DC.CC. 47, MUMBAI V. SMT. AMLA RUIA, MUMBAI

ITA 2161/MUM/2009

• Counselvise Citation: [2010] 136 COUNSELVISE.COM (IT) 1941 (ITAT-MUMBAI)
• Duration Of Justice: 1 year(s) 23 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 30-04-2010
• Appeal Filed By: Department
• Order Result: Allowed
• Bench Allotted: A
• Next Hearing Date: 21-04-2010
• Assessment Year: 2005-2006
• Appeal Filed On: 06-04-2009
• Result in Favour of: Revenue
• Court: TRIBUNAL
• Department Lawyers: SANDEEP DAHIYA
• Assessee Lawyers: HARESH G BUCH
• Keywords: Speculation loss

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL MUMBAI BENCHES, A, MUMBAI BEFORE SHRI R V EASWAR, SENIOR VICE PRESIDENT AND SHRI J SUDHAKAR REDDY, ACCOUNTANT MEMBER I T A NO: 2161/MUM/2009 (ASSESSMENT YEAR: 2005-06) DEPUTY COMMISSIONER OF INCOME TAX APPELLANT CENTRAL CIRCLE 47, MUMBAI VS SMT AMLA RUIA, MUMBAI RESPONDENT (PAN: ABVPR7369D) APPELLANT BY: SHRI SANDEEP DAHIYA RESPONDENT BY: SHRI HARESH G BUCH O R D E R R V EASWAR, SENIOR VICE PRESIDENT: THIS APPEAL HAS BEEN FILED BY THE REVENUE AND IT R ELATES TO THE ASSESSMENT YEAR 2005-06. THE GROUND TAKEN IS THAT THE CIT(A) ERRED IN DIRECTING THE ASSESSING OFFICER NOT TO TREAT THE LOSS ON ACCOUNT OF TRADING IN DERIVATIVES AS SPECULATION LOSS BUT TO T REAT THE SAME AS BUSINESS LOSS. THE CLAIM OF THE REVENUE IN THE GRO UND IS THAT THE CONTRACTS IN DERIVATIVES ARE SETTLED WITHOUT DELIVE RY AND HENCE THE LOSS SHOULD BE CONSIDERED AS SPECULATION LOSS. 2. AT THE TIME OF THE HEARING BEFORE US, IT WAS SUB MITTED ON BEHALF OF THE REVENUE THAT THE ISSUE NOW STANDS COVERED AG AINST THE ASSESSEE BY THE ORDER OF THE SPECIAL BENCH KOLKATA, IN THE CASE OF SHREE CAPITAL SERVICES LTD. VS. ACIT (2009) 124 TTJ (KOL) (SB) 740. IN THIS ORDER THE SPECIAL BENCH HAS HELD THAT THE T ERM DERIVATIVE IN WHICH THE UNDERLYING ASSET IS SHARES FALLS WITHIN T HE MEANING OF THE TERM COMMODITY FOR THE PURPOSE OF SECTION 43(5), WHICH CONTAINS A 2 DEFINITION OF WHAT IS A SPECULATIVE TRANSACTION. I T WAS FURTHER OBSERVED BY THE SPECIAL BENCH THAT CLAUSE (D) OF THE AFORESA ID SUB-SECTION WHICH EXCLUDED TRADING IN DERIVATIVES FROM THE PURVIEW OF A SPECULATIVE TRANSACTION WAS PROSPECTIVE IN NATURE AND APPLIED, ONLY FROM THE ASSESSMENT YEAR 2006-07. IT WAS SUBMITTED BY THE R EVENUE ON THE BASIS OF THE ORDER OF THE SPECIAL BENCH THAT THE OR DER OF THE CIT(A) SHOULD BE REVERSED AND THAT OF THE ASSESSING OFFICE R RESTORED. 