ITO, New Delhi V. M/s. Popular Impex Pvt. Ltd., New Delhi

ITA 461/DEL/2010

• Counselvise Citation: [2013] 140 COUNSELVISE.COM (IT) 69690 (ITAT-DELHI)
• Duration Of Justice: 3 year(s) 10 month(s) 17 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 20-12-2013
• Appeal Filed By: Department
• Order Result: Allowed
• Bench Allotted: F
• Next Hearing Date: 15-10-2013
• Assessment Year: 2006-2007
• Appeal Filed On: 02-02-2010
• Result in Favour of: Revenue
• Court: TRIBUNAL
• Department Lawyers: SATPAL SINGH
• Keywords: Business income; Speculation loss

Judgement Text

ITA NO.461/DEL/2010 1 IN THE INCOME TAX APPELLATE TRIBUNAL DELHI BENCHES : F : NEW DELHI BEFORE SHRI G.D. AGRAWAL, HONBLE VICE PRESIDENT AND SHRI A.D. JAIN, JUDICIAL MEMBER ITA NO.461/DEL/2010 ASSESSMENT YEAR : 2006-07 ITO, WARD 14 (3), ROOM NO.218, CR BUILDING, NEW DELHI. VS. P OPULAR IMPEX PVT. LTD., 11224, DORI WALAN, KAROL BAGH, NEW DELHI. PAN : AADCP3467C ( APPELLANT ) ( RESPONDENT ) ASSESSEE BY : SHRI SATYAN SETHI, ADVOCATE DEPARTMENT BY : SHRI SATPAL SINGH, SR. DR ORDER PER A.D. JAIN, JUDICIAL MEMBER: THIS IS DEPARTMENTS APPEAL FOR ASSESSMENT YEAR 2006-07, AGAINST THE ORDER DATED 26.11.2009 PASSED BY THE CIT (A)-XVII, NE W DELHI, TAKING THE FOLLOWING GROUND:- (I) THAT ON THE FACTS AND CIRCUMSTANCES OF THE CASE AND IN LAW, THE LD. CIT (A) ERRED IN ALLOWING SPECULATION LOSS OF R S.45,98,743/- AS BUSINESS LOSS WITHOUT CONSIDERING THE FACT THAT THE NOTIF ICATION NO.SO 89(E) IS DATED 25.01.2006. THUS THE SPECULATION LOSS TO THE EXTENT OF RS.37,31,149/ - INCURRED IN RESPECT OF TRADING IN DERIVATIVES FOR THE PERIOD 01.0 4.2005 TO 24.01.2006 IS NOT ALLOWABLE AS BUSINESS LOSS. 2. THE ASSESSEE COMPANY HAD DECLARED LOSS FROM THE BUSINESS OF SALE AND PURCHASE OF SHARES. BEFORE THE ASSESSING OFFICER, IT SUBM ITTED VIDE LETTER ITA NO.461/DEL/2010 2 DATED 03.10.2008 THAT IT WAS A SPECULATIVE LOSS, WHICH COULD NOT BE ADJUSTED AGAINST THE BUSINESS INCOME OF THE ASSESSEE, BUT COULD ONL Y BE ADJUSTED AGAINST SPECULATION PROFIT TO BE EARNED IN THE FUTUR E. THE ASSESSING OFFICER TREATED THE LOSS AS SPECULATION LOSS AND ALLOWED IT TO BE CARRIED FORWARD. 