANSACTION IN RESPECT OF TRADING IN DERIVATIVES REFERRED IN CLAUSE (AC) OF SEC. 2 OF THE SECURITIES CONTRACTS (REGULATION) ACT, 1956 (42 OF 1956) CARRIED OUT IN A RECOGNIZED STOCK EXCHANGE, THEREFORE, IN THE ABSENCE OF ANY MATERIAL/EVIDENCE HAVING BEEN PLACED ON REC ORD BY THE ASSESSEE , FROM WHERE IT COULD BE GATHERED THAT THE F&O TRANSACTIONS WERE DONE ON A RECOGNIZED STOCK EXCHANGE AND WERE SCREEN BASED TRANSACTIONS HAVING STAMP ED DATE, TIME AND DETAILS OF THE SAID TRANSACTIONS, THE CLAIM OF THE ITA NO. 1974/MUM/2016 M/S AMOL MARKETS PVT. LTD. 19 ASSESSEE COULD NOT B E SUMMARILY ACCEPTED . WE THUS ARE OF THE CONSIDERED VIEW THAT THE MATTER IN ALL FAIRNESS NEEDS TO BE RESTORE D TO THE FILE OF THE CIT(A) , WITH A LIBERTY TO THE ASSESSEE TO SUBSTANTIATE ITS CLAIM THAT THE F&O TRANSACTIONS UNDER CONSIDERATION PERTAIN ED TO ELIGIBLE TRANSACTIONS CONTEMPLATED BY EXPLANATION 1 OF SEC. 43(5). THE MATTER IS THUS RESTORE D TO THE FILE OF THE C I T(A) FOR FRESH ADJUDICATION IN THE BACKDROP OF OUR AFORESAID OBSERVATIONS. THAT IN CASE THE ASSESSEE IS ABLE TO ESTABLISH THAT THE F&O TRA DING S UNDER CONSIDERATION FALLS WITHIN THE SCOPE AND GAMUT OF ELIGIBLE TRANSACTIONS (SUPRA), THEN THE LOSS SUFFERED FROM THE SAID F&O TRANSACTIONS WOULD BE ASSESSED AS A TRADING LOSS, AS CLAIMED BY THE ASSESSEE. NEEDLESS TO SAY , THE CIT(A) SHALL AFFOR D SUFFICIENT OPPORTUNITY OF BEING HEARD TO THE ASSESSEE TO SUBSTANTIATE ITS CLAIM DURING THE COURSE OF THE SET ASIDE PROCEEDINGS. WE ARE FURTHER OF THE CONSIDERED VIEW THAT IF THE ASSESSEE IS ABLE TO SUBSTANTIATE THAT THE F&O TRANSACTIONS FALLS WITHIN THE SWEEP OF SEC. 43(5)(D), THEN SHALL BE ENTITLED TO CLAIM THE SET OFF OF THE PROFIT ON TRADING OF SHARES OF RS. 26,441/ - AS CLAIMED BY IT IN ITS RETURN OF INCOME . THE GROUND OF APPEAL NO. 1 TO THE EXTENT RELATABLE TO THE F&O TRANSACTIONS AND PROFIT ON TRADING OF SHARES AS RAISED BY THE ASSESSEE BEFORE US IS THUS ALLOWED FOR STATISTICAL PURPOSES IN TERMS OF OUR AFORESAID OBSERVATIONS. 16. WE NOW TAKE UP THE CONTENTION OF THE ASSESSEE THAT THE A.O HAD ERRED IN DISALLOWING 50% OF THE EXPENSES DEBITED TO THE PROFIT & LOSS A/C BY ATTRIBUTING THE SAME TO THE SPECULATIVE BUSINESS OF THE ASSESSEE . WE ARE OF THE CONSIDERED VIEW THAT THE AFORESAID DISALLOWANCE IS IN ITSELF DEPENDENT ON THE FACT AS TO WHETHER THE RESPECTIVE ITA NO. 1974/MUM/2016 M/S AMOL MARKETS PVT. LTD. 20 TRANSACTIONS OF SALE OF SHARES BY TH E ASSESSEE, VIZ. SALE OF SHARES HELD AS INVESTMENT AND THOSE HELD AS STOCK IN