HARISH CHANDRA GUTT & CO. PVT. LTD., MUMBAI V. I.T.O. 4(1)(2), MUMBAI

ITA 2622/MUM/2012

• Counselvise Citation: [2015] 121 COUNSELVISE.COM (IT) 0597 (ITAT-MUMBAI)
• Duration Of Justice: 3 year(s) 4 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 22-04-2015
• Appeal Filed By: Assessee
• Bench Allotted: H
• Next Hearing Date: 08-10-2014
• Assessment Year: 2008-2009
• Appeal Filed On: 18-04-2012
• Court: TRIBUNAL
• Department Lawyers: JEETENDRA KUMAR
• Assessee Lawyers: J P BAIRAGRA LA
• Keywords: Business expenditure; Transactions in derivatives; Speculation loss; Commercial expediency
• Section: 43(5)

Judgement Text

, , IN THE INCOME TAX APPELLATE TRIBUNAL H , BENCH MUMBAI . . , , BEFORE : SHRI R.C.SHARMA, AM & SHRI VIVEK VARMA , JM ./ ITA NO. 2622 / MUM/20 1 2 ( / ASSESSMENT YEAR : 200 8 - 09 ) HARISH CHANDRA GUTT & CO. PVT. LTD., BANK OF MAHARASHTRA BUILDING, 4 TH FLOOR, 45/47, MUMBAI SAMACHAR MARG, FORT, MUMBAI - 400001 VS. ITO, 4(1)(2), MUMBAI ./ ./ PAN /GIR NO. : A A AC H 2825 B ( / APPELLANT ) .. ( / RESPONDENT ) /ASSESSEE BY : SHRI J.P.BAIRAGRA LA /REVENUE BY : SHRI JEETENDRA KUMAR / DATE OF HEARING : 07 / 0 1 /201 5 / DATE OF PRONOUNCEMENT : 22/04 /2015 / O R D E R PER R.C.SHARMA ( A .M.) : TH IS APPEAL IS FILED BY THE ASSESSEE AGAINST THE ORDER OF CIT(A), DATED 21 - 2 - 2012 FOR ASSESSMENT YEAR 200 8 - 09 IN THE MATTER OF ORDER PASSED U/S. 143 (3) OF THE I.T.ACT , WHEREIN FOLLOWING GROUNDS HAVE BEEN RAISED BY THE ASSESSEE : - G ROUND NO.1: DISALLOWANCE OF RS. 7,57,600/ - : 1. ON THE FACTS AND IN THE CIRCUMSTANCES OF THE CASE AND IN LAW, THE CIT(A) ERRED IN CONFIRMING THE ACTION OF THE INCO ME TAX OFFICER, 4(1)(2), MUMBAI ('THE AO') OF DISALLOWING A SUM OF RS. 7,57,600/ - , BEING AN EXPENDITURE, IN THE NATURE OF COMPENSATION, INCURRED TOWARDS SISTER CONCERN FOR EXECUTING TRANSACTIONS ON THE BOMBAY STOCK EXCHANGE FOR CLIENTS OF SUCH SISTER CONCE RN ON THE GROUND THAT ITA NO. 2622 /1 2 2 THE APPELLANT HAS NOT PROVED AS TO WHETHER SUCH COMPENSATION WAS OFFERED TO TAX BY THE SISTER CONCERN IN ITS RETURN OF INCOME. 2. THE APPELLANT PRAYS THAT IT BE HELD THAT THE ACTION OF THE LOWER AUTHORITIES BE DELETED AND THE CLAIM MADE BY THE APPELLANT IN ITS RETURN OF INCOME BE ALLOWED. GROUND NO.2: DIS ALLOWANCE UNDER SECTION 40 (A) ( IA) - RS. 8,05,864/ - 1. ON THE FACTS AND IN THE CIRCUMSTANCES OF THE CASE AND IN LAW, THE (IT (A) ERRED IN CONFIRMING THE ACTION OF THE AO OF DISAL LOWING RS. 805,864/- UNDER SECTION 40 (A) (I A) OF THE ACT. 2. THE APPELLANT PRAYS