Smt. Prabha Sukhani, New Delhi V. ITO, New Delhi

ITA 6013/DEL/2012

• Counselvise Citation: [2016] 132 COUNSELVISE.COM (IT) 7009 (ITAT-DELHI)
• Duration Of Justice: 3 year(s) 6 month(s) 29 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 01-07-2016
• Appeal Filed By: Assessee
• Order Result: Allowed
• Bench Allotted: F
• Next Hearing Date: 01-06-2016
• Assessment Year: 2009-2010
• Appeal Filed On: 03-12-2012
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: R S NEGI
• Keywords: Transactions in derivatives; Speculation loss
• Section: 43(5)

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL DELHI BENCH F, NEW DELHI BEFORE SRI G.D. AGARWAL, HONBLE V.P. AND SRI C.M. GARG, JM ITA NO. 6013/DEL./2012 : ASSTT. YEAR : 2009-10 PRABHA SUKHANI FLAT NO. 915, 9 TH FLOOR, INDRA PRAKASH BUILDING, 21, BARAKHAMBA ROAD NEW DELHI VS ITO WARD-31(3) NEW DELHI (APPELLANT) (RESPONDENT) PAN NO. ACXPS6549K ASSESSEE BY : SH. VIPIN JAIN, CA REVENUE BY : SH. R.S.NEGI, S R. DR DATE OF HEARING : 01.06.2016 DATE OF PRONOUNCEMENT : 01.07.2016 ORDER PER C.M.GARG, J.M. THIS APPEAL BY THE ASSESSEE HAS BEEN FILED AGAINST THE ORDER OF THE CIT(A)-XXVI, NEW DELHI DATED 24.09.2012 PASSED IN FIRST APPEAL NO. 162/2011-12 FOR AY 2009-10. ITA NO. 6013/DEL/2012 SMT. PRABHA SUKHANI 2 2. GROUND NOS. 2 & 3 OF THE ASSESSEE ARE OF GENE RAL IN NATURE WHICH REQUIRE NO ADJUDICATION. SOLE REMAINING GROUN D NO. 1 READS AS FOLLOWS : THAT THE AUTHORITIES BELOW HAVE ERRED IN LAW IN H OLDING THAT THE AMENDMENTS MADE IN THE PROVISIONS OF SECTION 43 (5)(D) AND SECTION 73(4) OF THE INCOME TAX ACT, 1961, BY THE F INANCE ACT, 2005, IS PROSPECTIVE AND THEREFORE PRECLUDES THE ASSESSEE FROM CLAIMING SET OFF OF UNABSORBED LOSSES SUFFERED IN THE FAO EQUITY DERIVATIVE MARKETS, IN THE ASSTT. YEARS. 2000-01 AND 2001-02, AGAINST THE PROFITS EARNED IN THE FAO EQUITY DERIVATIVE MARKETS IN THE ASSTT. YEAR 2009- 10 UNDER REFERENCE. 3. WE HAVE HEARD ARGUMENTS OF BOTH THE SIDES. FIRST OF ALL, THE LD. ASSESSEES REPRESENTATIVE (AR) POINTED OUT THAT AS PER THE ORDER OF ITAT G BENCH MUMBAI DATED 31.5.2011 PASSED IN ITA NO. 1798/MUM/2010 FOR AY 2006-07 IN THE CASE OF GAJENDR A KUMAR T. AGARWAL VS. ITO PROVISIONS OF SECTION 43(5) (D) AND SECTION 73 OF THE INCOME TAX ACT, 1961 ARE RETROSPECTIVE AND THE ASSE SSEE DESERVES TO BE GRANTED SET OFF OF BROUGHT FORWARD LOSSES FROM THE BUSINESS DEALING IN DERIVATIVES, INCURRED IN ASSESSMENT YEARS PRIOR TO AY 2006-07 AGAINST PROFITS OF THE SAME BUSINESS IN AY 2006-07 AND SUBS EQUENT YEARS. 4. THE LD. DR SUPPORTED THE ACTION OF THE AO AS WELL AS CIT(A) WHICH CONFIRMED THE ASSESSMENT ORDER ON THIS ISSUE OF SET OFF OF BROUGHT FORWARD LOSSES. HOWEVER, HE COULD NOT CO NTROVERT THE PREPOSITION LAID DOWN BY THE ITAT MUMBAI IN THE CAS E OF GAJENDRA KUMAR T. AGARWAL VS. ITO (SUPRA) WHEREIN PARA 29 & 30 WAS HELD THUS : ITA NO. 6013/DEL/2012 SMT. PRABHA SUKHANI 3 29. IN VIEW OF THE GUIDANCE SO GIVEN BY THEIR LORDS HIPS, WE HAVE TO PROCEED ON THE BASIS THAT DESPITE 'INEXACTITUDE IN THE LANGUAGE