ACIT CENT, CIR 22, MUMBAI V. SHAREKHANCOMMODITIES PVT.LTD., MUMBAI

ITA 6343/MUM/2011

• Counselvise Citation: [2015] 140 COUNSELVISE.COM (IT) 92775 (ITAT-MUMBAI)
• Duration Of Justice: 3 year(s) 9 month(s) 1 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 16-06-2015
• Appeal Filed By: Department
• Order Result: Dismissed
• Bench Allotted: E
• Next Hearing Date: 16-06-2015
• Assessment Year: 2008-2009
• Appeal Filed On: 14-09-2011
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: NEIL PHILIP
• Keywords: Speculation loss
• Section: 43(5)

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL, MUMBAI BENCH E, MUMBAI BEFORE SHRI R.C. SHARMA, ACCOUNTANT MEMBER AND SHRI SANJAY GARG, JUDICIAL MEMBER ITA NO.6343/M/2011 ASSESSMENT YEAR: 2008-09 ACIT, CEN. CIR. 22, ROOM NO.403, 4 TH FLOOR, AAYAKAR BHAVAN, M.K. ROAD, MUMBAI - 400020 VS. M/S. SHAREKHAN COMMODITIES PVT. LTD., 206/A, PHOENIX HOUSE, SENAPATI BAPAT MARG, LOWER AUTHORITIES PAREL, MUMBAI 400 013 PAN: AAFCS 6396F (APPELLANT) (RESPONDENT) PRESENT FOR: ASSESSEE BY : SHRI HIRO RAI, A.R. REVENUE BY : SHRI NEIL PHILIP, D.R. DATE OF HEARING : 16.06.2015 DATE OF PRONOUNCEMENT : 16.06.2015 O R D E R PER SANJAY GARG, JUDICIAL MEMBER: THE PRESENT APPEAL HAS BEEN PREFERRED BY THE REVEN UE AGAINST THE ORDER DATED 16.06.2011 OF THE COMMISSIONER OF INCOME TAX (APPEALS) [HEREINAFTER REFERRED TO AS THE CIT(A)] RELEVANT TO ASSESSMENT Y EAR 2008-09. 2. THE REVENUE HAS TAKEN THE FOLLOWING GROUNDS OF A PPEAL: A. ON THE FACTS AND IN THE CIRCUMSTANCES OF THE CA SE AND IN LAW, THE LD. CIT(A) ERRED IN DELETING THE ADDITION AMOUNTING TO RS.13,13,558/- WITHOUT APPRECIATING THE FACT THAT THE AO HAS RIGHTLY TREAT ED THE BUSINESS LOSS AS SPECULATION LOSS AS PER SECTION 73 OF THE IT ACT. THE APPELLANT CRAVES TO LEAVE TO ADD, TO AMEND AND/ OR TO ALTER ANY OF THE GROUNDS OF APPEAL, IF NEED BE. THE APPELLANT, THEREFORE, PRAYS THAT ON THE GROUNDS STATED ABOVE, THE ORDER ITA NO.6343/M/2011 M/S. SHAREKHAN COMMODITIES PVT. LTD. 2 OF THE CIT(A), CENTRAL-IV, MUMBAI MAY BE SET ASIDE AND THAT OF THE ASSESSING OFFICER RESTORED.' 3. THE BRIEF FACTS OF THE CASE ARE THAT THE ASSESSE E IS ENGAGED IN THE BUSINESS OF COMMODITY BROKING. DURING THE ASSESSME NT PROCEEDINGS, THE ASSESSING OFFICER (AO) OBSERVED THAT THE ASSESSEE H AD CLAIMED A SUM OF RS.13,13,558/- AS LOSS ON ACCOUNT OF ERRONEOUS EXEC UTION OF TRADES ON BEHALF OF CLIENTS. THE AO WAS OF THE OPINION THAT THE ASSESS EE HAD TRANSACTED IN COMMODITY DERIVATIVES ON MCX AND NCDEX, WHICH WERE NOT RECOGNIZED AS STOCK EXCHANGES, HENCE SECTION 43(5) OF THE ACT, WH ICH CLASSIFIES AS SPECULATION TRANSACTION WAS SQUARELY APPLICABLE TO THE TRANSACTIONS CARRIED OUT BY THE ASSESSEE. HE, ACCORDINGLY, TREATED THE ABOVE STATED LOSS SPECULATION LOSS. HE THEREFORE DISALLOWED THE SAID LOSS AS BUSINESS L OSS AND ADDED THE AMOUNT OF RS.13,13,558/- TO THE TOTAL INCOME OF THE ASSESSEE. AGGRIEVED BY THE ORDER OF THE AO, THE ASSESSEE WENT IN APPEAL BEFORE THE LD. CIT(A). 