DCIT CIR 4(2), MUMBAI V. SPS SHARE BROKERS P. LTD, MUMBAI

ITA 5230/MUM/2009

• Counselvise Citation: [2011] 140 COUNSELVISE.COM (IT) 48926 (ITAT-MUMBAI)
• Duration Of Justice: 1 year(s) 8 month(s) 19 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 31-05-2011
• Appeal Filed By: Department
• Order Result: Allowed
• Bench Allotted: E
• Next Hearing Date: 10-05-2011
• Assessment Year: 2006-2007
• Appeal Filed On: 11-09-2009
• Result in Favour of: Revenue
• Court: TRIBUNAL
• Department Lawyers: B V JHAERI
• Keywords: Transactions in derivatives; Speculation loss
• Section: 143(3)

Judgement Text

ITA NO. 5230/MUM/2009 ASSESSMENT YEAR: 2006- 07 PAGE 1 OF 4 IN THE INCOME TAX APPELLATE TRIBUNAL MUMBAI E BENCH, MUMBAI [CORAM : PRAMOD KUMAR AM AND V DURGA RAO, JM] ITA NO. 5230/MUM/2009 ASSESSMENT YEAR: 2006-07 ASSISTANT COMMISSIONER OF INCOME TAX CIRCLE 4(2), MUMBAI ...APPELLANT VS. SPS SHARE BROKERS PRIVATE LIMITED RESPOND ENT 121/4, MAHATMA GANDHI ROAD AGRA BUILDING, 1 ST FLOOR FORT, MUMBAI 400020 [PAN : AAABCS9622C] APPEARANCES: A P SINGH, FOR THE APPELLANT B V JHAERI, FOR THE RESPONDENT O R D E R PER PRAMOD KUMAR : 1. BY WAY OF THIS APPEAL IS, THE ASSESSING OFFICER HAS CALLED INTO QUESTION CORRECTNESS OF CIT(A)S ORDER DATED 5 TH JUNE 20009, IN THE MATTER OF ASSESSMENT UNDER SECTION 143(3) OF THE INCOME TAX ACT, 1961, FOR THE ASSESSMENT YEAR 2006-07, ON THE FOLLOWING GROUNDS: ITA NO. 5230/MUM/2009 ASSESSMENT YEAR: 2006- 07 PAGE 2 OF 4 ON THE FACTS AND IN THE CIRCUMSTANCES OF THE CASE A ND IN LAW, THE CIT(A) ERRED IN TREATING SPECULATION LOSS IN COMMODITY EXC HANGES AS A BUSINESS TRANSACTION AND IN DIRECTING THE ASSESSING OFFICER TO SET OFF THE LOSS AGAINST THE PROFITS OF DERIVATIVES TRANSACTIONS 2. THE RELEVANT MATERIAL FACTS ARE LIKE THIS. THE ASSESSEE IS A STOCK BROKER. DURING THE RELEVANT PREVIOUS YEAR, THE ASSESSEE DEC LARED AN INCOME OF RS 5,76,68,123 FROM SPECULATION BUSINESS BY WAY OF DEALING IN SHAR ES. AS AGAINST THIS INCOME, THE ASSESSE CLAIMED A SET OFF OF SPECULATIVE LOSSES INC URRED IN COMMODITIES DERIVATIVES, AMOUNTING TO RS 5,35,55,577, AND LOSSES BROUGHT FOR WARD FROM EARLIER ASSESSMENT YEARS, AMOUNTING TO RS 1,17,23,674. THE CONTENTION OF THE ASSESSEE WAS THAT THE PROFITS OF RS 5,39,90,092, WHICH WERE MADE PRIOR TO THE DATE ON WHICH STOCK EXCHANGES WERE APPROVED FOR THE PURPOSES OF CLAUSE (D) OF SECTION 43(5), I.E. ON 25 TH JANUARY 2006, WERE REQUIRED TO BE TREATED AS SPECUL ATION PROFITS. THE ASSESSING OFFICER WAS OF THE VIEW, IN THE LIGHT OF TRIBUNALS DECISION IN THE CASE OF DCIT VS SSKI INVESTOR SERVICES PVT LTD (113 TTJ 511), PROFITS F ROM DERIVATIVES BUSINESS CANNOT BE TREATED AS SPECULATION PROFITS IN NATURE. ACCORDIN GLY, SET OFF OF THE LOSSES WAS DECLINED AND TAXABLE INCOME OF THE ASSESSEE WAS ENHANCED BY RS 5,39,90,092. AGGRIEVED, ASSESSEE CARRIED THE MATTER IN APPEAL BEFORE THE CI T(A). LEARNED CIT(A) WAS OF THE VIEW THAT THE ASSESSING OFFICERS ACTION OF TREATIN G THE DERIVATIVES