CAPT. AVINASH CHANDER BATRA, MUMBAI V. ACIT RG 2(3), MUMBAI

ITA 3249/MUM/2010

• Counselvise Citation: [2011] 140 COUNSELVISE.COM (IT) 48430 (ITAT-MUMBAI)
• Duration Of Justice: 11 month(s) 12 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 08-04-2011
• Appeal Filed By: Assessee
• Order Result: Allowed
• Bench Allotted: G
• Assessment Year: 2006-2007
• Appeal Filed On: 26-04-2010
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: A K NAYAK
• Keywords: Salary income; Transactions in derivatives; Speculation loss
• Section: 43(5); 6

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL MUMBAI BENCHES G, MUMBAI BEFORE SHRI D.K. AGARWAL (J.M.) AND SHRI R.K. PANDA (A.M.) ITA NO. 3249/MUM /2010 ASSESSMENT YEAR 2006-07 CAPT. AVINASH CHANDER BATRA, C/O KUCHERIA & ASSOCIATES, 59, JOLLY MAKER NO. 2, NARIMAN POINT, MUMBAI 400 021. PAN : AABPB 3384 M VS. A SST . COMMISSIONER OF INCOME - TAX, RANGE 2(3), ROOM NO. 555, 5 TH FLOOR, AAYAKAR BHAVAN, M.K. ROAD, MUMBAI 400020. (APPELLANT) (RESPONDENT) APPELLANT BY : SHRI VIMAL PUNMIYA RESPONDENT BY : SHRI A.K. NAYAK O R D E R PER D.K. AGARWAL, J.M. THIS APPEAL PREFERRED BY THE ASSESSEE IS DIRECTED AGAINST THE ORDER DATED 12.01.2010 PASSED BY THE LD. CIT (A) FOR THE A.Y. 2006-07. 2. BRIEFLY STATED FACTS OF THE CASE ARE THAT THE AS SESSEE AN INDIVIDUAL DERIVES INCOME FROM SALARY, CAPITAL GAINS ON SHARES AND INCOME FROM OTHER SOURCES FILED RETURN DECLARING TAXABLE INCOME OF ` 2,00,86,968/-. DURING THE COURSE OF ASSESSMENT PROCEEDINGS, IT WAS INTER ALIA OBSERVED BY THE A.O. THAT THE ASSESSEE HAS INCURRED CERTAIN SPECULATION LOSSES IN FUTURES & OPTIONS TRANSACTIONS AS EVIDENT FROM THE AUDITED BALANCE SHEET AND PROFIT & LOSS ACCOUNT. THE ASSESSEE WAS A SKED TO JUSTIFY AS TO WHY A SET OFF OF SUCH SPECULATION LOSSES HAS BEEN D ONE AGAINST THE SHORT TERM CAPITAL GAINS MADE BY THE ASSESSEE. THE A.R O F THE ASSESSEE CONFESSED THAT THE SAME HAD BEEN DONE BY MISTAKE AN D HENCE SHOULD BE DISALLOWED. THEREFORE, THE A.O. DISALLOWED AND ADD ED BACK TO THE TOTAL ITA 3249/M/10 CAPT. AVI NASH CHANDER BATRA 2 SHORT TERM CAPITAL GAINS OF ` 44,21,653/- TOTALLING TO ` 50,52,440/- AND TAXED THE SAME. ON APPEAL, THE LD. CIT(A) IN VIEW O F THE NOTIFICATION NO. 80(181)(E) DATED 25.01.2006 DIRECTED THE ASSESSEE A ND A.O. AS UNDER (PAGE 3, PARA NO. 5.4 OF CIT(A)S ORDER) :- THE APPELLANT SHALL FURNISH DETAILS OF INCOME AND L OSS SEPARATELY FOR THE PERIOD 01.04.2005 TO 24.01.2006 AND THE PERIOD 25.0 1.2006 TO 31.03.2006 RELATING TO F&O TRANSACTIONS AND THE A.O . AFTER VERIFYING THE SAME SHALL DETERMINE THE AMOUNT OF SPECULATIVE AND NON-SPECULATIVE INCOME/LOSS FROM F&O/DERIVATIVE TRANSACTIONS. 3. BEING AGGRIEVED BY THE ORDER OF THE LD. CIT(A) T HE ASSESSEE IS IN APPEAL BEFORE US BY TAKING THE FOLLOWING GROUNDS:- 1. ON THE FACTS & IN THE CIRCUMSTANCES OF THE CASE AND IN LAW THE LEARNED ASSESSING OFFICER HAS ERRED IN CONSIDERING SHORT TERM LOSS OF ` 6,30,787/- AS SPECULATION LOSS. YOUR APPELLANT PRA Y THAT THE SAME BE CONSIDERED AS SHORT TERM LOSS. 2. WITHOUT PREJUDICE TO THE ABOVE & ON THE FACTS & IN THE CIRCUMSTANCES OF THE CASE THE ASSESSEE PRAY THAT TH E LOSS FROM DERIVATIVE MAY BE CONSIDERED AS LOSS FROM BUSINESS OR PROFESSION. 