JM FINANCIAL SERVICES P.LD, MUMBAI V. ADDL CIT 4(3), MUMBAI

ITA 4476/MUM/2016

• Counselvise Citation: [2018] 112 COUNSELVISE.COM (IT) 6009 (ITAT-MUMBAI)
• Duration Of Justice: 2 year(s) 6 month(s) 2 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 31-12-2018
• Appeal Filed By: Assessee
• Order Result: Allowed
• Bench Allotted: Not Allotted
• Assessment Year: 2011-2012
• Appeal Filed On: 28-06-2016
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: S PADMAJA
• Assessee Lawyers: K SHIVRAM SANJAY PARIKH
• Keywords: Business income; Depreciation; Transactions in derivatives; Speculation loss; Futures and options; Speculative transactions; Rule 8D; Set aside
• Section: 14A; 43(5); 201; 192; 28

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL, MUMBAI BENCH F , MUMBAI BEFORE SHRI RAJESH KUMAR, ACCOUNTANT MEMBER AND SHRI AMARJEET SINGH , JUDICIAL MEMBER ITA NO. 4558 /M/20 16 ASSESSMENT YEAR: 201 1 - 12 ACIT, CIR 4 (3)( 1 ), R.NO. 649 , 6 TH FLOOR, AAYAKAR BHAVAN, MUM BAI 400 020 VS. M/S. J.M. FINANCIAL SERVICES PVT. LTD., 141, MAKER CHAMBER - III, NARIMAN POINT, MUMBAI 400 021 PAN: AAACJ5977A (APPELLANT) (RESPONDENT) ITA NO. 781 /M/20 17 ASSESSMENT YEAR: 201 2 - 1 3 ACIT, CIR 6 (3)( 2 ), R.NO.522, 5 TH FLOOR, AAYAKAR BHAVAN, M.K. ROAD, MUMBAI 20 VS. M/S. J M FINANCIAL PRODUCTS LTD., 7 TH FLOOR, CNERGY, APPASAHEB MARATHE MARG, PRABHADEVI, MUMBAI 400 0 25 PAN: AAACJ5977A (APPELLANT) (RESPONDENT) ITA NO.4 476 /M/2016 ASSESSMENT YEAR: 2011 - 12 M/S. J.M. FINANCIAL SERVICES P. LTD., (NOW J.M. FINANCIAL SERVICES LTD.) 7 TH FLOOR, CNERGY, APPASAHEB MARATHE MARG, PRABHADEVI, MUMBAI 400 0 25 PAN: AAACJ5977A VS. ACIT 4(3), R.NO. 635 , AAYAKAR BHAVAN, M.K. ROAD, MUMBAI (APPELLANT) (RESPONDENT) ITA NO.4558/M/2016 & ORS. M/S. J.M. FINANCIAL SERVICES PVT. LTD. & ORS. 2 CO NO.288/M/2018 ( ITA NO.4 558 /M/2016 ) ASSESSMENT YEAR: 2011 - 12 M/S. J.M. FINANCIAL SERVICES LTD., 7 TH FLOOR, CNERGY, APPASAHEB MARATHE MARG, PRABHADEVI, MUMBAI 400 0 25 PAN: AAACJ5977A VS. ACIT 4(3) (1) , R.NO.6 49 , 6 TH FLOOR, AAYAKAR BHAVAN, M.K. ROAD, MUMBAI 400 020 (APPELLANT) (RESPONDENT) PRESENT FOR: ASSESSEE BY : SHRI K. SHIVRAM/SANJAY PARIKH , A.R. REVENUE BY : SMT. S. PADMA JA , D.R. DATE OF HEARING : 0 3 . 1 0 .201 8 DATE OF PRONOUNCEMENT : 31 .1 2 .2018 O R D E R PER RAJESH KUMAR , ACCOUNTANT MEMBER: THE ABOVE TITLES CROSS APPEALS AND CROSS OBJECTION HAVE BEEN PREFERRED AGAINST THE ORDER S DATED 30.03.2016 & DATED 17.10.2016 OF THE COMMISSIONER OF INCOME TAX (APPEALS) [HEREINAFTER REFERRED TO AS THE CIT(A)] RELEVANT TO ASSESSMENT YEAR S 2011 - 12 & 2012 - 13 . ITA NO. 4558/M/2016 (REVENUES APPEAL) & CO NO.288/M/2018 2. THE GROUNDS RAISED BY THE REVENUE ARE AS UNDER: ON THE FAC TS AND IN THE CIRCUMSTANCES OF THE CASE AND IN LAW, THE LD. CIT (A) ERRED IN DIRECTING THE ASSESSING OFFICER TO DELETE THE ADDITION OF DEEMED SPECULATION LOSS OF RS. 58,08,13 , 038/ - MADE UNDER EXPLANATION TO SECTION 73 OF IT ACT AS THE ASSESSEE HAS WRONGLY SET OFF A SPECULATIVE LOSS AG AINST A NON - SPECULATIVE INCOME. 2. THE APPELLANT CRAVES LEAVE TO AMEND OR ALTER ANY GROUND OR ADD A NEW GROUND WHICH MAY BE NECESSARY.' ITA NO.4558/M/2016 & ORS. M/S. J.M. FINANCIAL SERVICES PVT. LTD. & ORS. 3 3. THE REVENUE HAS ALSO FILED ADDITIONAL GROUND OF APPEAL WHICH IS REPRODUCED AS UNDER: 1. ON THE FACTS AND IN THE CIRCUMSTANCES OF THE CASE AND IN LAW, THE LD. CIT(A) HAS ERRED IN DIRECTING THE AO THAT WHILE CALCULATING THE DISALLOWANCE U/S.14A R.W.R 8D(III) NOT TO INCLUDE SHARES HELD AS 'STOCK - IN - TRADE' WITHOUT CONSIDERING TH E FACT THAT T HE ISSUE IS BEING SETTLED BY THE DECISION OF HON ' BLE SUPREME COURT IN THE CASE OF MAXOPP INVESTMENT LTD.(2018 ) 91 TAXMANN.COM 154(S C). 2. THE APPELLANT CRAVES LEAVE TO AMEND OR ALTER ANY GROUND OR ADD NEW GROUND WHICH MAY BE NECESSARY. 4 . THE ONLY I SSUE RAISED BY THE REVENUE IN ITS GROUNDS OF APPEAL IS AGAINST THE DIRECTION OF LD. CIT(A) TO AO TO DELETE THE ADDITION OF DEEMED S PECULATION LOSS OF RS. 58,08,13,038/ - MADE UNDER EXPLANATION TO SECTION 73 OF THE ACT. 5 . THE BRIEF FACTS OF THE CASE ARE T HAT THE ASSESSEE IS A PRIMARY AND SECONDARY MARKET SHARE BROKER. DURING THE ASSESSMENT PROCEEDINGS, THE AO OBSERVED THAT ASSESSEE HAS EARNED INCOME FROM TRADING OPERATION OF RS.51,89,25,702/ - AND ACCORDINGLY THE ASSESSEE WAS ASKED TO GIVE DETAILS OF BREAK UP OF TRADING TRANSACTIONS. THE ASSESSEE FILED DETAILED BIFURCATION OF INCOME EARNED FROM TRADING OPERATIONS. THE AO, AFTER PERUSAL OF THE DETAILS FILED BY THE ASSESSEE, OBSERVED THAT THE ASSESSEE HAS EARNED INCOME THROUGH F & O TRANSACTION S AS WELL AS CASH SEGMENT TRANSACTIONS AND ACCORDINGLY ASKED THE ASSESSEE AS TO WHY THE DELIVERY BASED SHARE TRANSACTIONS BE NOT TREATED AS SPECULATIVE AND LOSS RESULTING THEREFROM SHOULD NOT BE SET OFF AGAINST THE F&O INCOME AS PER THE EXPLANATION TO SECTION 73 OF TH E ACT . THE SHOW CAUSE WAS REPLIED BY THE ASSESSEE VIDE LETTER DATED 24.02.14 MAKING DETAILED SUBMISSION S WHICH HAS BEEN REPRODUCED IN THE ASSESSMENT ORDER FROM PAGE NO.10 TO 20. FINALLY, THE AO NOT BEING SATISFIED WITH THE SUBMISSION S OF THE ITA NO.4558/M/2016 & ORS. M/S. J.M. FINANCIAL SERVICES PVT. LTD. & ORS. 4 ASSESSEE TR EATED THE INCOME FROM THE F&O SEGMENT AS BUSINESS INCOME WHILE THE LOSS RESULTING FROM DELIVERY BASED SHARE TRADING HAS BEEN TREATED AS SPECULATION LOSS TO THE TUNE OF RS.58,08,13,038/ - AND WAS ADDED TO THE INCOME OF THE ASSESSEE. 