USED', AS WAS THE EXPRESSION APPROVED BY HON'BLE SU PREME COURT, THE PROVISIONS OF CARRY FORWARD AND SET OFF ARE TO BE CONSTRUED IN A MANNER SO AS NOT TO DEFEAT THE PLAIN AND UNAMBIGUOUS INTENTION OF THE LEGISLATURE. IN OUR CO NSIDERED VIEW, THIS AMENDMENT WAS TO PROVIDE RELIEF TO THE T AXPAYERS AND IS TO BE VIEWED AS BENEFICIAL PROVISIONS, AS SUCH, AND ONE CANNOT POSSIBLY PROCEED ON THE BASIS THAT THE OBJECT OF MA KING AMENDMENT IN SECTION 43(5) WAS TO KILL THE BROUGHT FORWARD LOSSES OF DEALING IN DERIVATIVES OR MAKE THEM INELI GIBLE FOR BEING SET OFF AGAINST THE PROFITS OF THE SAME BUSINESS IN SUBSEQUENT YEARS. WHATEVER MAY BE CHARACTERIZATION OF INCOME F OR THE PURPOSE OF INTRA ASSESSMENT YEAR SET OFF IN THE REL EVANT ASSESSMENT YEAR, AND IRRESPECTIVE OF THE FACT THAT SUCH A CHARACTERIZATION HAS ACHIEVED FINALITY IN ASSESSMEN T, THE LOSSES AND PROFITS FROM DEALING IN DERIVATIVES MUST BE CHA RACTERIZED ON A UNIFORM BASIS IN THE ASSESSMENT YEAR IN WHICH SET OFF IS CLAIMED. VIEWED IN THIS PERSPECTIVE ALSO, THE CLASS IFICATION OF BUSINESS FOR THE LIMITED PURPOSE OF SET OFF OF PAST LOSSES, INTO SPECULATIVE AND NON-SPECULATIVE, IS TO BE DONE ON A UNIFORM BASIS, AND, WHICHEVER WAY ONE LOOKS AT IT, THE LOSS ES INCURRED IN THE SAME BUSINESS IN EARLIER ASSESSMENT YEARS ARE T O BE TREATED AS ELIGIBLE FOR SET OFF AGAINST PROFITS OF THE SAME BUSINESS, SUBJECT TO FULFILMENT OF OTHER CONDITIONS, IN THE SUBSEQUEN T ASSESSMENT YEARS. FOR THIS REASON ALSO, THE ASSESSEE DESERVES TO BE GRANTED SET OFF OF BROUGHT FORWARD LOSSES FROM BUSINESS OF DEALING IN DERIVATIVES, INCURRED IN ASSESSMENT YEARS PRIOR TO ASSESSMENT YEAR 2006-07 AGAINST PROFITS OF THE SAME BUSINESS I N ASSESSMENT YEARS 2006-07 AND SUBSEQUENT ASSESSMENT YEARS. 30. FOR THE REASONS SET OUT ABOVE, WE ARE OF THE CO NSIDERED VIEW THAT THE ASSESSEE WAS INDEED ELIGIBLE FOR SETTING O F LOSSES OF BUSINESS OF DEALING IN DERIVATIVES, INCURRED IN THE ASSESSMENT YEARS PRIOR TO THE ASSESSMENT YEAR 2006-07, AGAINST THE PROFITS OF ITA NO. 1798/MUM/2010 ASSESSMENT YEAR: 2006-07 THE SAME ITA NO. 6013/DEL/2012 SMT. PRABHA SUKHANI 4 BUSINESS IN ASSESSMENT YEAR 2006-07. THERE WAS NO I NFIRMITY IN THE ASSESSING OFFICER GRANTING THE SAID SET OFF. TH E ASSESSMENT ORDER, SUBJECTED TO IMPUGNED REVISION PROCEEDINGS, THUS COULD NOT BE HELD TO BE ERRONEOUS .AND PREJUDICIAL TO THE INTEREST OF THE REVENUE. ACCORDINGLY, WE QUASH THE IMPUGNED REVISIO N PROCEEDINGS, AND SET ASIDE LEARNED COMMISSIONER'S O RDER IN CHALLENGE BEFORE US. 5. IN THE PRESENT CASE THE AO HELD THAT THE BROU GHT FORWARD SPECULATIVE LOSSES FOR AY 2001-02 & 2002-03 CAN BE ADJUSTED ONLY AGAISNT SPECULATIVE GAINS. THE AO HELD THAT THE NAT URE OF THE SPECULATIVE LOSSES OF EARLIER YEARS BEFORE AMENDMEN T CAN NOT BE TREATED AS BUSINESS LOSSES AND SET OFF OF SAME CAN NOT BE G RANTED FOR AY 2009- 10. FURTHER, FROM RELEVANT OPERATIVE PARA 6 AT PAGE 6 OF FIRST APPELLATE ORDER WE OBSERVE THAT THE CIT(A) UPHOLD THE CONCLUS ION OF THE AO BY OBSERVING THAT THE AMENDMENT IN SECTION 