ASSTT COMMISSIONER OF INCOME TAX 19(1), MUMBAI V. KETAN ANIL SHAH, MUMBAI

ITA 2188/MUM/2022

AI Insights

The case revolves around the appeal by the Revenue against the order of the Ld. CIT(A), which had allowed the claim of the assessee for a business loss of ₹10,91,53,148 incurred from transactions on the NSEL platform. The Revenue contended that these transactions were speculative and thus the losses should be treated as speculative losses, which are not allowable under the Income Tax Act. The Tribunal examined the nature of the transactions, the legal provisions applicable, and the precedents set by similar cases. It was concluded that the transactions were not speculative as they involved commodity derivatives and were conducted through a recognized association, thus falling under the exception provided in the Act.

• Counselvise Citation: [2023] 140 COUNSELVISE.COM (IT) 123695 (ITAT-MUMBAI)
• Duration Of Justice: 4 month(s) 18 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 18-01-2023
• Appeal Filed By: Department
• Order Result: Dismissed
• Bench Allotted: H
• Next Hearing Date: 30-11-2022
• Assessment Year: 2014-2015
• Appeal Filed On: 31-08-2022
• Other Referred Cases: TRF Ltd. vs. CIT, DCIT vs. Cello Pens and Stationery Pvt. Ltd., Remi Securities Ltd. v. ACIT, M/s Remi Securities and Engineering Limited vs. ACIT, Megh Sakariya International (P.) Ltd. v. Dy. CIT, Jay Ashkaran Shah vs. I.T.O., Mohan Jain v. ITO
• Laws Referred To: Income Tax Act, 1961, RBI Act, Forward Contracts (Regulation) Act, 1952
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Keywords: Business income; Principle of natural justice; Speculation loss; Bad and doubtful debts; Speculative transactions
• Section: 263; 28; 143(3); 43(5); 43; 73

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL MUMBAI BENCH “H” MUMBAI BEFORE SHRI OM PRAKASH KANT (ACCOUNTANT MEMBER) AND SHRI SANDEEP SINGH KARHAIL (JUDICIAL MEMBER) ITA No. 2188/MUM/2022 Assessment Year: 2014-15 Asst. Commissioner of Income-tax 19(1), Mumbai, Matru Mandir, Room No.203, Grant Road, Mumbai-400 007 Vs. Ketan Anil Shah 44/b Rajul Apartment J Mehta Marg, Napean Sea Road, Mumbai-400 006 PAN No. AAIPS 9400 J Appellant Respondent Revenue by : Smt. Madhumalti Ghosh, CIT-DR Assessee by : Shri Anish Shah, CA & Shri Haridas Bhat Date of Hearing : 01/12/2022 Date of pronouncement : 19/01/2023 ORDER PER OM PRAKASH KANT, AM This appeal by the Revenue is directed against the order dated 07 th July, 2022 passed by the Ld. Commissioner of Income-tax (Appeals) (National Faceless Appeal Centre, Delhi [in short, ‘the Ld. CIT(A)] for Assessment Year 2014-15, raising the following grounds: 1. Whether on the facts and circumstances of the case and in law the Ld. CIT(A) has erred in ₹10,91,53,148/ Tax Act. 2. Whether on the facts and circumstances of the case and in law the Ld. CIT(A ₹10,91,53,148/ carried out through NSEL (Spot Exchange) from M/s Philips Commodities India Pvt Ltd & Motilal Oswal Commodities Broker Pvt Ltd transaction without appreciating the fact that the contract notes only state about the der 3. Whether on the facts and circumstances of the case and in law the Ld. CIT(A) erred ₹10,91,53,148/ transaction was banned on the NSEL platform hence transaction made by the assessee was not valid as per section 45V of the RBI Act.” 2. Briefly stated, facts of the case are that the assessee, an individual was engaged in carrying out transactions of commodity dealing on National Spo engaged in the business of merchant export of products such as brass adapter, brass chain, connectors’ screw, etc. through proprietary concern, M/s Conex Metals. consideration, the assessee filed re November, 2014 declaring total income of of income filed by the assessee was selected for scrutiny and statutory notices under the Income Whether on the facts and circumstances of the case and in law the Ld. CIT(A) has erred in deleting disallowance of 10,91,53,148/- treating it as business loss u/s 28 of the Income on the facts and circumstances of the case and in law the Ld. CIT(A) was justified in deleting the entire addition of 10,91,53,148/- with the observation that the transactions were carried out through NSEL (Spot Exchange) from M/s Philips Commodities India Pvt Ltd & Motilal Oswal Commodities Broker Pvt Ltd transaction without appreciating the fact that the contract notes only state about the derivative transactions. Whether on the facts and circumstances of the case and in law the Ld. CIT(A) erred in giving relief by deleting addition of 10,91,53,148/- without appreciating the fact that the Derivative transaction was banned on the NSEL platform hence transaction made by the assessee was not valid as per section 45V of the RBI Act.” stated, facts of the case are that the assessee, an individual was engaged in carrying out transactions of commodity on National Spot Exchange Ltd (NSEL) and was also engaged in the business of merchant export of products such as brass adapter, brass chain, connectors’ screw, etc. through concern, M/s Conex Metals. For the year under consideration, the assessee filed return of income on 19 November, 2014 declaring total income of ₹19,21,250/ of income filed by the assessee was selected for scrutiny and statutory notices under the Income-tax Act, 1961 (in short, ‘the Ketan Anil Shah ITA No. 2188/M/2022 2 Whether on the facts and circumstances of the case and in law deleting disallowance of treating it as business loss u/s 28 of the Income on the facts and circumstances of the case and in law ) was justified in deleting the entire addition of observation that the transactions were carried out through NSEL (Spot Exchange) from M/s Philips Commodities India Pvt Ltd & Motilal Oswal Commodities Broker Pvt Ltd transaction without appreciating the fact that the contract ivative transactions. Whether on the facts and circumstances of the case and in law in giving relief by deleting addition of without appreciating the fact that the Derivative transaction was banned on the NSEL platform (Spot Exchange) hence transaction made by the assessee was not valid as per stated, facts of the case are that the assessee, an individual was engaged in carrying out transactions of commodity t Exchange Ltd (NSEL) and was also engaged in the business of merchant export of products such as brass adapter, brass chain, connectors’ screw, etc. through his For the year under turn of income on 19 th 19,21,250/-. The return of income filed by the assessee was selected for scrutiny and tax Act, 1961 (in short, ‘the Act’) were issued and complied with. under section 143(3) of the Act on 29/12/2016, the Assessing Officer rejected the claim of off in profit and loss account. before the Ld. CIT(A), who business loss rather than ‘bad debt’ Aggrieved, the Revenue is in appeal before the Tribunal raising grounds as reproduced above. 3. The grounds raised by the Revenue relate to the sole issue of claim of the assessee of brokers in respect of transactions of commodity carried out through NSEL. The Assessing Officer has disallowed the said claim as ‘bad debt written off’ not allowable whereas the Ld.CIT(A) has same as business loss. 4. We have heard rival submissions of the parties and perused the relevant materials on record including the paper book containing pages 1 to 487 filed by the assessee. Act’) were issued and complied with. In the assessment completed under section 143(3) of the Act on 29/12/2016, the Assessing Officer rejected the claim of ₹10,91,53,148/- as ‘bad debts’ written in profit and loss account. Aggrieved, the assessee filed appeal CIT(A), who held the amount of ₹10,91,53,148/ business loss rather than ‘bad debt’ and allowed Aggrieved, the Revenue is in appeal before the Tribunal raising grounds as reproduced above. The grounds raised by the Revenue relate to the sole issue of claim of the assessee of ₹10,91,53,148/- outstanding from two brokers in respect of transactions of commodity carried out through SEL. The Assessing Officer has disallowed the said claim as ‘bad debt written off’ not allowable whereas the Ld.CIT(A) has same as business loss. We have heard rival submissions of the parties and perused the relevant materials on record including the paper book containing pages 1 to 487 filed by the assessee. Ketan Anil Shah ITA No. 2188/M/2022 3 n the assessment completed under section 143(3) of the Act on 29/12/2016, the Assessing as ‘bad debts’ written Aggrieved, the assessee filed appeal 10,91,53,148/- as allowed the same. Aggrieved, the Revenue is in appeal before the Tribunal raising The grounds raised by the Revenue relate to the sole issue of outstanding from two brokers in respect of transactions of commodity carried out through SEL. The Assessing Officer has disallowed the said claim as ‘bad debt written off’ not allowable whereas the Ld.CIT(A) has deleted the We have heard rival submissions of the parties and perused the relevant materials on record including the paper book 5. Briefly stated, the facts qua the issue in disput P&L Account the assessee has shown loss of irrecoverable loss on account of commodities the assessee, that assessee had entered into contracts of buying and selling of commodity Motilal Oswal Securities Pvt Ltd. According to the assessee, the contracts were for physical delivery of goods – purchase and sale. Further it was submitted that NSEL defaulted 31/07/2013 and thereafter NSEL was shut down and all the transactions which were pending on 31/07/2013 were abruptly stopped. The sale transactions which were entered into for which payment was to be made after 25 / 35 days from the date was not completed as the said parties could not get the delivery of goods purchased by it from the NSEL and in consequence thereto, the said parties did not make payment of goods purchased by them. Therefore, the parties, who sold the goods includ NSEL did not receive their sale proceeds. It was further submitted Briefly stated, the facts qua the issue in dispute are that in the P&L Account the assessee has shown loss of ₹10,91,53,148/ loss on account of commodities. It was explained by the assessee, that assessee had entered into contracts of buying and selling of commodity on NSEL through two brokers, viz. M/s Motilal Oswal Securities Pvt. Ltd and M/s Philips Commodity Pvt Ltd. According to the assessee, the contracts were for physical purchase and sale. Further it was submitted NSEL defaulted in its obligation for the first time on 31/07/2013 and thereafter NSEL was shut down and all the transactions which were pending on 31/07/2013 were abruptly stopped. The sale transactions which were entered into for which payment was to be made after 25 / 35 days from the date was not completed as the said parties could not get the delivery of goods purchased by it from the NSEL and in consequence thereto, the said parties did not make payment of goods purchased by them. Therefore, the parties, who sold the goods including assessee at the NSEL did not receive their sale proceeds. It was further submitted Ketan Anil Shah ITA No. 2188/M/2022 4 e are that in the 10,91,53,148/- as It was explained by the assessee, that assessee had entered into contracts of buying brokers, viz. M/s Ltd and M/s Philips Commodity Pvt Ltd. According to the assessee, the contracts were for physical purchase and sale. Further it was submitted he first time on 31/07/2013 and thereafter NSEL was shut down and all the transactions which were pending on 31/07/2013 were abruptly stopped. The sale transactions which were entered into for which payment was to be made after 25 / 35 days from the date of sale was not completed as the said parties could not get the delivery of goods purchased by it from the NSEL and in consequence thereto, the said parties did not make payment of goods purchased by them. ing assessee at the NSEL did not receive their sale proceeds. It was further submitted by the assessee that in the enquiries by various law enforcement agencies, it was found that goods were not available in many accredited warehouse of NSEL and, therefor receive the goods from the NSEL and delivered the goods purchased to the parties, who agreed to purchase the same after 25 / 35 