6 . AT THE OUTSET, THE LD. A.R. FOR THE ASSESSEE SUBMITTED THAT THE ISSUE IN THE PRESENT CASE QUA THE INCOME FROM F&O SEGMENT AND CASH SEGMENT IS SQUARELY COVERED IN FAVOUR OF THE ASSESSEE BY THE DECISION OF THE CO - ORDINATE BENCH OF THE TRIBUNAL IN A.Y. 2009 - 10 IN ASSESSEE OWN CASE VIDE ORDER DATED 28.12.16 WHEREIN THE CO - ORDINATE BENCH OF THE TRIBUNAL HAS HELD THAT THE TRANSACTION S OF THE ASSESSEE CAN NOT BE SEGREGATED TO ARRIVE AT PROFIT OR LOSS IN THESE BOTH SEGMENTS NAMELY CASH SEGMENT AND F & O SEGMENT AS BOTH THESE SEGME NTS ARE INSEPARABLE AND THE BUSINESS OF THE ASSESSEE SURVIVES ON THE ULTIMATE RESULT ANT FIGURE ARRIVED AT AFTER SETTING OFF/ADJUSTING THE PROFIT OR LOSS FOR EACH SEGMENT AND THEREFORE IT CAN NOT BE SAID THAT TRANSACTION S IN EACH SEGMENT ARE DONE BY THE A SSESSEE INDEPENDENT LY OF EACH OTHER. THE LD. A.R. PRAYED BEFORE THE BENCH THAT SINCE THE ISSUE IS FULLY COVERED IN FAVOUR OF THE ASSESSEE , THE SAME SHOULD BE FOLLOWED IN THE CURRENT YEAR ALSO AND THE APPEAL OF THE REVENUE SHOULD BE DISMISSED AS THE LD. CIT(A) HAS FOLLOWED THE ORDER OF HIS PREDECESSOR FOR A.Y. 2009 - 10 WHICH HAS BEEN UPHELD BY THE TRIBUNAL. 7 . THE LD. D.R. , ON THE OTHER HAND, THOUGH AGREED THAT THE ISSUE IS COVERED BY THE ORDER OF THE CO - ORDINATE BENCH OF THE TRIBUNAL IN A.Y. 2009 - 10 IN ASSESSEES OWN CASE IN ITA NO. 3654/M/2014 & ITA NO.36 60 /M/2014 FOR A.Y. 2009 - 10 BU T ITA NO.4558/M/2016 & ORS. M/S. J.M. FINANCIAL SERVICES PVT. LTD. & ORS. 5 THE SAID ORDER CONTAINS SOME GLARING AND PATENT ANOMALIES WHICH DESERVE TO BE HIGHLIGHTED. THE LD. D.R. MADE DETAILED SUBMISSION S WHICH ARE REPRODUCED AS UNDER: 3. SE CTION 73 IS IN CHAPTER VI WHICH IS ON AGGREGATION OF INCOME AND PERTAINS TO CARRY FORWARD AND SET OFF OF LOSS ARISING FROM SPECULATION BUSINESS. PLEASE SEE EXPLANATION TO SECTION 73 WHICH WAS INSERTED BY THE TAXATION LAWS (AMENDMENT) ACT ,1975 W.E.F. 01.04 .1977. THIS READ AS FOLLOWS (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 PROPERTY', 'CAPI TAL GAINS' AND 'INCOME FROM OTHER SOURCES'], OR A COMPANY [THE PRINCIPAL BUSINESS OF WHICH IS THE BUSINESS OF TRADING IN SHARES OR BANKING] OR THE GRANTING OF LOANS AND ADVANCES) CONSISTS 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. 4. PLEASE SEE SECTION 43(5) WHICH IS IN CHAPTER 4 ON COMPUTATION OF BUSINESS INCOME. SECTION 43 IS ON DEFINITION OF CERTAIN TERMS RELEVANT TO INCOME FROM PROFIT AND GAIN OF BUSINESS & PROFESSION. SECTION 43(5) READS AS FOLLOWS: - 'SPECULATIVE TRANSACTION' MEANS A TRANSACTION IN WHICH A CONTRACT FOR THE PURCHASE OR SALE OF ANY COMMO DITY, INCLUDING STOCKS AND SHARES, IS PERIODICALLY OR ULTIMATELY SETTLED OTHERWISE THAN BY THE ACTUAL DELIVERY OR TRANSFER OF THE COMMODITY OR SCRIPS:' PROVISO TO THIS SECTION WHICH WAS INSERTED BY THE FINANCE ACT, 2005 W.E.F. 01.04.2006 READS AS FOLLOWS: '(D) AN ELIGIBLE TRANSACTION IN RESPECT OF TRADING IN DERIVATIVES REFERRED TO IN CLAUSE[(AC)] OF SECTION 2 OF THE SECURITIES CONTRACTS (REGULATION) ACT, 1956(42 OF 1 956) CARRIED OUT IN A RECOGNIZED STOCK EXCHANGE' 5. PLEASE SEE SECTION 28 WHICH PERTAI NS TO PROFIT AND GAINS OF BUSINESS AND PROFESSION. EXPLANATION 2 TO SECTION 28 READS AS FOLLOWS: 'WHERE SPECULATIVE TRANSACTION CARRIED ON BY AN ASSESSEE ARE OF SUCH A NATURE AS TO CONSTITUTE A BUSINESS, THE BUSINESS( HERE IN AFTER REFERRED TO AS 'SPEC ULATION BUSINESS') SHALL BE DEEMED TO BE DISTINCT AND SEPARATE FROM ANY OTHER BUSINESS.' 6. PLEASE SEE COPY OF SECURITIES CONTRACTS (REGULATION) ACT, 1956[42 OF 1956] WHICH WAS SUBMITTED DURING THE COURSE OF HEARING. PLEASE SEE SECTION 2 (AC) WHICH DEFI NES DERIVATIVES. 7. PLEASE SEE PARA 6.2 OF PP 20 OF ASSESSMENT ORDER AND PARA6.3.4. AT PP 47 OF CIT (A)'S ORDER . PLEASE SEE PARA 6.3.5 OF PP 65 OF CIT(A)'S ORDER WHEREIN THE CIT (A) HAS RELIED ON VARIOUS CASE LAWS TO ALLOW THE SET OFF LOSS FROM CASH S EGMENT AGAINST INCOME OF FUTURE & OPTION SEGMENT. ITA NO.4558/M/2016 & ORS. M/S. J.M. FINANCIAL SERVICES PVT. LTD. & ORS. 6 8. PLEASE SEE ORDER OF HON'BLE 'J' BENCH, ITAT MUMBAI IN ASSESSEE'S OWN CASE IN ITA NO 3654/M/2014, AND ITA NO 3660/M/2014 FOR A.Y. 2009 - 10 DT 28.12.2016.PLEASE REFER TO THE DECISION OF THE ITAT AT PARA 21 OF PP 25. THE HON'BLE BENCH HAS HELD THAT THE TRANSACTION OF THE ASSESSEE IN BOTH SEGMENTS ARE PART OF COMPOSITE BUSINESS OF THE ASSESSEE AND THE TRANSACTIONS ARE SO MANAGED THAT THE RESULTANT FIGURE WILL BE A PROFIT. RELIANCE WAS PLACED ON THE DECISION OF THE HON'BLE DELHI HIGH COURT IN DLF COMMERCIAL AND OTHER DECISIONS. WITH RESPECT TO THE ABOVE DECISION OF ITAT IN ASSECSEE'S OWN CASE IT IS SUBMITTED THAT THIS DECISION HAS NOT DEALT WITH EXPLANATION 2 TO SEC 28 AT ALL WHEREBY SPECULATION BUSINESS IS DISTINCT FROM ANY OTHER BUSINESS OF THE ASSESSEE. THUS, THE TWO TRANSACTIONS IN DELIVERY BASED AND DERIVATIVES CANNOT BE CONSTRUED TO BE A COMPOSITE ACTIVITY. THIS MAKES THE AFORE - CITED DECISION BAD IN LAW. 9. THE FOLLOWING ARE THE CASE LAWS RELIED ON BY THE ITAT IN THE ASSESSEE'S OWN CASE FOR AY 09. THESE CANNOT BE RELIED ON FOR THE DETAILED REASONS THEREIN. MISS DHUN DADABHOY KAPADIA ([1967] 63 1TR 651{SC}) DT 31.10.1966 IS PRIOR TO AMENDMENT AND IS NOT GOOD LAW WRT FACTS OF THE CASE UNDER APPEAL. SHRE E CAPITAL