Appeal Details
Counselvise Citation
[2020] 111 COUNSELVISE.COM (IT) 4372 (ITAT-KOLKATA)
Assessee PAN
Bench
Appeal Number
CRN Number
Duration Of Justice
1 year(s) 10 month(s) 16 day(s)
Appellant
Respondent
Appeal Type
Income Tax Appeal
Pronouncement Date
26-02-2020
Appeal Filed By
Assessee
Order Result
Allowed
Bench Allotted
C
Next Hearing Date
15-01-2020
Assessment Year
2013-2014
Appeal Filed On
09-04-2018
Judgement Text
IN THE INCOME TAX APPELLATE TRIBUNAL KOLKATA C BENCH, KOLKATA (BEFORE SRI J. SUDHAKAR REDDY, ACCOUNTANT MEMBER & SRI S.S. GODARA, JUDICIAL MEMBER) ITA NO. 651/KOL/2018 ASSESSMENT YEAR: 2013-14 RAMPURIA INDUSTRIES & INVESTMENTS LTD............................................APPELLANT C/O. SUBASH AGARWAL & ASSOCIATES SIDDHA GIBSON 1, GIBSON LANE 2 ND FLOOR SUITE-213 KOLKATA 700 069 [PAN : AABCR 6319 P] VS. PR. COMMISSIONER OF INCOME TAX, CENTRAL (1), KOLKATA.....................................RESPONDENT APPEARANCES BY: SHRI SUBASH AGARWAL, ADVOCATE, APPEARED ON BEHALF OF THE ASSESSEE. SHRI SUPRIYO PAL, JCIT SR. D/R, APPEARING ON BEHALF OF THE REVENUE. DATE OF CONCLUDING THE HEARING : JANUARY 15 TH , 2020 DATE OF PRONOUNCING THE ORDER : FEBRUARY 26 TH , 2020 ORDER PER J. SUDHAKAR REDDY, AM :- THIS APPEAL FILED BY THE ASSESSEE IS DIRECTED AGAINST THE ORDER OF THE LEARNED PR. COMMISSIONER OF INCOME TAX (APPEALS) 1, KOLKATA, (HEREINAFTER THE LD. PR. CIT), PASSED U/S. 263 OF THE INCOME TAX ACT, 1961 (THE ACT), DT. 28/03/2018, FOR THE ASSESSMENT YEAR 2013-14. 2. THE ASSESSEE IS A COMPANY AND DERIVES INCOME FROM SHARE TRADING, SERVICES AND ALSO RENTAL INCOME. THE ASSESSING OFFICER PASSED AN ORDER U/S 143(3) OF THE ACT ON 19/03/2016. THE LD. CIT(A) ISSUED A SHOWCAUSE NOTICE TO THE ASSESSEE PROPOSING TO REVISE THE ORDER PASSED BY THE ASSESSING OFFICER U/S 143(3) OF THE ACT ON 19/03/2016, ON THE GROUND THAT:- A) CURRENCY IS NOT COVERED UNDER THE DEFINITION OF SECURITIES U/S 2(AC) OF SECURITIES CONTRACTS (REGULATION) ACT, 1956 (SCRA') AND HENCE THE NET LOSS ON FOREIGN CURRENCY TRANSACTION DEBITED TO THE PROFIT AND LOSS ACCOUNT UNDER THE HEAD OTHER EXPENSES, IS A SPECULATIVE LOSS AND AS THE TRANSACTION OF FOREIGN CURRENCY DO NOT QUALIFY TO BE DERIVATIVE TRANSACTIONS UNDER THE PROVISION OF SECTION 43(5)(D) OF THE ACT, THEY CANNOT BE TREATED AS BUSINESS TRANSACTIONS. THUS, HE CONCLUDES THAT LOSS ON SUCH FOREIGN CURRENCY TRANSACTION IS BUSINESS EXPENDITURE. B) THAT THE ASSESSING OFFICER HAS NOT CONDUCTED ANY VERIFICATION O THE COURSE OF ASSESSMENT PROCEEDINGS BY THE ASSESSING OFFICER. AFTER CONSIDERING THE REPLY OF THE ASSESSEE, THE LD. PR. CIT PASSED AN ORDER U/S 263 OF THE ACT DT. 28/03/2018, WHEREIN HE HAS SET ASIDE THE ORDER PA SSED BY THE ASSESSING OFFICER U/S 143(3) OF THE ACT ON 19/03/2016 AND RESTORED TO THE FILE OF THE ASSESSING OFFICER TO THE EXTENT OF EXAMINING THE TRANSACTIONS OF FOREIGN CURRENCY AND PASSING A FRESH ORDER AS PER THE DIRECTIONS GIVEN IN HIS ORDER. 3. AGGRI EVED THE ASSESSEE IS IN APPEAL BEFORE US. 4. THE LD. COUNSEL FOR THE ASSESSEE, SHRI SUBASH AGARWAL, SUBMITTED THAT THE ASSESSEE, IN ITS REPLY TO THE SHOWCAUSE NOTICE OFFICER THAT THE DEFINITION OF THE TERM DERIVA INCLUSIVE DEFINITION AND THAT ANY OTHER ITEM CONFIRMING TO THE GIVEN CHARACTERISTICS ALSO QUALIFY TO BE A DERIVATIVE TRANSACTION. HE RELIED ON PRESS RELEASE NO. 297/2007 DT. 14/11/2007 OF SEBI AND ALSO THE CENT 22/05/09, ON MCX STOCK EXCHANGE LTD. THE GOVERNMENT OF INDIA T O CONSIDER CURRENCY AS PART OF S LEGAL PURPOSES. HE RELIED ON OF RAJSHREE SUGARS & CHEMICALS LTD. V. AXIS BANK 8 MLJ 261 (MAD.) DERIVATIVE HAS BEEN DEFINED TO INCLUDE FOREIGN CURRENCY AS UNDERLYING DERIVATIVE FOR SECURITIES. HE FURTHER RELIED NAND NANDAN AGARWAL VS. DCIT REPORTED IN THE JUDGMENT IN THE CASE OF TRIB.), IN SUPPORT OF HIS CONTENTIONS. HE ALSO REFERRED TO CBDT INSTRUCTION NO. 3/2010 DT. 23/03/2010, WHEREIN IT WAS DECIDED THAT THE ARISING FROM ACTUAL SETTLEMENT/CONCLUSIONS OF CONTRACT SHOULD NOT BE CONSIDERED AS SPECULATIVE TRANSACTIONS. 