days. Therefore, neither assessee received the payment of the sale of the commodities nor did he rece amounts paid for purchase of commodities the amounts were paid in normal course assessee, the non-recovery loss to the assessee. However, the Assessing Officer rejected the contention of the assessee. In view of the Assessing Officer, the assessee has not made any efforts for recovery of said bad debt of ₹10,91,53,148/- from M/s Philips Commodity Pvt filing suit in the Court of Law. He further held that recovery from NSEL was subjudice and status of the debts, therefore, treating the debts as bad and by the assessee that in the enquiries by various law enforcement agencies, it was found that goods were not available in many warehouse of NSEL and, therefore, it was not possible to receive the goods from the NSEL and delivered the goods purchased to the parties, who agreed to purchase the same after 25 / 35 days. Therefore, neither assessee received the payment of the sale of the commodities nor did he receive the stock of commodities or the amounts paid for purchase of commodities from the the amounts were paid in normal course of the business of the recovery of sale proceeds resulted in business loss to the assessee. However, the Assessing Officer rejected the contention of the assessee. In view of the Assessing Officer, the assessee has not made any efforts for recovery of said bad debt of om M/s Motilal Oswal Securities Pvt M/s Philips Commodity Pvt. Ltd like sending any legal notice or filing suit in the Court of Law. He further held that recovery from NSEL was subjudice and there was no finality on the bts, therefore, treating the debts as bad and Ketan Anil Shah ITA No. 2188/M/2022 5 by the assessee that in the enquiries by various law enforcement agencies, it was found that goods were not available in many e, it was not possible to receive the goods from the NSEL and delivered the goods purchased to the parties, who agreed to purchase the same after 25 / 35 days. Therefore, neither assessee received the payment of the sale of the ive the stock of commodities or the the NSEL. Since of the business of the of sale proceeds resulted in business loss to the assessee. However, the Assessing Officer rejected the contention of the assessee. In view of the Assessing Officer, the assessee has not made any efforts for recovery of said bad debt of /s Motilal Oswal Securities Pvt. Ltd and Ltd like sending any legal notice or filing suit in the Court of Law. He further held that matter of there was no finality on the bts, therefore, treating the debts as bad and immediately writing off from the books of account was premature and without any substance. According to him, recovery is an ongoing process and the ultimate recovery shall take long time and, therefore, any claim of the bad debt earlier to that shall be prima facie considered as premature claim liable for rejection; hence, the claim of deduction under section 36(1)(vii) read with section 36(2) / 37(1) was inadmissible. The relevant finding of the Ld. Officer is reproduced as “4.14 The facts of the case is that the debt claimed by the appellant relates to the previous year in which it has been claimed to have become bad. However, law is to be interpreted in its essence and spirit. Though the debt in its account, however, the assessee has not taken pains to show / prove that the debt has actually become bad. The debt is on account of non receipt of sale receipts of commodities from M/s M/s Philips Commodity Pvt Lt Oswal Securities Pvt Ltd. The debt was only few months old at the time of its write off and it seems the appellant amount. If they had done it, they would have certainly filed some papers evidence or documents to prove their case. The appellant has only relied on the amended provision of section 36(1)(vii) for claiming deduction without proving that the debt has really become bad. Therefore, in the facts and circumstances, I hold that the write off of bad debts are not genuine and with out any substance to prove that the debts are actually became bad and virtually irrecoverable. In the absence of the same it is held that the claim of bad debts of and not withstood the test of genuineness of the claim. Hence, the claim of deduction on account of bad debts of back to the total income of the assessee. and hence, not allowed 271(1)(c) are initiated separately for furnishing inaccurate particulars of income leading to concealment of taxable income.” immediately writing off from the books of account was premature and without any substance. According to him, recovery is an ongoing process and the ultimate recovery shall take long time and, aim of the bad debt earlier to that shall be prima facie considered as premature claim liable for rejection; hence, the claim of deduction under section 36(1)(vii) read with section 36(2) / 37(1) was inadmissible. The relevant finding of the Ld. Officer is reproduced as under: - The facts of the case is that the debt claimed by the appellant relates to the previous year in which it has been claimed to have become bad. However, law is to be interpreted in its essence and spirit. Though the assessee has claimed the bad debt in its account, however, the assessee has not taken pains to show / prove that the debt has actually become bad. The debt is on account of non receipt of sale receipts of commodities from M/s M/s Philips Commodity Pvt Ltd & M/s Motilal Oswal Securities Pvt Ltd. The debt was only few months old at the time of its write off and it seems the appellant has not made any effort for the collection of this amount. If they had done it, they would have certainly filed some papers evidence or documents to prove their case. The appellant has only relied on the amended provision of section 36(1)(vii) for claiming deduction without proving that the debt has really become bad. Therefore, in the facts and circumstances, I hold the write off of bad debts are not genuine and with out any substance to prove that the debts are actually became bad and virtually irrecoverable. In the absence of the same it is held that the claim of bad debts of ₹10,91,53,148/ ithstood the test of genuineness of the claim. Hence, the claim of deduction on account of bad debts of ₹10,91,53,148/- is not allowed and added back to the total income of the assessee. Accordingly, the Business loss is disallowed and hence, not allowed to be set off & carried forward. Penalty proceedings u/s 271(1)(c) are initiated separately for furnishing inaccurate particulars of income leading to concealment of taxable income.” Ketan Anil Shah ITA No. 2188/M/2022 6 immediately writing off from the books of account was premature and without any substance. According to him, recovery is an ongoing process and the ultimate recovery shall take long time and, aim of the bad debt earlier to that shall be prima facie considered as premature claim liable for rejection; hence, the claim of deduction under section 36(1)(vii) read with section 36(2) / 37(1) was inadmissible. The relevant finding of the Ld. Assessing The facts of the case is that the debt claimed by the appellant relates to the previous year in which it has been claimed to have become bad. However, law is to assessee has claimed the bad debt in its account, however, the assessee has not taken pains to show / prove that the debt has actually become bad. The debt is on account of non receipt of sale d & M/s Motilal Oswal Securities Pvt Ltd. The debt was only few months old at the time of its write- has not made any effort for the collection of this amount. If they had done it, they would have certainly filed some papers or evidence or documents to prove their case. The appellant has only relied on the amended provision of section 36(1)(vii) for claiming deduction without proving that the debt has really become bad. Therefore, in the facts and circumstances, I hold the write off of bad debts are not genuine and with out any substance to prove that the debts are actually became bad and virtually irrecoverable. In the absence ₹10,91,53,148/- is premature ithstood the test of genuineness of the claim. Hence, the claim of is not allowed and added Accordingly, the Business loss is disallowed Penalty proceedings u/s 271(1)(c) are initiated separately for furnishing inaccurate particulars of income 5.1 The Ld.CIT(A), however, after going through the submission of the assessee held the loss claimed by the assessee as business loss observing as under: - “3.5 I have carefully gone through the observations of the AO in the assessment order extracted in para 3.1 abo evidence filed during the appeal proceedings and the case laws relied by the AO and also the appellant. The AO disallowed the claim of bad debt on the ground that (i) the write-off of bad debts is not genuine that the debts had actually become bad and irrecoverable and in the alternative (iii) the transaction of purchase and sale of commodities at the NSEL were speculative transactions and therefore, the loss on accou speculative loss and the same may be allowed to be carried forward for set off against the speculation gains in the subsequent years. 3.6 Verification of computation of income sheet of the appellant shows 'net profit before tax as per P&L A/c under the Commodities Trading business head shows a loss of Rs.10,91,53,148/ ended shows a debit of Rs.10,91,53,148/ Commodities : irrecoverbility business loss by the assessee in his accounts and the return of income. In the submissions extracted at para 3.3 above, the appellant argued that the loss is allowable as 'business loss'. However it is see 'bad debt' and made the disallowance of Rs.10,91,53,148/ by treating the same as premature and not genuine. AO also took an alternate ground for disallowance to treat the transactions on NSEL as speculation loss. After detailed examination of the issue, my decision is as under. 3.7 AO in the assessment order quoted a letter of NSEL dated 16.06.2016 to state that the claims of loss made by the brokers/clients/agents are prem recovery process is underway by EOW and HCC and the assets worth 7000 crores as against the claim of 5,600 crores have already been secured. It appears record that the AO has not supplied the assessment proceedings. Appellant con that the AO was under obliga^jbn to supply the information collected from third party to the assessee, if she wanted to use the same in the assessment. Mere statement regarding the alleged observations of N against the principles of natural justice. Such statement/letter,, if/any has ,to be CIT(A), however, after going through the submission of the assessee held the loss claimed by the assessee as business loss - 5 I have carefully gone through the observations of the AO in the assessment order extracted in para 3.1 above, written submissions made by the appellant, evidence filed during the appeal proceedings and the case laws relied by the AO and also the appellant. The AO disallowed the claim of bad debt on the ground that (i) off of bad debts is not genuine and (ii) the assessee was not able to prove that the debts had actually become bad and irrecoverable and in the alternative (iii) the transaction of purchase and sale of commodities at the NSEL were speculative transactions and therefore, the loss on account of speculation trading was a speculative loss and the same may be allowed to be carried forward for set off against the speculation gains in the subsequent years. 