THAT IT BE HELD THAT THE ACTION OF THE LOWER AUTHORITIES BE DELETED. GROUND NO.3: DISALLOWANCE OF REPAIRS AND MAINTENANCE EXPENSES - RS. 4,36,848/ - : 1. ON THE FACTS AND IN THE CIRCUMSTANCES OF THE CASE AND IN LAW, THE CIT(A) ERRED IN GIVING DIRECTION TO THE AO TO ALLOW THE EXPENDITURE SUBJECT TO PERUSAL OF SUPPORTING DOCUMENTS THOUGH THE SAME WERE MADE AVAILABLE TO HIM IN THE COURSE OF THE APPELLATE PROCEEDINGS. 2. THE APPELLANT PRAYS THAT REPAIRS AND MAINTENANCE EXPENDITURE AS CLAIMED IN THE RETURN OF INCOME BE ALLOWED TO IT. GROUND NO.4: DISALLOWANCE OF SHORT - TERM CAPITAL LOSS - RS.155.41.499/ - 1. ON THE FACTS AND IN THE CIRCUMSTANCES OF THE CASE AND IN LAW, THE CIT(A) ERRED IN CONFIRMING THE ACTION OF THE A O OF MAKING DISALLOWANCE OF RS. 155,41,499/ - , BEING LOSS ON TRADING IN DERIVATIVES TRANSACTIONS, BY TREATING THE SAME AS BOGUS. IN UPHOLDING THAT THE DISALLOWANCE OF LOSS OF RS.1,55,41,499/ - , AS BOGUS, THE CI T(A) HAS FURTHER ERRED IN REJECTING THE APPELLANT'S IN RESPECT OF NON GRANT OF ADEQUATE OPPORTUNITY. 3. THE APPELLANT PRAYS THAT IT BE HELD THAT THE ACTION OF THE LOWER AUTHORITIES BE DELETED AND THE CLAIM OF THE APPELLANT AS MADE IN THE RETURN OF INCOME BE ALLOWED. WITHOUT PREJUDICE TO ABOVE IF AT ALL THE ACTION OF THE LOWER AUTHORITIES BE UPHELD THEN, IN THAT CASE, THE TRANSACTIONS OF TRADING IN DERIVATIVES BE TREATED AS OFF MARKET TRANSACTIONS AND LOSS ON SUCH TRANSACTIONS BE ALLOWED TO THE APPELLA NT. WITHOUT PREJUDICE TO GRANT OF 4 ABOVE GROUND NO.5: TRADING IN DERIVATIVE - WHETHER SPECULATIVE TRANSACTION: ITA NO. 2622 /1 2 3 1. ON THE FACTS AND IN THE CIRCUMSTANCES OF THE CASE AND IN LAW THE CIT(A) ERRED IN DISMISSING THE GROUND RAISED BY THE APPELLANT AS TO WHET HER THE TRANSACTION OF TRADING IN DERIVATIVES IS SPECULATIVE TRANSACTION WITHOUT GIVING ANY FINDING TO THAT EFFECT. GROUND NO.6: GENERAL 2. RIVAL CONTENTIONS HAVE BEEN HEARD AND RECORD PERUSED. FACTS IN BRIEF ARE THAT ASSESSEE IS A SHARE BROKER. DURIN G THE COURSE OF SCRUTINY ASSESSMENT THE AO DISALLOWED ASSESSEES CLAIM OF SHORT TERM CAPITAL LOSS ON SALE OF SHARES BY TREATING THE SAME AS BOGUS. THE AO ALSO DISALLOWED COMPENSATION PAID TO SISTER CONCERN AMOUNTING TO RS.7,57,600/ - , REPAIR AND MAINTENANCE EXPENSES OF RS.4,36,848/ - , RS.10,44,594/ - U/S.43B ETC. BY THE IMPUGNED ORDER, THE CIT(A) CONFIRMED THE DISALLOWANCE OF COMPENSATION PAID TO SISTER CONCERN RS.805,864/ - , DISALLOWANCE MADE U/S.40(A)(IA), MAINTENANCE EXPENSES AND SHORT TERM CAPITAL LOSS. AG AINST WHICH ASSESSEE