Venus Enterprises Pvt. Ltd., Ahmedabad V. The Income Tax Officer, Ward-8(4), Now Dy.CIT, Circle-4(1)(2), Ahmedabad

ITA 3635/AHD/2015

• Counselvise Citation: [2016] 121 COUNSELVISE.COM (IT) 2360 (ITAT-AHMEDABAD)
• Duration Of Justice: 3 month(s) 2 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 31-03-2016
• Appeal Filed By: Assessee
• Order Result: Allowed
• Bench Allotted: SMC
• Next Hearing Date: 30-03-2016
• Assessment Year: 2011-2012
• Appeal Filed On: 28-12-2015
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: DEEPAK SUTARIA
• Keywords: Business income; Speculation loss; Capital expenditure
• Section: 43(5)

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL AHMEDABAD C BENCH (BEFORE SHRI RAJPAL YADAV, JUDICIAL MEMBER & SHRI N.K. BILLAIYA, ACCOUNTANT MEMBER) ITA. NO: 3635/AHD/2015 (ASSESSMENT YEAR: 2011-12) VENUS ENTERPRISES P. LTD. 510, SAHJANAND TRADE CENTRE, OPP. KOTHWALA FLATS, PRITAMNAGAR, AHMEDABAD-380006 V/S DCIT, CIRCLE-4(1)(2), AHMEDABAD (APPELLANT) (RESPONDENT) PAN: AAACV6467F APPELLANT BY : SHRI DEEPAK SHAH, AR RESPONDENT BY : SHRI DEEPAK SUTARIA, SR. D.R . ( )/ ORDER DATE OF HEARING : 30 -03-201 6 DATE OF PRONOUNCEMENT : 31 -03-2016 PER N.K. BILLAIYA, ACCOUNTANT MEMBER: 1. THIS APPEAL BY THE ASSESSEE IS PREFERRED AGAINST TH E ORDER OF LD. CIT(A)-9, AHMEDABAD DATED 18.11.2015 PERTAINING TO A.Y. 2011-12. ITA NO. 3635 /AHD/2015 . A.Y. 2011-2 012 2 2. THE ONLY GRIEVANCE OF THE ASSESSEE RELATES TO THE A DDITION OF RS. 28,03,790/- BY TREATING THE BUSINESS LOSS AS SPECUL ATION LOSS. 3. THE ASSESSEE IS DOING BUSINESS AS TRADING & CARTING OF IRON & COPPER SLUDGE. THE RETURN FOR THE YEAR WAS ELECTRONICALLY FILED ON 30.09.2011 DECLARING TOTAL LOSS AT RS. 19,43,662/-. THE RETURN WAS SELECTED FOR SCRUTINY ASSESSMENT AND ACCORDINGLY STATUTORY NOTIC ES WERE ISSUED AND SERVED UPON THE ASSESSEE. 4. DURING THE COURSE OF THE SCRUTINY ASSESSMENT PROCEE DINGS, THE A.O FOUND THAT ASSESSEE HAS SHOWN LOSS FROM SHARES, SEC URITIES AND OTHER TRANSACTIONS AT RS. 28,03,790/-. THE ASSESSEE WAS A SKED TO STATE THE NATURE OF TRANSACTION WITH DETAILS THEREOF. VIDE LE TTER DATED 20.06.2013; ASSESSEE SUBMITTED THE DETAILS OF SHARE S, SECURITIES AND OTHER TRANSACTIONS. ON VERIFYING THE SAME, THE A.O FOUND THAT THE LOSS INCURRED IS ON ACCOUNT OF TRADING IN SHARE DERIVATI VES. 5. DRAWING SUPPORT FROM THE PROVISIONS OF SECTION 73 O F THE ACT. THE A.O WAS OF THE FIRM BELIEF THAT THE LOSS IS NOTHING BUT SPECULATION LOSS AND CANNOT BE ALLOWED TO BE SET OFF FROM OTHER BUSINESS INCOME OF THE ASSESSEE. THE A.O ACCORDINGLY ALLOWED RS. 28,03,790 /- TO BE CARRIED FORWARD TO BE SET OFF AGAINST OTHER SPECULATION PRO FIT AND MADE AN ADDITION OF RS. 28,03,790/- FOR THE YEAR UNDER CONS IDERATION. 