4. AT THE TIME OF HEARING, THE LD. COUNSEL FOR THE ASSESSEE WHILE REITERATING THE SAME SUBMISSIONS AS SUBMITTED BEFOR E THE LD. CIT(A) ALSO RELIED ON THE DECISIONS OF DCIT VS. SSKI 113 TTJ 51 1 (MUM), P.S. KAPUR V. ACIT (2009) 120 TTJ (JP) 422 AND R.B.K. SECURITI ES (P) LTD. V. ITO (2008) 118 TTJ. HE, THEREFORE, SUBMITS THAT THE AM OUNT OF ` 6,30,787/- BE ALLOWED AS SHORT TERM CAPITAL LOSS TO BE SET OFF AGAINST SHORT TERM CAPITAL GAINS OF THE ASSESSEE AND ALTERNATIVELY THE SAME MAY BE TREATED AS BUSINESS LOSS. 5. THE LD. D.R. ON THE OTHER HAND, SUPPORT THE ORDE R OF THE A.O. AND LD. CIT(A). ITA 3249/M/10 CAPT. AVI NASH CHANDER BATRA 3 6. AFTER HEARING THE RIVAL PARTIES AND PERUSING THE MATERIAL AVAILABLE ON RECORD WE FIND THAT THE FACTS ARE NOT IN DISPUTE . THE ASSESSEE HAS BEEN INCURRED LOSS IN RESPECT OF FUTURES & OPTIONS TRANSACTIONS INCURRED THROUGH STOCK EXCHANGE AND CLAIMED TO BE SHORT TERM CAPITAL LOSS TO BE SET OFF OUT OF SHORT TERM CAPITAL GAINS OR TO BE TREATED AS NORMAL BUSINESS LOSS IN VIEW OF EXCEPTION PROVIDED UNDER CLAUSE (D) OF SECTION 43(5) BROUGHT TO STATUTE W.E.F. 01.04.2006. 7. IN SHREE CAPITAL SERVICES LTD. (SUPRA) IT HAS BE EN HELD THAT CLAUSE (D) OF SECTION 43(5) IS PROSPECTIVE IN NATURE AND W ILL BE EFFECTIVE FROM THE DATE FROM WHICH THE LEGISLATURE MADE IT EFFECTIVE, I.E., 01.04.2006 AND WILL BE APPLICABLE TO THE ASSESSMENT YEAR 2006-07 ONWARD S. 8. IN THE ABSENCE OF ANY DISTINGUISHING FEATURE BRO UGHT ON RECORD BY THE REVENUE WE RESPECTFULLY FOLLOWING THE DECISIONS OF SPECIAL BENCH OF THE TRIBUNAL AND THE CONSISTENT VIEW OF COORDINATE BENCH OF THE TRIBUNAL HOLD THAT THE DERIVATE TRANSACTIONS, ENTERED INTO B Y THE ASSESSEE AT THE RECOGNIZED STOCK EXCHANGE EVEN PRIOR TO DATE OF NOT IFICATION IN THE RELEVANT PREVIOUS YEAR ARE TO BE TREATED AS COVERED BY THE EXCLUSION CLAUSE SET OUT IN SECTION 43(5)(D) OF THE ACT AND A CCORDINGLY WE ACCEPT THE CLAIM OF THE ASSESSEE. THE GROUND TAKEN BY THE ASS ESSEE IS, THEREFORE, ALLOWED. 9. IN THE RESULT, ASSESSEES APPEAL STANDS ALLOWED. ORDER PRONOUNCED ON 08.04.2011 SD/- (R.K. PANDA) ACCOUNTANT MEMBER SD/- (D.K. AGARWAL) JUDICIAL MEMBER MUMBAI, DATED 8.4.2011. ITA 3249/M/10 CAPT. AVI NASH CHANDER BATRA 4 RK COPY TO: 1. THE APPELLANT 2. THE RESPONDENT 3. COMMISSIONER OF INCOME TAX (APPEALS)- 6, MUMBAI 4. COMMISSIONER OF INCOME TAX, 2, MUMBAI 5. DEPARTMENTAL REPRESENTATIVE, BENCH J, MUMBAI //TRUE COPY// BY ORDER ASSTT. REGISTRAR, ITAT, MUMBAI ITA 3249/M/10 CAPT. AVI NASH CHANDER BATRA 5 1 DRAFT DICTATED ON 2 9 .3.11 SR PS 2 DRAFT PLACED BEFORE AUTHOR ON 30 .3.11 SR PS 3 DRAFT PROPOSED & PLACE BEFORE THE 2 ND MEMBER JM/AM 4 DRAFT DISCUSSED/APPROVED BY 2 ND MEMBER JM/AM 5 APPROVED DRAFT COMES TO THE SR PS SR.PS 6 KEPT FOR PRONOUNCEMENT ON SR PS 7 FILE SENT TO THE BENCH CLER K SR PS 8 DATE ON WHICH FILE GOES TO THE HEAD CLERK 9 DATE ON WHICH FILE GOES TO THE AR 10 DATE OF DESPATCH SR PS