IS IN FURTHER APPEAL BEFORE US. 3. WE HAVE CONSIDERED RIVAL CONTENTIONS, CAREFULLY GONE THROUGH THE ORDERS OF THE AUTHORITIES BELOW AND FOUND THAT ASSESSEE IS A BROKER, WHO DEALS ON THE BOMBAY STOCK EXCHANGE ONLY. HSSBL IS REGISTERED A S A SHARE BROKERS WITH NSE AND EXECUTES TRANSACTIONS ON THE NATIONAL STOCK EXCHANGE ONLY. THEREFORE IF ANY OF THE CLIENTS OF HSSBL WANT TO EXECUTE TRANSACTIONS ON THE BOMBAY STOCK EXCHANGE, HSSBL APPROACHES THE ASSESSEE TO EXECUTE THEM ON BEHALF OF THEIR C LIENTS ON THE BOMBAY STOCK EXCHANGE AND IT IS VICE VERSA WHEN THE ASSESSEE RECEIVES ORDERS FOR EXECUTION ON THE NATIONAL STOCK EXCHANGE. IN LIGHT OF THE SERVICES AVAILED BY THE ASSESSEE FROM HSSBL A COMPENSATION OF RS.7,57,600 LAKHS WAS ITA NO. 2622 /1 2 4 PAID TO THEM. THE AO DISALLOWED THE COMPENSATION PAID TO M/S SCG STOCK & SHARE BROKERS LTD. (HSSBL) , RS. 757,600/ - AFTER HAVING DISCUSSION AT PARA 6, ON THE PLEA THAT CONSIDERATION WAS PAID AS COMPENSATION TO THE SISTER CONCERN AND NOT AS A BROKER. BY STATING THAT ASSESSEE WA S NOT ABLE TO FURNISH ITS BOOKS OF ACCOUNT FOR VERIFICATION , AO DISALLOWED THE SAME. BY THE IMPUGNED ORDER, THE CIT(A) CONFIRMED THE ACTION OF THE AO BY OBSERVING AT PARA 3 THAT ASSESSEE HAS NOT PRODUCED COPY OF THE RETURN OF INCOME FILED BY SISTER CONCERN (HSSBL) TO ASCERTAIN AS TO WHETHER THE INCOME HAS BEEN OFFERED TO TAX. WE FOUND THAT ASSESSEE HAS SUBMITTED ITS COMPUTATION OF TOTAL INCOME, BALANCE SHEET FOR THE RELEVANT ASSESSMENT YEAR ALONG WITH DETAILS OF BROKERAGE RECEIVED BY HCGSSL FROM WHICH IT IS CLEAR THAT THE SISTER CONCERN HCGSSL DECLARED THE SAID AMOUNT IN THEIR PROFIT AND LOSS ACCOUNT WHICH IS PLACED AT PAGE 511 TO 533 OF THE PAPER BOOK. EVEN THE CIT(A) HAS ALSO OBSERVED THAT ASSESSEE HAS PRODUCED THE PARTICULARS OF THE TRANSACTION AND THE BA SIS ON WHICH THE COMPENSATION OF RS.7,57,600/ - WAS PAID TO THE SAID HSSBL. WE FOUND THAT THE PAYMENT WAS MADE OUT OF COMMERCIAL EXPEDIENCY AND FOR THE PURPOSE OF BUSINESS EXPENDITURE. THE DETAILS OF BROKERAGE RECEIVED BY THE HCGSSL FILED BEFORE THE LOWER A UTHORITIES INDICATES THAT THE SISTER CONCERN HAS ALREADY OFFERED THE SAID AMOUNT FOR TAXATION. ACCORDINGLY, WE DIRECT THE AO TO DELETE THE DISALLOWANCE. 