2 RAMPURIA INDUSTRIES & INVESTMENTS LTD LOSS ON SUCH FOREIGN CURRENCY TRANSACTION IS SPECULATIVE LOSS AND NOT ALLOWABLE BUSINESS EXPENDITURE. THAT THE ASSESSING OFFICER HAS NOT CONDUCTED ANY VERIFICATION O THE COURSE OF ASSESSMENT PROCEEDINGS AND HENCE THERE NON APPLICATION OF MIND BY THE ASSESSING OFFICER. THUS THE ORDER IS ERRONEOUS. AFTER CONSIDERING THE REPLY OF THE ASSESSEE, THE LD. PR. CIT PASSED AN ORDER U/S 263 OF THE ACT DT. 28/03/2018, WHEREIN HE HAS SET ASIDE THE SSED BY THE ASSESSING OFFICER U/S 143(3) OF THE ACT ON 19/03/2016 AND RESTORED TO THE FILE OF THE ASSESSING OFFICER TO THE EXTENT OF EXAMINING THE TRANSACTIONS OF FOREIGN CURRENCY AND PASSING A FRESH ORDER AS PER THE DIRECTIONS EVED THE ASSESSEE IS IN APPEAL BEFORE US. THE LD. COUNSEL FOR THE ASSESSEE, SHRI SUBASH AGARWAL, SUBMITTED THAT THE REPLY TO THE SHOWCAUSE NOTICE , HAS BROUGHT TO THE NOTICE OF THE ASSESSING OFFICER THAT THE DEFINITION OF THE TERM DERIVA TIVE IN SECTION 2(AC) OF THE SCRA IS AN INCLUSIVE DEFINITION AND THAT ANY OTHER ITEM CONFIRMING TO THE GIVEN CHARACTERISTICS ALSO QUALIFY TO BE A DERIVATIVE TRANSACTION. HE RELIED ON PRESS RELEASE NO. 297/2007 DT. 14/11/2007 OF SEBI AND ALSO THE CENT RAL GOVERNMENT NOTIFICATION, S.O. 1327 (E) DATED MCX STOCK EXCHANGE LTD. , FOR THE PROPOSITION THAT IT WAS THE INTENTION OF O CONSIDER CURRENCY AS PART OF S ECURITIES FOR ALL PRACTICAL AND ON THE JUDGMENT OF THE HONBLE MADRAS HIGH RAJSHREE SUGARS & CHEMICALS LTD. V. AXIS BANK 8 MLJ 261 (MAD.) , WHEREIN THE TERM DERIVATIVE HAS BEEN DEFINED TO INCLUDE FOREIGN CURRENCY AS UNDERLYING DERIVATIVE FOR ON THE JUDGMENT OF THE AGRA BENCH OF THE ITAT IN THE CASE OF NAND NANDAN AGARWAL VS. DCIT REPORTED IN [2018] 90 TAXMANN.COM 3 (AGRA THE JUDGMENT IN THE CASE OF M/S. IVF ADVISORS VS. ACIT (2015) 39 ITR (T) 541 (MUMBAI CONTENTIONS. HE ALSO REFERRED TO CBDT INSTRUCTION NO. 3/2010 DT. WHEREIN IT WAS DECIDED THAT THE LOSS ON FOREX DERIVATIVE TRANSACTIONS ARISING FROM ACTUAL SETTLEMENT/CONCLUSIONS OF CONTRACT SHOULD NOT BE CONSIDERED AS ITA NO. 651/KOL/2018 ASSESSMENT YEAR: 2013-14 RAMPURIA INDUSTRIES & INVESTMENTS LTD . SPECULATIVE LOSS AND NOT ALLOWABLE AS THAT THE ASSESSING OFFICER HAS NOT CONDUCTED ANY VERIFICATION O F THIS ISSUE DURING AND HENCE THERE NON APPLICATION OF MIND AFTER CONSIDERING THE REPLY OF THE ASSESSEE, THE LD. PR. CIT PASSED AN ORDER U/S 263 OF THE ACT DT. 28/03/2018, WHEREIN HE HAS SET ASIDE THE ASSESSMENT SSED BY THE ASSESSING OFFICER U/S 143(3) OF THE ACT ON 19/03/2016 AND RESTORED TO THE FILE OF THE ASSESSING OFFICER TO THE EXTENT OF EXAMINING THE TRANSACTIONS OF FOREIGN CURRENCY AND PASSING A FRESH ORDER AS PER THE DIRECTIONS THE LD. COUNSEL FOR THE ASSESSEE, SHRI SUBASH AGARWAL, SUBMITTED THAT THE HAS BROUGHT TO THE NOTICE OF THE ASSESSING TIVE IN SECTION 2(AC) OF THE SCRA IS AN INCLUSIVE DEFINITION AND THAT ANY OTHER ITEM CONFIRMING TO THE GIVEN CHARACTERISTICS , WILL ALSO QUALIFY TO BE A DERIVATIVE TRANSACTION. HE RELIED ON PRESS RELEASE NO. 297/2007 DT. RAL GOVERNMENT NOTIFICATION, S.O. 1327 (E) DATED , FOR THE PROPOSITION THAT IT WAS THE INTENTION OF ECURITIES FOR ALL PRACTICAL AND THE JUDGMENT OF THE HONBLE MADRAS HIGH COURT IN THE CASE , WHEREIN THE TERM DERIVATIVE HAS BEEN DEFINED TO INCLUDE FOREIGN CURRENCY AS UNDERLYING DERIVATIVE FOR ON THE JUDGMENT OF THE AGRA BENCH OF THE ITAT IN THE CASE OF [2018] 90 TAXMANN.COM 3 (AGRA - TRIB.) AND (2015) 39 ITR (T) 541 (MUMBAI CONTENTIONS. HE ALSO REFERRED TO CBDT INSTRUCTION NO. 3/2010 DT. LOSS ON FOREX DERIVATIVE TRANSACTIONS ARISING FROM ACTUAL SETTLEMENT/CONCLUSIONS OF CONTRACT SHOULD NOT BE CONSIDERED AS 4.1. ON THE ISSUE OF WHETHER THE ASSESSING OFFICER HAS CONDUCTED PROPER ENQUIRY, THE LD. COUNSEL FOR THE ASSESSEE FILED A CERTIFIED COPY OF THE ORDER SHEET ENTRY ASSESSMENT RECORD AT PAGES 48 TO 53 AND POINTED OUT THAT THE ASSESSING OFFICER HAS R EPEATEDLY ASKED FOR EXPLANATIONS ON THE NET LOSS VARIOUS OCCASIONS I.E., AS POINT NO. 16 AS POINT NO. 2 AS POINT NO. 2 DURING THE HEARING DURING THE HEARING 4.2. HE ALSO POINTED OUT THAT THE ASSESSING OFFICER ON THE LAST DATE OF HEARING CLEARLY RECORDED THAT THE PAPERS SUBMITTED BY THE ASSESSEE HAVE BEEN PERUSED THEREAFTER CONSCIOUSLY CHOSE CONCLUSION THAT THE ASSESSING OFFICER HAS NOT CALLED FOR THE DETAILS AND VERIFIED THE SAME AFTER APPLICATION OF MIND, IS A FACTUALLY INCORRECT OBSERVATION. HE RELIED ON THE FOLLOWING CASE PASSED