SERVICES (ITA NO 1294/KOL/2008 FOR A.Y. 2004 - 05] SPECIAL BENCH DATED 31.07.2009. THIS IS WRT AY PRIOR TO AMENDMENT OF SEC 43(5) AND THEREFORE CANNOT BE RELIED ON. LOKMAT NEWSPAPERS (P.) LTD. [2010] 322 ITR 43 (BOMBAY) DT 16.02.2010 IS FOR AY 200 3 - 04 WHICH IS PRIOR TO THE AMENDMENT BROUGHT IN BY SEC 43(5)(D) WEF 1.4.2006 AND THEREFORE DOES NOT APPLY TO THE FACTS OF THE CASE UNDER APPEAL. RELIANCE ON THIS DECISION IS MISPLACED. LOKNATH SARAF SECURITIES LTD. (ITA NO 695/KOL/2008 & C.O. NO 36/KOL/20 08 FOR AY. 2002 - 03 AND ITA 696/KOL/2008 & C.O. NO 37/KOL/2008 FOR AY. 2004 - 05, ITAT C BENCH KOLKATA DT 20.06.2011. THE GROUNDS OF APPEAL PERTAIN TO THE APPLICABILITY OF EXPLANATION TO SEC 73 AND ON PROFIT FROM FUTURES AND OPTIONS IS TO BE TREATED AS SPECUL ATION PROFIT. PLEASE SEE PARAS 8 AND 9. THE ITAT HELD BY RELYING ON ARVIND INVESTMENTS THAT FUTURES AND OPTIONS ARE NOT SPECULATION TRANSACTION AND THEREFORE PROFIT THEREFROM CAN BE SET OFF AGAINST BUSINESS OF SHARE TRADING AND THAT SEC 73 WOULD NOT APPLY TO THE FACTS OF THIS CASE. THIS DECISION IS WITH RESPECT TO AYS PRIOR TO THE INTRODUCTION OF PROVISO (D) TO SEC 43 (5) WHICH WAS WEF 1.4.2006 WHEREBY F AND 0 ARE CLEARLY HELD TO BE NON - SPECULATIVE TRANSACTIONS. HENCE, RELIANCE ON THIS DECISION OR ON ARVIND INVESTMENTS (192 ITR 365 CAL HC) IS MISPLACED. ARENA TEXTILES & INDUSTRIES LTD. IN ITA NO. 1019/KOL/2011 FOR A.Y. 2008 - 09) OF A BENCH KOLKATA DT 29.12.2011 HELD THAT TRANSACTIONS DONE BY DELIVERY AS WELL AS DERIVATIVE TRANSACTIONS ARE NOT HIT BY SEC 43(5 ) OF THE ACT AND THAT THE AGGREGATION OF SHARE TRADING LOSS AND PROFIT FROM DERIVATIVE TRANSACTION SHOULD BE DONE BEFORE THE APPLICATION OF EXPLANATION TO SEC 73 IS DONE. PLEASE SEE PARA 6 AND 6.1. THIS IS CONTRARY TO WHAT IS HELD BY THE HON'BLE BOMBAY HC IN BHARAT R RUIA WHICH IS STILL GOOD LAW. FURTHER, THE KOLKATA TRIBUNAL RELIED ON THE DECISION OF THE BOM HC IN LOKMAT NEWS PAPERS ( P) LTD WHICH WAS BASED ON FACTS ARISING PRIOR TO AMENDMENT ITA NO.4558/M/2016 & ORS. M/S. J.M. FINANCIAL SERVICES PVT. LTD. & ORS. 7 OF SEC 43(5) (D). THEREFORE, RELIANCE ON THE DECISION OF THE KOL KATA TRIBUNAL IS MISPLACED. ARION COMMERCIAL P. LTD. (ITA NO 1010/KOL/2011 FOR A.Y. 2008 - 09) 'A' BENCH KOLKATA DATED 29.12.2011. PLEASE SEE PARA 6 OF THIS DECISION WHEREIN IT IS HELD THAT DERIVATIVE TRANSACTIONS IN SHARES PROFIT /LOSS IS NOT HIT BY SEC 43 (5) AND THAT AS SUCH BOTH PROFIT/LOSS FROM ALL THE SHARE DELIVERY TRANSACTIONS AND DERIVATIVE TRANSACTIONS HAVE THE SAME MEANING . THIS DECISION DOES NOT FOLLOW BHARAT R RUIA HUF OF HON'BLE BOMBAY HC WHICH IS STILL GOOD LAW AND IS THAT OF THE JURISDICTIONA L HC. THEREFORE, RELIANCE ON ARION COMMERCIAL IS MISPLACED. RAJANIGANDHA PROPERTIES LTD. KOLKATA (ITA NO. 1011/KOL/2011 FOR A.Y. 2008 - 09 OF A BENCH ITAT KOLKATA DT 29.12.2011. PLEASE SEE PARA 6 OF THIS DECISION WHEREIN IT IS HELD THAT DERIVATIVE TRANSACTI ONS IN SHARES PROFIT /LOSS IS NOT HIT BY SEC 43(5) AND THAT AS SUCH BOTH PROFIT/LOSS FROM ALL THE SHARE DELIVERY TRANSACTIONS AND DERIVATIVE TRANSACTIONS HAVE THE SAME MEANING . THIS DECISION DOES NOT FOLLOW BHARAT R RUIA HUF OF HON'BLE BOMBAY HC WHICH IS STILL GOOD LAW AND IS THAT OF THE JURISDICTIONAL HC. THEREFORE, RELIANCE ON RAJANIGANDHA PROPERTIES LTD IS MISPLACED. CHIRAG D. TANNA , ITA NO 4227/M/2010, ITA NO 5072/MUM/2010) FOR AY. 2006 - 07 'C' BENCH MUMBAI, DT 14.03.2012 PLEASE SEE THE FACTS OF THE CASE WHICH ARE DISTINGUISHABLE. PLEASE SEE PARA 8 WHEREIN THE FACTS ARE THAT THE ASSESSE IS IN THE BUSINESS OF JOBBING/ARBITRAGE ACTIVITIES AND PURCHASES SECURITIES ON ONE MARKET FOR IMMEDIATE RESALE ON ANOTHER MARKET, THAT IS PURCHASES AT EITHER BSE OR N SE WHERE THE PRICE IS LOWER AND SELLS ON BSE OR NSE WHERE THE PRICE IS HIGHER. IT IS IN THIS FACTUAL BACKGROUND THAT THE ITAT HELD THAT THE TRANSACTIONS ARE COMPOSITE AND THE MATTER WAS SET ASIDE TO THE AO FOR ADJUDICATION AFRESH IN ACCORDANCE WITH LAW. IT IS TO BE NOTED THAT PROVISO (D) TO SEC 43 (5) WAS BROUGHT ON THE STATUE WEF 1.4.2006 WHEREIN DERIVATIVES ARE CLEARLY NON - SPECULATIVE. HENCE, ANY RATIO DERIVED FROM THE AFORECITED DECISION WILL NOT APPLY TO THE CASE UNDER APPEAL. ALSO, THE SAID CITED DECIS ION DOES NOT DWELL UPON EXPLANATION 2 TO SEC 28 WHEREBY MAINTENANCE OF SEPARATE ACCOUNTS FOR SPECULATIVE TRANSACTIONS IS STIPULATED. J.GJV SHAH SHARE BROKERS P. LTD.(ITA NO 4053/MUM/20L3) '}' BENCH DT 16.03.2016. PLEASE REFER TO PARA 3.6 OF THIS DECISION . RELIANCE IS PLACED ON SNOWTEX INVESTMENTS OF KOL ITAT, DLF OF DEL HC AND BALJIT SECURITIES OF CAL HC. SNOWTEX IS PRIOR TO AMENDMENT OF SEC 43(5). DLF OF DEL HC AS DISCUSSED ELSEWHERE IN THIS SUBMISSION HAS NOT DISTINGUISHED DECISION OF HON'BLE BOMBAY HC IN BHARAT R RUIA HUF WHICH IS STILL GOOD LAW. BALJIT SECURITIES OF CAL HC IS PRIOR TO AMENDMENT IN SEC 43(5)(D). THEREFORE, THE DECISION IN JGA SHAH SHARE BROKERS P LTD IS BAD IN LAW. BALJIT SECURITIES (P) LTD. ([2015] 55 TAXMANN.COM 11 91(KOLKATA - TRIB) OF C BENCH DT 21.10.2014 PLEASE SEE PARA 5 AND 6 OF THIS DECISION. RELIANCE IS PLACED ON CONCORD COMMERCIAL, SB ITAT, MUMBAI WHEREIN THE ISSUE WAS NOT WRT 43(5)(D). PLEASE SEE PARA 12 OF CONCORD COMMERCIALS (P) LTD.