3.6 Verification of computation of income sheet of the appellant shows 'net before tax as per P&L A/c under the Commodities Trading business head shows a loss of Rs.10,91,53,148/-. And the P&L a/c of the assessee for the year debit of Rs.10,91,53,148/- under the title 'Loss on account of Commodities : irrecoverbility'. This shows that the loss is actually claimed as business loss by the assessee in his accounts and the return of income. In the submissions extracted at para 3.3 above, the appellant argued that the loss is allowable as 'business loss'. However it is seen that the AO discussed the claim as 'bad debt' and made the disallowance of Rs.10,91,53,148/- debited to P&L account by treating the same as premature and not genuine. AO also took an alternate ground for disallowance to treat the transactions on NSEL as speculative and loss as speculation loss. After detailed examination of the issue, my decision is as under. .7 AO in the assessment order quoted a letter of NSEL dated 16.06.2016 to state that the claims of loss made by the brokers/clients/agents are prem recovery process is underway by EOW and HCC and the assets worth 7000 crores as against the claim of 5,600 crores have already been secured. It appears ecord that the AO has not supplied the assessment proceedings. Appellant contested this letter in his submissions. It is true that the AO was under obliga^jbn to supply the information collected from third party to the assessee, if she wanted to use the same in the assessment. Mere statement regarding the alleged observations of NSEL, and /making addition is against the principles of natural justice. Such statement/letter,, if/any has ,to be Ketan Anil Shah ITA No. 2188/M/2022 7 CIT(A), however, after going through the submission of the assessee held the loss claimed by the assessee as business loss 5 I have carefully gone through the observations of the AO in the assessment ve, written submissions made by the appellant, evidence filed during the appeal proceedings and the case laws relied by the AO and also the appellant. The AO disallowed the claim of bad debt on the ground that (i) and (ii) the assessee was not able to prove that the debts had actually become bad and irrecoverable and in the alternative (iii) the transaction of purchase and sale of commodities at the NSEL were speculative nt of speculation trading was a speculative loss and the same may be allowed to be carried forward for set off 3.6 Verification of computation of income sheet of the appellant shows 'net before tax as per P&L A/c under the Commodities Trading business head . And the P&L a/c of the assessee for the year under the title 'Loss on account of '. This shows that the loss is actually claimed as business loss by the assessee in his accounts and the return of income. In the submissions extracted at para 3.3 above, the appellant argued that the loss is n that the AO discussed the claim as debited to P&L account by treating the same as premature and not genuine. AO also took an alternate speculative and loss as speculation loss. After detailed examination of the issue, my decision is as under. .7 AO in the assessment order quoted a letter of NSEL dated 16.06.2016 to state that the claims of loss made by the brokers/clients/agents are premature, since the recovery process is underway by EOW and HCC and the assets worth 7000 crores as against the claim of 5,600 crores have already been secured. It appears from the tested this letter in his submissions. It is true that the AO was under obliga^jbn to supply the information collected from third party to the assessee, if she wanted to use the same in the assessment. Mere SEL, and /making addition is against the principles of natural justice. Such statement/letter,, if/any has ,to be supplied to the assessee for giving examine the third party. Hon'ble Supreme Court in the case Industries vs.\ Commissioner of Central Excise (2015) 281 CTR 241 (SC) has reaffirmed the' principles of natural justice and held that the opportunity of cross examination of witness is must in a case where some adverse inference is to b drawn against the assessee. Reliance is also placed on Asst. CIT Vs. Katrina Rosemary Turcotte 87 Taxmann.com 116 (ITAT Mum) Addl. CIT Vs. Miss Lata Mangeshkar 97 ITR 696 (Bom). loss of Rs.10,91,53,148/ a debit of Rs.10,91,53,148/ irrecoverbility'. This shows that the loss is actually claimed as business loss by the assessee in his accounts and the return of income. In the submissions extracted at para 3.3 above, the appellant argued that the loss is allowable as 'business loss'. However it is seen that the AO discussed the claim as 'bad debt' and made the disallowance of Rs.10,91,53,148/ premature and not genuine. AO also took an alternate ground for disallowance to treat the transactions on NSEL as speculative and loss as speculation loss. After detailed examination of the issue, my decision is as under. 5.7 AO in the assessment order quoted a letter of NSEL dated 16.06.2016 to state that the claims of loss made by the brokers/clients/agents are premature, since the recovery process is underway by EOW and HCC and the assets against the claim of 5,600 crores have already been secured. It record that the AO has not supplied the assessment proceedings. Appellant contested this letter that the AO was under obli party to the assessee, statement regarding the alleged observations of NSEL, and making addition is against theprinciples of natural justice. Suc supplied to the assessee for giving examine the third party. Hon'ble Supreme Court in the case of Andaman Industries vs. Commissioner of Central Excise (2015) 281 CTR 241 (SC) has reaffirmed theprinciples of natural justice and held that the opportunity of cross examination of witness is must drawn against the assessee. Reliance is also placed on Asst. CIT Vs. Katrina Rosemary Turcotte 87 Taxmann.com 116 Mangeshkar 97 ITR 696 3.8 Let the statement of NSEL be as it may, but the opinion of NSEL that brokers/agents/clients are claiming loss which may result in duplication of bad debt supplied to the assessee for giving ; an opportunity and ; aiso an opportunity to cross examine the third party. Hon'ble Supreme Court in the case of Andaman Timber Commissioner of Central Excise (2015) 281 CTR 241 (SC) has reaffirmed the' principles of natural justice and held that the opportunity of cross examination of witness is must in a case where some adverse inference is to b drawn against the assessee. Reliance is also placed on Asst. CIT Vs. Katrina Rosemary Turcotte 87 Taxmann.com 116 (ITAT Mum) Addl. CIT Vs. Miss Lata Mangeshkar 97 ITR 696 (Bom). loss of Rs.10,91,53,148/-. And the P&L a/c of the assessee for the year ende debit of Rs.10,91,53,148/- under the title 'Loss on account of Commodities irrecoverbility'. This shows that the loss is actually claimed as business loss by the assessee in his accounts and the return of income. In the submissions extracted at ara 3.3 above, the appellant argued that the loss is allowable as 'business loss'. However it is seen that the AO discussed the claim as 'bad debt' and made the disallowance of Rs.10,91,53,148/- debited to P&L account by treating the same as not genuine. AO also took an alternate ground for disallowance to treat the transactions on NSEL as speculative and loss as speculation loss. After examination of the issue, my decision is as under. the assessment order quoted a letter of NSEL dated 16.06.2016 to state loss made by the brokers/clients/agents are premature, since the underway by EOW and HCC and the assets worth 7000 crores as of 5,600 crores have already been secured. It appears from record that the AO has not supplied the said letter to the appellant during the assessment proceedings. Appellant contested this letter in his submissions. that the AO was under obligation to supply the information collected from third to the assessee, if she wanted to use the same in the assessment. Mere statement regarding the alleged observations of NSEL, and making addition is against theprinciples of natural justice. Such statement/letter,.if any supplied to the assessee for giving ; an opportunity and : a!so an opportunity to cross examine the third party. Hon'ble Supreme Court in the case of Andaman Industries vs. Commissioner of Central Excise (2015) 281 CTR 241 (SC) has reaffirmed theprinciples of natural justice and held that the opportunity of cross examination of witness is must in a case where some adverse inference is to be assessee. Reliance is also placed on Asst. CIT Vs. Katrina Rosemary Turcotte 87 Taxmann.com 116 (ITAT Mum) Addl. CIT Vs. Miss Lata 696 (Bom). Let the statement of NSEL be as it may, but the opinion of NSEL that ts are claiming loss which may result in duplication of bad debt Ketan Anil Shah ITA No. 2188/M/2022 8 aiso an opportunity to cross of Andaman Timber Commissioner of Central Excise (2015) 281 CTR 241 (SC) has reaffirmed the' principles of natural justice and held that the opportunity of cross examination of witness is must in a case where some adverse inference is to be drawn against the assessee. Reliance is also placed on Asst. CIT Vs. Katrina Rosemary Turcotte 87 Taxmann.com 116 (ITAT Mum) Addl. CIT Vs. Miss Lata . And the P&L a/c of the assessee for the year ended shows under the title 'Loss on account of Commodities irrecoverbility'. This shows that the loss is actually claimed as business loss by the assessee in his accounts and the return of income. In the submissions extracted at ara 3.3 above, the appellant argued that the loss is allowable as 'business loss'. However it is seen that the AO discussed the claim as 'bad debt' and made the debited to P&L account by treating the same as not genuine. AO also took an alternate ground for disallowance to treat the transactions on NSEL as speculative and loss as speculation loss. After the assessment order quoted a letter of NSEL dated 16.06.2016 to state loss made by the brokers/clients/agents are premature, since the worth 7000 crores as appears from the said letter to the appellant during the submissions. It is true on to supply the information collected from third the assessment. Mere statement regarding the alleged observations of NSEL, and making addition is h statement/letter,.if any,has to be a!so an opportunity to cross examine the third party. Hon'ble Supreme Court in the case of Andaman Timber Industries vs. Commissioner of Central Excise (2015) 281 CTR 241 (SC) has reaffirmed theprinciples of natural justice and held that the opportunity of cross a case where some adverse inference is to be assessee. Reliance is also placed on Asst. CIT Vs. Katrina Addl. CIT Vs. Miss Lata Let the statement of NSEL be as it may, but the opinion of NSEL that ts are claiming loss which may result in duplication of bad debt ;j claims is not the basis for allowing a loss in the assessment in Income Tax proceedings. The allowability of a claim has to be examined with respect to the transactions, books of accounts Act. So, the reliance placed by the AO on the said lette claim of loss and premature claim of bad debts by the tax payers cannot be basis fordisallowance. Further, an agent or b account sale and purchases of the clients as their transactions. An agent or broker only records commission in its books of account. 3.9 It transpires from the record that the appellant regularly trades in on NSEL and the payments are received in 25/35 days. However, due to the manipulation of transactions on NSEL by some of the authorized brokers a scam broke out and the NSEL as an intermediary between the buyer and sellers of commodities failed to honour the payments on 31 information was in public domain and it became a scam. AO also described the scam that has taken place in NSEL in paragraphs 4.3 to 4.7 of the assessment order and accepted that NSEL did no the investors. As NSEL failed to pay the outstanding amounts, the assessee neither received the payment for the commodities sold nor did he receive the stock of commodities or the amounts paid for the pu the contracts through its broker other agencies revealed that stock of goods required to be available in accredited warehouses of NSEL was not found. Appellant argued got completely suspended and was shut consequently, the assessee completely lost its chance of recovering the amounts from NSEL. It is argued that since the amount were paid in the normal course of business of the assessee, t sale proceeds would result in regular 'business loss' for the assessee. Therefore he claimed the non recoverable amount as a 'business loss' for the year. 5.2 Further, the Ld. Ld.AO that the claim in question was of bad debts written off. Relevant finding of the Ld. “3.10 However, the AO argued that the assessee has not provided any suppor in respect of the claim of bad debts therefore the claim is illegal. record that the assessee had provided documentary evidences in the form of contract notes of the brokers M/s. Motilal Oswal Securities Pvt. Ltd. and M/s. Phillip Commodities Pvt. Ltd to show that the amount of Rs.10,91,53,1487 ;j claims is not the basis for allowing a loss in the assessment in Income Tax proceedings. The allowability of a claim has to be examined with respect to the transactions, books of accounts of the assessee and provisions of the Income Tax Act. So, the reliance placed by the AO on the said letter regarding the duplication of claim of loss and premature claim of bad debts by the tax payers cannot be basis fordisallowance. Further, an agent or broker cannot claim a loss as they cannot sale and purchases of the clients as their transactions. An agent or broker only records commission in its books of account. 