U/S 263 OF THE ACT IS BAD IN LAW NARAYAN TATU RANE VS. ITO (2016) 70 TAXMANN.COM 227 (MUM) GABRIEL INDIA LTD. (BOM) 203 ITR 108 MALABAR CO. LTD. VS. CIT (SC) (2000) 243 ITR 83 CIT VS. G.M. MITTAL STAINLESS STEEL P. LTD. (SC) (2003) 263 ITR 255 CIT VS. GREENWORLD CORPORATION (SC) (2009) 314 IR 81 CIT VS. MAX INDIA LTD. (SC) (2007) 295 ITR 282 MEDICARE TPA SERVICE (I) PVT. LTD. VS. PR. CIT 5. THE LD. D/R, SHRI SUPRIYO PAL, JCIT, SUBMITTED THAT THE A CALLED FOR ANY RECORDS AND EXAMINED THE ISSUE CLAIM, SPECULATIVE LOSS ON TRADING AND DERIVATIVES THROUGH THE ASSESSMENT ORDER AND SUBMITTED THAT A PERUSAL OF THE SAME DEMONSTRATES TOTAL NON- APPLICATION OF MIND BY THE ASSESSING OFFICER AND THIS RESULTED THE ORDER BEING 3 RAMPURIA INDUSTRIES & INVESTMENTS LTD ON THE ISSUE OF WHETHER THE ASSESSING OFFICER HAS CONDUCTED PROPER ENQUIRY, THE LD. COUNSEL FOR THE ASSESSEE FILED A CERTIFIED COPY OF THE ORDER SHEET ENTRY AT PAGES 48 TO 53 AND POINTED OUT THAT THE ASSESSING OFFICER HAS EPEATEDLY ASKED FOR EXPLANATIONS ON THE NET LOSS ON FOREIGN CURRENCY TRANSACTIONS 16 DURING THE HEARING ON 13/07/2015 POINT NO. 2 DURING THE HEARING ON 09/10/2015 POINT NO. 2 DURING THE HEARING ON 02/11/2015 DURING THE HEARING 14/12/2015 DURING THE HEARING 07/03/2016 HE ALSO POINTED OUT THAT THE ASSESSING OFFICER ON THE LAST DATE OF HEARING CLEARLY RECORDED THAT THE PAPERS SUBMITTED BY THE ASSESSEE HAVE BEEN PERUSED THEREAFTER CONSCIOUSLY CHOSE NOT TO DISALLOW THE LOSS IN QUESTION CONCLUSION THAT THE ASSESSING OFFICER HAS NOT CALLED FOR THE DETAILS AND VERIFIED THE SAME AFTER APPLICATION OF MIND, IS A FACTUALLY INCORRECT OBSERVATION. HE RELIED ON THE FOLLOWING CASE -LAW IN SUPPORT OF HIS CONTENTIONS PASSED U/S 263 OF THE ACT IS BAD IN LAW :- NARAYAN TATU RANE VS. ITO (2016) 70 TAXMANN.COM 227 (MUM) GABRIEL INDIA LTD. (BOM) 203 ITR 108 MALABAR CO. LTD. VS. CIT (SC) (2000) 243 ITR 83 STAINLESS STEEL P. LTD. (SC) (2003) 263 ITR 255 CIT VS. GREENWORLD CORPORATION (SC) (2009) 314 IR 81 CIT VS. MAX INDIA LTD. (SC) (2007) 295 ITR 282 MEDICARE TPA SERVICE (I) PVT. LTD. VS. PR. CIT THE LD. D/R, SHRI SUPRIYO PAL, JCIT, SUBMITTED THAT THE A SSESSING OFFICER HAS NOT CALLED FOR ANY RECORDS AND EXAMINED THE ISSUE AS TO WHETHER TH E ASSESSEE IS ELIGIBLE TO CLAIM, SPECULATIVE LOSS ON TRADING AND DERIVATIVES AS DEDUCTION . HE TOOK THIS BENCH THROUGH THE ASSESSMENT ORDER AND SUBMITTED THAT A PERUSAL OF THE SAME DEMONSTRATES APPLICATION OF MIND BY THE ASSESSING OFFICER AND THIS RESULTED THE ORDER BEING ITA NO. 651/KOL/2018 ASSESSMENT YEAR: 2013-14 RAMPURIA INDUSTRIES & INVESTMENTS LTD . ON THE ISSUE OF WHETHER THE ASSESSING OFFICER HAS CONDUCTED PROPER ENQUIRY, THE LD. COUNSEL FOR THE ASSESSEE FILED A CERTIFIED COPY OF THE ORDER SHEET ENTRY FROM THE AT PAGES 48 TO 53 AND POINTED OUT THAT THE ASSESSING OFFICER HAS FOREIGN CURRENCY TRANSACTIONS , ON HE ALSO POINTED OUT THAT THE ASSESSING OFFICER ON THE LAST DATE OF HEARING , HAS CLEARLY RECORDED THAT THE PAPERS SUBMITTED BY THE ASSESSEE HAVE BEEN PERUSED AND NOT TO DISALLOW THE LOSS IN QUESTION AND HENCE THE CONCLUSION THAT THE ASSESSING OFFICER HAS NOT CALLED FOR THE DETAILS AND VERIFIED THE SAME OF HIS CONTENTIONS THAT THE ORDER STAINLESS STEEL P. LTD. (SC) (2003) 263 ITR 255 SSESSING OFFICER HAS NOT E ASSESSEE IS ELIGIBLE TO . HE TOOK THIS BENCH THROUGH THE ASSESSMENT ORDER AND SUBMITTED THAT A PERUSAL OF THE SAME DEMONSTRATES APPLICATION OF MIND BY THE ASSESSING OFFICER AND THIS RESULTED THE ORDER BEING ERRONEOUS AND PREJUDICIAL TO THE INTEREST OF THE REVENUE. HE RE PR. CIT PASSED U/S 263 OF THE ACT AND SUBMITTED THAT THE ISSUE HAS BEEN RESTORED TO THE FILE OF THE ASSESSING OFFICER FOR FRESH EXAMINATION IN ACCORDANCE WITH LAW AND HENCE THE ASSESSE E SHOULD NOT HAVE ANY GRIEVANCE AND THAT AL BEFORE THE ASSESSING OFFICER. HE REBUTTED THE CONTENTIONS OF THE ASSESSEE. 