43(5) BY FI NANCE ACT, 2005, W.E.F. 1.4.2006, PROSPECTIVELY MANDATES THAT THE TR ANSACTIONS IN DERIVATIVES WERE NO LONGER TREATED AS SPECULATIVE TRANSACTIONS AND TREATED AS ELIGIBLE TRANSACTIONS THE RESULTANT P ROFITS OR LOSS IS CONSTITUTED AS BUSINESS LOSS/ PROFIT. SHE FURTHE R NOTED THAT THE AMENDMENT MADE IS PROSPECTIVE, WITH EFFECT FROM AY 2006-07 AND THE ASSESSEE HAS NTO SHOWN ANY GAINS FROM THE SPECULATI ON BUSINESS AND ONLY BUSINESS GAINS HAS BEEN SHOWN, HENCE AO WAS RI GHT IN DISALLOWING THE SET OFF OF SPECULATIVE LOSSES FOR A Y 2001-02 & 2002- 03. ITA NO. 6013/DEL/2012 SMT. PRABHA SUKHANI 5 11. AT THE SAME TIME, FROM THE PREPOSITION LAID D OWN BY THE ITAT MUMBAI IN THE CASE OF GAJENDRA KUMAR T. AGARWAL VS. ITO (SUPRA) WE CLEARLY OBSERVE THAT ONE CAN NOT POSSIBILY PROCEED ON THE BASIS THAT THE OBJECT OF MAKING AMENDMENT IN SECTION 43(5) WAS TO KILL THE BROUGHT FORWARD LOSSES OF DEALING IN DERIVATIVES OR MAKE TH EM IN ELIGIBLE FOR BEING SET OFF AGAINST THE PROFITS OF THE SAME BUSIN ESS IN SUBSEQUENT YEARS. IN THIS CASE THE ASSESSEE CLAIMED SET OFF OF LOSSES OF AY 2001-02 INCURED BY HIM IN DERIVATIVES TRANSACTIONS WHICH WA S DENIED BY THE AO ON THE SAME GROUND WHICH HAS BEEN TAKEN BY THE AUTH ORITIES BELOW IN THE PRESENT CASE. BUT AS PER PREPOSITION LAID DOWN BY THE TRIBUNAL ORDER (SUPRA) THE ASSESSEE DESERVES TO BE GRANTED SET OFF OF BROUGHT FORWARD LOSSES FROM BUSINESS DEALING IN DERIVATIVES, INCURR ED IN THE ASSESSMENT YEARS PRIOR TO AY 2006-07 AGAINST PROFIT OF THE SAM E BUSINESS IN AY 2006-07 AND SUBSEQUENT ASSESSMENT YEARS. 12. ON SPECIFIC QUERRY FROM THE BENCH, THE LD. DR COULD NOT SHOW US LEGAL PREPOSITION ON ORDER OF ANY COMPETENT AUTHORI TIES WHICH COULD LEAD US TO AGREE WITH THE CONCLUSION OF THE CIT(A) ON THE ISSUE. THUS, SINCE IN THE PRESENT CASE ALSO THE ASSESSEE SOUGHT SET OFF OF BROUGHT FORWARD LOSSES FROM DERIVATIVE TRANSACTIONS OF AY 2 001-02 & 2002-03 IN AY 2009-10, WHICH WAS DENIED BY THE AO, WE RESPE CTFULLY FOLLOW THE ORDER OF ITAT, MUMBAI (SUPRA) AND CONSEQUENTLY, SOLE GROUND OF THE ASSESSEE IS ALLOWED AND THE AO IS DIRECTED TO G RANT SET OFF LOSSES FOR AY 2001-02 & 2002-03 FROM DERIVATIVE BUSINESS FROM THE BUSINESS ITA NO. 6013/DEL/2012 SMT. PRABHA SUKHANI 6 PROFITS / GAINS OF AY 2009-10 TO THE ASSESSEE. ACCO RDINGLY, SOLE GROUND OF THE ASSESSEE IS ALLOWED. 13. IN THE RESULT, APPEAL OF THE ASSESSEE IS ALLO WED. ORDER PRONOUNCED IN THE COURT ON 01/07/2016. SD/- SD/- ( G.D.AGARWAL ) (C.M.GARG) VICE PRESIDENT J UDICIAL MEMBER DATED: 01 / 07/2016 *BINITA* COPY FORWARDED TO: 1. APPELLANT 2. RESPONDENT 3. CIT 4. CIT(APPEALS) ITA NO. 6013/DEL/2012 SMT. PRABHA SUKHANI 7 DATE INITIAL 1. DRAFT DICTATED ON (HAND WRITTEN) HANDWRITTEN 2. DRAFT PLACED BEFORE AUTHOR 20.06.2016 3. DRAFT PROPOSED & PLACED BEFORE THE SECOND MEMBER JM/AM 4. DRAFT DISCUSSED/APPROVED BY SECOND MEMBER. JM/AM 5. APPROVED DRAFT COMES TO THE SR.PS/PS PS/PS 6. KEPT FOR PRONOUNCEMENT ON PS 7. FILE SENT TO THE BENCH CLERK 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.