3.9 It transpires from the record that the appellant regularly trades in on NSEL and the payments are received in 25/35 days. However, due to the manipulation of transactions on NSEL by some of the authorized brokers a scam broke out and the NSEL as an intermediary between the buyer and sellers of to honour the payments on 31 st July 2013 for the first time. This information was in public domain and it became a scam. AO also described the scam that has taken place in NSEL in paragraphs 4.3 to 4.7 of the assessment order and accepted that NSEL did not honour their commitment and wrongly caused loss to the investors. As NSEL failed to pay the outstanding amounts, the assessee neither received the payment for the commodities sold nor did he receive the stock of commodities or the amounts paid for the purchase of commodities from NSEL for the contracts through its broker-members. Further,as the investigation by SEBI and other agencies revealed that stock of goods required to be available in accredited warehouses of NSEL was not found. Appellant argued that as the operations of NSEL got completely suspended and was shut consequently, the assessee completely lost its chance of recovering the amounts from NSEL. It is argued that since the amount were paid in the normal course of business of the assessee, the non sale proceeds would result in regular 'business loss' for the assessee. Therefore he claimed the non recoverable amount as a 'business loss' for the year. Further, the Ld. CIT(A) has also rejected the finding of the he claim in question was of bad debts written off. Relevant finding of the Ld. CIT(A) is reproduced as under: 3.10 However, the AO argued that the assessee has not provided any suppor in respect of the claim of bad debts therefore the claim is illegal. It is seen from the record that the assessee had provided documentary evidences in the form of contract notes of the brokers M/s. Motilal Oswal Securities Pvt. Ltd. and M/s. Phillip Commodities Pvt. Ltd to show that the amount of Rs.10,91,53,1487 Ketan Anil Shah ITA No. 2188/M/2022 9 ;j claims is not the basis for allowing a loss in the assessment in Income Tax proceedings. The allowability of a claim has to be examined with respect to the of the assessee and provisions of the Income Tax r regarding the duplication of claim of loss and premature claim of bad debts by the tax payers cannot be basis roker cannot claim a loss as they cannot sale and purchases of the clients as their transactions. An agent or broker 3.9 It transpires from the record that the appellant regularly trades in commodities on NSEL and the payments are received in 25/35 days. However, due to the manipulation of transactions on NSEL by some of the authorized brokers a scam broke out and the NSEL as an intermediary between the buyer and sellers of July 2013 for the first time. This information was in public domain and it became a scam. AO also described the scam that has taken place in NSEL in paragraphs 4.3 to 4.7 of the assessment order and t honour their commitment and wrongly caused loss to the investors. As NSEL failed to pay the outstanding amounts, the assessee neither received the payment for the commodities sold nor did he receive the stock of rchase of commodities from NSEL for Further,as the investigation by SEBI and other agencies revealed that stock of goods required to be available in accredited that as the operations of NSEL got completely suspended and was shut consequently, the assessee completely lost its chance of recovering the amounts from NSEL. It is argued that since the amount he non-recovery of the sale proceeds would result in regular 'business loss' for the assessee. Therefore he claimed the non recoverable amount as a 'business loss' for the year.” CIT(A) has also rejected the finding of the he claim in question was of bad debts written off. CIT(A) is reproduced as under:- 3.10 However, the AO argued that the assessee has not provided any suppor in It is seen from the record that the assessee had provided documentary evidences in the form of contract notes of the brokers M/s. Motilal Oswal Securities Pvt. Ltd. and M/s. Phillip Commodities Pvt. Ltd to show that the amount of Rs.10,91,53,1487- was recoverable from NSEL. As operations on NSEL were banned and the law enforcing agencies swooped on it and found that the actual goods were not available in the accredited warehouses of NSEL the appellant felt the amounts due to him not recoverable. It is seen satisfies the conditions section 36(l)(vii) read with section 36(2) of the Act to claim the loss incurred as bad debt. Therefore, I do not find any force in arguments of the AO that there is no docum 3.11 AO observed that the assessee has not made any efforts for recovery of bad debts from M/s. Phillip Commodities Pvt. Ltd Pvt. Ltd like sending legal notices and filing This avermment of the AO appears to be not correct as the assessee has filed the suit against M/s. Motilal Oswal Securities Pvt. Ltd. & M/s. Phillip Commodities for recovery in the Bombay High Court NSEL M/s Modern India Ltd. (Investor in NSEL) has filed a Suit under Order 1 Rule 8 of the CPC (Class action suit) which includes all investors in NSEL including the appellant. From the above facts it is clear appellant in the normal course of business and it became irrecoverable on account of the scam that has taken place in NSEL, ban on operations of NSEL and also that there was no stock of commodities in the accredited has become bad, the appellant booked loss for the year and claimed in the return of income for the year. 3.12 The Assessing Officer has not disputed the fact that the assessee has carried out trading of commodities at NSEL an that remained to be recovered by the assessee on account to abrupt embargo on trading at NSEL. Once the amount has become irrecoverable and the assessee writes off the same in the books of accounts, there is no statutory re assessee to establish that the debt, in fact, has become irrecoverable. It is sufficient if the bad debts are written off as irrecoverable in the accounts of the assessee. [TRF Ltd.]. Later, if at any stage", the assessee recovers any mon written off as bad debt, the assessee is under obligation to declare it as income. It is also seen that an amount of' Rs.1,27,98,621/ from NSEL as against the outstanding amount of Rs. 15,62,29,161/ receivable from NSEL. Appellant has offered the recovered amount as income in the year of receipt as per the submissions made. 3.13 AO has argued that the debt has to be bad and then only he can write off. The facts narrated above show that the amo as it may, after the amendment made to the Act with effect from 15 the assessee is not required to establish that the debt has in fact become verable from NSEL. As operations on NSEL were banned and the law enforcing agencies swooped on it and found that the actual goods were not available in the accredited warehouses of NSEL the appellant felt the amounts due to him not recoverable. It is seen that the appellant also explained to the AO as to how he satisfies the conditions section 36(l)(vii) read with section 36(2) of the Act to claim the loss incurred as bad debt. Therefore, I do not find any force in arguments of the AO that there is no documentary evidence for the loss incurred. 3.11 AO observed that the assessee has not made any efforts for recovery of bad debts from M/s. Phillip Commodities Pvt. Ltd and M/s. Motilal Oswal Securities Pvt. Ltd like sending legal notices and filing cases against the brokers and the NSEL. ment of the AO appears to be not correct as the assessee has filed the suit against M/s. Motilal Oswal Securities Pvt. Ltd. & M/s. Phillip Commodities for recovery in the Bombay High Court (Recovery Suit Number 70 of 2017). Against NSEL M/s Modern India Ltd. (Investor in NSEL) has filed a Suit under Order 1 Rule 8 of the CPC (Class action suit) which includes all investors in NSEL including the appellant. From the above facts it is clear that there is loss that occurred to the appellant in the normal course of business and it became irrecoverable on account of the scam that has taken place in NSEL, ban on operations of NSEL and also that there was no stock of commodities in the accredited warehouses. Therefore, as it has become bad, the appellant booked loss for the year and claimed in the return of The Assessing Officer has not disputed the fact that the assessee has carried out trading of commodities at NSEL and there were outstanding amounts that remained to be recovered by the assessee on account to abrupt embargo on trading at NSEL. Once the amount has become irrecoverable and the assessee writes off the same in the books of accounts, there is no statutory requirement for the assessee to establish that the debt, in fact, has become irrecoverable. It is sufficient if the bad debts are written off as irrecoverable in the accounts of the assessee. [TRF Ltd.]. Later, if at any stage", the assessee recovers any money against the sum written off as bad debt, the assessee is under obligation to declare it as income. It is also seen that an amount of' Rs.1,27,98,621/- only was received by the assessee from NSEL as against the outstanding amount of Rs. 15,62,29,161/ receivable from NSEL. Appellant has offered the recovered amount as income in the year of receipt as per the submissions made. 3.13 AO has argued that the debt has to be bad and then only he can write off. The facts narrated above show that the amounts became irrecoverable and bad. Be that as it may, after the amendment made to the Act with effect from 15 the assessee is not required to establish that the debt has in fact become Ketan Anil Shah ITA No. 2188/M/2022 10 verable from NSEL. As operations on NSEL were banned and the law enforcing agencies swooped on it and found that the actual goods were not available in the accredited warehouses of NSEL the appellant felt the amounts due to him not that the appellant also explained to the AO as to how he satisfies the conditions section 36(l)(vii) read with section 36(2) of the Act to claim the loss incurred as bad debt. Therefore, I do not find any force in arguments of the 3.11 AO observed that the assessee has not made any efforts for recovery of said and M/s. Motilal Oswal Securities cases against the brokers and the NSEL. ment of the AO appears to be not correct as the assessee has filed the suit against M/s. Motilal Oswal Securities Pvt. Ltd. & M/s. Phillip Commodities for (Recovery Suit Number 70 of 2017). Against NSEL M/s Modern India Ltd. (Investor in NSEL) has filed a Suit under Order 1 Rule 8 of the CPC (Class action suit) which includes all investors in NSEL including the that there is loss that occurred to the appellant in the normal course of business and it became irrecoverable on account of the scam that has taken place in NSEL, ban on operations of NSEL and also that warehouses. Therefore, as it has become bad, the appellant booked loss for the year and claimed in the return of The Assessing Officer has not disputed the fact that the assessee has d there were outstanding amounts that remained to be recovered by the assessee on account to abrupt embargo on trading at NSEL. Once the amount has become irrecoverable and the assessee writes quirement for the assessee to establish that the debt, in fact, has become irrecoverable. It is sufficient if the bad debts are written off as irrecoverable in the accounts of the assessee. [TRF ey against the sum written off as bad debt, the assessee is under obligation to declare it as income. It is only was received by the assessee from NSEL as against the outstanding amount of Rs. 15,62,29,161/- due and receivable from NSEL. Appellant has offered the recovered amount as income in the 3.13 AO has argued that the debt has to be bad and then only he can write off. The unts became irrecoverable and bad. Be that as it may, after the amendment made to the Act with effect from 15 th April, 1989, the assessee is not required to establish that the debt has in fact become irrecoverable. The only requirement under section 36(l)( of the Act is write off the debt as irrecoverable in the books of account of the assessee for claiming deduction u/s. 36(l)(vii) of the Act which is complied with by the assessee. Reliance in this regard is placed on the decisi TRF Ltd. Vs. CIT [(2010) 323 ITR 397 (SC)] and the Board Circular No. [F.NO.279/MISC./140/2015 the AO in para 4.11 and para 4.14 of the assessment order are not correct a against the settled law which is accepted by the Board by issuing a circular. 