6. WE HAVE HEARD RIVAL CONTENTIONS. ON CAREFUL CONSIDERATION OF THE FACTS AND CIRCUMSTANCES OF THE CASE, PERUSAL OF THE PAPERS ON RECORD, ORDERS OF T BELOW AS WELL AS CASE LAW CITED, WE HOLD AS FOLLOWS: 7. THE FIRST ISSUE THAT ARISES FOR OUR CONSIDERATION IS WHETHER CURRENCY TRANSACTIONS ARE INCLUDED WITHIN THE DEFINITION OF DERIVATIVES UNDER CLAUSE 2(AC) OF THE SCRA. THE MUMBAI I BE NCH OF THE TRIBUNAL IN THE CASE OF HELD AS FOLLOWS:- 7. WE HAVE CAREFULLY PERUSED THE ORDERS OF THE REVENUE AUTHORITIES AND THE SUBMISSIONS MADE BY THE ASSESSEE IN THE LIGHT OF THE RELEVANT PROVISIONS OF THE IT ACT AND ALSO S ECURITIES CONTRACT REGULATION ACT, 1956. SECTION 43(5) OF THE I.T. ACT READ AS UNDER: (5) 32'SPECULATIVE TRANSACTION' MEANS A TRANSACTION IN WHICH A CONTRACT FOR THE PURCHASE OR SALE OF ANY COMMODITY33, INCLUDING STOCKS AND SHARES, IS PERIODICALLY OR ULTIM THAN BY THE ACTUAL DELIVERY33 OR TRANSFER OF THE COMMODITY OR SCRIPS: PROVIDED THAT FOR THE PURPOSES OF THIS CLAUSE RESPECT OF RAW MATERIALS OR MERCHANDISE ENTERED INTO BY A PERSON IN THE COURSE OF HIS MANUFACTU AGAINST LOSS THROUGH FUTURE PRICE FLUCTUATIONS IN RESPECT OF HIS CONTRACTS FOR ACTUAL DELIVERY OF GOODS MANUFACTURED BY HIM OR MERCHANDISE SOLD BY HIM; OR (B) A CONTRACT IN RESPECT OF STOCKS AND SHARES ENTERED INTO BY LOSS IN HIS HOLDINGS OF STOCKS AND SHARES THROUGH PRICE FLUCTUATIONS; OR (C) A CONTRACT ENTERED INTO BY A MEMBER OF A FORWARD MARKET OR A STOCK EXCHANGE IN THE COURSE OF ANY TRANSACTION IN THE NATURE OF JOBBING ORDINARY COURSE OF HIS BUSINESS AS SUCH MEMBER; [OR] (D) AN ELIGIBLE TRANSACTION IN RESPECT OF TRADING IN DERIVATIVES REFERRED TO IN CLAUSE [(AC)] OF SECTION 236 OF THE SECURITIES CONTRACTS (REGULA 1956 (42 OF 1956) CARRIED OUT IN A RECOGNISED STOCK EXCHANGE;[OR] (E) AN ELIGIBLE TRANSACTION IN RESPECT OF TRADING IN COMMODITY DERIVATIVES CARRIED OUT IN A RECOGNIZED ASSOCIATION[ WHICH IS CHARGEABLE TO COMMODITIES TRANSACTION TAX UNDER CHAPTE 2013 (17 OF 2013)] SHALL NOT BE DEEMED TO BE A SPECULATIVE 4 RAMPURIA INDUSTRIES & INVESTMENTS LTD ERRONEOUS AND PREJUDICIAL TO THE INTEREST OF THE REVENUE. HE RE LIED ON THE ORDER OF THE LD. PR. CIT PASSED U/S 263 OF THE ACT AND SUBMITTED THAT THE ISSUE HAS BEEN RESTORED TO THE FILE OF THE ASSESSING OFFICER FOR FRESH EXAMINATION IN ACCORDANCE WITH LAW AND HENCE THE E SHOULD NOT HAVE ANY GRIEVANCE AND THAT AL L THESE ARGUMENTS CAN BE RAISED BEFORE THE ASSESSING OFFICER. HE REBUTTED THE CONTENTIONS OF THE ASSESSEE. WE HAVE HEARD RIVAL CONTENTIONS. ON CAREFUL CONSIDERATION OF THE FACTS AND CIRCUMSTANCES OF THE CASE, PERUSAL OF THE PAPERS ON RECORD, ORDERS OF T BELOW AS WELL AS CASE LAW CITED, WE HOLD AS FOLLOWS: - THE FIRST ISSUE THAT ARISES FOR OUR CONSIDERATION IS WHETHER CURRENCY TRANSACTIONS ARE INCLUDED WITHIN THE DEFINITION OF DERIVATIVES UNDER CLAUSE 2(AC) OF THE SCRA. NCH OF THE TRIBUNAL IN THE CASE OF M/S. IVF ADVISORS (SUPRA) 7. WE HAVE CAREFULLY PERUSED THE ORDERS OF THE REVENUE AUTHORITIES AND THE SUBMISSIONS MADE BY THE ASSESSEE IN THE LIGHT OF THE RELEVANT PROVISIONS OF THE IT ACT ECURITIES CONTRACT REGULATION ACT, 1956. SECTION 43(5) OF THE I.T. ACT READ (5) 32'SPECULATIVE TRANSACTION' MEANS A TRANSACTION IN WHICH A CONTRACT FOR THE PURCHASE OR SALE OF ANY COMMODITY33, INCLUDING STOCKS AND SHARES, IS PERIODICALLY OR ULTIM ATELY SETTLED33 OTHERWISE THAN BY THE ACTUAL DELIVERY33 OR TRANSFER OF THE COMMODITY OR SCRIPS: PROVIDED THAT FOR THE PURPOSES OF THIS CLAUSE (A) A CONTRACT IN RESPECT OF RAW MATERIALS OR MERCHANDISE ENTERED INTO BY A PERSON IN THE COURSE OF HIS MANUFACTU RING OR MERCHANTING BUSINESS TO GUARD AGAINST LOSS THROUGH FUTURE PRICE FLUCTUATIONS IN RESPECT OF HIS CONTRACTS FOR ACTUAL DELIVERY OF GOODS MANUFACTURED BY HIM OR MERCHANDISE SOLD BY HIM; OR (B) A CONTRACT IN RESPECT OF STOCKS AND SHARES ENTERED INTO BY A DEALER OR INVESTOR THEREIN TO GUARD AGAINST LOSS IN HIS HOLDINGS OF STOCKS AND SHARES THROUGH PRICE FLUCTUATIONS; OR (C) A CONTRACT ENTERED INTO BY A MEMBER OF A FORWARD MARKET OR A STOCK EXCHANGE IN THE COURSE OF ANY TRANSACTION IN THE NATURE OF OR ARBITRAGE TO GUARD AGAINST LOSS WHICH MAY ARISE IN THE ORDINARY COURSE OF HIS BUSINESS AS SUCH MEMBER; [OR] (D) AN ELIGIBLE TRANSACTION IN RESPECT OF TRADING IN DERIVATIVES REFERRED TO IN CLAUSE [(AC)] OF SECTION 236 OF THE SECURITIES CONTRACTS (REGULA 1956 (42 OF 1956) CARRIED OUT IN A RECOGNISED STOCK EXCHANGE;[OR] (E) AN ELIGIBLE TRANSACTION IN RESPECT OF TRADING IN COMMODITY DERIVATIVES CARRIED OUT IN A RECOGNIZED ASSOCIATION[ WHICH IS CHARGEABLE TO