4 . THE AO HAS ALSO DISALLOWED DEMAT TRANSACTION CHARGES OF RS. 2,28,815/ - , GENERAL CHARGES - BSE RS.4,31,3 95/ - , TRANSACTION CHARGES - BSE OF RS.57,452/ - TOTALING TO RS.7,17,662/ - . WE FOUND THAT THE AUDIT FEES ITA NO. 2622 /1 2 5 OF RS.38,202/ - WAS DISALLOWED AS NO TDS WAS DEDUCTED THEREFROM. WE CONFIRM THE ACTION OF THE AO FOR THE DISALLOWANCE SO MADE. 5 . THE AO ALSO DISALLOWED PRO FESSIONAL FEES OF RS.50,000/ - . THE CIT(A) HAS DEALT WITH THE ISSUE IN PARA 4.9 AND HELD THAT PROFESSIONAL FEES PAID ON 7 - 6 - 2007 ON WHICH TDS DEDUCTED AND PAID ON 30 - 7 - 2008 I.E. BEFORE THE DUE DATE OF FILING THE RETURN OF INCOME. HOWEVER, BY FOLLOWING THE SPECIAL BENCH DECISION IN THE CASE OF BHARATI SHIPYARD LTD., 141 TTJ 129 , HE CONFIRMED THE DISALLOWANCE. 6 . WE HAVE CONSIDERED RIVAL CONTENTIONS AND FOUND THAT PAYMENT OF PROFESSIONAL FEES WAS DISALLOWED ON THE PLEA THAT NO TAX HAS BEEN DEDUCTED AT SOURCE. WE FOUND THAT ASSESSEE HAS DEDUCTED AND PAID TAX ON THE PROFESSIONAL FEES ON 30 - 7 - 2008, WHICH WAS BEFORE THE DUE DATE OF FILING RETURN OF INCOME. IN VIEW OF THE DECISION OF HONBLE KOLKATA HIGH COURT IN THE CASE OF VIRGIN CREATION, REPORTED IN [TS - 810 - HC - 2011(CAL)] AND THE DECISION OF DELHI HIGH COURT IN THE CASE OF ORACLE SOFTWARE INDIA LTD., (2007) 293 ITR 353 , AMENDMENT MADE IN SECTION 40(A)(IA) BY THE FINANCE ACT, 2010, WHICH PROVIDES FOR DEDUCTIBILITY OF EXPENDITURE IF TDS PAID WITHIN RETURN FILING DU E DATE, AMENDMENT IS CURATIVE IN NATURE, THEREFORE, SHOULD BE GIVEN RETROSPECTIVE OPERATION. ACCORDINGLY, WE DIRECT THE AO TO VERIFY THE DATE OF ACTUAL PAYMENT OF TDS AND IF HE FINDS THAT THE SAME WAS PAID BEFORE THE LAST DATE OF FILING OF THE RETURN, HE S HOULD DELETE THE DISALLOWANCE SO MADE. 7. THE AO HAS DISALLOWED EXPENDITURE ON REPAIRS AND MAINTENANCE BY HAVING DISCUSSION AT PARA 7. THE DISALLOWANCE WAS MADE ON THE PLEA THAT ITA NO. 2622 /1 2 6 ASSESSEE HAS NOT PROVIDED DETAILS OF TDS DEDUCTED U/S.194C/194J. BY THE IMPUGN ED ORDER, THE CIT(A) DIRECTED THE AO TO ALLOW THE SAID EXPENDITURE AFTER PERUSAL OF THE BILLS ALONG WITH THE LOG BOOK WITH REFERENCE TO THE PROVISIONS OF SECTION 40(A)(IA) OF THE I.T.ACT. W E DO NOT FIND ANY INFIRMITY IN THIS DIRECTION OF CIT(A). 8. THE AO HAS ALSO DISALLOWED RS.1,55,41,499/ - BEING LOSS ON TRADING IN DERIVATIVE TRANSACTIONS BY TREATING THE SAME AS BOGUS. THE AO HAS DEALT THIS ISSUE EXHAUSTIVELY IN PARA 4 OF HIS ORDER. THE AO HAS RECORDED THE STATEMENT U/S.131 OF MS. VARSHA VAIDYA DIRECTOR OF THE ASSESSEE COMPANY ON 14 - 12 - 2010. HE HAS ALSO RECORDED THE STATEMENT OF MANAGING DIRECTOR OF THE ASSESSEE COMPANY MR. ARVIND BHINDE ON 15 - 12 - 2010 AND ALSO RECORDED THE STATEMENT OF MR. ANIL AGARWAL THE PROPRIETOR OF M/S TRISHLA COMMODITIES, THE MCX BROK ER THROUGH WHOM TRANSACTIONS HAS BEEN ENTERED INTO