([2005] 95 ITD 117 (MUMBAI) DT 28.01.2005. RELIANCE IS PLACED ON BALJIT SECURITIES P LTD OF CAL HC ( 386 ITR 470 CAL HC) WHEREIN THE ISSUE WAS ON FACTS FOR AYS PRIOR TO INSERTION OF SEC 43(5)(D). THEREFORE , THIS DECISION IS ITA NO.4558/M/2016 & ORS. M/S. J.M. FINANCIAL SERVICES PVT. LTD. & ORS. 8 BAD IN LAW. FURTHER, THE DECISION OF THE HON'BLE BOM HC IN BHARAT R RUIA H UF IS STILL GOOD LAW. RELIANCE ON BALJIT SECURITIES OF DECISION OF ITAT KOL IS THEREFORE MISPLACED. DLF COMMERCIAL DEVELOPERS LTD.([2013] 261 CTR 127 (DELHI) DT 11.07.2013, THE HON'BLE DEL HC HAS HELD THAT SEC 43(5) D IS ONLY FOR PURPOSE OF COMPUTATION OF BUSINESS PER SEC 28 TO 41 ONLY AND NOT FOR THE PURPOSE OF SET OFF OF LOSS PER EXPLANATION TO SEC 73. THIS DECISION BEARS REFERENCE TO THE DECISION OF THE HON'BLE BOMBAY HC IN BHARAT R RUIA . THIS DECISION IS CONTRARY TO WHAT THE HON'BLE BOM HC HAS HELD IN BHARAT R RUIA HUF (2011)337 ITR 452 ( BOM HC); HERE THE HON'BLE HC HAS HELD THAT SEC 43(5) (D) WHICH WAS BROUGHT ON THE STATUTE ON 1.4.2006 IS WITH PROSPECTIVE EFFECT. THE PLEA OF THE ASSESSEE WAS THAT TRANSACTION IN DERIVATIVES WERE NOT SPECULATIVE EVEN PRIOR TO 1.4.2006 AND WERE BUSINESS INCOME AND THEREFORE SET OFF OF LOSS AGAINST BUSINESS INCOME SHOULD BE ALLOWED. THE HON'BLE HC HELD THAT TRANSACTION IN DERIVATIVES WERE SPECULATIVE TRANSACTIONS PRIOR TO 1.4.2006 AND THEREFORE SET OFF OF LOSS AGAINS 1 : B USINESS INCOME SHOULD NOT BE ALLOWED. IN THE FACTUAL CIRCUMSTANCES THE RATIO OF THE HON'BLE BOM HC IS THAT SEC 43(5)D IS PROSPECTIVE, I.E. WEF 1.4.2006 AND DERIVATIVES DO NOT CONSTITUTE SPECULATIVE TRANSACTION AND POST 1.4.2006 CAN BE SET OFF AGAINST NON - S PECULATIVE BUSINESS INCOME ONLY. CLEARLY THE DECISION OF THE JURISDICTIONAL BOMBAY HC IN BHARAT R RUIA SUPPORTS THE CASE OF REVENUE IN THE PRESENT APPEAL. REVENUE RELIES ON THE FOLLOWING DECISIONS ALONGWITH THE DECISION OF THE JURISDICTIONAL BOMBAY HC IN BHARAT R RUIA: PAHARPUR COOLING TOWERS LTD.[2011] 338 ITR 295 (CALCUTTA) DT 05.10.2010 CLEARLY DISTINGUISHES BETWEEN SPECULATIVE AND NON - SPECULATIVE TRANSACTIONS AND THAT EXPLANATION TO SEC 73 APPLIES ONLY TO SPECULATION BUSINESS. PLEASE SEE PARA 41,42,43 AND 44. DEALING IN DERIVATIVES IS NON - SPECULATIVE TRANSACTION AS PER SEC 43(5) PROVISO D. IN PARA 44, THE CAL HC HAS HELD THAT SINCE THE ASSESSEE IS HIT BY EXPLANATION TO SEC 73 , THE ASSESS WILL NOT BE ENTITLED TO BENEFIT OF SETTING OFF OR CARRY FORWARD AS AGAINST THE OTHER SPECULATION BUSINESS. THIS DECISION HAS NOT BEEN FOLLOWED BY THE KOL ITAT IN SUBSEQUENT DECISIONS. THIS DECISION IS RELIED ON BY REVENUE AND WAS NOT DISTINGUISHED BY THE ITAT. SSKI INVESTORS SERVICES (P) LTD.(ITA NO 3182 (MUM) OF 2004 FOR AY 2001 - 02) OF J BENCH ITAT MUMBAI DT 25.09.2007. THIS DECISION FOR AY 01 - 02 HELD THAT LOSS ON ACCOUNT OF DERIVATIVE TRADING CANNOT BE TREATED AS SPECULATIVE LOSS. THIS SUPPORTS THE CASE OF REVENUE IN THE PRESENT APPEAL. 10. THE LD COUNSEL FOR ASSESS EE IN REPLY HAS RELIED ON DECISION OF THE HON'BLE BOM HC IN HATKESH COOP HSG SOCY AND MERCEDES BENZ INDIA PVT LTD TO CONTEND THAT THE DECISION OF THE EARLIER YEAR MUST BE FOLLOWED. PLEASE SEE PARA 17 AND 19 OF THE DECISION IN MERCEDES BENZ INDIA PVT LTD WH EREIN IT IS STATED THAT IF THE ITAT WANTED TO DIFFER FROM THE COORDINATE BENCH, JUDICIAL DISCIPLINE REQUIRED REFERENCE TO A LARGER BENCH. THIS MAY BE DONE. THIS DOES NOT SAY THAT THE DECISION OF THE COORDINATE BENCH MUT BE FOLLOWED EVEN IF IT IS FOUND TO BE FAULTY. PLEASE SEE PARA 5 OF HATKESH COOP HSG SOCY WHEREIN IT IS HELD THAT COORDINATE BENCH MUST BE FOLLOWED UNLESS THE ORDERS ARE PER INCURIM OR SUB SILENTIO. 1 HAVE ITA NO.4558/M/2016 & ORS. M/S. J.M. FINANCIAL SERVICES PVT. LTD. & ORS. 9 POINTED OUT IN MY SUBMISSION , BOTH ORAL AND WRITTEN, THAT THE ORDER RELIED ON IS BOT H PER INCURIM AND SUB SLILENTIO. HENCE, THIS DECISION CANNOT BE TREATED AS COVERED BY ORDER OF THE EARLIER YEAR. THE ASSESSEE HAS RELIED ON THE DECISION OF THE KOL ITAT IN SUVRIDHI CAPITAL MARKETS LTD DT 31,8.2017. THIS DECISION RELIES ON THE RATIO OF BAL JIT SECURITIES OF KOL HC WHICH I HAVE POINTED OUT IS PRIOR TO AMENDMENT IN SEC 43(5) AND THEREFORE NOT APPLICABLE TO THE FACTS OF THIS CASE. THIS DECISION HAS NO REFERENCE TO PAHARPUR COOLING TOWERS OF KOL HC WHICH IS IN FAVOUR OF REVENUE AND IS GOOD LAW. THEREFORE, RELIANCE ON THIS DECISION BY THE LD COUNSEL IS MISPLACED. 11. FOR THE AFORE - CITED REASONS, THE ORDER OF THE AO MUST BE UPHELD WITH RESPECT TO DISALLOWANCE OF SET OFF OF LOSS FROM DELIVERY BASED TRANSACTIONS AGAINST PROFIT FROM DERIVATIVES. 8 . AFTER HEARING BOTH THE PARTIES AND PERUSING THE MATERIAL ON RECORD INCLUDING THE DECISION OF THE ITAT IN ASSESSEES OWN CASE IN A.Y. 2009 - 10, WE FIND THAT THE IDENTICAL ISSUE HAS BEEN DECID ED BY THE TRIBUNAL IN THAT YEAR. THE OPERATIVE PART WHEREOF IS REPRODUCED AS UNDER: 19. WE HAVE HEARD THE LD. REPRESENTATIVES OF THE PARTIES. THE LD. D.R. HAS SUBMITTED THAT UNDER THE PROVISIONS OF THE INCOME TAX ACT THE SPECULATIVE BUSINESS IS DEEMED TO BE A DISTI NCT AND SEPARATE BUSINESS THAN THE NORMAL BUSINESS OR PROFESSION AS DEFINED UNDER SECTION 28 OF THE ACT. THE LD. D.R. HAS FURTHER SUBMITTED THAT AS PER THE PROVISIONS OF SECTION 43(5) OF THE INCOME TAX ACT SOME TRANSACTIONS, THOUGH, ARE OTHERWISE SPECULATIVE TRANSACTIONS BUT HAVE BEEN DEEMED NOT TO BE SPECULATIVE TRANSACTIONS AND THEREFORE THE PROFIT AND LOSS ARISING OUT OF SUCH TRANSACTION IS TO BE COM PUTED/SET OFF AS THAT