COMMODITIES TRANSACTION TAX UNDER CHAPTE R VII OF THE FINANCE ACT, 2013 (17 OF 2013)] SHALL NOT BE DEEMED TO BE A SPECULATIVE ITA NO. 651/KOL/2018 ASSESSMENT YEAR: 2013-14 RAMPURIA INDUSTRIES & INVESTMENTS LTD . LIED ON THE ORDER OF THE LD. PR. CIT PASSED U/S 263 OF THE ACT AND SUBMITTED THAT THE ISSUE HAS BEEN RESTORED TO THE FILE OF THE ASSESSING OFFICER FOR FRESH EXAMINATION IN ACCORDANCE WITH LAW AND HENCE THE L THESE ARGUMENTS CAN BE RAISED BEFORE THE ASSESSING OFFICER. HE REBUTTED THE CONTENTIONS OF THE ASSESSEE. WE HAVE HEARD RIVAL CONTENTIONS. ON CAREFUL CONSIDERATION OF THE FACTS AND CIRCUMSTANCES OF THE CASE, PERUSAL OF THE PAPERS ON RECORD, ORDERS OF T HE AUTHORITIES THE FIRST ISSUE THAT ARISES FOR OUR CONSIDERATION IS WHETHER CURRENCY TRANSACTIONS ARE INCLUDED WITHIN THE DEFINITION OF DERIVATIVES UNDER CLAUSE 2(AC) OF THE SCRA. M/S. IVF ADVISORS (SUPRA) HAS 7. WE HAVE CAREFULLY PERUSED THE ORDERS OF THE REVENUE AUTHORITIES AND THE SUBMISSIONS MADE BY THE ASSESSEE IN THE LIGHT OF THE RELEVANT PROVISIONS OF THE IT ACT ECURITIES CONTRACT REGULATION ACT, 1956. SECTION 43(5) OF THE I.T. ACT READ (5) 32'SPECULATIVE TRANSACTION' MEANS A TRANSACTION IN WHICH A CONTRACT FOR THE PURCHASE OR SALE OF ANY COMMODITY33, INCLUDING ATELY SETTLED33 OTHERWISE THAN BY THE ACTUAL DELIVERY33 OR TRANSFER OF THE COMMODITY OR SCRIPS: (A) A CONTRACT IN RESPECT OF RAW MATERIALS OR MERCHANDISE ENTERED INTO BY A PERSON IN RING OR MERCHANTING BUSINESS TO GUARD AGAINST LOSS THROUGH FUTURE PRICE FLUCTUATIONS IN RESPECT OF HIS CONTRACTS FOR ACTUAL DELIVERY OF GOODS MANUFACTURED BY HIM OR MERCHANDISE SOLD BY HIM; OR (B) A CONTRACT IN RESPECT OF STOCKS AND A DEALER OR INVESTOR THEREIN TO GUARD AGAINST LOSS IN HIS HOLDINGS OF STOCKS AND SHARES THROUGH PRICE FLUCTUATIONS; OR (C) A CONTRACT ENTERED INTO BY A MEMBER OF A FORWARD MARKET OR A STOCK EXCHANGE IN THE COURSE OF ANY TRANSACTION IN THE NATURE OF OR ARBITRAGE TO GUARD AGAINST LOSS WHICH MAY ARISE IN THE ORDINARY COURSE OF HIS BUSINESS AS SUCH MEMBER; [OR] (D) AN ELIGIBLE TRANSACTION IN RESPECT OF TRADING IN DERIVATIVES REFERRED TO IN CLAUSE [(AC)] OF SECTION 236 OF THE SECURITIES CONTRACTS (REGULA TION) ACT, 1956 (42 OF 1956) CARRIED OUT IN A RECOGNISED STOCK EXCHANGE;[OR] (E) AN ELIGIBLE TRANSACTION IN RESPECT OF TRADING IN COMMODITY DERIVATIVES CARRIED OUT IN A RECOGNIZED ASSOCIATION[ WHICH IS CHARGEABLE TO R VII OF THE FINANCE ACT, 2013 (17 OF 2013)] SHALL NOT BE DEEMED TO BE A SPECULATIVE TRANSACTION. [EXPLANATION. EXPRESSIONS CARRIED OUT ELECTRONICALLY ON SCREEN BROKER OR SUB SECTION 12 OF THE SECURITIES AND EXCHANGE BOARD OF INDIA ACT, 1992 (15 OF 1992) IN ACCORDANCE WITH THE PROVISIONS OF THE SECURITIES CONTRACTS (REGULATION) ACT, 1956 EXCHANGE BOARD OF INDIA ACT, 1992 (15 OF 1992) OR THE DEPOSITORIES ACT, 1996 (22 OF 1996) AND THE RULES, REGULATIONS OR BYE DIRECTIONS ISSUED UNDER THOSE ACTS OR BY BANKS OR MUTUAL FUNDS ON A RECOGNISED STOC STAMPED CONTRACT NOTE ISSUED BY SUCH STOCK BROKER OR SUB SUCH OTHER INTERMEDIARY TO EVERY CLIENT INDICATING IN THE CONTRACT NOTE THE UNIQUE CLIENT IDENTITY NUMBER ALLOTTED UNDER ANY ACT REFERRED TO UNDER THIS ACT; (II) 'RECOGNISED STOCK EXCHANGE' MEANS A RECOGNISED STOCK EXCHANGE AS REFERRED TO IN CLAUSE (F) OF SECTION 238 OF THE SECURITIES CONTRACTS (REGULATION) ACT, 1956 (42 OF 1956) AND WHICH FULFILS SUCH CONDITIONS AS MAY BE PRESCRIBED AND NOTIFIED39 BY THE CENTRAL GOVERNMENT FOR THIS PURPOSE;] [EXPLANATION 2 PURPOSES OF CLAUSE (E), THE EXPRESSIONS SHALL HAVE THE MEANING AS ASSIGNED TO IT IN CHAPTER VII ACT, 2013; (II) ELIGIBLE TRANSACTION MEANS ANY TRANSACTION, (A)CARRIED OUT ELECTRONICALLY ON SCREEN MEMBER OR AN INTERMEDIARY, REGISTERED UNDER THE BYE REGULATIONS OF THE RECOGNIZED ASSOCIATION FOR TRA DERIVATIVE IN ACCORDANCE WITH THE PROVISIONS OF THE FORWARD CONTRACTS (REGULATION) ACT, 1952 (74 OF 1952) AND THE RULES, REGULATIONS OR BYE RECOGNIZED ASSOCIATION; AND (B) WHICH IS SUPPOR STAMPED CONTRACT NOTE ISSUED BY SUCH MEMBER OR INTERMEDIARY TO VERY CLIENT INDICATING IN THE CONTRACT NOTE, THE UNIQUE CLIENT IDENTITY NUMBER ALLOTTED UNDER THE ACT, RULES, REGULATIONS OR BYE TO IN SUB NUMBER ALLOTTED UNDER THIS ACT. (III) RECOGNIZED ASSOCIATION MEANS A RECOGNIZED ASSOCIATION AS REFERRED TO IN CLAUSE (J) OF SECTION 2 OF THE FORWARD CONTRACTS (REGULATION) ACT, 1952 (74 OF 1952) AND WHICH FULFILS SUCH CONDITIO CENTRAL GOVERNMENT FOR THIS PURPOSE PROVISO (D) EXCLUDES THE TRANSACTION FROM THE DEFINITION OF SPECULATIVE TRANSACTION IN RESPECT OF TRADING OF DERIVATIVES REFERRED TO IN SECTION 2(AC) OF THE SECURITIES CONT RACT (REGULATION) ACT, 1956 CARRIED IN RECOGNIZED STOCK EXCHANGE. SECTION 2(AC) OF THE SECURITIES CONTRACT (REGULATION) ACT, 1956 READ AS UNDER: 2.