MUKUL A. SONAWALA, MUMBAI V. DCIT CIR 4(1), MUMBAI

ITA 3387/MUM/2010

• Counselvise Citation: 338719914 RSA 2010
• Duration Of Justice: 1 year(s) 9 month(s) 15 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 15-02-2012
• Appeal Filed By: Assessee
• Order Result: Allowed
• Bench Allotted: H
• Next Hearing Date: 09-02-2012
• Assessment Year: 2006-2007
• Appeal Filed On: 30-04-2010
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: V V SHASTRI
• Keywords: Business income; Speculation loss
• Section: 43(5)

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL H BENCH: MUMBAI BEFORE SHRI J. SUDHAKAR REDDY, ACCOUNTANT MEMBER AND SHRI R.S. PADVEKAR, JUDICIAL MEMBER ITA NO.3387/MUM/2010 (ASSESSMENT YEAR: 2006-07) MR. MUKUL A. SONAWALA, 135, SHEIKH MEMON STREET, MUMBAI -400 002 ...... APPELLANT VS DY. COMMISSIONER OF INCOME-TAX, CIRCLE -4(1), AAYAKAR BHAVAN, M.K. MARG, MUMBAI -400 020 ..... RESPONDENT PAN: AAFPS 9028 R APPELLANT BY: SHRI JITENDRA JAIN RESPONDENT BY: SHRI V.V. SHASTRI DATE OF HEARING: 09.02.2012 DATE OF PRONOUNCEMENT: 15.02.2012 O R D E R PER R.S. PADVEKAR, JM : IN THIS APPEAL THE ASSESSEE HAS CHALLENGED THE IMPU GNED ORDER OF THE LD. CIT (A)-8, MUMBAI DATED 22.02.2010 FOR T HE A.Y. 2006-07. THE SOLITARY ISSUE WHICH ARISES FOR OUR CONSIDERATI ON IS WHETHER INSERTION OF CLAUSE (D) IN SECTION 43(5) IS PURELY CLARIFICATORY IN NATURE AND APPLIES TO THE PROFIT/LOSS DERIVED FROM THE DER IVATIVES ARE TO BE TREATED AS PROFIT/LOSS FROM THE BUSINESS FROM THE A .Y. 2006-07 OR FROM THE DATE OF NOTIFICATION OF THE STOCK EXCHANGE I.E. 25.1.2006, THE SAME HAS TO BE TREATED AS BUSINESS INCOME OR BUSINESS LO SS. 2. FACTS OF THE CASE ARE IN NARROW COMPASS. THE AS SESSEE IS IN THE SHARE TRADING AND HE IS A SHARE BROKER AND ALSO HE IS A MEMBER OF NSE. THE ASSESSEE HAS SHOWN LOSS OF ` 89,26,760/- IN FUTURE & OPTION (F & O) TRANSACTIONS. DURING THE FINANCIAL YEAR 2005-06 RELEVANT TO THE A.Y. 2006-07. THE A.O. WAS OF THE OPINION THAT LOSS INCURRED PRIOR TO 25.01.2006 IS TO BE TREATED AS SP ECULATION LOSS WHICH ITA 3387/M/2010 MR. MUKUL A. SONAWALA 2 WAS TO THE EXTENT OF ` 64,79,863/- WHICH WAS AS PER THE WORKING MADE BY THE A.O. FOR THE PERIOD 1.4.2005 TO 24.1.2006. THE SAID LOSS WAS IN RESPECT OF F & O LOSS IN THE DERIVATIVE TRANSACTION S. THE A.O., THEREFORE, TREATED THE LOSS IN DERIVATE TRANSACTION S UP TO 24.1.2006 AMOUNTING TO ` 64,79,863/- AS SPECULATIVE LOSS AND DECLINED TO AL LOW TO BE SET OFF AGAINST NON-SPECULATIVE INCOME. THE ASSESSEE CARRIED THE ISSUE BEFORE THE LD. CIT (A) BUT WITHOUT SUCCESS. T HE LD. CIT (A) REFERRED TO THE DECISION OF THE ITAT, SB, CALCUTTA IN SHREE CAPITAL SERVICES LTD. VS. ACIT 121 ITD 498 BUT MISINTERPRET ED THE SAME. IN THE CASE OF SHREE CAPITAL SERVICES LTD. (SUPRA) HO NBLE SPECIAL BENCH HAS EXAMINED THE EFFECT OF INSERTION OF CLAUSE (D) TO SEC. 43(5) AND ALSO DECIDED WHETHER THE SAME IS APPLICABLE FROM THE A.Y . 2006-07 AND HELD THAT INSERTION OF CLAUSE (D) TO SEC.43(5) IS N OT APPLICABLE RETROSPECTIVELY BUT APPLICABLE FROM A.Y. 2006-07 TH AT IS FOR THE WHOLE ASSESSMENT YEAR. THE IDENTICAL ISSUE HAS BEEN CONS IDERED BY THE CO- ORDINATE BENCH (ONE OF US IS PARTY IN THE CASE VIZ. LD. J. M.) IN THE CASE OF ACIT, CIRCLE 21(1), MUMBAI VS. SHRI PARIMAL D. NATHWANI IN ITA NO.3336/MUM/2009 DATED 21.01.2011, DISMISSING T HE APPEAL FILED BY THE REVENUE AND HELD THAT IN VIEW OF INSER TION OF CLAUSE (D) TO SECTION 43(5,) THE PROFIT OR LOSS FROM THE DERIVATIVES FOR THE WHOLE ASSESSMENT YEAR I.E. A.Y. 2006-07 IS TO BE TREATED AS NON-SPECULATIVE. WE, THEREFORE, REVERSE THE ORDER OF THE LD. CIT (A) AND ALLOW THE APPEAL FILED BY THE ASSESSEE AND DIRECT THE A.O. TO ALLOW THE LOSS CLAIMED BY THE ASSESSEE TO BE SET OFF AS PER PROVISIONS OF LAW AGAINST THE OTHER NON-SPECULATIVE INCOME. 3. IN THE RESULT, ASSESSEES APPEAL IS ALLOWED. ORDER PRONOUNCED IN THE OPEN COURT ON THIS DAY OF 1 5TH FEBRUARY, 2012. SD/- ( J. SUDHAKAR REDDY ) ACCOUTANT MEMBER SD/- ( R.S. PADVEKAR ) JUDICIAL MEMBER MUMBAI, DATE: 15TH FEBRUARY, 2012 ITA 3387/M/2010 MR. MUKUL A. SONAWALA 3 COPY TO:- 1) THE APPELLANT. 2) THE RESPONDENT. 3) THE CIT (A)-8, MUMBAI. 4) THE CIT-4, MUMBAI. 5) THE D.R. H BENCH, MUMBAI. BY ORDER / / TRUE COPY / / ASSTT. REGISTRAR I.T.A.T., MUMBAI *CHAVAN