The Dy. Commissioner of Income Tax, Circle-1(1)(2), Ahmedabad V. M/s. Dsons Projects Pvt. Ltd., Ahmedabad

ITA 2016/AHD/2016

• Counselvise Citation: [2018] 125 COUNSELVISE.COM (IT) 2417 (ITAT-AHMEDABAD)
• Duration Of Justice: 2 year(s) 1 month(s) 2 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 04-09-2018
• Appeal Filed By: Department
• Order Result: Dismissed
• Bench Allotted: Not Allotted
• Assessment Year: 2012-2013
• Appeal Filed On: 02-08-2016
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Assessee Lawyers: M K PATEL
• Keywords: Speculation loss
• Section: 143(3); 43(5)

Judgement Text

, C IN THE INCOME TAX APPELLATE TRIBUNAL C BENCH, AHMEDABAD BEFORE SHRI PRADIP KUMAR KEDIA, ACCOUNTANT MEMBER & SHRI MAHAVIR PRASAD, JUDICIAL MEMEBR ./ I.T.A. NO. 2016/AHD/2016 ( ASSESSMENT YEAR : 2012-13) DCIT, CIRCLE.1(1)(2), A WING, ROOM NO. 308, 3 RD FLOOR, PRATYAKSH KAR BHAVAN, AMBAWADI, AHMEDABAD-380015 / VS. M/S. DSONS PROJECTS LTD., 1, 3 RD FLOOR, LANKMARK, OPP. HDFC HOUSE, MITHAKHALI SIX ROADS, AHMEDABAD ./ ./ PAN/GIR NO. : AABCE2403R ( APPELLANT ) .. ( / RESPONDENT ) / APPELLANT BY : SHRI MUDIT NAGPAL, SR. D.R. / RESPONDENT BY : SHRI M. K. PATEL, A.R. DATE OF HEARING 14/08/2018 !'# / DATE OF PRONOUNCEMENT 04/09/2018 / O R D E R PER PRADIP KUMAR KEDIA - AM: THE CAPTIONED APPEAL HAS BEEN FILED AT THE INSTANCE OF THE REVENUE AGAINST THE ORDER OF THE CIT(A)-1, AHMEDABA D (CIT(A) IN SHORT), DATED 23.05.2016 ARISING IN THE ASSESSMENT ORDER DATED 30.01.2015 PASSED BY THE ASSESSING OFFICER (AO) UND ER S. 143(3) OF ITA NO. 2016/AHD/16 [DCIT VS. DSONS PROJECTS PVT. LTD.] A.Y. 2012-13 - 2 - THE INCOME TAX ACT, 1961 (THE ACT) CONCERNING ASSES SMENT YEAR 2012- 13. 2. THE GROUNDS OF APPEAL RAISED BY THE REVENUE REA DS AS UNDER:- THAT THE LD. CIT(A) ERRED IN LAW AND ON FACTS IN DE LETING THE ADDITION OF RS.74,18,448/- MADE ON ACCOUNT OF DISALLOWANCE OF S PECULATION LOSS. 3. BRIEFLY STATED, THE ASSESSEE, A DOMESTIC COMPANY , IS ENGAGED IN THE BUSINESS OF TRADING IN COMMODITIES LIKE GOLD, S ILVER, BULLION ETC. AND SHARES AS WELL AS CARRIED OUT DERIVATIVE TRANSA CTIONS AT COMMODITY EXCHANGES. THE RETURN FILED BY THE ASSESSEE CONCER NING AY 2012-13 WAS SUBJECTED TO SCRUTINY ASSESSMENT. THE AO INTER ALIA OBSERVED THAT THE ASSESSEE HAS CLAIMED LOSSES OF RS.74,18,448/- A GAINST THE TRANSACTIONS IN CURRENCY DERIVATIVES CARRIED OUT WI TH MCFX. THE AO ACCORDINGLY INVOKED THE PROVISIONS OF SECTION 43(5) OF THE ACT AND MADE A BIZARRE OBSERVATION THAT TRANSACTIONS OF TRA DING IN COMMODITY DERIVATIVE HAS NOT BEEN CARRIED ON DELIVERY BASIS B UT SETTLED OTHERWISE THAN DELIVERY AND CONSEQUENTLY THE LOSS ARISING THE REFROM IS SPECULATIVE IN NATURE. 4. IN THE FIRST APPEAL, THE CIT(A) REVISITED THE FA CTUAL ASPECTS AS WELL AS THE LEGAL POSITION IN THIS REGARD AND FOUND THAT THE CASE OF THE ASSESSEE IS SQUARELY COVERED BY THE EXCEPTIONS PROV IDED AS PER CLAUSE (D) TO SECTION 43(5) OF THE ACT. THE RELEVANT OPER ATIVE PART OF THE ORDER OF THE CIT(A) READS AS UNDER: 5.5 I HAVE GONE THROUGH THE FACTS OF THE CASE, FIN DINGS OF A.O. IN ASSESSMENT ORDER, SUBMISSIONS OF THE APPELLANT AND PROVISIONS OF SECTION 43(5) OF THE ACT. THE A.O. AS PER PROVISION S OF SUB-SECTION (5) OF SECTION 43 OF THE ACT TREATED