TRANSACTIONS AT BSE/NSE AS NON- SPECULATIVE TRANSACTIONS WAS, IN V IEW OF TRIBUNALS DECISION IN THE CASE OF SSKI INVESTOR SERVICES (SUPRA), CORRECT, BU T NOTED THAT, BY THE SAME LOGIC, THE DEALINGS IN DERIVATIVES IN COMMODITIES EXCHANGE MUS T ALSO BE HELD TO BE IN THE NON- SPECULATIVE IN NATURE. THE SET OFF WAS, ACCORDINGLY , DIRECTED TO BE GIVEN. THE ASSESSING OFFICER IS AGGRIEVED AND IS IN APPEAL BEFORE US. 3. WE HAVE HEARD THE RIVAL CONTENTIONS, PERUSED TH E MATERIAL ON RECORD AND DULY CONSIDERED FACTUAL MATRIX OF THE CASE AS ALSO THE APPLICABLE LEGAL POSITION. ITA NO. 5230/MUM/2009 ASSESSMENT YEAR: 2006- 07 PAGE 3 OF 4 4. WE HAVE NOTED THAT LEARNED COUNSEL HAS VERY FAI RLY ACCEPTED THAT THE DECISION OF A COORDINATE BENCH IN THE CASE OF SSKI INVESTOR SERVICES (SUPRA) IS NO LONGER GOOD LAW AND THE SAME STANDS REVERSED BY SPE CIAL BENCH DECISION IN THE CASE OF SHREE CAPITAL SERVICES LTD VS ACIT (124 TTJ 740) . HONBLE JURISDICTIONAL HIGH COURT HAS ALSO, IN THE CASE OF BHARAT S RUIA VS CIT (2011 TIOL 238 HC MUM), NOT APPROVED THE STAND OF THE REVENUE. IN VIEW OF THESE LATER DEVELOPMENTS, THE VERY FOUNDATION OF IMPUGNED ORDER PASSED BY THE LEARNED CIT(A) CEASES TO HOLD GOOD IN LAW. LEARNED COUNSEL, HOWEVER, SEEKS TO JUSTIFY TH E CONCLUSIONS ARRIVED AT BY THE LEARNED CIT(A) ON GROUNDS OTHER THAN THE GROUNDS ON WHICH THE DECISION WAS TAKEN. NEITHER THESE ASPECTS OF THE MATTER WERE ADJUDICATE D BY THE CIT(A) NOR EVEN BY THE ASSESSING OFFICER. UNDOUBTEDLY, UNDER RULE 27 OF TH E APPELLATE TRIBUNAL RULES, EVEN A RESPONDENT CAN SUPPORT THE ORDER OF THE CIT(A) ON A NY OF THE GROUNDS DECIDED AGAINST HIM, BUT THE GROUNDS ON WHICH ORDER IS SOUGHT TO BE SUPPORTED HAVE NOT EVEN BEEN EXAMINED BY THE CIT(A). WE ARE NOT INCLINED TO ADDR ESS OURSELVES TO THESE ISSUES AT THIS STAGE. HOWEVER, IN THE INTEREST OF JUSTICE, WE ALSO DEEM IT FIT AND PROPER TO LET THE MATTER BE EXAMINED AFRESH, IN THE LIGHT OF WHATEVER LEGAL AND FACTUAL SUBMISSIONS THE ASSESSEE MAY LIKE TO MAKE, AND REMIT THE MATTER TO THE FILE OF THE CIT(A) FOR THE SAID PURPOSE. WHILE WE, THEREFORE, VACATE THE IMPUGNED ORDER PASSED BY THE CIT(A), WE ALSO REMIT THE MATTER TO HIM FOR FRESH ADJUDICATION , AFTER GIVING YET ANOTHER OPPORTUNITY OF HEARING TO THE ASSESSEE, BY WAY OF A SPEAKING ORDER DEALING WITH ALL THE CONTENTIONS OF THE ASSESSEE AND IN ACCORDANCE W ITH LAW. 5. IN THE RESULT, THE APPEAL IS ALLOWED FOR STATIST ICAL PURPOSES IN THE TERMS INDICATED ABOVE. PRONOUNCED IN THE OPEN COURT TODAY ON _31 ST DAY OF MAY, 2011. SD/- SD/- (V DURGA RAO ) (PRAMOD KUMAR) JUDICIAL MEMBER ACCOUNT ANT MEMBER MUMBAI; 31 ST _ DAY OF MAY , 2011 . ITA NO. 5230/MUM/2009 ASSESSMENT YEAR: 2006- 07 PAGE 4 OF 4 COPY FORWARDED TO : 1. THE APPELLANT 2. THE RESPONDENT 3. COMMISSIONER -4 , MUMBAI 4. COMMISSIONER (APPEALS)-OV , MUMBAI 5. DEPARTMENTAL REPRESENTATIVE, E BENCH, MUMBAI 6. GUARD FILE TRUE COPY BY O RDER ETC. ASSISTANT REGISTRAR INCOME TAX APPELLATE TRIBUNAL MUMBAI BENCHES, MUMBAI