OF A NORMAL BUSINESS. HE HAS FURTHER CONTENDED THAT HOWEVER, THE TRANSACTIONS WHICH ARE NOT SPECIFICALLY EXCLUDED UNDER THE PROVISIONS OF SECTION 43 OF THE ACT, THOSE TRANSACTIONS R ESULT INTO SPECULATIVE PROFIT OR LOSS WHICH CANNOT BE ADJUSTED OR SET OFF FROM THE PROFIT AND LOSS OF NORMAL BUSINESS TRANSACTIONS. HE HAS FURTHER INVITED OUR ATTENTION TO SECTION 73 OF THE ACT AND HAS SUBMITTED THAT THOUGH AS PER THE PROVISIONS OF SECTION 43(5) , THE DELIVERY BASED TRANSACTION IN SHARES ARE NOT DEEMED TO BE SPECULATIVE TRANSACTIONS; HOWEVER, THE SECTION CARVES AN EXCEPTION TO IT WHEREI N SUBJECT TO CERTAIN EXCEPTIONS, THE PROFIT OR LOSS FROM BUSINESS OF PURCHASE AND SALE OF SHARES BY THE COMPANIES IS TO BE TREATED AS SPECULATIVE PROFIT OR LOSS WHICH CANNOT BE SET OFF OR CARRIED FORWARD TOWARDS THE LOSS FROM OTHER/NORMAL BUSINESS. THE LD. D.R. HAS FURTHER HAS FURTHER INVITED OUR ATTENTION TO THE PROVISIONS OF SECTION 43(5) OF THE INCOME TAX ACT, 1961 TO SUBMIT THAT CERTAIN TRANSACTIONS IN DERIVATIVES OF COMMODITIES AND SECURITIES, THOUGH OTHERWISE ARE SPECULATIVE TRANSACTIONS, BUT BECAUSE OF THE PROVISIONS OF SECTION 43(5) OF THE ACT ARE TO BE TREATED AS NORMAL BUSINESS TRANSACTIONS. HE HAS THEREFORE SUBMITTED THAT CERTAIN TRANSACTIONS SUCH AS HEDGING TRANSACTIONS, JOBBING AND ARBITRAGE IN COMMODITIES AND SECURITIES ARE EXCLUDED FROM THE PREVIEW OF SPECULATIVE TRANSACTIONS FOR THE PURPOSE OF SECTION 43(5) OF THE ACT. HOWEVER, EXPLANATI ON TO SECTION 73 COVERS THE SHARE TRANSACTIONS ITA NO.4558/M/2016 & ORS. M/S. J.M. FINANCIAL SERVICES PVT. LTD. & ORS. 10 DONE BY A COMPANY, SUBJECT TO CERTAIN EXCEPTIONS, AS SPECULATIVE TRANSACTIONS. HE, THEREFORE, HAS CONTENDED THAT THE ASSESSEE'S PROFIT OR LOSS FROM FUTURE ARBITRAGE IN DERIVATIVES ARE TO BE COMPUTED SEPARATELY AS NORMAL BUSINESS TRANSACTIONS, WHEREAS, THE TRANSACTION DONE BY THE ASSESSEE IN CASH SEGMENT IN SHARES ARE TO BE TREATED AS SPECULATIVE TRANSACTIONS. THEREFORE, THE LOSS OR PROFIT EARNED IN DERIVATIV E/FUTURE ARBITRAGE CANNOT BE ADJUSTED OR SET OFF AGAINST THE PROFIT AND LOSS ARRIVED OUT OF DELIVERY BASED SHARE TRANSACTIONS. HE, IN THIS RESPECT, HAS STRONGLY RELIED UPON THE DECISION OF THE HON'BLE KOLKATA HIGH COURT IN THE CASE OF ' PAHARPUR COOLING TOWERS LTD. VS. CIT ' (2011) 338 ITR 295 (CAL) TO CONTEND THAT WHEN ANY PURCHASE OR SALE OF SHARES BY CERTAIN COMPANIES WOULD BE SPECULATIVE TRANSACTION FOR THE PURPOSE OF SECTION 73 , THE LOSS ARISING THERE FROM CANNOT BE SET OFF OR CARRIED FORWARD BY TREATING THE SAME AS NON - SPECULATIVE AS SECTION 43(5) OF THE ACT EXCLUDES THE DELIVERY BASED SHARE TRAN SACTIONS FROM THE PREVIEW OF SPECULATIVE BUSINESS. HE HAS FURTHER CONTENDED THE HON'BLE KOLKATA HIGH COURT, HAS HELD THAT THE EXPLANATION ADDED TO SECTION 73 IS FOR THE SPECIAL PURPOSES AND FOR THAT SEC TION ONLY AND THAT THE PROVISION OF SECTION 73 WITH THE EXPLANATION OVERRIDES THE PROVISIONS OF SECTION SECTION 43(5) . TO STRESS HIS POINT, THE LD. D.R. HAS FURTHER RELIED UPON THE FOLLOWING CASE LAWS TO STRESS UPON THE POINT THAT SECTION 73 OVERRIDES THE PROVISIONS OF SECTION 43(5) AND WHAT IS CONSIDERED AS SPECULATIVE IN NATURE UNDER SECTION 73 , SECTION 43(5) CANNOT BE APPLIED TO EXCLUDE THOSE TRANSACTIONS FROM THE PREVIEW OF SPECULATIVE T RANSACTIONS. HE FINALLY HAS STRESSED THAT SINCE THE TRANSACTIONS IN DERIVATIVES IS NON - SPECULATIVE BECAUSE OF THE EXCLUSION GIVEN UNDER SECTION 43(5) OF THE ACT WHEREAS THE ASSESSEE'S BUSINESS IN SHARES IS TO BE TREATED AS SPECULATIVE AS PER THE PROVISIONS OF SECTION 73 OF THE ACT. THAT THE EXPLANATION TO SECTION 73 DOES NOT COVER THE TRANSACTIONS I N DERIVATIVES AND THEREFORE THE PROVISIONS OF SECTION 43(5) WILL COME INTO OPERATION AND THEREFORE THE INCOME FROM DERIVATIVES IS TO BE TREATED AS NORMAL BUSINESS INCOME AND CAN NOT BE ADJUSTED OR SETOFF AGAINST INCOME FROM SPECULATIVE TRANSACTIONS. '1. CIT VS. LOKMAT NEWSPAPER (P) LTD . - (2010) 322 ITR 43 2. CIT VS. ARVIND INVESTMENTS LTD . - (19 91) 192 ITR 365 3. ARAKSA DIAMOND PVT. LTD. VS. ACIT 5(1), MUMBAI - ITA NO.5631/M/12 FOR A.Y. 2009 - 10 (ITAT - MUMBAI) 4. ACIT VS. SUCHAM FINANCE & INVESTMENT - (2007) 290 ITR 379 (ITAT MUM.) 5. SHREE CAPITAL SERVICES LTD. VS. ACIT (2009) 121 ITD 498 (KOL. ITAT) (SB) 6. C. BHARATH KUMAR VS. DCIT (2005) 4 SOT 593 (BANG.) (ITAT) 7. DCIT VS. SSKI INVESTORS SERVICES (P) LTD. - (2008) 113 TTJ 511 (ITAT) (MUM) 8. APOLLO TYRES LTD. VS. CIT (2002) 255 ITR 273 (SC)' 20. THE LD. COUNSEL FOR THE ASSESSEE, ON THE OTHER HAND, HAS SUBMITTED THAT THE ASSESSEE IS IN THE BUSINESS OF CASH FUTURE ARBITRAGE. THE A SSESSEE TAKES BENEFIT IN THE PRICE DIFFERENCE IN THE TWO DIFFERENT MARKET/SEGMENTS. THE ASSESSEE IN HIS BUSINESS BUYS A PARTICULAR SCRIP IN THE CASH SEGMENT AND SIMULTANEOUSLY SELLS THE SAME SCRIP IN THE FUTURE SEGMENT. THOUGH, WHILE PURCHASING THE SCRIP I N CASH SEGMENT, THE ASSESSEE HAS TO PAY THE PRICE AND TAKE DELIVERY OF THE SHARES; HOWEVER, ON SIMULTANEOUSLY SELLING THE SCRIP IN FUTURE SEGMENT AT A HIGHER RATE, THE ASSESSEE ON THE STIPULATED DATE OF CONCLUSION OF CONTRACT IS NOT REQUIRED TO RECEIVE ITA NO.4558/M/2016 & ORS. M/S. J.M. FINANCIAL SERVICES PVT. LTD. & ORS. 11 ANY PAYMENT TOWARDS THE PRICE OF THE SHARES BUT RECEIVE THE MARGIN BETWEEN THE PRICE DIFFERENCE AS ON THE DATE OF ENTERING INTO THE CONTRACT AND DATE OF