3.14 It is seen that number of other assessees also incurred losses on account of scam in NSEL and stoppage of payments by NSEL in July 2013, which have reached higher appellate forums and claim of bad debts of such assessees have been accepted by courts. Reliance is placed on the following case laws.  DCIT vs. Cello Pens and Stationery Pvt. Ltd. in ITA No. 305/Mum/2019 for A.Y. 2014 dated 22nd October, 2021 • Remi Securities Ltd. v. ACIT in ITA No. 3649/Murn/2018 for A.Y. 2014 January, 2019 M/s Remi Securities and Engineering Limited vs. ACIT, Circle 13(3)(1), Mumbai [ITA No. 3650/Mum/2108; dated 06.09.2019 • Megh Sakariya International (P.) L 2018 • JayAshkaran Shah vs. • Mohan Jain v. ITO [ITA No. 605/ind/2017forAY2014 5.3 Further, the Ld.CIT(A) has also rejected the contention of transactions being in the nature of observing as under:- “3.15 AO observed that if the assessee succeeds in appeal on the claim as bad debts/business loss, as an alter at the NSEL may be held as speculative transactions, the loss as speculation loss and the same may be allowed to be carried forward for set off against the speculation gains in the subsequent years. It is seen that the appellant did trading in commodities in earlier years irrecoverable. The only requirement under section 36(l)(vii) read with section 36(2) of the Act is write off the debt as irrecoverable in the books of account of the assessee for claiming deduction u/s. 36(l)(vii) of the Act which is complied with by the assessee. Reliance in this regard is placed on the decision of the Apex Court in . CIT [(2010) 323 ITR 397 (SC)] and the Board Circular No. [F.NO.279/MISC./140/2015-ITJ], DATED 30-5-2016. Therefore, the observations of the AO in para 4.11 and para 4.14 of the assessment order are not correct a against the settled law which is accepted by the Board by issuing a circular. 3.14 It is seen that number of other assessees also incurred losses on account of scam in NSEL and stoppage of payments by NSEL in July 2013, which have reached appellate forums and claim of bad debts of such assessees have been accepted by courts. Reliance is placed on the following case laws. DCIT vs. Cello Pens and Stationery Pvt. Ltd. in ITA No. 305/Mum/2019 for A.Y. 2014 dated 22nd October, 2021 Remi Securities Ltd. v. ACIT in ITA No. 3649/Murn/2018 for A.Y. 2014 M/s Remi Securities and Engineering Limited vs. ACIT, Circle 13(3)(1), Mumbai [ITA No. 3650/Mum/2108; dated 06.09.2019 • Megh Sakariya International (P.) Ltd. v. Dy. CIT [ITA No.59/Cheny/2018 decided on 5 • JayAshkaran Shah vs. I.T.O. (129 taxmann.com 6, Mum.)(dated 3rd May, 2021 • Mohan Jain v. ITO [ITA No. 605/ind/2017forAY2014-15 decided on 5-2 Further, the Ld.CIT(A) has also rejected the contention of transactions being in the nature of ‘speculative transaction AO observed that if the assessee succeeds in appeal on the claim as bad debts/business loss, as an alternative, the transactions of purchase and sale of commodities at the NSEL may be held as speculative transactions, the loss as speculation loss and the same may be allowed to be carried forward for set off against the speculation gains in the rs. It is seen that the appellant did trading in commodities in earlier years Ketan Anil Shah ITA No. 2188/M/2022 11 vii) read with section 36(2) of the Act is write off the debt as irrecoverable in the books of account of the assessee for claiming deduction u/s. 36(l)(vii) of the Act which is complied with by on of the Apex Court in . CIT [(2010) 323 ITR 397 (SC)] and the Board Circular No. 12/2016 Therefore, the observations of the AO in para 4.11 and para 4.14 of the assessment order are not correct and go against the settled law which is accepted by the Board by issuing a circular. 3.14 It is seen that number of other assessees also incurred losses on account of scam in NSEL and stoppage of payments by NSEL in July 2013, which have reached appellate forums and claim of bad debts of such assessees have been DCIT vs. Cello Pens and Stationery Pvt. Ltd. in ITA No. 305/Mum/2019 for A.Y. 2014-15 Remi Securities Ltd. v. ACIT in ITA No. 3649/Murn/2018 for A.Y. 2014-15 dated 10th M/s Remi Securities and Engineering Limited vs. ACIT, Circle 13(3)(1), Mumbai [ITA No. td. v. Dy. CIT [ITA No.59/Cheny/2018 decided on 5-9- . (129 taxmann.com 6, Mum.)(dated 3rd May, 2021 2-2019” Further, the Ld.CIT(A) has also rejected the contention of speculative transaction’ by AO observed that if the assessee succeeds in appeal on the claim as bad native, the transactions of purchase and sale of commodities at the NSEL may be held as speculative transactions, the loss as speculation loss and the same may be allowed to be carried forward for set off against the speculation gains in the rs. It is seen that the appellant did trading in commodities in earlier years also and the department accepted the income out of these trading transactions as business transaction. In the circumstances loss for the year cannot be treated as speculative 3.16 The issue of treating the commodity trading transactions on NSEL as speculative transactions is also examined by the courts in similar cases involving the Hon. Tribunal Mumbai Bench in the case of No.6321/Mum/2019 for A.Y. 2016 made to NSEL through registered broker towards purchase of commodities shall be allowable as regular business loss u/s 28 of the Act and that the said loss c construed as speculative in nature. Therefore, the alternate conclusion of the AO to the effect that the transactions of purchase and sale of commodities by the assessee at NSEL were speculative transactions is contrary to the facts, consistency down.” 6. Before us, the Ld. decision of the co-ordinate bench of the Tribunal in the case of Chowdry Associates vs Assessment Year 2015 transaction carried on NSEL The Tribunal has also rejected the contention that these transactions are in the nature of speculative transactions. Th relevant finding of the Tribunal is reproduced as under: 14. Heard the arguments of both the parties and perused the material available on re 15. From the entirety of the events, we find that in the assessment year 2014 made purchases in the middle or last week of June 2013 through M/s A Rathi Commodities Pvt. Ltd. and M/s Philips Commodities Pvt. Ltd. The NSEL fail ultimately the Government had prohibited NSEL to make transactions after 1 details of outstanding unsettled transactions c assessee through both the brokers has also been furnished to the revenue authoritii the NSEL. 16. The AO disallowed the losses as claimed by the assessee on the ground transactions has carried out by the assessee are speculative transactions settled wi Section 43(5) of the Act. The AO in the assessment < reproduced the relevant provisions of also and the department accepted the income out of these trading transactions as business transaction. In the circumstances loss for the year cannot be treated as speculative The issue of treating the commodity trading transactions on NSEL as speculative transactions is also examined by the courts in similar cases involving the Hon. Tribunal Mumbai Bench in the case of DCIT vs. M/s Nirshilp Securitie No.6321/Mum/2019 for A.Y. 2016-17 held that the loss arising on account of payment made to NSEL through registered broker towards purchase of commodities shall be allowable as regular business loss u/s 28 of the Act and that the said loss c construed as speculative in nature. Therefore, the alternate conclusion of the AO to the effect that the transactions of purchase and sale of commodities by the assessee at NSEL were speculative transactions is contrary to the facts, consistency and also the law laid Before us, the Ld. Counsel of the assessee has relied on the ordinate bench of the Tribunal in the case of Associates vs. ACIT in ITA No.3928/Del/2019 Assessment Year 2015-16 wherein identical claim of the loss transaction carried on NSEL has been held to be a The Tribunal has also rejected the contention that these transactions are in the nature of speculative transactions. Th relevant finding of the Tribunal is reproduced as under: 14. Heard the arguments of both the parties and perused the material available on re 15. From the entirety of the events, we find that in the assessment year 2014 es in the middle or last week of June 2013 through M/s A Rathi Commodities Pvt. Ltd. and M/s Philips Commodities Pvt. Ltd. The NSEL failed to fulfill its commitments and ultimately the Government had prohibited NSEL to make transactions after 1 details of outstanding unsettled transactions c assessee through both the brokers has also been furnished to the revenue authoritii the NSEL. 16. The AO disallowed the losses as claimed by the assessee on the ground transactions has the assessee are speculative transactions settled with delivery in terms of Section 43(5) of the Act. The AO in the assessment < reproduced the relevant provisions of Ketan Anil Shah ITA No. 2188/M/2022 12 also and the department accepted the income out of these trading transactions as business transaction. In the circumstances loss for the year cannot be treated as speculative loss. The issue of treating the commodity trading transactions on NSEL as speculative transactions is also examined by the courts in similar cases involving the loss from NSEL. DCIT vs. M/s Nirshilp Securities Pvt. Ltd (ITA 17 held that the loss arising on account of payment made to NSEL through registered broker towards purchase of commodities shall be allowable as regular business loss u/s 28 of the Act and that the said loss cannot be construed as speculative in nature. Therefore, the alternate conclusion of the AO to the effect that the transactions of purchase and sale of commodities by the assessee at NSEL and also the law laid Counsel of the assessee has relied on the ordinate bench of the Tribunal in the case of ACIT in ITA No.3928/Del/2019 for 16 wherein identical claim of the loss from a business loss. The Tribunal has also rejected the contention that these transactions are in the nature of speculative transactions. The relevant finding of the Tribunal is reproduced as under:- 14. Heard the arguments of both the parties and perused the material available on record. 15. From the entirety of the events, we find that in the assessment year 2014-15 assessee had es in the middle or last week of June 2013 through M/s A Rathi Commodities fulfill its commitments and ultimately the Government had prohibited NSEL to make transactions after 1 st July 2013. The details of outstanding unsettled transactions c assessee through both the brokers has also 16. The AO disallowed the losses as claimed by the assessee on the ground transactions has th delivery in terms of Section 43(5) of the Act. The AO in the assessment < reproduced the relevant provisions of Section 43(5) upto sub going further to sub-Section (e). 