3. BEFORE THE CIT (A), THE ASSESSEE CONTENDED THAT THE ASSESSING OFFICER HAD ERRED IN NOT ENTERTAINING THE ALTERNATIVE PLEA TAKEN BY THE ASSESSEE TO THE EFFECT THAT AS PER SECTION 43 (5) OF THE IT ACT SPECULATION TRANSACTION MEANS A TRANSACTION IN WHICH A CONTRACT FOR THE PURC HASE AND SALE OF ANY COMMODITY, INCLUDING STOCKS AND SHARES, IS PERIODICALLY OR ULTIMATELY SETTLED OTHERWISE THAN BY THE ACTUAL DELIVERY OR TRANSFER OF THE COMMODITY OR SCRIPS AND THAT SECTION 43 (5) (D) EXCLUDES TRANSACTIONS IN RESPECT OF TRADING IN DERIVATIVES FROM THE PURVIEW OF SPECULATIVE TRANSACTI ON. 4. THE LD. CIT (A), ACCEPTED THE ABOVE CONTENTION O F THE ASSESSEE AND HELD THE LOSS OF ` 45,98,743/- TO BE A BUSINESS LOSS. THE ASSESSING OFFICER WAS DIRECTED TO ALLOW ITS CARRY FORWARD AS A BUSINESS LOSS. 5. BEFORE US, THE LD. DR HAS PLACED RELIANCE ON CIT, DELHI-IV VS. DLF COMMERCIAL DEVELOPERS LTD., 35 TAXMAN.COM. 280 (DEL ), WHEREIN, IT HAS BEEN HELD THAT IN THE CASE OF CERTAIN TYPES OR CLASSES O F COMPANIES (INCLUDING THE TYPE OF COMPANY THAT THE ASSESSEE COMPANY IS, I.E., A COMPANY ENGAGED IN THE BUSINESS OF MANUFACTURE AND EXPORT OF GARMENTS A ND DEALING IN PURCHASE AND SALE OF SHARES ON DELIVERY AND FOB BASIS), L OSS IN TRADING OF DERIVATIVES IS A SPECULATIVE LOSS UNDER SECTION 73 READ WITH SECTION 43 (5) OF THE IT ACT, NOT ELIGIBLE TO BE CARRIED FORWARD. 6. THE LD. COUNSEL FOR THE ASSESSEE, ON THE OTHER HAND, HAS PLACED STRONG RELIANCE ON THE IMPUGNED ORDER. 7. HAVING CONSIDERED THE RIVAL CONTENTIONS IN THE LI GHT OF THE MATERIAL ON RECORD, WE FIND THE ISSUE AT HAND IS SQUARELY COVERED BY DLF COMMERCIAL DEVELOPERS, (SUPRA), WHEREIN IT HAS BEEN HELD THAT IN THE CASE OF LOSS IN ITA NO.461/DEL/2010 3 TRADING OF DERIVATIVES INCURRED BY A COMPANY LIKE TH E ASSESSEE COMPANY, IS A SPECULATIVE LOSS, WHICH IS INELIGIBLE TO BE CARRIED FOR WARD. NOW, DLF COMMERCIAL DEVELOPERS, (SUPRA), IS A JUDGEMENT RENDER ED BY THE HONBLE JURISDICTIONAL HIGH COURT ON 11.07.2013. AS SUCH, IT W AS NOT AVAILABLE BEFORE THE LD. CIT (A) ON THE DATE OF THE PASSING OF THE IMP UGNED ORDER, I.E., 26.11.2009 AND THE LD. CIT (A) DID NOT HAVE THE BEN EFIT OF THIS POSITION AT THAT TIME. 8. IN VIEW OF THE ABOVE, IT WOULD BE IN THE FITNESS O F THINGS AND IN THE INTEREST OF JUSTICE TO REMAND THIS MATTER TO THE FILE OF THE CIT (A) TO BE DECIDED AFRESH IN ACCORDANCE WITH THE LAW, PARTICULA RLY IN THE LIGHT OF DLF COMMERCIAL DEVELOPERS, (SUPRA). ORDERED ACCORDINGLY. 9. IN THE RESULT, THE APPEAL FILED BY THE DEPARTMENT IS TREATED AS ALLOWED, FOR STATISTICAL PURPOSES. THE ORDER PRONOUNCED IN THE OPEN COURT ON 20.12.201 3. SD/- SD/- [ G.D. AGRAWAL ] [A.D. JAIN] VICE PRESIDENT JUDICIAL MEMBER DATED, 20 TH DECEMBER, 2013. DK COPY FORWARDED TO: 1. APPELLANT 2. RESPONDENT 3. CIT 4. CIT (A) 5. DR, ITAT AR, ITAT, NEW DELHI.