BY THE ASSESSEE. THE CIT(A) HAS CALLED FOR THE REMAND REPORT FROM THE AO WHICH IS SUBMITTED BY THE AO ON 24 - 01 - 2012. THE ASSESSEE COMPANY HAS FILED LETTER DATED 14 - 2 - 2012 DURING THE COURSE OF THE APPELLATE PROCEEDINGS IN REBUTTAL TO THE REMAND REPORT OF THE AO. HOWEVER, THE CIT(A) HAS CONFIRMED THE DISALLOWANCE OF SHORT TERM CAPITAL LOSS INCURRED ON DERIVATIVE TRANSACTIONS BY UPHOLDING THE ACTION OF THE AO TO THE EFFECT THAT THE LOSS SO INCURRED WAS BOGUS. 9. WE HAVE CONSIDERED RIVAL CONTENTIONS AND FOUND THAT ASSESSEE HAS SURRENDERED THE SHARES OF BOMBAY STOCK EXCHANGE UNDER THE BUYBACK OFFER AND EARNED LONG TERM CAPITAL GAIN OF RS.1,55,99,087/ - . AT THE VERY SAME TIME ASSESSEE HAS ENTERED INTO TRANSACTION O F PURCHASE AND SALE OF ITA NO. 2622 /1 2 7 DERIVATIVES THROUGH TRISHLA A PROP. CONCERN OF ANIL AGARWAL AND INCURRED LOSS OF RS.1,55,41,449/ - AND CLAIMED IT AS SHORT TERM CAPITAL LOSS AND SETTED OFF AGAINST THE LONG TERM CAPITAL GAINS OF RS.1,55,99,087/ - . THE LOWER AUTHORITIES HAVE DECLINED THE CLAIM OF OBSERVING THAT FROM THE INTIMATION RECEIVED FROM MCX, THE ASSESSEE WAS NOT REGISTERED AS CLIENT WITH M/S TRISHLA COMMODITIES. AS PER LD. AR SINCE THE TRANSACTIONS HAS BEEN DONE OFF MARKET THEREFORE THE SAME IS NOT REPORTED TO MC X, THE ASSESSEE WAS NOT REGISTERED AS CLIENT WITH M/S TRISHLA COMMODITIES. THE AO HAS ALSO OBSERVED THAT MS. VARSHA VAIDYA DIRECTOR OF THE ASSESSEE COMPANY HAS CONFIRMED THAT THE TRANSACTIONS ENTERED INTO WITH TRISHLA ON WHICH ASSESSEE HAS INCURRED A LOSS ARE BOGUS. THE CONTENTION OF THE LEARNED AR WAS THAT THE AO HAS NOT CONSIDERED THE QUESTION 20 AND ITS ANSWER WHICH WAS GIVEN BY MS. VARSHA IN HER STATEMENT RECORDED U/S.131 WHICH PROVES IN WHAT CONTEXT SHE AGREES THAT THE SAID TRANSACTIONS ARE BOGUS. QU ESTION NO.20 AND ITS ANSWER GIVEN BY VARSHA ARE REPRODUCED AS UNDER : - Q.20 AS STATED IN ANSWER TO Q.NO.19 THAT THE TRANSACTION REFLECTED IN THE CONTRACT NOTES ISSUED BY M/S TRISHLA COMMODITIES A MEMBER OF M CX, ARE GENUINE. NOW I AM SHOWING YOU LETTER DA TED 10.11.2010 ISSUED FRY MCX WHERE IT IS CATEGORICALLY STATED THAT YOUR COMPA NY M/S HARISHCHANDRA GUTT & CO. PVT LTD ( P AN: A4.ACH2825B) WAS NOT REGISTERED AS CLIENT WITH M/ S. TRISHLA COMMODITIES (CMID - 12865) DURING F Y. 2007 - 08 AND NO TRADES WERE RECORDE D IN CLIENT CODE H001' ,PLEASE GO THROUGH THIS AND OFFER YOUR COMMENTS ANSWER: SI R ; WHEN MCX CONFIRMS THAT OUR COMPANY WAS NOT REGISTERED AS CLIENT DURING THE F. Y'2007 - 08 WITH M/S. TRISHLA COMMODITIES AND THE