17. Reading further, sub April 2014 reveals that in respect of trading and commodity derivatives carried c a recogni/ed association shall not be a spe (e relevant provisions of Section 43(5)(e) are as detailed below. f [(e) an eligible transaction in respect of trading in commodity derivatives a out in a recognised association [, which is chargeable to commodities trans Act, 2013 (17 of 2013),]] shall not be 18. Further, Explanation 2 for the purpose of Clause (e) defines what const derivative". The meaning has been assigned as per Chapter VII of the Fit Act, 2013. 19. Chapter VII of the Finance Act, 2013 at definitions mentioned at para 1C Commodity derivative means- (i) a contract for delivery of goods which is not a ready delivery contract; or (ii) a contract for differences which derives its value from prices or indices of p (A) of such underlying goods; or (B) of related services and rights, such as warehous weather and similar events and activities. 20. The "eligible transactions" means (A) carried out electronically on screen registered under the bye commodity derivative in accordance with the provisions of th 1952 (74 of 1952) and the rules, regulations or bye laws made or directions issued under that Act on a recognized association; and (B) which is supported by a time stamped contract note issued by such member o intermediary to every client indicating in the contract note, the unique client identit rules, regulations or bye account number allotted under this Act; 21. The "recognized association" means "recognized association" means a recognized association as referred to in clause (j) c section 281 of the Forward Contracts (Regulation) Act, 1952 (74 of 1952) and which be prescribed and is notified by the Central Government fo 22. We also find that all the transactions made by the assessee are evidencing the No. and also carried out through computerized exchanged through electroni screen (NSEL) as per the details collected by the revenue. 23. We have also gone through the provisions of the Act introduced vide Finance Bill 200 in respect of measures to rationalize the tax treatment of derivative transactions. Th same is as under: Under the existing provisions clause (5) of Section 43, a transaction for the purchas sale of any commodity including stocks and shares is deemed to be "speculative transaction". If it is settled otherwise than by actual delivery. Howeve of transactions are excluded from the purview of the sai unabsorbed speculation losses are allowed to be came forward for eight years for set against speculation profits in subsequent yean These restrictions were essentially designed as an anti-evasion measure to prevent of an appropriate institutions infrastructure. Recent systemic and technological changes introduced by stock markets hav sufficient transparency to prevent generating fictitious losses throug transactions or shi Section 43(5) upto sub-Section (d) of 45(3) AO stopped at short of sub- Section (e). 17. Reading further, sub-Section (e) which was introduced by the Finance Act, 2013 April 2014 reveals that in respect of trading and commodity derivatives carried c a recogni/ed association shall not be a speculative transaction. (e relevant provisions of Section 43(5)(e) are as detailed below. [(e) an eligible transaction in respect of trading in commodity derivatives a out in a recognised association [, which is chargeable to commodities transaction under Chapter VII of the Finance Act, 2013 (17 of 2013),]] shall not be deemed to be a speculative transaction: 18. Further, Explanation 2 for the purpose of Clause (e) defines what const derivative". The meaning has been assigned as per Chapter VII of the Fit Act, 2013. 19. Chapter VII of the Finance Act, 2013 at definitions mentioned at para 1C Commodity (i) a contract for delivery of goods which is not a ready delivery contract; or (ii) a contract for differences which derives its value from prices or indices of p (A) of such underlying goods; or (B) of related services and rights, such as warehousing and freight; or weather and similar events and activities. 20. The "eligible transactions" means (A) carried out electronically on screen-based systems through member or registered under the bye-laws, rules and regulations of the recognized association for trading in commodity derivative in accordance with the provisions of the Forward Contracts (Regulation) Act, 1952 (74 of 1952) and the rules, regulations or bye laws made or directions issued under that Act n a recognized association; and (B) which is supported by a time stamped contract note issued by such member o intermediary to every client indicating in the contract note, the unique client identity number allotted under the Act, rules, regulations or bye-laws referred to in sub-clause (A), unique trade number and permanent account number allotted under this Act; 21. The "recognized association" means "recognized association" means a recognized association as referred to in clause (j) c section 281 of Forward Contracts (Regulation) Act, 1952 (74 of 1952) and which fulfill such conditions as may be prescribed and is notified by the Central Government for this purpose;] . 22. We also find that all the transactions made by the assessee are evidencing the No. and also carried out through computerized exchanged through electroni screen (NSEL) as per the details collected by the revenue. 23. We have also gone through the provisions of the Act introduced vide Finance Bill 200 in respect ures to rationalize the tax treatment of derivative transactions. Th same is as under: Under the existing provisions clause (5) of Section 43, a transaction for the purchas sale of any commodity including stocks and shares is deemed to be "speculative transaction". If it is settled otherwise than by actual delivery. Howeve of transactions are excluded from the purview of the said provision. Further th unabsorbed speculation losses are allowed to be came forward for eight years for set against speculation profits in subsequent yean These restrictions were essentially designed evasion measure to prevent claims of artificially generated lo of an appropriate institutions infrastructure. Recent systemic and technological changes introduced by stock markets hav sufficient transparency to prevent generating fictitious losses throug transactions or shifting of incidence of loss from one person to another. Th Ketan Anil Shah ITA No. 2188/M/2022 13 -Section (d) without Section (e) which was introduced by the Finance Act, 2013 w.e.f. 1 st April 2014 reveals that in respect of trading and commodity derivatives carried c a recogni/ed [(e) an eligible transaction in respect of trading in commodity derivatives a out in a recognised hapter VII of the Finance speculative transaction: 18. Further, Explanation 2 for the purpose of Clause (e) defines what constitutes "commodity derivative". The meaning has been assigned as per Chapter VII of the Fit Act, 2013. 19. Chapter VII of the Finance Act, 2013 at definitions mentioned at para 1C Commodity (i) a contract for delivery of goods which is not a ready delivery contract; or (ii) a contract for differences which derives its value from prices or indices of prices- ing and freight; or (C) with reference to based systems through member or an intermediary, association for trading in Forward Contracts (Regulation) Act, 1952 (74 of 1952) and the rules, regulations or bye laws made or directions issued under that Act (B) which is supported by a time stamped contract note issued by such member o intermediary to number allotted under the Act, (A), unique trade number and permanent "recognized association" means a recognized association as referred to in clause (j) c section 281 of such conditions as may 22. We also find that all the transactions made by the assessee are evidencing the clien ID and PA No. and also carried out through computerized exchanged through electroni screen (NSEL) as per 23. We have also gone through the provisions of the Act introduced vide Finance Bill 200 in respect ures to rationalize the tax treatment of derivative transactions. Th same is as under: Under the existing provisions clause (5) of Section 43, a transaction for the purchase and sale of any commodity including stocks and shares is deemed to be "speculative transaction". If it is settled otherwise than by actual delivery. However certain categories provision. Further the unabsorbed speculation losses are allowed to be came forward for eight years for set-off against speculation profits in subsequent yean These restrictions were essentially designed claims of artificially generated losses in the absence Recent systemic and technological changes introduced by stock markets have resulted in sufficient transparency to prevent generating fictitious losses through artificial fting of incidence of loss from one person to another. The screen based computerized trading proves for an excellent audit trail. Therefore the present distinction between speculative and non is no more required. The proposed amendmen transaction carried out in respect c trading in derivatives in a recognized stock exchange shall not be deemed to be speculative transaction. The proposed amendment al notify relevant rules etc. regarding conditions to be fulfilled by recognized exchanges in this regard. Further, it is also proposed to amend sub reduce the period of carry forward of speculation losses from eight assessment years t four assessment years. These amendments will take effect from 1 relation to assessment year 2006 24. The revenue has clearly held that the assessee is in the trading of commod Revenue, having said that failed to give the benefit of provisions of Sect 43(5)(e). Hence, the transactions done by the assessee shall not be deemed to be speculative t of the provisions of the Act. 25. We have also gone through the accounts of assessee for the earlier years. The amo kept with M/s Anand Rathi Commodities Pvt. Ltd. was Rs.1.30 crores for the year endi 31.03.2014 and Rs.4.60 crores for the ending 31.03.2013 and Rs.2.95 crores for the y< ending 31.03.3012. Similarly, the amount kept with M/s Philips Commodities India P Ltd. was Rs.4.33 crores for the year ending 31.03.2014 and Rs.14.95 crores for the end the year, the assessee could not recover the amounts from these t brokers owing to suspension of operations by the NSEL which was given as a part of t business transaction for purchase of commodities in the conduct of regular busine advanced made to purchase the commodity during t course of the business is a business loss allowable u/s 28 of the Act. 26. We have also perused the notice of PCIT, Central, New Delhi issued under t provisions of Section 263 of the Act proposing to withdraw the bad debts claimed by t assessee and accepted by the Assessing Officer. We categorically refrain from adjudicati of the notice, however, we observe that the said notice also dealt w the issue of bad claimed u/s 36(l)(vii) by that assessee. 