4. THE LD. CIT(A) OBSERVED THAT THE ASSESSEES BUSI NESS WAS TO EARN INCOME AS A BROKER OF COMMODITY EXCHANGE. THE ASSE SSEE HAD INCURRED LOSS DUE TO THE FACT THAT CERTAIN CLIENTS DID NOT OWN UP THE PURCHASE OF COMMODITY FUTURES AND AS A RESULT THE ASSESSEE HAD TO BEAR TH E LOSSES ARISEN FROM SUCH INCIDENT. THE LOSSES WERE NOT ON ACCOUNT OF PURCHA SE OF COMMODITY FUTURES BY THE ASSESSEE ITSELF. THE ASSESSE BEING THE BROKER HAD TO BEAR THE LOSSES WHICH WERE NOT OWNED UP BY THE CLIENTS. HE THEREAFTER RE LYING UPON THE DECISION OF THE AHMEDABAD BENCH OF THE TRIBUNAL IN THE CASE OF M/S. PARKAR SECURITIES LTD. VS. DCIT 102 TTJ (AHD.) 235 DELETED THE ADDITI ONS SO MADE BY THE AO. BEING AGGRIEVED BY THE ORDER OF THE CIT(A), THE REV ENUE HAS COME IN APPEAL BEFORE US. 5. WE HAVE HEARD THE RIVAL CONTENTIONS. THE CASE O F THE ASSESSEE IS SQUARELY COVERED BY THE DECISION OF THE TRIBUNAL IN THE CASE OF M/S. PARKAR ITA NO.6343/M/2011 M/S. SHAREKHAN COMMODITIES PVT. LTD. 3 SECURITIES LTD. (SUPRA) WHEREIN THE TRIBUNAL HAS C ATEGORICALLY HELD THAT THE LOSS ARISEN TO THE ASSESSEE WAS IN THE COURSE OF IT S BUSINESS ACTIVITY OF BROKERAGE. HENCE, THE SAID LOSS DOES NOT FALL WITH IN THE AMBIT OF EXPLANATION TO SECTION 73. THUS, THE LOSS IS AN ALLOWABLE AS BUSI NESS LOSS OCCURRED IN THE NORMAL COURSE OF BROKERAGE BUSINESS OF THE ASSESSEE AND THUS, IS ALLOWABLE AS BUSINESS LOSS. FURTHER, WE FIND THAT THE IDENTICAL RATIO CAME INTO CONSIDERATION OF THE MUMBAI BENCH OF THE TRIBUNAL IN THE CASE OF M/S. IDFC SSKI SECURITIES LTD. ITA NO.3756/M/2012 DECIDED ON 02.04.2014 WHERE IN THE TRIBUNAL WHILE DEALING WITH THE IDENTICAL ISSUE HAS HELD THAT THE LOSS OCCURRED TO A SHARE BROKER ON ACCOUNT OF CLIENT DISOWNING TRANSACTION IS TO BE TREATED AS BUSINESS LOSS AND NOT SPECULATIVE LOSS. WE THEREFORE DO NOT FIND ANY INFIRMITY IN THE ORDER OF THE CIT(A) AND THE SAME IS THEREFORE UPHELD. 6. IN THE RESULT, THE REVENUES APPEAL IS HEREBY DI SMISSED. ORDER PRONOUNCED IN THE OPEN COURT ON 16.06.2015. SD/- SD/- (R.C. SHARMA) (SANJAY GARG) ACCOUNTANT MEMBER JUDICIAL MEMBER MUMBAI, DATED: 14.10.2015. * KISHORE, SR. P.S. COPY TO: THE APPELLANT THE RESPONDENT THE CIT, CONCERNED, MUMBAI THE CIT (A) CONCERNED, MUMBAI THE DR CONCERNED BENCH //TRUE COPY// [ BY ORD ER DY/ASSTT. REGISTRAR, ITAT, MUMBAI.