TRADES ARE REFLECTED IN OUR COMPANY'S NAME THEN THE CON TRACT' NOTES ISSUED BY M/S. TRISHLA COMMODITIES IN OUR COMPANY'S NAME ARE TOTALLY BOGUS. ITA NO. 2622 /1 2 8 10. WITH REGARD TO THE AOS RELIANCE ON THE ANSWER TO QUESTION NO.22 BY MR. ARVIND BHINDE, THE CONTENTION OF THE LEARNED AR WAS THAT MR. ARVIND BHIDE HA S CONFIRMED THIS ON ACCOUNT OF THE FACTS THAT IF THE TRANSACTION ARE NOT THROUGH MCX MEANS THEY ARE BOGUS HOWEVER AO HAS NOT QUOTED QUESTION NO. 21 AND ITS REPLY GIVEN BY MR. ARVIND BHIDE WHICH IS AS UNDER: Q.21 NOW I AM SHOWING YOU THE LETTER DATED 10. 11.2010 ISSUED BY MCX, WHEREIN IT IS CRITICALL Y STATED THAT YOU WERE NOT REGISTERED AS CLIENT OF M/ S. TRISHLA COMMODITIES IN MCX AND THE TRANSACTION FOR WHICH CONTRACT NOTES WERE ISSUED BY M/ S. TRISHLA COMMODITIES HAVE NOT ENTERED IN M CX PLEASE OFFER YO UR COMMENTS. ANS - I HAVE NOTHING TO EXPLAIN. HOWEVER I AM SURPRISED TO SEE THE FINDINGS OF THE MCX . THIS REPLY IS GIVEN BY MR. BHIDE AS HE ALSO CAME TO KNOW FOR THE 1 ST TIME THAT TRANSACTION ENTERED BY THE COMPANY WAS OFF MARKET AND NOT THROUGH MCX. HE WAS ALSO OF THE OPINION THAT THE TRANSACTION SHOULD BE ENTERED THROUGH MCX ONLY AND IF IT IS NOT ENTERED THROUGH MCX THEN IT WILL BE BOGUS . ''Q.22 IT MEANS THE TRAN SACTION ENTERED INTO THROUGH M/ S. TRIS H LA COMMODITIES, AS CLAIMED, ARE BOGUS? ANS - YE S, IT CAN BE SAID LIKE THAT IF MCX CONFIRMS THE SAME. ''Q.23 PLEASE TELL WHETHER AT ANY INSTANCE, YOU HAVE RECEIVED ANY AMOUNT FROM M/S TRISHLA COMMODITIES.? ANS - NO, I HAVE NEVER RECEIVED ANY AMOUNT FROM THAT CONCERN DURING THE COURSE OF TRADE. 11. IT WAS THE CONTENTION OF LD. AR THAT THE AO NOT CONSIDERED THE ANSWER TO QUESTION N O. 14 AND 19 WHICH ARE AS UNDER: ITA NO. 2622 /1 2 9 Q.14. NOW I AM SHOWING YOU THE COPIES OF BILLS AS WELL AS CONTRACT NOTES ISSUED BY M/ S. T RISHLA COMMODITIES. PLEASE CONFIRM ABOUT THE GEN UINENESS OF THE SAME. WHETHER THESE BILLS/ CONTRACT NOTES WERE ISSUE BY YOUR PROPRIETARY CONCERN? ANS - YES' THESE BILLS AND CONTRACT NOTES ARE ISSUED BY MY PROPRIETARY CONCERN AND SIGNED BY SHRI. RAVINDRA JAIN' ONE OF MY AUTHORIZED SIGNATORY. FURTHER TO ENFORCE THAT THIS BUSINESS WAS LOOKED AFTER BY MYSELF, SHRI. DEVENDRA JAIN AND SHRI. RAVINDRA JAIN. (Q.19 AS STATED, YOU HAVE PROVIDED THESE BILLS AND CONTRACT NOTES ON BOGUS TRANSACTION ON . COMMUNICATION BASIS. PLEASE TELL NOW THE ENTIRE AMOUNT OF TRAN SACTION EFFECTS WITH SAID COMPA NY) , WERE CREDITED IN YOUR ACCOUNT. IF IT WAS A COMMISSION BASED BOGUS TRANSACTION, ONLY COMMISSION AMOUNT SHOULD HAVE BEEN CREDITED IN YOUR ACCOUNT? ANS - SIR' I CANNOT SAY ANYTHING ABOUT IT SINCE SHRI. DEVENDRA JAIN WAS HA ND LING THESE MATTERS AND SINCE HE IS NO MORE NO W O NLY SHRI. ARVIND BHIDE, DIRECTOR OF THAT COMPANY MAY EXPLAIN THESE PROPERTIES. 