27. We have also perused the order of the Chennai Tribunal in the case of Megh Sakari International Pvt. Ltd. in ITA No. 59/Chennai/2018 wherein the bad debts have be allowed by the Tribunal u/s 36(l)(vii) o brought to the notice regarding the information received from NSEL was topped since 31.07.2014 and the NSEL was in the pro of its traders and auctioning its assets for the s; purpose. The revenue claimed that the claim of bad debts was premature, However, t ITAT has allowed the claim of the assessee based on the judgment of the Hon'ble Ap was held that after 1 debt has becor irrecoverable and it was enough if the debt was written off as irrecoverable in the books. Further, the CBDT vide Circula bad deb the same is reproduced as under: . computerized trading proves for an excellent audit trail. Therefore the present distinction between speculative and non-speculative transactions, particularly relating to derivatives s no more required. The proposed amendment, therefore, seeks to provide that an eligible transaction carried out in respect c trading in derivatives in a recognized stock exchange shall not be deemed to be speculative transaction. The proposed amendment al rules etc. regarding conditions to be fulfilled by recognized exchanges in Further, it is also proposed to amend sub-section (4) of Section 73 so as to the period of carry forward of speculation losses from eight assessment years t four assessment years. These amendments will take effect from 1 st April, 2006and will, accordingly, relation to assessment year 2006-07 and subsequent years. revenue has clearly held that the assessee is in the trading of commod Revenue, having said that failed to give the benefit of provisions of Sect 43(5)(e). Hence, the transactions done by the assessee shall not be deemed to be speculative t of the provisions of the Act. 25. We have also gone through the accounts of assessee for the earlier years. The amo kept with M/s Anand Rathi Commodities Pvt. Ltd. was Rs.1.30 crores for the year endi 31.03.2014 and Rs.4.60 crores for the ending 31.03.2013 and Rs.2.95 crores for the y< ending 31.03.3012. Similarly, the amount kept with M/s Philips Commodities India P Ltd. was Rs.4.33 crores for the year ending 31.03.2014 and Rs.14.95 crores for the ending the year, the assessee could not recover the amounts from these t brokers owing to suspension of operations by the NSEL which was given as a part of t business transaction for purchase of commodities in the conduct of regular business operations. Hence, the amount advanced made to purchase the commodity during t course of the business is a business loss allowable u/s 28 of the Act. 26. We have also perused the notice of PCIT, Central, New Delhi issued under t provisions of 63 of the Act proposing to withdraw the bad debts claimed by t assessee and accepted by the Assessing Officer. We categorically refrain from adjudicati of the notice, however, we observe that the said notice also dealt w the issue of bad claimed u/s 36(l)(vii) by that assessee. 27. We have also perused the order of the Chennai Tribunal in the case of Megh Sakari International Pvt. Ltd. in ITA No. 59/Chennai/2018 wherein the bad debts have be allowed by the Tribunal u/s 36(l)(vii) of the Income Tax Act, 1961. In that case too, the brought to the notice regarding the information received from NSEL if trading on that platform was topped since 31.07.2014 and the NSEL was in the process of settling the outstanding dues f its traders and auctioning its assets for the s; purpose. The revenue claimed that the claim of bad debts was premature, However, t ITAT has allowed the claim of the assessee based on the judgment of the Hon'ble Apex Court in the case of TRF Ltd. Vs CIT 320 ITR 397 wherein it was held that after 1 st April 1989, it was not necessary for the assessee to establish that the debt has becor irrecoverable and it was enough if the debt was written off as irrecoverable in Further, the CBDT vide Circular No. 12/2016 clarified regarding the claim of the bad deb the same is reproduced as under: . Ketan Anil Shah ITA No. 2188/M/2022 14 computerized trading proves for an excellent audit trail. Therefore the present distinction particularly relating to derivatives , therefore, seeks to provide that an eligible transaction carried out in respect c trading in derivatives in a recognized stock exchange shall not be deemed to be speculative transaction. The proposed amendment also seeks to rules etc. regarding conditions to be fulfilled by recognized exchanges in section (4) of Section 73 so as to the period of carry forward of speculation losses from eight assessment years t four April, 2006and will, accordingly, applyin revenue has clearly held that the assessee is in the trading of commodity derivatives. Revenue, having said that failed to give the benefit of provisions of Sect 43(5)(e). Hence, the transactions done by the assessee shall not be deemed to be speculative transaction in terms 25. We have also gone through the accounts of assessee for the earlier years. The amount kept with M/s Anand Rathi Commodities Pvt. Ltd. was Rs.1.30 crores for the year ending 31.03.2014 and Rs.4.60 crores for the ending 31.03.2013 and Rs.2.95 crores for the y< ending 31.03.3012. Similarly, the amount kept with M/s Philips Commodities India P Ltd. was Rs.4.33 31.03.2013. During the year, the assessee could not recover the amounts from these t brokers owing to suspension of operations by the NSEL which was given as a part of t business transaction for operations. Hence, the amount advanced made to purchase the commodity during t course of the business is a business loss 26. We have also perused the notice of PCIT, Central, New Delhi issued under t provisions of 63 of the Act proposing to withdraw the bad debts claimed by t assessee and accepted by the Assessing Officer. We categorically refrain from adjudicating on the strength of the notice, however, we observe that the said notice also dealt w the issue of bad debts 27. We have also perused the order of the Chennai Tribunal in the case of Megh Sakari International Pvt. Ltd. in ITA No. 59/Chennai/2018 wherein the bad debts have be allowed by he revenue has also f trading on that platform of settling the outstanding dues f its traders and auctioning its assets for the s; purpose. The revenue claimed that the claim of bad debts was premature, However, t ITAT has allowed the claim of the assessee based on 320 ITR 397 wherein it 1989, it was not necessary for the assessee to establish that the debt has becor irrecoverable and it was enough if the debt was written off as irrecoverable in r No. 12/2016 clarified regarding the claim of the Ministry of Finance Department of Revenue Central Board of Direct Taxes Subject: - Admissibility of claim of deduction of Bad Debt under section 36(1) ( Income-Tax Act, 1961— reg. Proposals have been received by the Central Board of Direct Taxes regarding filing of appeals/pu the issue of allowability of bad debt that are written off as irrecoverable in the accounts of the assessee. The dispute relates to cases involving failure on the part of assessee to establish that the debt is irrecoverable. 2. Direct Tax Laws (Amendment) Act, 1987 amended the provisions of sections 36(l)(vii) and 36(2) of the Income Tax Act 1961, (hereafter referred to as the Act) to rationalize the provisions regarding allowability of bad debt with effect from the 3. The legislative intention behind the amendment was to eliminate litigation on the issue of the allowability of the bad debt by doing away with the requirement for the irrecoverable. However, despi that the debt has not been established to be irrecoverable. The Hon'ble Supreme Court in the case of TRF Ltd. in CA Nos. 5292 to 5294 of 2003 vide judgment dated 9.2.20 1.4.1989, for allowing deduction for the amount of any bad debt or part thereof under section 36(l)(vii) of the Act, it is not necessary for assessee to establish that the debt, in fact has be written off as irrecoverable in the books of accounts of assessee." 4. In view of the above, claim for any debt or part thereof in any previous year shall be admissible under section 36(l)(vii) of the Act, i assessee for that previous year and it fulfills the conditions stipulated in sub section (2) of sub 36(2) of the Act. 5. Accordingly, no appeals may henceforth be filed on this g this issue before various Courts/Tribunals may be withdrawn/not pressed upon. 6. This may be brought to the notice of all concerned. (Sadhana Panwar) Delhi. 28. Thus, we find that the CBDT has unequivocally allowed the claim of bad debts once the same is written off in the books of accounts as irrecoverable. Thus, the argument of the Id. DR that the bad debts should not be allowed which is based on the letter issu process of settling the amounts in view of the sufficiency of the assets and not to allow bad debts as the claim is pre-mature. 29. We also hold that, if in any previous year, the debt has been written off as bad and the deduction has also been claimed but later on the same debt is recovered in full or part, then the amount so recovered will be included as income of the financial year in which such amount has recovered. Owing to taxability of the amounts recovered amount as and when received in accordance with the provisions of the Act. The department must obtain the information pertaining to payment by the NSEL to brokers/traders on real time basis and bring these amounts to tax net. Hence, the advisory of the NSEL not to allow the bad debts claim would be legallyuntenable owing to the provisions of the Act, Circular of the CBDT and ruling of the Hon't Apex Court in the case of TRF Ltd. Vs CIT (323 ITR 397). 30. Further, we have also perused the order in the case of M/s Omni Lens Pvt. Ltd. in 2818/Ahd./2010 wherein the matter was referred back to the file of the AO to exami “Circular No. 12/20 F.No.2 79/Misc./14 0/2015-ITJ Government of India Ministry of Finance Department of Revenue Central Board of Direct Taxes New Delhi, Dated Admissibility of claim of deduction of Bad Debt under section 36(1) ((vii) read with section 36(2) of the reg. Proposals have been received by the Central Board of Direct Taxes regarding filing of appeals/pu the issue of allowability of bad debt that are written off as irrecoverable in the accounts of the assessee. The dispute relates to cases involving failure on the part of assessee to establish that the debt is irrecoverable. Tax Laws (Amendment) Act, 1987 amended the provisions of sections 36(l)(vii) and 36(2) of the Income Tax Act 1961, (hereafter referred to as the Act) to rationalize the provisions regarding allowability of bad debt with effect 3. The legislative intention behind the amendment was to eliminate litigation on the issue of the allowability of the bad debt by doing away with the requirement for the assessee to establish that the debt, has in fact, become irrecoverable. However, despite the amendment, disputes on the issue of allowability continue, mostly for the reason that the debt has not been established to be irrecoverable. The Hon'ble Supreme Court in the case of TRF Ltd. in CA Nos. 5292 to 5294 of 2003 vide judgment dated 9.2.2010, has stated that the position of law is well settled. "After 1.4.1989, for allowing deduction for the amount of any bad debt or part thereof under section 36(l)(vii) of the Act, it is not necessary for assessee to establish that the debt, in fact has become irrecoverable; it is enough if bad debt is written off as irrecoverable in the books of accounts of assessee." 4. In view of the above, claim for any debt or part thereof in any previous year shall be admissible under section 36(l)(vii) of the Act, if it is written off as irrecoverable in the books of accounts of the assessee for that previous year and it fulfills the conditions stipulated in sub section (2) of sub 5. Accordingly, no appeals may henceforth be filed on this ground and appeals already filed, if any, on this issue before various Courts/Tribunals may be withdrawn/not pressed upon. 6. This may be brought to the notice of all concerned. (Sadhana Panwar) DCIT (OSD) (ITJ Thus, we find that the CBDT has unequivocally allowed the claim of bad debts once the same is written off in the books of accounts as irrecoverable. Thus, the argument of the Id. DR that the bad debts should not be allowed which is based on the letter issued by the NSEL that NSEL is in the process of settling the amounts in view of the sufficiency of the assets and not to allow bad debts as 29. We also hold that, if in any previous year, the debt has been written off as bad and the deduction has also been claimed but later on the same debt is recovered in full or part, then the amount so recovered will be included as income of the financial year in which such amount has recovered. Owing to taxability of the amounts recovered, the revenue would at liberty to tax the amount as and when received in accordance with the provisions of the Act. The department must obtain the information pertaining to payment by the NSEL to brokers/traders on real time basis and o tax net. Hence, the advisory of the NSEL not to allow the bad debts claim would be legallyuntenable owing to the provisions of the Act, Circular of the CBDT and ruling of the Hon't Apex Court in the case of TRF Ltd. Vs CIT (323 ITR 397). have also perused the order in the case of M/s Omni Lens Pvt. Ltd. in 2818/Ahd./2010 wherein the matter was referred back to the file of the AO to exami Ketan Anil Shah ITA No. 2188/M/2022 15 Ministry of Finance Department of Revenue Central Board of