[AC] DERIVATIVE INCLUDES INSTRUMENT, SHARE, LOAN, WHETHER SECURED OR INSTRUMENT OR CONTRACT FOR DIFFERENCES OR ANY OTHER FORM OF SECURITY; (B)A CONTRACT WHICH DERIVES ITS VALUE FROM THE PRICES, OR INDEX OF PRICES, OF UNDERLYING SECURITIES;] 5 RAMPURIA INDUSTRIES & INVESTMENTS LTD TRANSACTION. [EXPLANATION. FOR THE PURPOSES OF THIS CLAUSE, THE EXPRESSIONS (I) 'ELIGIBLE TRANSACTION' MEANS ANY TRANSACTION, CARRIED OUT ELECTRONICALLY ON SCREEN -BAS ED SYSTEMS THROUGH A STOCK BROKER OR SUB - BROKER OR SUCH OTHER INTERMEDIARY REGISTERED UNDER SECTION 12 OF THE SECURITIES AND EXCHANGE BOARD OF INDIA ACT, 1992 (15 OF 1992) IN ACCORDANCE WITH THE PROVISIONS OF THE SECURITIES CONTRACTS (REGULATION) ACT, 1956 (42 OF 1956) OR THE SECURITIES AND EXCHANGE BOARD OF INDIA ACT, 1992 (15 OF 1992) OR THE DEPOSITORIES ACT, 1996 (22 OF 1996) AND THE RULES, REGULATIONS OR BYE DIRECTIONS ISSUED UNDER THOSE ACTS OR BY BANKS OR MUTUAL FUNDS ON A RECOGNISED STOC K EXCHANGE; AND(B) WHICH IS SUPPORTED BY A TIME STAMPED CONTRACT NOTE ISSUED BY SUCH STOCK BROKER OR SUB SUCH OTHER INTERMEDIARY TO EVERY CLIENT INDICATING IN THE CONTRACT NOTE THE UNIQUE CLIENT IDENTITY NUMBER ALLOTTED UNDER ANY ACT REFERRED TO IN SUB- CLAUSE (A) AND PERMANENT ACCOUNT NUMBER ALLOTTED UNDER THIS ACT; (II) 'RECOGNISED STOCK EXCHANGE' MEANS A RECOGNISED STOCK EXCHANGE AS REFERRED TO IN CLAUSE (F) OF SECTION 238 OF THE SECURITIES CONTRACTS (REGULATION) ACT, 1956 (42 OF 1956) AND WHICH FULFILS SUCH CONDITIONS AS MAY BE PRESCRIBED AND NOTIFIED39 BY THE CENTRAL GOVERNMENT FOR THIS PURPOSE;] [EXPLANATION 2 PURPOSES OF CLAUSE (E), THE EXPRESSIONS (I) COMMODITY DERIVATIVE SHALL HAVE THE MEANING AS ASSIGNED TO IT IN CHAPTER VII ACT, 2013; (II) ELIGIBLE TRANSACTION MEANS ANY TRANSACTION, (A)CARRIED OUT ELECTRONICALLY ON SCREEN - BASED SYSTEMS THROUGH MEMBER OR AN INTERMEDIARY, REGISTERED UNDER THE BYE - LAWS, RULES AND REGULATIONS OF THE RECOGNIZED ASSOCIATION FOR TRA DING IN COMMODITY DERIVATIVE IN ACCORDANCE WITH THE PROVISIONS OF THE FORWARD CONTRACTS (REGULATION) ACT, 1952 (74 OF 1952) AND THE RULES, REGULATIONS OR BYE - LAWS MADE OR DIRECTIONS ISSUED UNDER THAT ACT ON A RECOGNIZED ASSOCIATION; AND (B) WHICH IS SUPPOR TED BY A TIME STAMPED CONTRACT NOTE ISSUED BY SUCH MEMBER OR INTERMEDIARY TO VERY CLIENT INDICATING IN THE CONTRACT NOTE, THE UNIQUE CLIENT IDENTITY NUMBER ALLOTTED UNDER THE ACT, RULES, REGULATIONS OR BYE TO IN SUB -CLAUSE (A), UNIQUE TRADE N UMBER AND PERMANENT ACCOUNT NUMBER ALLOTTED UNDER THIS ACT. (III) RECOGNIZED ASSOCIATION MEANS A RECOGNIZED ASSOCIATION AS REFERRED TO IN CLAUSE (J) OF SECTION 2 OF THE FORWARD CONTRACTS (REGULATION) ACT, 1952 (74 OF 1952) AND WHICH FULFILS SUCH CONDITIO NS AS MAY BE PRESCRIBED AND IS NOTIFIED BY THE CENTRAL GOVERNMENT FOR THIS PURPOSE PROVISO (D) EXCLUDES THE TRANSACTION FROM THE DEFINITION OF SPECULATIVE TRANSACTION IN RESPECT OF TRADING OF DERIVATIVES REFERRED TO IN SECTION 2(AC) OF THE RACT (REGULATION) ACT, 1956 CARRIED IN RECOGNIZED STOCK EXCHANGE. SECTION 2(AC) OF THE SECURITIES CONTRACT (REGULATION) ACT, 1956 READ AS UNDER: 2.