ACIT, New Delhi V. M/s. A.R. Chadha & Co. India Pvt. Ltd., New Delhi

ITA 3925/DEL/2014

• Counselvise Citation: [2017] 127 COUNSELVISE.COM (IT) 5082 (ITAT-DELHI)
• Duration Of Justice: 3 year(s) 26 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 04-08-2017
• Appeal Filed By: Department
• Order Result: Partly Allowed
• Bench Allotted: A
• Next Hearing Date: 12-06-2017
• Assessment Year: 2010-2011
• Appeal Filed On: 08-07-2014
• Result in Favour of: Partly Allowed
• Court: TRIBUNAL
• Department Lawyers: R C DUBEY
• Keywords: Speculation loss
• Section: 43(5)

Judgement Text

1 ITA NO. 3925/DEL/2014 IN THE INCOME TAX APPELLATE TRIBUNAL DELHI BENCH: A NEW DELHI BEFORE SHRI R. K. PANDA, ACCOUNTANT MEM BER AND MS SUCHITRA KAMBLE, JUDI CIAL MEMBER I.T.A .NO.3925/DEL/20 14 (A.Y .2010-11) ACIT CIRCLE-1(1) NEW DELHI (APPELLANT) VS A R CHADHA & CO. INDIA PVT. LTD. OFFICE NO. 8, 1 ST FLOOR, ALMA RAM MANSION, CONNAUGHT PLACE, NEW DELHI AAACA1108L (RESPONDENT) APPELLANT BY SH. R. C. DUBEY, SR. DR RESPONDENT BY SH. RANJAN CHOPRA, CA ORDER PER SUCHITRA KAMBLE, JM THE APPEAL IS FILED BY THE REVENUE AGAINST THE ORDE R DATED 15/04/2014 PASSED BY THE CIT(A)-IV, NEW DELHI. 2. THE GROUNDS OF APPEAL ARE AS UNDER:- 1.(I) ON THE FACTS AND IN THE CIRCUMSTANCES OF THE CASE, THE LD.CIT(A) HAS ERRED IN RELYING UPON THE ORDER OF HIS PREDECESSOR FOR ASSESSMENT YEAR 2008-09 WHICH HAS BEEN SET ASIDE BY THE HONBL E ITAT VIDE ITA NO. 5210/DEL/2011 DATED 5/10/2012. (II) ON THE FACTS AND IN THE CIRCUMSTANCES OF THE C ASE, THE LD.CIT(A) HAS ERRED IN LAW AND ON FACTS IN DIRECTING THE A.O TO A LLOW THE SET OFF OF SPECULATION LOSS OF RS.1,15,01,196/-. DATE OF HEARING 12.06.2017 DATE OF PRONOUNCEMENT 02.08.2017 2 ITA NO. 3925/DEL/2014 (III) THE LD.CIT(A) HAS ERRED IN NOT APPRECIATING T HAT STOCK FUTURES AND OPTIONS BEING DERIVATIVES OF SHARES, HAVE TO BE TRE ATED AT PAR WITH SHARES FOR THE PURPOSE OF EXPLANATION TO SECTION 73 OF THE ACT. 3. THE ASSESSEE IS ENGAGED IN THE BUSINESS OF DEALE RSHIP FOR PRODUCTS OF JCB INDIA LTD. (SALES, SERVICES AND SPARES) AND SHA RE TRADING. IT HAS ALSO SHOWN RENTAL INCOME AND INCOME FROM LONG TERM CAPIT AL GAIN DURING THE YEAR UNDER CONSIDERATION. THE ASSESSEE HAS CLAIMED SPECU LATION LOSS ARISING FROM SHARES UNDER THE FUTURE & OPTIONS OF RS.1,15,01,1 96/-. THIS AMOUNT HAD BEEN SHOWN IN THE PROFIT AND LOSS ACCOUNT OF THE AS SESSEE AS AN EXPENDITURE. THE ASSESSING OFFICER OBSERVED THAT SECTION 73(1) O F THE ACT STATED THAT ANY LOSS COMPUTED IN RESPECT OF SPECULATION BUSINESS CA RRIED ON BY THE ASSESSEE, SHALL NOT BE SET OF EXCEPT AGAINST PROFITS AND GAIN S, IF ANY OF ANOTHER SPECULATION BUSINESS. THE ASSESSING OFFICER FURTH ER OBSERVED THAT AS PER THIS PROVISION THE SPECULATIVE LOSS OF THE ASSESSEE IS D ISALLOWED FROM THE BUSINESS LOSS. THE ASSESSING OFFICER OBSERVED THAT SPECULAT IVE LOSS SHALL HAVE TO BE TREATED SEPARATELY AND SHALL NOT BE ALLOWED TO BE S ET OFF AGAINST ANY OTHER PROFIT OR GAIN OF THE BUSINESS AND SHALL BE REQUIRED TO BE CARRIED FORWARD AND SET OFF AS PER THE PROVISIONS OF SECTION 73. THE AO HELD T HAT ADDITION ON THIS ACCOUNT HAS ALSO BEEN MADE IN THE PREVIOUS YEAR RELEVANT TO ASSESSMENT YEAR 2009-10 AT RS.20,46,450/- WHICH WAS UNDER APPEAL BEFORE THE LD.CIT(A). ACCORDINGLY, AN ADDITION OF RS.1,15,01,196/- WAS DISALLOWED BEIN G A SPECULATIVE LOSS BY THE ASSESSING OFFICER. 