12. CONSIDERING THE ENTIRE MATERIAL PLACED ON RECORD VIS - - VIS THE QUESTIONS AND ANSWERS GIVEN BY THE ASSESSEE AS WELL AS BY DIRECTORS OF M/S TRISHLA COMMODITIES, ANSWERS GIVEN DURING THE COURSE OF CROSS VERIFICATION, WE FOUND THAT ASSESSEE WAS NOT REGISTERED IN MULTI COMMODITIES EXCHANGE AS CLIENT OF TRISHLA DURING THE YEAR UNDER CONSIDERATION. THE TRANSACTION ENTERED BY THE A SSESSEE WAS OFF MARKET, WHEREIN REGISTRATION WITH MCX WAS NOT REQUIRED. AS PER THE BILLS, COPY OF THE ACCOUNT OF DERIVATIVES, BANK STATEMENT EVIDENCING THE PAYMENT , WE HOLD THAT TRANSACTION WAS OFF MARKET AND SPECULATIVE IN NATURE . THIS CONCLUSION IS SUPPO RTED BY THE OBSERVATION OF THE AO AT PAGE 14 PARA 4.8, WHICH READS AS UNDER : - ITA NO. 2622 /1 2 10 4.8 FURTHER, WITHOUT PREJUDICE TO THE ABOVE, IT CAN BE SEEN FROM THE DETAILS SUBMITTED AS WELL AS ANSWER GIVEN TO Q.NO. - 24 ABOVE, WHEREIN THE ASSESSEE ITSELF HAS ADMITTED THAT IT HAS NEVER TAKEN POSSESSION OF GOODS TRADED IN COMMODITY MARKET THROUGH M/S TRISHLA COMMODITIES; ACCORDINGLY, IN NO WAY IT CAN BE SAID THAT IT WAS A SHORT TERM CAPITAL LOSS AND CONTRARY TO THE ASSESSEES CLAIM, AS PER SECTION 43(5) OF THE ACT, IT SHALL B E A SPECULATION LOSS WHICH ALSO IS NOT ALLOWABLE FOR SETTING OFF AGAINST ANY OTHER INCOME EXCEPT AGAINST PROFITS AND GAINS, IF ANY, OF ANOTHER SPECU L ATION BUSINESS AS PER PROVISIONS OF SECTION 73(1) OF THE ACT. 13. IN VIEW OF THE ABOVE, WE HOLD THAT THE LOSS SO INCURRED WAS SPECULATIVE LOSS, WHICH IS NOT ELIGIBLE FOR SET OFF AGAINST THE LONG TERM CAPITAL GAINS DECLARED BY ASSESSEE. HOWEVER, SUCH SPECULATION LOSS IS ELIGIBLE TO BE CARRIED FORWARD U/S.73(1) TO BE SET UP AGAINST SPECULATION PROFIT ONLY IN TH E SUBSEQUENT YEAR AS PER PROVISIONS OF LAW. WE DIRECT ACCORDINGLY. 14 . IN THE RESULT, APPEAL OF THE ASSESSEE IS ALLOWED IN PART . ORDER PRONOUNCED IN THE OPEN COURT ON THIS 22 ND APRIL, 201 5 . SD/ - SD/ - ( , ) ( VIVEK VARMA ) ( . . ) ( R.C.SHARMA ) / JUDICIAL MEMBER / ACCOUNTANT MEMBER MUMBAI ; DATED 22/04 /201 5 . . /PKM , . / PS / COPY OF THE ORDER FORWARDED TO : / BY ORDER, / ( ASSTT. REGISTRAR) , / ITAT, MUMBAI 1. / THE APPELLANT 2. / THE RESPONDENT. 3. ( ) / THE CIT(A), MUMBAI. 4. / CIT 5. , , / DR, ITAT, MUMBAI 6. / GUARD FILE. //TRUE COPY//