[AC] DERIVATIVE INCLUDES (A)A SECURITY DERIVED FROM A DEBT INSTRUMENT, SHARE, LOAN, WHETHER SECURED OR UNSECURED, RISK INSTRUMENT OR CONTRACT FOR DIFFERENCES OR ANY OTHER FORM OF SECURITY; (B)A CONTRACT WHICH DERIVES ITS VALUE FROM THE PRICES, OR INDEX OF PRICES, OF UNDERLYING SECURITIES;] ITA NO. 651/KOL/2018 ASSESSMENT YEAR: 2013-14 RAMPURIA INDUSTRIES & INVESTMENTS LTD . FOR THE PURPOSES OF THIS CLAUSE, THE (I) 'ELIGIBLE TRANSACTION' MEANS ANY TRANSACTION, (A) ED SYSTEMS THROUGH A STOCK BROKER OR SUCH OTHER INTERMEDIARY REGISTERED UNDER SECTION 12 OF THE SECURITIES AND EXCHANGE BOARD OF INDIA ACT, 1992 (15 OF 1992) IN ACCORDANCE WITH THE PROVISIONS OF THE SECURITIES (42 OF 1956) OR THE SECURITIES AND EXCHANGE BOARD OF INDIA ACT, 1992 (15 OF 1992) OR THE DEPOSITORIES ACT, 1996 (22 OF 1996) AND THE RULES, REGULATIONS OR BYE -LAWS MADE OR DIRECTIONS ISSUED UNDER THOSE ACTS OR BY BANKS OR MUTUAL FUNDS ON A K EXCHANGE; AND(B) WHICH IS SUPPORTED BY A TIME STAMPED CONTRACT NOTE ISSUED BY SUCH STOCK BROKER OR SUB -BROKER OR SUCH OTHER INTERMEDIARY TO EVERY CLIENT INDICATING IN THE CONTRACT NOTE THE UNIQUE CLIENT IDENTITY NUMBER ALLOTTED UNDER ANY ACT CLAUSE (A) AND PERMANENT ACCOUNT NUMBER ALLOTTED UNDER THIS ACT; (II) 'RECOGNISED STOCK EXCHANGE' MEANS A RECOGNISED STOCK EXCHANGE AS REFERRED TO IN CLAUSE (F) OF SECTION 238 OF THE SECURITIES CONTRACTS (REGULATION) ACT, 1956 (42 OF 1956) AND WHICH FULFILS SUCH CONDITIONS AS MAY BE PRESCRIBED AND NOTIFIED39 BY THE CENTRAL GOVERNMENT FOR THIS PURPOSE;] [EXPLANATION 2 FOR THE (I) COMMODITY DERIVATIVE SHALL HAVE THE MEANING AS ASSIGNED TO IT IN CHAPTER VII OF THE FINANCE ACT, 2013; (II) ELIGIBLE TRANSACTION MEANS ANY TRANSACTION, - BASED SYSTEMS THROUGH LAWS, RULES AND DING IN COMMODITY DERIVATIVE IN ACCORDANCE WITH THE PROVISIONS OF THE FORWARD CONTRACTS (REGULATION) ACT, 1952 (74 OF 1952) AND THE RULES, LAWS MADE OR DIRECTIONS ISSUED UNDER THAT ACT ON A TED BY A TIME STAMPED CONTRACT NOTE ISSUED BY SUCH MEMBER OR INTERMEDIARY TO VERY CLIENT INDICATING IN THE CONTRACT NOTE, THE UNIQUE CLIENT IDENTITY NUMBER ALLOTTED UNDER THE ACT, RULES, REGULATIONS OR BYE -LAWS REFERRED UMBER AND PERMANENT ACCOUNT NUMBER ALLOTTED UNDER THIS ACT. (III) RECOGNIZED ASSOCIATION MEANS A RECOGNIZED ASSOCIATION AS REFERRED TO IN CLAUSE (J) OF SECTION 2 OF THE FORWARD CONTRACTS (REGULATION) ACT, 1952 (74 OF 1952) AND WHICH NS AS MAY BE PRESCRIBED AND IS NOTIFIED BY THE PROVISO (D) EXCLUDES THE TRANSACTION FROM THE DEFINITION OF SPECULATIVE TRANSACTION IN RESPECT OF TRADING OF DERIVATIVES REFERRED TO IN SECTION 2(AC) OF THE RACT (REGULATION) ACT, 1956 CARRIED IN RECOGNIZED STOCK EXCHANGE. SECTION 2(AC) OF THE SECURITIES CONTRACT (REGULATION) ACT, 1956 READ AS UNDER: (A)A SECURITY DERIVED FROM A DEBT UNSECURED, RISK INSTRUMENT OR CONTRACT FOR DIFFERENCES OR ANY OTHER FORM OF SECURITY; (B)A CONTRACT WHICH DERIVES ITS VALUE FROM THE PRICES, OR INDEX OF 7.1 THUS, IT CAN BE SEEN THAT THE DERIVATIVES ALSO INCLUDES SECURI ELIGIBLE TRANSACTION MENTIONED HEREIN ABOVE CLEARLY SHOW THAT THE TRANSACTION MUST HAVE BEEN CARRIED OUT ELECTRONICALLY IN ACCORDANCE WITH THE PROVISIONS OF SECURITIES CONTRACTS (REGULATION) ACT AND THE RULES AND REGULATIONS OR BYE DIRECTIONS ISSUED UNDER THIS ACT OR BY BANKS OR MUTUAL FUNDS ON A RECOGNIZED STOCK EXCHANGE AND WHICH IS SUPPORTED BY TIME STAMPED CONTRACT NOTE ISSUED BY SUCH STOCK BROKER OR SUB- BROKER OR INTERMEDIARY TO EVERY CLIENT INDICATING IN THE CONTRA THE UNIQUE CLIENT IDENTITY NUMBER AND PERMANENT ACCOUNT NUMBER. 7.2 IT WOULD BE PERTINENT TO CONSIDER THE DECISION OF HONBLE MADRAS HIGH COURT IN THE CASE OF RAJSHREE SUGAR & CHEMICALS LTD. VS. AXIS BANK LTD., AIR 2011 (MAD) 144, WHEREIN THE TERM DERIVATIVE HAS BEEN DEFINED TO INCLUDE FOREIGN CURRENCY AS AN UNDERLYING SECURITY OF THE DERIVATIVE. THE RELEVANT EXTRACT OF THE CASE IS QUOTED BELOW: WHAT ARE THESE DERIVATIVES WHICH HAVE GAINED SUCH A GREAT DEAL OF NOTORIETY? IN SIMPLE TERMS, WHOSE VALUES DEPEND ON THE VALUE OF OTHER UNDERLYING FINANCIAL INSTRUMENTS. THE INTERNATIONAL ACCOUNTING STANDARD (IAS) 39, DEFINES DERIVATIVES AS FOLLOWS: WHOSE VALUE C RATE, SECURITY PRICE, COMMODITY PRICE, FOREIGN EXCHANGE RATE, INDEX OF PRICES OR RATES, A CREDIT RATING OR CREDIT INDEX, OR SIMILAR VARIABLE (SOMETIMES CALLED THE UNDERLYING); (B) THAT REQUIRES NO INVESTMENT OR LITTLE INITIAL NET INVESTMENT RELATIVE TO OTHER TYPES OF CONTRACTS THAT HAVE A SIMILAR RESPONSE TO CHANGES IN MARKET CONDITIONS; AND (C) THAT IS SETTLED AT A FUTURE DATE. ACTUALLY, DERIVATIVES ARE ASSETS, WHOSE VALUES ARE DERIVED UNDERLYING ASSETS. THESE UNDERLYING ASSETS CAN BE COMMODITIES, METALS, ENERGY RESOURCES, AND FINANCIAL ASSETS SUCH AS SHARES, BONDS, AND FOREIGN CURRENCIES. 