TRADE ARE IN THE NATURE OF SPECULATIVE TRANSACTIONS, OR NOT. THAT AS WE HAVE CONCLUDED THAT THE LOSS SUFFERED BY THE ASSESSEE ON SALE OF SHARES HELD BY IT AS AN INVESTMENT IS T O BE HELD TO BE A SPECULATION LOSS, THEREFORE, THE DISALLOWANCE OF EXPENSES PERTAINING TO SUCH TRANSACTIONS WOULD BE JUSTIFIED. HOWEVER, AS THE ADJUDICATION ON THE ISSUE AS TO WHETHER THE LOSS SUFFERED BY THE ASSESSEE ON THE SALE OF SHARES HELD BY IT AS STOCK IN TRADE WOULD FALL WITHIN THE REALM OF THE SPECULATIVE LOSS , OR NOT, HAD BEEN SET ASIDE BY US TO THE FILE OF THE CIT(A) FOR FRESH ADJUDICATION FOR VERIFYING THE FULFILLMENT BY THE ASSESSEE OF THE REQUISITE CONDITIONS CONTEMPLATED U/S 43(5)(D) R. W. EXPLANATION 1, THEREFORE, THE ISSUE AS REGARDS THE DISALLOWANCE OF ANY PART OF EXPENSES RELATABLE TO SUCH TRANSACTION S WOULD BE DEPENDENT ON THE ADJUDICATION BY THE CIT(A) OF THE AFORESAID ISSUE. WE THUS RESTORE THE ISSUE AS REGARDS THE DISALLOWANCE OF EXPENSES RELATABLE TO TRANSACTIONS PERTAINING TO SALE OF SHARES HELD BY THE ASSESSEE IN STOCK IN TRADE TO THE FILE OF THE CIT(A). THE ASSESSEE SHALL BE AT LIBERTY TO RAISE FRESH SUBMISSIONS IN CONTEXT OF THE EXPENSES RELATABLE TO THE TRANSACTIONS PERTAINING TO SALE OF SHARES HELD BY IT AS STOCK IN TRADE BEFORE THE CIT(A), IN CASE THE NEED SO ARISE. THE CIT(A) IS DIRECTED TO PASS A FRESH ORDER AS REGARDS THE DISALLOWANCE OF THE EXPENSES TO THE EXTENT RELATABLE TO THE TRANSACTIONS PERTAINING TO THE SALE OF SHARES HELD BY THE ASSESSEE AS STOCK IN TRADE, IN CASE IF THE ASSESSEE IS FOUND TO HAVE FAILED TO SATISFY THE REQUISITE CONDITION S CONTEMPLATED U/S 43(5)(D) PERTAINING TO THE SALE TRANSACTIONS OF THE SHARES HELD BY IT AS ITA NO. 1974/MUM/2016 M/S AMOL MARKETS PVT. LTD. 21 STOCK IN TRADE . T HE GROUND OF APPEAL NO. 2 IS THUS PARTLY ALLOWED IN TERMS OF OUR AFORESAID OBSERVATIONS. 17. THAT AS THE GROUND OF APPEAL NO. 3 AND GROUND OF APPEAL NO. 4 ARE GENERAL IN NATURE AND NO SEPARATE AVERMENT HAD BEEN RAISED BY THE ASSESSEE BEFORE US AS REGARDS THE SAME , THEREFORE , THE SAME ARE DISMISSED AS NOT PRESSED. 18. THE APPEAL OF THE ASSESSEE IS PARTLY ALLOWED FOR STATISTICAL PURPOSES IN TERMS OF OUR AFORESAID OBSERVATIONS. ORDER PRONOUNCE D IN THE OPEN COURT ON 21 /08/2017 SD/ - SD/ - ( G.S. PANNU ) (RAVISH SOOD ) ACCOUNTANT MEMBER JUDICIAL MEMBER DATED: 21 . 0 8 . 2017 COPY OF THE ORDER FORWARDED TO : 1. THE APPELLANT 2. THE RESPONDENT. 3. CONCERNED CIT 4. THE CIT(A) 5. D.R., BY ORDER, //TRUE COPY// (DY./ASSTT. REGISTRAR) ITAT, MUMBAI