3. WE FIND THAT THE CIT(A) HAS DECIDED IN FAVOUR OF THE ASSESSEE FOLLOWING AN ORDER OF THE MUMBAI BENCH OF THE TRIBU NAL IN THE CASE OF DCIT VS. SSKI INVESTOR SERVICES LTD. IN ITA NO: 318 2/MUM/2004, WHEREIN IT WAS HELD THAT TRADING IN DERIVATIVES DO ES NOT INVOLVE ANY PURCHASE OR SALE OF SHARES AND, THEREFORE, THE LOSS IN SUCH TRADING CANNOT BE TREATED AS SPECULATION LOSS. IT WAS ALSO POINTED OUT BY THE ASSESSEE BEFORE US THAT THE TRIBUNAL HAS DECIDED TH E ISSUE IN FAVOUR OF THE ASSESSEE FOR THE ASSESSMENT YEAR 2004-05 IN ITA NO: 3396/MUM/2007 DATED 27 TH APRIL 2009. AS REGARDS THE ORDER OF THE SPECIAL BENCH CITED ABOVE, IT HAS BEEN SUBMITTED BE FORE US ON BEHALF OF THE ASSESSEE THAT THE SAID ORDER HAS NOT TAKEN I NTO ACCOUNT THE ORDER PASSED BY THE JAIPUR BENCH OF THE TRIBUNAL IN THE CASE OF P S KAPUR VS. ACIT (2009) 29 SOT 587 (JP) AND A COPY OF THE SAID ORDER WAS FILED BEFORE US. IT WAS SUBMITTED THAT THE ORD ER OF THE SPECIAL BENCH NOT HAVING REFERRED TO THE AFORESAID ORDER OF THE JAIPUR BENCH, MAY REQUIRE RECONSIDERATION AND A PRAYER WAS MADE T HAT THE MATTER BE FIXED BEFORE A LARGER BENCH FOR HEARING. 3 4. WE HAVE CONSIDERED THE MATTER. IT IS NO DOUBT T RUE THAT FOR THE ASSESSMENT YEAR 2004-05 THE TRIBUNAL HAS DECIDED TH E ISSUE IN FAVOUR OF THE ASSESSEE BY ORDER DATED 27 TH APRIL 2009. HOWEVER, THE SPECIAL BENCH HAS TAKEN A DIFFERENT VIEW OF THE MATTER IN I TS ORDER PASSED SUBSEQUENTLY ON 31 ST JULY 2009 IN THE CASE OF SHREE CAPITAL SERVICES LTD. VS. ACIT (SUPRA). IN ACCORDANCE WITH JUDICIAL DISCIPLINE, WE ARE TO FOLLOW THE ORDER OF THE SPECIAL BENCH IN PREFERENCE TO THE ORDER PASSED BY THE DIVISION BENCH OF THE TRIBUNAL IN THE ASSESS EES OWN CASE. MERELY BECAUSE ONE ORDER OF THE TRIBUNAL, IN THIS C ASE THE ORDER OF THE JAIPUR BENCH (SUPRA), HAS NOT BEEN CONSIDERED BY TH E SPECIAL BENCH, WE CANNOT REFUSE TO FOLLOW THE ORDER OF THE SPECIAL BENCH IN WHICH THE ISSUE HAS BEEN DECIDED. NO CASE HAS ALSO BEEN MADE OUT, FOR THE SAME REASON, FOR REFERRING THE MATTER TO THE HONBL E PRESIDENT, ITAT, FOR CONSTITUTION OF A LARGER BENCH. SINCE THE ISSU E ARISING IN THE PRESENT APPEAL IS DECIDED BY THE ORDER OF THE SPECI AL BENCH, RESPECTFULLY FOLLOWING THE SAME, WE HOLD THAT THE L OSS SUFFERED ON ACCOUNT OF TRADING IN DERIVATIVES IS A SPECULATION LOSS AS HELD BY THE ASSESSING OFFICER. ACCORDINGLY WE ALLOW THE APPEAL FILED BY THE DEPARTMENT WITH NO ORDER AS TO COSTS. ORDER PRONOUNCED ON 30 TH APRIL 2010. SD/- SD/- (J SUDHAKAR REDDY) (R V EASWAR) ACCOUNTANT MEMBER SENIOR VICE PRESI DENT MUMBAI, DATED 30 TH APRIL 2010 SALDANHA 4 COPY TO: 1. SMT AMLA RUIA 462, THE PHOENIX MILLS PREMISES S B MARG, MUMBAI 400 013 2. DCIT, CENTRAL CIRCLE 47 3. CIT-XVI 4. CIT(A)-XVI 5. DR A BENCH TRUE COPY BY ORDER ASSTT. REGISTRAR, ITAT, MUMBAI