TRANSACTION IN WHICH CONTRACT FOR ITA NO. 2016/AHD/16 [DCIT VS. DSONS PROJECTS PVT. LTD.] A.Y. 2012-13 - 3 - PURCHASE OR SALE OF ANY COMMODITIES INCLUDING STOCK AND SHARES IS PERIODICALLY AND ULTIMATELY SETTLED OTHERWISE THAN ACTUAL DELIVERY AS SPECULATIVE TRANSACTIONS, WHEREAS, THE A.R. OF THE APPELLANT STATED THAT AS PER PROVISIONS OF SECTION 43(5)(D), ANY ELI GIBLE TRANSACTION CARRIED OUT ON RECOGNIZED STOCK EXCHANGE IN DERIVAT IVES SHALL NOT BE DEEMED TO BE SPECULATIVE TRANSACTION. THE A.R. OF T HE APPELLANT FURTHER STATED THAT NSE AND MCX ARE RECOGNIZED FOR DERIVATIVE TRANSACTIONS ON 25.01.2006 AND 25.05.2009 RESPECTIV ELY. THEREFORE, TRANSACTIONS IN CURRENCY DERIVATIVES ON FUTURE BASI S IN THE YEAR UNDER CONSIDERATION ARE IN THE NATURE OF BUSINESS TRANSAC TIONS AND NOT IN THE NATURE OF SPECULATIVE TRANSACTIONS. THE A.R. OF THE APPELLANT ALSO RELIED UPON FOLLOWING JUDGMENTS OF JURISDICTIONAL T RIBUNAL, OTHER TRIBUNALS AND COURTS, WHERE IT IS HELD THAT THE DER IVATIVES INCLUDE FOREIGN CURRENCY AND CALL OPTION/PUT OPTION ARE TRA NSACTIONS OF DERIVATIVE MARKETS CANNOT BE TERMED AS SPECULATIVE IN NATURE, AS HELD BY MUMBAI TRIBUNAL IN THE CASE OF IVF ADVISORS PVT. VS. ACIT (SUPRA). GOING THROUGH THE PROVISIONS OF THE ACT U/ S. 43(5)(D) AND DECISIONS OF THE TRIBUNALS AND COURTS, THE CURRENCY DERIVATIVE TRANSACTIONS IN RECOGNIZED STOCK EXCHANGES ARE TREA TED AS BUSINESS TRANSACTIONS AND LOSSES FROM SUCH TRANSACTIONS IS B USINESS LOSS AND NOT SPECULATIVE LOSS AS TREATED BY A.O. ACCORDINGLY , THE A.O. IS DIRECTED TO CONSIDER LOSSES FROM CURRENCY DERIVATIV ES IN THE NSE AND MCX, RECOGNIZED STOCK EXCHANGES AS BUSINESS LOSS. T HE DISALLOWANCE OF LOSSES IN NSE IS ALREADY CONSIDERED AS ALLOWABLE IN GROUND DECIDED ABOVE AND THE DISALLOWANCE OF LOSSES IN MCX OF RS. 74,18,448/- IS DELETED. THIS GROUND OF APPEAL IS AL LOWED. 5. WE HAVE HEARD RIVAL SUBMISSIONS ON THE ISSUE AND ALSO PERUSED THE ORDERS OF THE AO AND CIT(A). WE FIND LACK OF M ERIT IN THE APPEAL OF THE REVENUE AT THE FIRST INSTANCE. THE CIT(A) R IGHTLY HELD THAT THE ASSESSEE EXECUTED CURRENCY TRANSACTIONS IN DERIVATI VE SEGMENT ON THE PLATFORM OF RECOGNIZED STOCK EXCHANGE WHICH IS IN T HE REALM OF ELIGIBLE TRANSACTION AND COVERED BY THE EXCEPTION S PROVIDED TO ITA NO. 2016/AHD/16 [DCIT VS. DSONS PROJECTS PVT. LTD.] A.Y. 2012-13 - 4 - SECTION 43(5)(D) OF THE ACT. IN VIEW OF THE PROVIS IONS OF SECTION 43(5)(D) OF THE ACT READ WITH SECTION 2 OF SECURITI ES CONTRACTS (REGULATION) ACT, 1956, SUCH DERIVATIVE TRANSACTION S OF THE NATURE OF CURRENCY FUTURES ARE TO BE EXCLUDED FROM THE AMBIT OF THE SPECULATIVE TRANSACTIONS. CONSEQUENTLY, THE LOSS ARISING FROM EXCHANGE TRADED CURRENCY DERIVATIVES HAS BEEN RIGHTLY REGARDED AS N ORMAL BUSINESS LOSS BY THE CIT(A). WE DO NOT FIND ANY INFIRMITY IN THE ORDER OF THE CIT(A). 6. IN THE RESULT, THE APPEAL OF THE REVENUE IS DISM ISSED. SD/- SD/- (MAHAVIR PRASAD) (PRADIP KUMA R KEDIA) JUDICIAL MEMBER ACCOUNTANT MEMBER AHMEDABAD: DATED 04/09/2018 TRUE COPY S. K. SINHA !'#' / COPY OF ORDER FORWARDED TO:- &. / REVENUE 2. / ASSESSEE (. )*+ , / CONCERNED CIT 4. ,- / CIT (A) /. 012 33*+4 *+#4 56) / DR, ITAT, AHMEDABAD 7. 289 : / GUARD FILE. BY ORDER / 4 /5 *+#4 56) THIS ORDER PRONOUNCED IN OPEN COURT ON 04/09/2018