MATURITY OF THE CONTRACT. THE ASSESSEE AT A LATER DATE WOULD SELL THE SHARES PURCHASED IN THE CASH SEGMENT AND BUY THE SHARES IN THE FUTURE MARKET. THE DIFFERENCE IN THE PRICE OF THE CASH AND FUTURE SEGMENT IS THE PROFIT OF THE ASSESSEE. THE LD. COUNSEL BY WAY OF AN EXAMPLE HAS EXPLAINED THAT THE ASSESSEE SO MANAGES THESE TRANSACTIONS THAT WHEN THE PROFIT AND LOSS FROM BOTH THE TRANSACTIONS IS TAKEN TOGETHER AND SET OFF AGAINST EACH OTHER, THE RESULTANT FIGURE WILL ALWAYS BE A POSITIVE FIGURE. IN OTHER WORDS BOTH THE TRANSACTIONS ARE TAKEN AS A COMPOSITE BUSINESS WHERE THE LOSS IN ONE SEGMENT WILL RESULT INTO P ROFIT IN ANOTHER SEGMENT AND VICE - A - VERSA AND ULTIMATE THE NET RESULT WILL BE A PROFIT. THEREFORE, THE ACTION OF THE AO IN TREATING THE BUSINESS HAVING COMPOSITE TRANSACTIONS IN CASH SEGMENT AND FUTURE SEGMENT AS UNDER DIFFERENT HEADS AND THEREBY NOT ALLO WING THE SET OFF OF PROFIT AND LOSS FROM ONE SEGMENT AGAINST ANOTHER SEGMENT IS NOT JUSTIFIED. THE LD. COUNSEL, IN THIS RESPECT, HAS RELIED UPON VARIOUS CASE LAWS WHICH ARE DETAILED AS UNDER: 1) J.G.A. SHAH SHARE BROKERS P. LTD. [ITA NO.4053/MUM/2013] 2) ITO V. M/S. ARION COMMERCIAL LTD. [ITA NO .1010/KOL/2011] 3) ITO V. M/S. ARENA TEXTILES & INDUSTRIES LTD. [ITA NO.1019/KOL/2011] 4) ITO V. M/S. RAJANIGANDHA PROPERTIES LTD. [ITA NO.1011/KOL/2011] 5) D CIT V. BALJIT SECURITIES PVT. LTD. [ITA NO.1183/KOL/2012] 6) CIT V. LOKMAT NEWSPAPERS (P .) LTD. (2010) 322 ITR 43 (BOM) 7) DLF COMMERCIAL DEVELOPERS LTD. (2013) 261 CTR 127 (DEL) 21. WE HAVE CONSIDE RED THE RIVAL CONTENTIONS. IN THIS CASE, THE PECULIARITY OF THE BUSINESS OF THE ASSESSEE IS THAT THE ASSESSEE SO MANAGES HIS TRANSACTIONS OF SALE AND PURCHASE IN SHARES IN CASH SEGMENT AND IN FUTURE SEGMENT THAT THE FINAL OUTCOME WILL BE A PROFIT. THE TRAN SACTIONS OF THE ASSESSEE, THEREFORE, CANNOT BE SEGREGATED TO ARRIVE AT PROFIT AND LOSS IN BOTH THESE TRANSACTIONS INDEPENDENTLY OR SEPARATELY. THE NATURE OF THE BUSINESS OF THE ASSESSEE IS SUCH THAT THE TRANSACTIONS OF THE ASSESSEE IN BOTH SEGMENTS ARE PAR T OF COMPOSITE BUSINESS OF THE ASSESSEE AND THE TRANSACTIONS ARE SO MANAGED THAT THE RESULTANT FIGURE WILL BE A PROFIT. WE, THEREFORE, DO NOT FIND ANY JUSTIFICATION ON THE PART OF THE LOWER AUTHORITIES TO INTERPRET THE PROVISIONS OF THE INCOME TAX ACT TO THE DISADVANTAGE OF THE ASSESSEE AND TO SEGREGATE THE TRANSACTIONS IN CASH AND FUTURE SEGMENT WHICH, IN OUR VIEW, WILL BE AGAINST THE SPIRIT OF THE TAXATION LAWS. EVEN OTHERWISE THE CASE OF THE ASSESSEE I S SQUARELY COVERED BY THE DECISION OF THE HON'BLE DELHI HIGH COURT IN THE CASE OF ' CIT VS. DLF COMMERCIAL DEVELOPERS ' (SUPRA) WHEREIN THE HON'BLE DELHI HIGH COURT HAS CATEGORICALLY HELD THAT IN TERMS O F EXPLANATION TO SECTION 73 , BY ALL ACCOUNTS, DERIVATIVES ARE BASED ON STOCKS AND SHARES WHICH FALL SQUARELY WITHIN EXPLANATION TO SECTION 73 AND TH EREFORE LOSS FROM SALE - PURCHASE OF SUCH DERIVATIVES WOULD BE SPECULATIVE LOSS. THE HON'BLE DELHI HIGH COURT HAS, THUS, HELD THAT THOUGH UNDER PROVISIONS OF SECTION 43(5) , THE TRANSACTIONS IN DERIVATIVES AT CERTAIN STOCK EXCHANGES ARE DEEMED TO BE NON - SPECULATIVE, HOWEVER, AS PER THE EXPLANATION TO SECTION 73 FOR THE PURPOSE OF COMPUTATION OF BUSINESS LOSS THE DERIVATIVE TRANSACTIONS SQUARELY FALL WITHI N THE SCOPE OF EXPLANATION TO SECTION 73 . UNDER THE CIRCUMSTANCES, BOTH THE TRANSACTIONS I.E. THE TRANSACTIONS IN THE DERIVATIVE AND TRANSACTIONS IN THE CASH SEGMENT CAN BE TREATED AS SPECULATIVE TRANSA CTIONS AS PER ITA NO.4558/M/2016 & ORS. M/S. J.M. FINANCIAL SERVICES PVT. LTD. & ORS. 12 EXPLANATION TO SECTION 73 AND HENCE THE PROFIT OR LOSS AGAINST BOTH THE SEGMENTS CAN BE ADJUSTED OR SET OFF AGAINST EACH OTHER. 22. EVEN OTHERWISE AS DISCUSSED ABOVE, THE PECULIARITY OF T HE BUSINESS OF THE ASSESSEE IS SUCH THAT THE TRANSACTIONS CARRIED OUT BY THE ASSESSEE IN CASH SEGMENT AND IN FUTURE SEGMENT CANNOT BE SEGREGATED. THE BUSINESS OF THE ASSESSEE SURVIVES ON THE ULTIMATE RESULTANT FIGURE ARRIVED AT AFTER SETTING OFF/ADJUSTING OF THE PROFIT AND LOSS FROM EACH SEGMENT. IT CANNOT BE SAID THAT THE TRANSACTIONS IN EACH SEGMENT DONE BY THE ASSESSEE ARE INDEPENDENT OF EACH OTHER. BEFORE PARTING WE WOULD LIKE TO FURTHER ADD THAT CERTAIN EXCEPTIONS HAVE BEEN CARVED OUT UNDER SECTION 43(5) VIDE WHICH CERTAIN TRANSACTIONS IN DERIVATIVE NAMED AS 'ELIGIBLE TRANSACTIONS,' DONE ON A RECOGNIZED STOCK EXCHANGE, SUBJECT TO FULFILLMENT OF CERTAIN REQUIREMENTS, ARE DEEMED TO BE NON - SPECULATIVE. THE SAID PROVISIONS HAVE BEEN INSERTED IN THE ACT FOR THE BENEFIT OF THE ASSESSEES KEEPING IN VIEW THE FACT THAT IN SUCH TYPE TRANSACTIONS ON RECOGNIZED STOCK EXCHANGE, THE CHANCE OF MANIPULATING AND THEREBY ADJUSTING THE BUSINESS PROFITS TOWARDS SPECULATI VE LOSSES BY THE ASSESSEE IS NEGLIGIBLE BECAUSE SUCH TRANSACTIONS ARE DONE ON RECOGNIZED STOCK EXCHANGE AND THERE ARE LESS CHANCES OF MANIPULATION OF FIGURES OF PROFITS AND LOSSES. THESE PROVISIONS HAVE BEEN INSERTED FOR THE BENEFIT OF THE ASSESSEE SO THAT THE ASSESSEE MAY BE ABLE TO SET OFF AND ADJUST HIS PROFIT AND LOSSES FROM DERIVATIVES IN COMMODITIES AGAINST THE NORMAL BUSINESS LOSSES. THESE PROVISIONS ARE INTENDED TO EASE OUT THE ASSESSEE FROM THE DIFFICULTIES FACED DUE TO THE STRINGENT PROVISIONS SEP ARATING THE SPECULATIVE TRANSACTIONS FROM THE NORMAL TRANSACTIONS. HOWEVER, THESE EXCLUSIONS GIVEN TO THE ASSESSEE CANNOT BE ALLOWED TO BE SO INTERPRETED TO THE DISADVANTAGE OF AN ASSESSEE SO AS TO GIVE IT A DIFFERENT MEANING AND THEREBY DENYING THE ASSESS EE THE SET OFF OF OTHERWISE ELIGIBLE BUSINESS LOSS FROM ONE SEGMENT AS AGAINST THE OTHER SEGMENT, ESPECIALLY WHEN THE ACTIVITY DONE BY THE ASSESSEE IS A COMPOSITE ACTIVITY AND PROFIT AND LOSS IN ONE SEGMENT NOT ONLY DEPENDS BUT THE VERY TRANSACTION IS DONE TAKING INTO CONSIDERATION NOT 'EXPECTED' BUT CERTAIN FUTURE PROFIT OR LOSS IN OTHER SEGMENT. 