Direct Taxes New Delhi, Dated 30th May, 2016 read with section 36(2) of the Proposals have been received by the Central Board of Direct Taxes regarding filing of appeals/pursuing litigation on the issue of allowability of bad debt that are written off as irrecoverable in the accounts of the assessee. The dispute relates to cases involving failure on the part of assessee to establish that the debt is irrecoverable. Tax Laws (Amendment) Act, 1987 amended the provisions of sections 36(l)(vii) and 36(2) of the Income Tax Act 1961, (hereafter referred to as the Act) to rationalize the provisions regarding allowability of bad debt with effect 3. The legislative intention behind the amendment was to eliminate litigation on the issue of the allowability of the to establish that the debt, has in fact, become te the amendment, disputes on the issue of allowability continue, mostly for the reason that the debt has not been established to be irrecoverable. The Hon'ble Supreme Court in the case of TRF Ltd. in CA 10, has stated that the position of law is well settled. "After 1.4.1989, for allowing deduction for the amount of any bad debt or part thereof under section 36(l)(vii) of the Act, it is come irrecoverable; it is enough if bad debt is 4. In view of the above, claim for any debt or part thereof in any previous year shall be admissible f it is written off as irrecoverable in the books of accounts of the assessee for that previous year and it fulfills the conditions stipulated in sub section (2) of sub-section round and appeals already filed, if any, on DCIT (OSD) (ITJ. CBDT, New Thus, we find that the CBDT has unequivocally allowed the claim of bad debts once the same is written off in the books of accounts as irrecoverable. Thus, the argument of the Id. DR that the bad ed by the NSEL that NSEL is in the process of settling the amounts in view of the sufficiency of the assets and not to allow bad debts as 29. We also hold that, if in any previous year, the debt has been written off as bad and the relevant deduction has also been claimed but later on the same debt is recovered in full or part, then the amount so recovered will be included as income of the financial year in which such amount has , the revenue would at liberty to tax the amount as and when received in accordance with the provisions of the Act. The department must obtain the information pertaining to payment by the NSEL to brokers/traders on real time basis and o tax net. Hence, the advisory of the NSEL not to allow the bad debts claim would be legallyuntenable owing to the provisions of the Act, Circular of the CBDT and ruling of the have also perused the order in the case of M/s Omni Lens Pvt. Ltd. in I No. 2818/Ahd./2010 wherein the matter was referred back to the file of the AO to examine the issue of speculation/non-speculation business after taking note of crucial aspect actual de commodity, if any, as claimed and to ascertain as to how the enti assessee was purportedly in possession of the goo purchased. The issue before us is clear on this aspect.V 31. The matter before us deals with t the instant year held that the assessee is dealing in speculati Section 43(5) of the Act. The AO has also held th derivatives. Section 43(5)( considers an eligible transaction in respect of trading in commodity derivatives carried o in a recognized association shall not be deemed to be a speculative transaction. Hence we hold that the transactions of the a transactions. Chapter VII of the Finance Act, 2013 w.e.f. 01.04.2014, details as to wh is a commodity derivative in the Commodities Transaction Tax (CTT). As per the C" commodity derivative means a contract for delivery of goods which is not a ready delive contract or a contract for differences which derives its value from the prices of su< underlying goods. Thus, we find that the assessee is in the business of commodi derivatives but not in the speculation trans revenue has also accepted the income from the transactions of the assessee as business income but not; income from speculation for all the earlier years. (Owing to collapse of the NSEL, trading could be conducted by trade advances given by the assessee stands irrecoverable. 32. In conclusion, keeping in view the facts of the case, a tax history of the assessee treatment given by the revenue to the transactions undertaken by the assessee, findi into commodity derivatives, provisions of the Section 43(' invoked by the AO, provisions of Section 43(5)(e) relied upon by the Id. AR, Explanati derivatives, Para 5 of Chapter VII Finance Act, 2013, CBDT Circular No. 3/2006 dated 27.02.2006, orders of the Co-ordinate Bench of ITAT in Megh Sakariya International (supra), Omni Lens Pvt. Ltd. (supra judgment of the Hon'ble Apex Court in the case of TRF Ltd. (supra), we hereby hold th business loss claimed by the assessee is allowable u/s 28 of the Act. 33. In the result, the appeal of the assessee is allowed. 9. Facts and circumstances of the instant case being exactly identical to the facts and circumstances in the case of Associates vs. ACIT (supra), respectfully following the finding of the Tribunal, we uphold the finding of the Ld.CIT(A) as the loss being business loss. speculation business after taking note of crucial aspect actual de commodity, if any, as claimed and to ascertain as to how the entire debt has turned bad when the assessee was purportedly in possession of the goo purchased. The issue before us is clear on this 31. The matter before us deals with the non-recovery of the advances given to tl brokers. The AO, for the instant year held that the assessee is dealing in speculative transactions and invoked provisions Section 43(5) of the Act. The AO has also held the the assessee has been carrying trade i derivatives. Section 43(5)( considers an eligible transaction in respect of trading in commodity derivatives carried o in a recognized association shall not be deemed to be a speculative transaction. we hold that the transactions of the assessee shall not be deemed to be speculati transactions. Chapter VII of the Finance Act, 2013 w.e.f. 01.04.2014, details as to wh is a commodity derivative in the Commodities Transaction Tax (CTT). As per the C" commodity derivative means a delivery of goods which is not a ready delive contract or a contract for differences which derives its value from the prices of su< underlying goods. Thus, we find that the assessee is in the business of commodi derivatives but not in the speculation transaction as held by the AO. The accepted the income from the transactions of the assessee as business income but not; income from speculation for all the earlier years. (Owing to collapse of the NSEL, trading could be conducted by the assessee in the latter years). It is also c undisputed fact that the trade advances given by the assessee stands irrecoverable. 32. In conclusion, keeping in view the facts of the case, a tax history of the assessee treatment given the transactions undertaken by the assessee, finding of the AO that the assessee is into commodity derivatives, provisions of the Section 43(' invoked by the AO, provisions of Section 43(5)(e) relied upon by the Id. AR, Explanation (2) of Section 43 as to what constitutes commodity derivatives, Para 5 of Chapter VII Finance Act, 2013, CBDT Circular No. 3/2006 dated 27.02.2006, Bench of ITAT in Megh Sakariya International (supra), Omni Lens Pvt. Ltd. (supra judgment of the Hon'ble Apex Court in the case of TRF Ltd. (supra), we hereby hold th business loss claimed by the assessee is allowable u/s 28 of the Act. esult, the appeal of the assessee is allowed.” Facts and circumstances of the instant case being exactly identical to the facts and circumstances in the case of (supra), respectfully following the finding of the uphold the finding of the Ld.CIT(A) as the loss being Ketan Anil Shah ITA No. 2188/M/2022 16 speculation business after taking note of crucial aspect actual delivery of the debt has turned bad when the assessee was purportedly in possession of the goo purchased. The issue before us is clear on this recovery of the advances given to tl brokers. The AO, for transactions and invoked provisions the assessee has been carrying trade in commodity derivatives. Section 43(5)( considers an eligible transaction in respect of trading in commodity derivatives carried o in a recognized association shall not be deemed to be a speculative transaction. ssessee shall not be deemed to be speculati 1 transactions. Chapter VII of the Finance Act, 2013 w.e.f. 01.04.2014, details as to wh is a commodity derivative in the Commodities Transaction Tax (CTT). As per the C" commodity derivative means a delivery of goods which is not a ready delive contract or a contract for differences which derives its value from the prices of su< underlying goods. Thus, we find that the assessee is in the action as held by the AO. The accepted the income from the transactions of the assessee as business income but not; income from speculation for all the earlier years. (Owing to collapse of the NSEL, no further undisputed fact that the 32. In conclusion, keeping in view the facts of the case, a tax history of the assessee treatment given of the AO that the assessee is into commodity derivatives, provisions of the Section 43(' invoked by the AO, provisions of Section what constitutes commodity derivatives, Para 5 of Chapter VII Finance Act, 2013, CBDT Circular No. 3/2006 dated 27.02.2006, Bench of ITAT in Megh Sakariya International (supra), Omni Lens Pvt. Ltd. (supra judgment of the Hon'ble Apex Court in the case of TRF Ltd. (supra), we hereby hold that the Facts and circumstances of the instant case being exactly identical to the facts and circumstances in the case of Chowdry (supra), respectfully following the finding of the uphold the finding of the Ld.CIT(A) as the loss being 10. Asfar as grounds 2 & 3 of the Revenue ordinate bench of the Tribunal in the case of ACIT (supra) has after detailed discussion has giving the transactions were carried out prior to the ban on the NSEL platform and, therefore, being recognized association transactions were not falling in the definition of the speculative transactions. Respectfully following the finding of bench of the Tribunal as reproduced above, the grounds 2 & 3 of the appeal of the Revenue are dismissed. 11. In the result, appeal filed by the Revenue is dismissed. Order pronounced under Rule 34(4) of the ITAT Rules, 1963 on 19/01/2023. Sd/- (SANDEEP SINGH KARHAIL JUDICIAL MEMBER Mumbai; Dated: 19/01/2023 Pavanan, Sr. P.S (on contract) Asfar as grounds 2 & 3 of the Revenue are concerned, the co ordinate bench of the Tribunal in the case of Chowdry Associates vs ACIT (supra) has after detailed discussion has giving the transactions were carried out prior to the ban on the NSEL platform and, therefore, being recognized association transactions were not falling in the definition of the speculative transactions. Respectfully following the finding of of the Tribunal as reproduced above, the grounds 2 & 3 of the appeal of the Revenue are dismissed. In the result, appeal filed by the Revenue is dismissed. Order pronounced under Rule 34(4) of the ITAT Rules, 01/2023. Sd/- SANDEEP SINGH KARHAIL) (OM PRAKASH KANT JUDICIAL MEMBER ACCOUNTANT MEMBER Ketan Anil Shah ITA No. 2188/M/2022 17 are concerned, the co- Chowdry Associates vs ACIT (supra) has after detailed discussion has giving finding that the transactions were carried out prior to the ban on the NSEL platform and, therefore, being recognized association, the transactions were not falling in the definition of the speculative transactions. Respectfully following the finding of the co-ordinate of the Tribunal as reproduced above, the grounds 2 & 3 of In the result, appeal filed by the Revenue is dismissed. Order pronounced under Rule 34(4) of the ITAT Rules, - OM PRAKASH KANT) ACCOUNTANT MEMBER Copy of the Order forwarded to 1. The Appellant 2. The Respondent. 3. The CIT(A)- 4. CIT 5. DR, ITAT, Mumbai 6. Guard file. //True Copy// Copy of the Order forwarded to : BY ORDER, (Sr. Private Secretary) ITAT, Mumbai Ketan Anil Shah ITA No. 2188/M/2022 18 BY ORDER, (Sr. Private Secretary) ITAT, Mumbai