Suresh Kumar Jalan, Kolkata V. ITO, Ward - 36(2), Kolkata, Kolkata

ITA 445/KOL/2012

• Counselvise Citation: 44523514 RSA 2012
• Duration Of Justice: 1 year(s) 8 month(s) 19 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 09-12-2013
• Appeal Filed By: Assessee
• Order Result: Partly Allowed
• Bench Allotted: C
• Assessment Year: 2006-2007
• Appeal Filed On: 21-03-2012
• Result in Favour of: Partly Allowed
• Court: TRIBUNAL
• Department Lawyers: A K DAS
• Assessee Lawyers: SOUMITR A CHOUDHURY; S P CHOWDHURY
• Keywords: Transactions in derivatives; Earning of tax free income; Speculation loss; Revised return
• Section: 14A; 43(5)

Judgement Text

I.T.A. NO.: 445/KOL./2012 ASSESSMENT YEAR : 2006-07 PAGE 1 TO 5 1 IN THE INCOME TAX APPELLATE TRIBUNAL, KOLKATA C BENCH, KOLKATA CORAM : SHRI MAHAVIR SINGH (JUDICIAL MEMBER) AND SHRI ABRAHAM P. GEORGE (ACCOUNTA NT MEMBER) I.T.A. NO.: 445/KOL./ 2012 ASSESSMENT YEAR : 2006-2007 SURESH KUMAR JALAN,.............................. ........APPELLANT 6, LYONS RANGE, ROOM G-20, KOLKATA-700 001 [PAN : ACPPJ 6074 L] -VS.- INCOME TAX OFFICER,................................ ....................RESPONDENT WAR-36(2), KOLKATA, 18, RABINDRA SARANI, KOLKATA-700 001 APPEARANCES BY: SHRI SOUMITRA CHOUDHURY AND SHRI S.P. CHOWDHURY, A. R., FOR THE ASSESSEE SHRI A.K. DAS, SR. D.R., FOR THE DEPARTMENT DATE OF CONCLUDING THE HEARING : DECEMBER 09, 2013 DATE OF PRONOUNCING THE ORDER : DECEMBER 09, 2013 O R D E R PER ABRAHAM P. GEORGE : 1. THIS APPEAL FILED BY THE ASSESSEE IS AGAINST AN ORDER DATED 1 ST DECEMBER, 2011 OF COMMISSIONER OF INCOME TAX (APPEA LS)-XX, KOLKATA FOR ASSESSMENT YEAR 2006-07. 2. ASSESSEE HAS RAISED SEVEN GROUNDS IN TOTAL, OUT OF WHICH GROUNDS NO. 1 & 7 ARE GENERAL, THEREFORE, NEED NO ADJUDICAT ION. 3. THROUGH ITS GROUNDS NO. 2 TO 4, ASSESSEE IS AGGR IEVED ON AN ADDITION OF RS.7,12,636/- MADE BY THE ASSESSING OFFICER, CON SIDERING LOSS SUFFERED IN SHARE DERIVATIVE TRANSACTIONS AS SPECULATIVE LOS S. THIS WAS CONFIRMED BY THE LD. CIT(APPEALS). I.T.A. NO.: 445/KOL./2012 ASSESSMENT YEAR : 2006-07 PAGE 1 TO 5 2 4. FACTS APROPOS ARE THAT ASSESSEE HAD FILED HIS RE TURN FOR THE IMPUGNED ASSESSMENT YEAR DECLARING A LOSS OF RS.34, 224/-. WHILE COMPLETING THE ASSESSMENT ASSESSING OFFICER DISALLO WED A LOSS OF RS.7,12,636/- CLAIMED BY THE ASSESSEE AS A PART OF NORMAL LOSS. AS PER THE ASSESSING OFFICER, LOSS ON ACCOUNT OF DERIVATIVE TR ANSACTIONS COULD ONLY BE CONSIDERED AS SPECULATION LOSS. ASSESSING OFFICER F OR TAKING THIS VIEW RELIED ON A CBDT NOTIFICATION NO. 2 DATED 25 TH JANUARY, 2006. 