23. IN VIEW OF THE ABOVE, WE DO NOT FIND ANY MERIT IN THE APPEAL OF THE REVENUE AND THE SAME IS ACCORDINGLY DISMISSED. HOWEVER, IN VIEW OF OUR FINDINGS GIVEN ABO VE, THE APPEAL OF THE ASSESSEE IS TREATED AS PARTLY ALLOWED. 9 . AFTER PERUSING THE ORDER OF CO - ORDINATE BENCH OF THE TRIBUNAL AND ALSO THE SUBMISSION FILED BY THE LD. D.R., WE ARE OF THE VIEW THAT THOUGH THE LD. CIT(A) HAS RAISED SAME OBJECTION S WHICH HA S BEEN NARRATED HEREINABOVE IN A VERY DETAILED MANNER BUT IN THE JUDICIAL HIERARCHY WE ARE SUPPOSED TO OBSERVE JUDICIAL DISCIPLINE IN THE MATTER OF FOLLOWING DECISIONS OF THE COORDINATE BENCHES . SINCE THE FACTS AND ISSUES INVOLVED IN THE PRESENT CASE A RE IDENTICAL TO ONE AS DECIDED BY THE CO - ORDINATE BENCH OF THE TRIBUNAL IN AY 2009 - 10 IN ASSESSEES OWN CASE AND THERE IS ITA NO.4558/M/2016 & ORS. M/S. J.M. FINANCIAL SERVICES PVT. LTD. & ORS. 13 NO CHANGE IN THE CIRCUMSTANCES OR FACTS OF THE CASE IN ANY MANNER WHATSOEVER, WE ARE THEREFORE INCLINED TO FOLLOW THE DECISION OF T HE CO - ORDINATE BENCH OF THE TRIBUNAL AND DISMISS THE GROUND S RAISED BY THE REVENUE. 10. BY WAY OF THIS ADDITIONAL GROUND, THE REVENUE HAS CHALLENGED THE DIRECTION OF LD. CIT(A) TO AO TO WORK OUT THE DISALLOWANCE AFTER EXCLUDING SHARES HELD AS STOCK IN TR ADE WITHOUT CONSIDERING THE FACTS THAT ISSUE HAS BEEN SETTLED BY THE HONBLE SUPREME COURT IN THE CASE OF MAXOPP INVESTMENT LTD.(2018) 91 TAXMANN.COM 154(SC) . THE ASSESSEE HAS ALSO RAISED A CROSS OBJECTION IN WHICH THE ASSESSEE HAS RAISED THE ISSUE IF NON RECORDING OF SATISFACTION BY THE AO BEFORE INVOKING THE PROVISIONS OF SECTION 14A OF THE ACT . 1 1. AFTER HEARING BOTH THE PARTIES AND PERUSING THE RELEVANT MATERIAL ON RECORD, WE ARE OF THE VIEW THAT ISSUE NEEDS TO BE LOOKED INTO AND EXAMINED AT THE LE VEL OF AO. THEREFORE, WE ARE RESTORING THE ISSUE OF DISALLOWANCE UNDER SECTION 14A TO THE FILE OF AO WITH THE DIRECTION TO DECIDE THE SAME AFTER FOLLOWING THE DECISION OF THE HONBLE SUPREME COURT IN THE CASE OF MAXOPP INVESTMENT LTD.(2018) 91 TAXMANN.COM 154(SC) AND ALSO IN THE CASE OF GODREJ & BOYCE MANUFACTURING CO. LTD. VS. DCIT [(2017) 394 ITR 49 (SC)]. ACCORDINGLY, THE ISSUE RELATING TO 14A OF THE ACT IS SET ASIDE TO THE FILE OF THE AO. 1 2 . ACCORDINGLY, APPEAL OF THE REVENUE FOR A.Y. 2011 - 12 IS DISPOSED OFF AS STATED HEREINABOVE. ITA NO.4558/M/2016 & ORS. M/S. J.M. FINANCIAL SERVICES PVT. LTD. & ORS. 14 CO NO.288/M/2018(ITA NO.4558/M/2016)AY: 2011 - 12 1 3 .THE ISSUE RAISED BY THE ASSESSEE IN THE CROSS OBJECTION IS AGAINST ORDER OF CIT(A) NOT FOLLOWING THE ORDER OF HIS PREDECESSOR QUA NON RECORDING OF SATISFACTION BY TH E AO BEFORE MAKING ADDITIONAL DISALLOWANCE U/S 14A AND THEREFORE PRAYED THAT THE SAME MAY B E DELETED. 1 4 . SINCE WE HAVE RESTORED THE ISSUE RELATING TO DISALLOWANCE U/S 14A OF THE ACT TO THE AO IN REVENUE APPEAL , THE LD AR SUBMITTED THAT ISSUE MAY BE REST ORED TO THE FILE OF AO FOR DENOV O ADJUDICATION AND THUS THE CO BECOMES INFRUCT UOUS AND DISMISSED. ITA NO.4476/M/2016 AY 2011 - 12 (ASSESSEES APPEAL ) 1 5 . THE VARIOUS GROUNDS RAISED BY THE ASSESSEE ARE AS UNDER: A DISALLOWANCE OF LEASE RENTALS PAID ON MO TOR VEHICLES - RS. 33,60,5067 - 1) THE LEARNED COMMISSIONER OF INCOME TAX (APPEALS) - 9, MUMBAI [CIT(A) ERRED ON FACTS AND IN LAW IN UPHOLDING THE ORDER OF THE ADDITIONAL COMMISSIONER OF INCOME TAX - 4(3), MUMBAI (AO) MAKING A DISALLOWANCE OF LEASE R ENTALS PAID ON MOTOR VEHICLES TAKEN ON LEASE, AMOUNTING TO RS. 33,60,5067 - BY HOLDING THAT AN IDENTICAL ISSUE WAS DECIDED AGAINST THE APPELLANT IN THE EARLIER YEAR BY HIS PREDECESSOR WITHOUT APPRECIATING THAT THE ORDERS OF INITIAL Y EARS HAD BEEN SET ASIDE BY THE H ON'BLE INCOME TAX APPELLATE TRIBUNAL TO THE FILE OF THE AO. 2) THE APPELLANT PRAYS THAT THE DISALLOWANCE OF LEASE RENTALS PAID ON MOTOR VEHICLES TAKEN OF LEASE AMOUNTING TO RS. 33,60,5067 - AS MADE BY THE AO AND AS CONFIRMED BY THE CIT(A) MAY BE DELETED. 3) WITHOUT PREJUDICE TO THE ABOVE, THE LEARNED CIT(A) ERRED IN NOT ALLOWING DEPRECIATION ON LEASED ASSETS AMOUNTING TO RS. 18,08,8197 - AND FINANCE CHARGES AMOUNTING TO RS. 11,75,8457 - INCLUDED IN THE LEASE RENT. 4) THE APPELLANT PRAYS THAT IF LEASE RENTALS ARE NOT ALLOWED AS A DEDUCTION, DEPRECIATION ON LEASED ASSETS AND FINANCE CHARGES INCLUDED IN THE LEASE RENTALS MAY BE ALLOWED AS A DEDUCTION. B) ADDITIONAL DISALLOWANCE U7S. 14A ITA NO.4558/M/2016 & ORS. M/S. J.M. FINANCIAL SERVICES PVT. LTD. & ORS. 15 5) THE LEARNED CIT(A) ERRED ON FAC TS AND IN LAW IN UPHOLDING THE ORDER OF THE AO MAKING AN ADDITIONAL DISALLOWANCE U/S. 14A READ WITH RULE 8D(III) WITHOUT RECORDING A SATISFACTION AS TO WHY THE APPELLANT'S CONTENTION IS TO BE REJECTED HAVING REGARD TO THE ACCOUNTS. 