4. BEING AGGRIEVED BY THE ASSESSMENT ORDER, THE ASS ESSEE FILED APPEAL BEFORE THE CIT(A), WHEREIN THE CIT(A) HAS FOLLOWED THE EARLIER ASSESSMENT YEAR 2008-09 ORDER OF THE CIT(A) DATED 26.09.2011 WHICH WAS IN FAVOUR OF ASSESSEE ON THIS ISSUE. 3 ITA NO. 3925/DEL/2014 5. THE LD. DR SUBMITTED THAT THE SPECULATIVE LOSS H AS TO BE TREATED SEPARATELY AND SHOULD NOT BE ALLOWED TO BE SET OFF AGAINST ANY OTHER PROFIT OR GAIN OF THE BUSINESS AND IS REQUIRED TO BE CARRIED FORWARD AND SET OFF AS PER THE PROVISIONS OF SECTION 73 AND THUS THE ASSESSING OFF ICER RIGHTLY DISALLOWED SPECULATIVE LOSS OF THE ASSESSEE FROM BUSINESS INCO ME. 6. THE LD. AR SUBMITTED THAT THE ORDER OF THE CIT(A ) IN ASSESSMENT YEAR 2008-09 WAS FURTHER APPEALED BY THE REVENUE BEFORE THE ITAT. THE ITAT REMANDED BACK THE SAID ISSUE TO THE FILE OF THE ASS ESSING OFFICER. 7. WE HAVE HEARD BOTH THE PARTIES AND PERUSED THE R ECORDS. THE ISSUE WHICH IS CONTESTED HEREIN IS IDENTICAL ISSUE ARISIN G IN A.Y. 2008-09. THE ITAT IN ITA NO.5210/DEL/2011 ORDER DATED 05.10.2012 (AY 200 8-09) HELD IN PARA 13.1 THAT .THE CASE OF ASSESSEE BEFORE US RELATES TO AY 200 8-09 AND THEREFORE, APPLICABILITY OF AFORESAID CL. (D) OF S. 43(5) OF T HE ACT IS REQUIRED TO BE EXAMINED. SINCE NEITHER THE AO NOR THE LD. CIT(A) EXAMINED TH E APPLICABILITY OF SAID CLAUSE (D) NOR RELEVANT FACTS AND FIGURES ARE BEFORE US, W E CONSIDER IT FAIR AND APPROPRIATE TO SET ASIDE THE ORDER OF THE LD. CIT(A ) AND RESTORE THE MATTER TO THE FILE OF THE AO FOR DECIDING THE AFORESAID ISSUE RAI SED IN GROUND NO. 3 IN THE APPEAL BEFORE US, AFRESH IN ACCORDANCE WITH LAW, AFTER ALL OWING SUFFICIENT OPPORTUNITY TO THE ASSESSEE. NEEDLESS TO SAY THAT WHILE REDECIDING THE ISSUE THE AO SHALL PASS A SPEAKING ORDER, BRINGING OUT CLEARLY AS TO THE NA TURE OF DERIVATIVES AND AS TO WHETHER OR NOT THE TRANSACTIONS IN THE SAID DERIVAT IVES WERE SPECULATIVE IN NATURE OR WERE ELIGIBLE TRANSACTIONS WITHIN THE MEANING OF CLAUSE (D) OF THE PROVISO TO THE SECTION 43(5) OF THE ACT. WITH THESE OBSERVATIONS, GROUND NO. 3 IN THE APPEAL IS DISPOSED OFF. IN THE PRESENT CASE ALSO THE CIT(A) AS WELL AS THE ASSESSING OFFICER HAS NOT TAKEN INTO COGNIZANCE OF NATURE OF THE TRANSACT IONS IN THE DERIVATIVES WHETHER THEY ARE SPECULATIVE IN NATURE OR NOT. THER EFORE, IN THE PRESENT CASE ALSO IT WILL BE APPROPRIATE TO REMAND BACK THIS ISS UE TO THE FILE OF THE ASSESSING 4 ITA NO. 3925/DEL/2014 OFFICER FOR BRINGING OUT ACTUAL NATURE OF DERIVATIV ES AND ACCORDINGLY DECIDE THE ISSUE. NEEDLESS TO SAY, THE ASSESSEE BE GIVEN OPPOR TUNITY TO BE HEARD. 8. IN RESULT, THE APPEAL OF THE REVENUE IS PARTLY A LLOWED FOR STATISTICAL PURPOSE. ORDER PRONOUNCED IN THE OPEN COURT ON 02 ND AUGUST, 2017 . SD/- SD/- (R. K. PANDA) (SUCHITRA KAMBLE) ACCOUNTANT MEMBER JUDICIAL MEM BER DATED: 02/08/2017 R. NAHEED * COPY FORWARDED TO: 1. APPELLANT 2. RESPONDENT 3. CIT 4. CIT(APPEALS) 5. DR: ITAT ASSISTANT REGISTRAR ITAT NEW DELHI DATE 1. DRAFT DICTATED ON 12/06/2017 PS 2. DRAFT PLACED BEFORE AUTHOR 12/06/2017 PS 3. DRAFT PROPOSED & PLACED BEFORE THE SECOND MEMBER .2017 JM/AM 5 ITA NO. 3925/DEL/2014 4. DRAFT DISCUSSED/APPROVED BY SECOND MEMBER. JM/AM 5. APPROVED DRAFT COMES TO THE SR.PS/PS 2.08.2017 PS/PS 6. KEPT FOR PRONOUNCEMENT ON PS 7. FILE SENT TO THE BENCH CLERK 2 .08.2017 PS 8. DATE ON WHICH FILE GOES TO THE AR 9. DATE ON WHICH FILE GOES TO THE HEAD CLERK. 10. DATE OF DISPATCH OF ORDER.