5. AGGRIEVED, ASSESSEE MOVED IN APPEAL BEFORE LD. C IT(APPEALS). AS PER THE ASSESSEE, ITS CASE WAS COVERED BY EXPLANATION (D) TO SECTION 43(5) OF THE ACT AND WAS DOING FUTURES & OPTIONS (F&O) TRANS ACTIONS AGAINST HOLDINGS OF STOCKS AND SHARES, TO GUARD AGAINST LOS S THAT COULD ARISE ON ACCOUNT OF PRICE FLUCTUATIONS. AS PER ASSESSEE, CBD T CIRCULAR RELIED ON BY THE ASSESSING OFFICER WAS NOT BINDING ON HIM. LOSS INCURRED ON ACCOUNT OF DERIVATIVE TRANSACTIONS FOR ASSESSMENT YEAR 2006-07 HAD TO BE CONSIDERED AS BUSINESS LOSS. HOWEVER, LD. CIT(APPEALS) WAS NOT IMPRESSED. ACCORDING TO HIM, CBDT CIRCULAR WAS BINDING ON THE ASSESSING OFFICER. AS PER LD. CIT(APPEALS), ASSESSEE HAD NOT FILED ANY EVIDENCE T O PROVE THAT F&O TRANSACTIONS WERE UNDERTAKEN TO GUARD AGAINST LOSS IN HOLDINGS OF STOCK IN SHARES. HE, THEREFORE, CONFIRMED THE ORDER OF ASSES SING OFFICER. 6. NOW BEFORE US, LD. A.R. STRONGLY ASSAILING THE O RDER OF AUTHORITIES BELOW SUBMITTED THAT HONBLE SPECIAL BENCH OF THIS TRIBUNAL IN THE CASE OF SHREE CAPITAL SERVICES LIMITED VS.- ACIT [121 ITD 498] HAS HELD THAT CLAUSE (D) OF SECTION 43(5) WAS PROSPECTIVE AND EFF ECTIVE W.E.F. 1 ST APRIL, 2006 I.E. ASSESSMENT YEAR 2006-07 ONWARDS. ACCORDIN G TO HIM, THE IMPUGNED ASSESSMENT YEAR BEING ASSESSMENT YEAR 2006 -07, THE LOSS ON ACCOUNT OF F&O TRANSACTIONS COULD BE TREATED ONLY A S NORMAL LOSS AND NOT AS SPECULATIVE LOSS. RELIANCE WAS ALSO PLACED ON TH E DECISION OF AHMEDABAD BENCH OF THE TRIBUNAL IN THE CASE OF ACIT VS.- HIREN JASWANTRAI SHAH (2011) 62 DTR 95. ACCORDING TO HIM , THIS DECISION OF I.T.A. NO.: 445/KOL./2012 ASSESSMENT YEAR : 2006-07 PAGE 1 TO 5 3 AHMEDABAD BENCH WAS RENDERED AFTER CONSIDERING THE DECISION OF SPECIAL BENCH OF THIS TRIBUNAL IN THE CASE OF SHREE CAPITAL SERVICES LTD. IT WAS HELD THAT TRANSACTIONS CARRIED OUT THROUGH RECOGNIZ ED STOCK EXCHANGES FROM 1 ST APRIL, 2005 TO 25 TH JANUARY, 2006, WOULD BE ELIGIBLE FOR BEING TREATED AS NON-SPECULATIVE IN NATURE IN VIEW OF CLA USE (D) OF PROVISO TO SECTION 43(5) OF THE ACT. LD. A.R. SUBMITTED THAT A LL THE TRANSACTIONS CARRIED OUT BY THE ASSESSEE WERE ONLY THROUGH STOCK EXCHANGES. 7. PER CONTRA, LD. D.R. STRONGLY SUPPORTED THE ORDE R OF LD. CIT(APPEALS). 8. WE HAVE HEARD THE RIVAL SUBMISSIONS AND PERUSED THE MATERIAL ON RECORD. WE FIND THAT REVENUE HAS NOT DISPUTED THE C LAIM OF ASSESSEE THAT THE TRANSACTIONS IN F&O WERE CARRIED OUT THROUGH RE COGNIZED STOCK EXCHANGES. ASSESSING OFFICER HAD TREATED THE LOSS A RISING ON ACCOUNT OF TRADING IN F&O AS SPECULATIVE LOSS THOUGH ASSESSEE HAD RELIED ON CLAUSE (D) OF PROVISO TO SECTION 43(5) OF THE ACT. AS POIN TED OUT BY LD. A.R. HONBLE SPECIAL BENCH OF THIS TRIBUNAL IN THE CASE OF SHREE CAPITAL SERVICES LTD. HAS CLEARLY HELD THAT CLAUSE (D) OF S ECTION 43(5) IS NOT CLARIFICATORY IN NATURE. THE SAID CLAUSE WAS HELD E FFECTIVE FROM ASSESSMENT YEAR 2006-07 ONWARDS. THEREFORE, LOSS SU FFERED BY THE ASSESSEE DURING IMPUGNED ASSESSMENT YEAR ON ACCOUNT OF TRADING IN F&O TRANSACTIONS COULD NOT BE TREATED AS SPECULATIVE LO SS. CLAUSE (D) OF SECTION 43(5) OF THE ACT DOES NOT REQUIRE THAT THE TRADING IN DERIVATIVES SHOULD BE UNDERTAKEN ONLY FOR HEDGING ANY PROBABLE FUTURE LOS S THAT COULD HAPPEN ON SHARES HELD AS STOCK. DECISION OF BOTH SPECIAL B ENCH OF THIS TRIBUNAL IN THE CASE OF SHREE CAPITAL SERVICES LTD. (SUPRA) AS WELL AS THAT OF COORDINATE BENCH IN THE CASE OF HIREN JASWANTRAI SH AH (SUPRA) HAD CONSIDERED