6. ASSESSEE CARRIED THE MATTER BEFORE THE LD. CIT(A) A ND ONCE AGAIN EXPLAINED THE NATURE OF TRANSACTION. IT WAS VEHEMEN TLY CONTENDED THAT TRADING IN SHARE DERIVATIVES ARE NO MORE TREATED AS SPECULATION BUSINESS AND, THEREFORE, ANY LOSS INCURRED ON ACCOU NT OF TRADING IN DERIVATIVES WOULD NOT BE A SPECULATION LOSS. AFTER CONSIDERING THE FACTS ITA NO. 3635 /AHD/2015 . A.Y. 2011-2 012 3 AND THE SUBMISSIONS, THE LD. CIT(A) WAS CONVINCED T HAT PROVISIONS OF SECTION 73 OF THE ACT SQUARELY APPLY ON THE FACTS O F THE CASE AND CONFIRMED THE ADDITION OF RS. 28,03,790/-. 7. AGGRIEVED BY THIS, THE ASSESSEE IS BEFORE US. THE L D. COUNSEL FOR THE ASSESSEE STATED THAT EXPLANATION TO SECTION 73 IS N OT ATTRACTED ON THE FACTS OF THE CASE AS DERIVATIVES ARE NOT SHARES. ST RONG RELIANCE WAS PLACED ON THE DECISION IN THE CASE OF APPOLLO TYRES LTD. 237 ITR 706 KERALA HIGH COURT WHICH HAS BEEN CONFIRMED BY THE H ONBLE SUPREME COURT 255 ITR 273. RELIANCE WAS ALSO PLACED ON THE DECISION OF HONBLE KARNATAKA HIGH COURT IN THE CASE OF FIRST SECURITIE S P. LTD. 370 ITR 72 AND ALSO ON THE DECISION OF THE HONBLE MADRAS HIGH COURT IN THE CASE OF ANUSH SHARES & SECURITIES P. LTD. 62 TAXMANN.COM 287. 8. PER CONTRA, THE LD. D.R. STRONGLY SUPPORTED THE FIN DINGS OF THE FIRST APPELLATE AUTHORITY. 9. WE HAVE CAREFULLY CONSIDERED THE ORDERS OF THE AUTH ORITIES BELOW. WE HAVE ALSO GIVEN A THOUGHTFUL CONSIDERATION TO THE D ECISIONS RELIED UPON BY THE LEARNED COUNSEL. SECTION 73 ALONG WITH THE E XPLANATION READ AS UNDER:- 73. (1) ANY LOSS, COMPUTED IN RESPECT OF A SPECULAT ION BUSINESS CARRIED ON BY THE ASSESSEE, SHALL NOT BE SET OFF EXCEPT AGAINST PROFI TS AND GAINS, IF ANY, OF ANOTHER SPECULATION BUSINESS. (2) WHERE FOR ANY ASSESSMENT YEAR ANY LOSS COMPUTED IN RESPECT OF A SPECULATION BUSINESS HAS NOT BEEN WHOLLY SET OFF UNDER SUB-SECTION (1), SO MUCH OF THE LOSS AS IS NOT SO SET OFF OR THE WHOLE LOSS WHERE THE ASSESSEE HAD NO INCOME FROM ANY OTHER SPECULATION BUSINESS, SHALL, SUBJECT TO THE OTHER PROVISIONS OF THIS CHAP TER, BE CARRIED FORWARD TO THE FOLLOWING ASSESSMENT YEAR AND- ITA NO. 3635 /AHD/2015 . A.Y. 2011-2 012 4 (I) IT SHALL BE SET OFF AGAINST THE PROFITS AND GAI NS, IF ANY, OF ANY SPECULATION BUSINESS CARRIED ON BY HIM ASSESSABLE FOR THAT ASSESSMENT YE AR; AND (II) IF THE LOSS CANNOT BE WHOLLY SO SET OFF, THE A MOUNT OF LOSS NOT SO SET OFF SHALL BE CARRIED FORWARD TO THE FOLLOWING ASSESSMENT YEAR AND SO ON. (3) IN RESPECT OF ALLOWANCE ON ACCOUNT OF DEPRECIAT ION OR CAPITAL EXPENDITURE ON SCIENTIFIC RESEARCH, THE PROVISIONS OF SUB-SECTION (2) OF SECTION 72 SHALL APPLY IN RELATION TO SPECULATION BUSINESS AS THEY