6) THE LEARNED CI T(A) ERRED IN NOT APPRECIATING THAT THE DISALLOWANCE U/S. 14A COULD NOT BE MADE UNLESS A SATISFACTION WAS REACHED BY THE AO THAT THE APPELLANT'S CLAIM COULD NOT BE ACCEPTED HAVING REGARD TO THE ACCOUNTS. NO SUCH SATISFACTION HAVING BEEN RECORDED BY THE AO OR CIT(A), THE ADDITIONAL DISALLOWANCE UNDER SECTION 14A READ WITH RULE 8D IS LIABLE TO BE DELETED. 7) THE APPELLANT PRAYS THAT THE ADDITIONAL DISALLOWANCE U/S. 14A MADE BY THE AO AND AS UPHELD BY THE CIT(A) MAY BE DELETED. C) GENERAL 8) THE ABOVE GROUNDS OF APPEAL ARE WITHOUT PREJUDICE TO ONE ANOTHER AND THE APPELLANT CRAVES LEAVE TO ADD, ALTER, AMEND, DELETE OR MODIFY ANY OF THE ABOVE GROUNDS OF APPEAL. 1 6 . THE ISSUE RAISED IN GROUND A (1 & 2) IS AGAINST THE ORDER OF LD. CIT(A) UPH OLDING THE ORDER OF ACIT MAKING A DISALLOWANCE OF LEASE RENTAL PAID ON MOTOR VEHICLE TAKEN ON LEASE AMOUNTING TO RS.33,60,506/ - WHEREAS GROUND A (3 & 4) ARE WITHOUT PREJUDICE TO GROUND S TO ALLOW DEPRECIATION AND FINANCE CHARGES ON THE LEASED ASSETS IF THE LEASE RENTAL ARE NOT ALLOWED AS DEDUCTION. 1 7 . AT THE OUTSET, THE LD. COUNSEL OF THE ASSESSEE SUBMITTED THAT THE IDENTICAL ISSUE HAS BEEN DECIDED BY THE CO - ORDINATE BENCH OF THE TRIBUNAL IN ASSESSEES OWN CASE FOR A.Y. 2007 - 08, 2008 - 09, 2009 - 10 & 2010 - 11 . THE LD. A.R. SUBMITTED THAT THE CO - ORDINATE BENCH OF THE TRIBUNAL HAS RESTORED THE ISSUE TO THE FILE OF THE AO TO DECIDE THE SAME DENOVO IN THE LIGHT OF THE DECISION OF HONBLE SUPREME COURT IN THE CASE OF ICDS VS. CIT (2013) 350 ITR 527 (SC). THE LD. A.R. PRAYED BEFORE THE BENCH THAT SIMILAR DIRECTION MAY KINDLY BE GIVEN O N THE PRESENT ISSUE ALSO. ITA NO.4558/M/2016 & ORS. M/S. J.M. FINANCIAL SERVICES PVT. LTD. & ORS. 16 1 8 . THE LD. D.R., ON THE OTHER HAND, RELIED ON THE ORDER OF LD. CIT(A). 19 . AFTER HEARING BOTH THE PARTIES AND PERUSING THE MATERIAL ON RECORD, WE FIND THAT IN THE EARLIER YEAR THE ISSUE HAS BEEN RESTORED TO THE FILE OF THE AO TO DECIDE THE SAME IN THE LIGHT OF THE DECISION OF HONBLE SUPREME COURT IN THE CASE OF ICDS VS. CIT (2013) 350 ITR 527 (SC). THE RELEVANT PARA OF THE SAID DECISION OF THE CO - ORDIN ATE BENCH OF THE TRIBUNAL IS REPRODUCED AS UNDER: '13. WE HAVE CAREFULLY CONSIDERED THE RIVAL CONTENTIONS, PERUSED RELEVANT FINDINGS OF THE ASSESSING OFFICER AS WELL AS THE LEARNED COMMISSIONER (APPEALS) AND THE MATERIAL PLACED ON RECORD. FROM THE FACTS DI SCUSSED FROM PAGES 8 TO 11 OF THE LEARNED COMMISSIONER (APPEALS) ORDER, IT IS SEEN THAT THE SAME HAS NOT BEEN DISCUSSED OR DEALT WITH BY THE ASSESSING OFFICER. SUCH AN APPRECIATION OF FACTS BY THE LEARNED COMMISSIONER (APPEALS) HAS ALSO BEEN DISPUTED BEFOR E US. FURTHER, THE HON'BLE SUPREME COURT IN IDCS LTD. (SUPRA) HAS ALSO LAID DOWN THE LAW RELATING TO ALLOWANCE OF DEPRECIATION ON LEASED VEHICLES AND WHETHER IT IS FOR THE BUSINESS PURPOSE OR NOT. THEREFORE, IN THE INTEREST OF JUSTICE, WE ARE OF THE CONSID ERED OPINION THAT THE ENTIRE ISSUE SHOULD HE RESTORED BACK TO THE FILE OF THE ASSESSING OFFICER FOR DENOVO ADJUDICATION. CONSEQUENTLY, WE SET ASIDE THE IMPUGNED ORDER PASSED BY THE LEARNED COMMISSIONER (APPEALS) AND RESTORE THE ENTIRE ISSUE BACK TO THE FIL E OF THE ASSESSING OFFICER FOR FRESH ADJUDICATION IN THE LIGHT OF THE JUDICIAL PRONOUNCEMENTS OF THE HON'BLE SUPREME COURT IN IDCS LTD. (SUPRA).' WE, THEREFORE, FOLLOWING THE ORDER OF CO - ORDINATE BENCH OF THE TRIBUNAL IN THE EARLIER YEARS IN ASSESSEES OWN CASE, RESTORE THE ISSUE BACK TO THE FILE OF THE AO WITH A DIRECTION THAT THE ISSUE MAY BE DECIDED IN THE LIGHT OF THE HONBLE SUPREME COURT DECISION . GROUND IS ALLOWED FOR STATISTICAL PURPOSES. 20 . THE ISSUE RAISED IN GROUND B (5 TO 7) IS IN RESPECT OF DISALLOWANCE UNDER SECTION 14A WHICH WAS UPHELD BY THE LD. CIT(A). SINCE WE HAVE ALREADY RESTORED THE MATTER TO THE FILE OF THE AO TO DECIDE THE ISSUE IN THE LIGHT OF THE HONBLE SUPREME COURT DECISION IN THE CASE OF GODREJ & BOYCE MANUFACTURING CO. ITA NO.4558/M/2016 & ORS. M/S. J.M. FINANCIAL SERVICES PVT. LTD. & ORS. 17 LTD . VS. DCIT [(2017) 394 ITR 49 (SC) AND MAXOPP INVESTMENT LTD.(2018) 402 ITR 6 4 0 (SC) , T HEREFORE, THE ISSUE RAISED BY THE ASSESSEE IS ALSO RESTORED TO THE FILE OF THE AO TO DECIDE THE SAME IN THE L IGHT OF THE ABOVE SAID DECISION. 21 . IN THE RESULT, APPEAL O F THE ASSESSEE IS ALLOWED FOR STATISTICAL PURPOSES . ITA NO.781/M/ 2017 AY 2011 - 12 (REVENUES APPEAL) 22 . THE ONLY ISSUE RAISED IN VARIOUS GROUNDS OF APPEAL IS AGAINST THE DELETION OF ADDITION UNDER SECTION 14A READ WITH RULE 8D. 23 . W E HAVE ALREAD Y DECIDED THE ISSUE IN A.Y. 2011 - 12 RESTORING THE SAME TO THE FILE OF THE AO TO DECIDE THE SAME IN THE LIGHT OF THE DECISION OF HONBLE SUPREME COURT IN THE CASE OF GODREJ & BOYCE MANUFACTURING CO. LTD. VS. DCIT [(2017) 394 ITR 49 (SC) AND MAXOPP INVESTME NT LTD.(2018) 91 TAXMANN.COM 154(SC). ACCORDINGLY, THIS ISSUE IS ALSO RESTORED TO THE FILE OF THE AO. 24 . IN THE RESULT, APPEAL OF THE REVENUE IS DISMISSED . ORDER PRONOUNCED IN THE OPEN COURT ON 31 . 12 . 201 8 . SD/ - SD/ - ( AM ARJEET SINGH ) ( RAJESH KUMAR ) JUDICIAL MEMBER ACCOUNTANT MEMBER MUMBAI, DATED: 31 .1 2 . 201 8 . * KISHORE , SR. P.S. ITA NO.4558/M/2016 & ORS. M/S. J.M. FINANCIAL SERVICES PVT. LTD. & ORS. 18 COPY TO: THE APPELLANT THE RESPONDENT THE CIT, CONCERNED, MUMBAI THE CIT ( A) CONCERNED, MUMBAI THE DR CONCERNED BENCH //TRUE COPY// [ BY ORDER DY/ASSTT. REGISTRAR, ITAT, MUMBAI.