THE EFFECT OF THE CBDT CIRCULAR NO. 2 BE FORE HOLDING THAT PROVISO (D) TO SECTION 43(5) HAD TO BE APPLIED ONLY FROM ASSESSMENT YEAR 2006-07. THEREFORE, FROM ASSESSMENT YEAR 2006-07 LO SS ARISING OUT OF F&O TRANSACTIONS DONE RECOGNIZED THROUGH STOCK EXCH ANGES CANNOT BE I.T.A. NO.: 445/KOL./2012 ASSESSMENT YEAR : 2006-07 PAGE 1 TO 5 4 CONSIDERED AS SPECULATIVE TRANSACTIONS. GROUNDS NO. 2 TO 4 OF THE APPEAL ARE ALLOWED FOR STATISTICAL PURPOSES. 9. VIDE ITS GROUND NO. 5 GRIEVANCE OF THE ASSESSEE IS THAT LD. CIT(APPEALS) DID NOT DIRECT THE ASSESSING OFFICER T O ALLOW REBATE OF SECURITY TRANSACTION TAX OF RS.1,35,023/- LEGITIMAT ELY AVAILABLE TO IT UNDER SECTION 88E OF THE ACT. 10. WE FIND FROM THE GROUNDS TAKEN BY THE ASSESSEE BEFORE LD. CIT(APPEALS) THAT NO SUCH ISSUE WAS EVER RAISED BY HIM BEFORE THE CIT(APPEALS). COMPUTATION OF INCOME, AS GIVEN BY TH E ASSESSING OFFICER IN THE ASSESSMENT ORDER, CLEARLY SHOW THAT THERE WAS N O SUCH CLAIM MADE BY THE ASSESSEE IN THE RETURN OF INCOME AT ALL. THEREF ORE, IN VIEW OF THE DECISION OF HONBLE APEX COURT IN THE CASE OF GOETZ INDIA LTD. VS.- CIT (2006) 284 ITR 323 (SC) THIS BEING A FRESH CLAIM CO ULD NOT HAVE BEEN MADE EXCEPT THROUGH A REVISED RETURN. WE ARE THEREF ORE NOT INCLINED TO CONSIDER THIS GROUND RAISED BY ASSESSEE. GROUND NO. 5 STANDS DISMISSED. 12. VIDE GROUND NO. 6, GRIEVANCE OF THE ASSESSEE IS THAT LD. CIT(APPEALS) CONFIRMED AN ADDITION OF RS.37,907/- M ADE UNDER SECTION 14A OF THE ACT. ASSESSEE HAD EARNED RS.1,09,494/- W HICH WAS CLAIMED EXEMPT UNDER SECTION 10(34) OF THE ACT. SINCE ASSES SEE HAD NOT MADE ANY SUO MOTU DISALLOWANCE FOR EXPENSES INCURRED ON SUCH EXEMPT INCOME, ASSESSING OFFICER INVOKED SECTION 14A OF THE ACT AN D MADE A DISALLOWANCE OF RS.37,907/-. LD. CIT(APPEALS) CONFIRMED THIS DIS ALLOWANCE. 13. WE ARE OF THE OPINION THAT BY VIRTUE OF DECISIO N OF THE HONBLE MUMBAI HIGH COURT IN THE CASE OF GODREJ & BOYCE MAN UFACTURING CO. LTD. VS.- DCIT (2010) 328 ITR 81 (BOM.) DISALLOWANCE UND ER SECTION 14A CAN BE MADE EVEN PRIOR TO ASSESSMENT YEAR 2008-09, THOU GH RULE 8D OF INCOME TAX RULES COULD NOT BE APPLIED. THIS TRIBUNA L HAS BEEN CONSISTENTLY HOLDING THAT IN SUCH CASES PRIOR TO AS SESSMENT YEAR 2008-09 I.T.A. NO.: 445/KOL./2012 ASSESSMENT YEAR : 2006-07 PAGE 1 TO 5 5 DISALLOWANCE OF 1% OF THE EXEMPT INCOME WOULD BE AP PROPRIATE. THEREFORE, WE DIRECT THAT THE DISALLOWANCE BE RESTR ICTED TO 1% OF THE EXEMPT INCOME CLAIMED BY THE ASSESSEE. ORDERED ACCO RDINGLY. GROUND NO. 6 OF ASSESSEE IS PARTLY ALLOWED. 14. IN THE RESULT, THE APPEAL FILED BY THE ASSESSEE IS PARTLY ALLOWED. ORDER PRONOUNCED IN THE OPEN COURT ON 9 TH DAY OF DECEMBER, 2013. SD/- SD/- MAHAVIR SINGH ABRAHAM P. GEORGE (JUDICIAL MEMBER) (ACC OUNTANT MEMBER) KOLKATA, THE 9 TH DAY OF DECEMBER, 2013 COPIES TO : (1) THE APPELLANT (2) THE RESPONDENT (3) CIT (4) CIT(A) (5) THE DEPARTMENTAL REPRESENTATIVE (6) GUARD FILE BY ORDER ETC ASSISTANT REGISTRAR INCOME TAX APPELLATE TRIBUNAL KOLKATA BENCHES, KOLKATA LAHA/SR. P.S.