APPLY IN RELATION T O ANY OTHER BUSINESS. (4) NO LOSS SHALL BE CARRIED FORWARD UNDER THIS SEC TION FOR MORE THAN FOUR ASSESSMENT YEARS IMMEDIATELY SUCCEEDING THE ASSESSMENT YEAR FO R WHICH THE LOSS WAS FIRST COMPUTED. [EXPLANATION]- WHERE ANY PART OF THE BUSINESS OF A COMPANY ([OTHER THAN A COMPANY WHOSE GROSS TOTAL INCOME CONSISTS MAINLY OF INCOME WHICH IS CHARGEABLE UNDER THE HEADS INTEREST ON SECURITIES, INCOME FROM HOUSE PROPER TY, CAPITAL GAINS AND INCOME FROM OTHER SOURCES), OR A COMPANY THE PRINCIPAL BU SINESS OF WHICH IS THE BUSINESS OF BANKING OR THE GRANTING OF LOANS AND ADVANCES) CON SISTS IN THE PURCHASE AND SALE OF SHARES OF OTHER COMPANIES, SUCH COMPANY SHALL, FOR THE PURPOSES OF THIS SECTION, BE DEEMED TO BE CARRYING ON A SPECULATION BUSINESS TO THE EXTENT TO WHICH THE BUSINESS CONSISTS OF THE PURCHASE AND SALE OF SUCH SHARES.] 10. THE AFOREMENTIONED SECTION HAS TO BE READ ALONG WIT H SECTION 43(5) OF THE ACT WHICH CONTAINS THE DEFINITION OF S PECULATIVE TRANSACTION. THE RELEVANT CLAUSE IS 43(5)(D) WHICH READ AS UNDER EXCLUDES- (A) (B) (C) .. (D) AN ELIGIBLE TRANSACTION IN RESPECT OF TRADING IN DE RIVATIVES REFERRED TO IN CLAUSE (AC) OF SECTION 2 OF THE SECURITIES CONTRACTS (REGULATION) ACT, 1956 (42 OF 1956) CARRIED OUT IN A RECOGNIZED STOCK EXCHANGE. ITA NO. 3635 /AHD/2015 . A.Y. 2011-2 012 5 11. A PERUSAL OF THE AFOREMENTIONED SECTION SHOWS THAT WITH EFFECT FROM 01.04.2006 TRADING IN DERIVATIVES CARRIED OUT IN A RECOGNIZED STOCK EXCHANGE HAS BEEN TAKEN OUT OF THE AMBIT OF S PECULATION TRANSACTION. THE ASSESSMENT ORDER UNDER CONSIDERATI ON IS 2011-12. THUS, IT CAN BE SAFELY CONCLUDED THAT FOR THE YEAR UNDER CONSIDERATION, THE IMPUGNED TRANSACTIONS OF THE ASSESSEE ARE EXCLU DED BY THE DEFINITION OF SPECULATIVE TRANSACTION. 12. IN OUR UNDERSTANDING OF THE LAW, THE EXPLANATION TO SECTION 73 OF THE ACT CANNOT OVERRIDE THE PROVISIONS OF SECTION 4 3(5)(D) OF THE ACT. ONCE A TRANSACTION HAS BEEN TAKEN OUT OF THE SCOPE OF SPECULATION ANY LOSS INCURRED ON ACCOUNT OF SUCH TRANSACTION CANNOT , BY ANY STRETCH OF IMAGINATION BE TREATED AS SPECULATION LOSS. WE, THE REFORE, SET ASIDE THE FINDINGS OF THE LD. CIT(A) AND DIRECT THE A.O N OT TO TREAT THE LOSS AS A SPECULATION LOSS AND ALLOW THE SAME AS A BUSINESS LOSS. 13. IN THE RESULT, THE APPEAL FILED BY THE ASSESSEE IS ALLOWED. ORDER PRONOUNCED IN OPEN COURT ON 31- 03 - 201 6. SD/- SD/- (RAJPAL YADAV) (N. K. BILLAIYA) JUDICIAL MEMBER ACCOUNTANT MEMBER AHMEDABAD: TRUE COPY RAJESH COPY OF THE ORDER FORWARDED TO: - 1. THE APPELLANT. 2. THE RESPONDENT. 3. THE CIT (APPEALS) 4. THE CIT CONCERNED. 5. THE DR., ITAT, AHMEDABAD. 6. GUARD FILE. BY ORDER DEPUTY/ASSTT.REGISTRAR ITAT,AHME DABAD