7.3 FURTHER, THE SEBI WEBSITE IN ITS SECTION FREQUENTLY ASKED QUESTIONS HAS EXP THE MEANING OF DERIVATIVE AS UNDER: Q 1. WHAT ARE DERIVATIVES? A. THE TERM DERIVATIVE INDICATES THAT IT HAS NO INDEPENDENT VALUE, I.E. ITS VALUE IS ENTIRELY DERIVED FROM THE VALUE OF THE UNDERLYING ASSET. THE UNDERLYING ASSET CAN BE SECURITIES, COMMODITIES, BULLION, CURRENCY, LIVE STOCK OR ANYTHING ELSE. IN OTHER WORDS, DERIVATIVE MEANS A FORWARD, FUTURE OPTION OR ANY OTHER HYBRID CONTRACT OF PRE DETERMINED FIXED DURATION, LINKED FOR THE PURPOSE OF CONTRACT FULFILLMENT TO THE VALUE OF A SPECIFIED REAL OR FINANCIAL ASSET OR TO AN INDEX OF SECURITIES. WITH SECURITIES LAWS (SECOND AMENDMENT) ACT,1999, DERIVATIVES HAS BEEN INCLUDED IN THE DEFINITION OF SECURITIES. THE TERM DERIVATIVE HAS BEEN DEFINED IN SECURITIES CONTRACTS (REGULATIONS) ACT, AS: A DE RIVATIVE INCLUDES: LOAN, WHETHER SECURED OR UNSECURED, RISK INSTRUMENT OR CONTRACT FOR DIFFERENCES OR ANY OTHER FORM OF SECURITY; B. A CONTRACT WHICH DERIVES ITS VALUE FROM THE PRICES, OR INDEX OF PRIC ES, OF UNDERLYING SECURITIES; AUG.2008 SEBI PERMITTED EXCHANGE TRADED CURRENCY DERIVATIVE. 7.4 CONSIDERING THE RELEVANT PROVISIONS OF THE RELEVANT ACTS, DISCUSSED HEREIN ABOVE IN THE LIGHT OF HONBLE MADRAS HIGH COURT AND THE ANSWERS GIVEN TO FREQUENTLY ASKED QUESTIONS BY THE SEBI AND THE INCORPORATION OF EXCHANGE TRADED CURRENCY DERIVATIVE FROM AUGUST, 2008, THERE REMAIN NO IOTA OF DOUBT THAT THE TRANSACTION OF THE ASSESSEE CANNOT BE TREATED AS SPECULATIVE TRANSACTION. WE HAVE ALSO GONE THROUGH THE COPIES 6 RAMPURIA INDUSTRIES & INVESTMENTS LTD 7.1 THUS, IT CAN BE SEEN THAT THE DERIVATIVES ALSO INCLUDES SECURI TIES. THE DEFINITION OF ELIGIBLE TRANSACTION MENTIONED HEREIN ABOVE CLEARLY SHOW THAT THE TRANSACTION MUST HAVE BEEN CARRIED OUT ELECTRONICALLY IN ACCORDANCE WITH THE PROVISIONS OF SECURITIES CONTRACTS (REGULATION) ACT AND THE RULES AND REGULATIONS OR BYE DIRECTIONS ISSUED UNDER THIS ACT OR BY BANKS OR MUTUAL FUNDS ON A RECOGNIZED STOCK EXCHANGE AND WHICH IS SUPPORTED BY TIME STAMPED CONTRACT NOTE ISSUED BY SUCH STOCK BROKER OR INTERMEDIARY TO EVERY CLIENT INDICATING IN THE CONTRA THE UNIQUE CLIENT IDENTITY NUMBER AND PERMANENT ACCOUNT NUMBER. 7.2 IT WOULD BE PERTINENT TO CONSIDER THE DECISION OF HONBLE MADRAS HIGH COURT IN THE CASE OF RAJSHREE SUGAR & CHEMICALS LTD. VS. AXIS BANK LTD., AIR 2011 (MAD) 144, DERIVATIVE HAS BEEN DEFINED TO INCLUDE FOREIGN CURRENCY AS AN UNDERLYING SECURITY OF THE DERIVATIVE. THE RELEVANT EXTRACT OF THE CASE IS QUOTED BELOW: WHAT ARE THESE DERIVATIVES WHICH HAVE GAINED SUCH A GREAT DEAL OF NOTORIETY? IN SIMPLE TERMS, DERIVATIVES ARE FINANCIAL INSTRUMENTS WHOSE VALUES DEPEND ON THE VALUE OF OTHER UNDERLYING FINANCIAL INSTRUMENTS. THE INTERNATIONAL ACCOUNTING STANDARD (IAS) 39, DEFINES DERIVATIVES AS FOLLOWS: - A DERIVATIVE IS A FINANCIAL INSTRUMENT: (A) WHOSE VALUE C HANGES IN RESPONSE TO THE CHANGE IN A SPECIFIED INTEREST RATE, SECURITY PRICE, COMMODITY PRICE, FOREIGN EXCHANGE RATE, INDEX OF PRICES OR RATES, A CREDIT RATING OR CREDIT INDEX, OR SIMILAR VARIABLE (SOMETIMES CALLED THE UNDERLYING); (B) THAT REQUIRES NO INVESTMENT OR LITTLE INITIAL NET INVESTMENT RELATIVE TO OTHER TYPES OF CONTRACTS THAT HAVE A SIMILAR RESPONSE TO CHANGES IN MARKET CONDITIONS; AND (C) THAT IS SETTLED AT A FUTURE DATE. ACTUALLY, DERIVATIVES ARE ASSETS, WHOSE VALUES ARE DERIVED FROM VALUES OF UNDERLYING ASSETS. THESE UNDERLYING ASSETS CAN BE COMMODITIES, METALS, ENERGY RESOURCES, AND FINANCIAL ASSETS SUCH AS SHARES, BONDS, AND FOREIGN CURRENCIES. 7.3 FURTHER, THE SEBI WEBSITE IN ITS SECTION FREQUENTLY ASKED QUESTIONS HAS EXP THE MEANING OF DERIVATIVE AS UNDER: Q 1. WHAT ARE DERIVATIVES? A. THE TERM DERIVATIVE INDICATES THAT IT HAS NO INDEPENDENT VALUE, I.E. ITS VALUE IS ENTIRELY DERIVED FROM THE VALUE OF THE UNDERLYING ASSET. THE UNDERLYING ASSET CAN BE COMMODITIES, BULLION, CURRENCY, LIVE STOCK OR ANYTHING ELSE. IN OTHER WORDS, DERIVATIVE MEANS A FORWARD, FUTURE OPTION OR ANY OTHER HYBRID CONTRACT OF PRE DETERMINED FIXED DURATION, LINKED FOR THE PURPOSE OF CONTRACT FULFILLMENT TO THE VALUE REAL OR FINANCIAL ASSET OR TO AN INDEX OF SECURITIES. WITH SECURITIES LAWS (SECOND AMENDMENT) ACT,1999, DERIVATIVES HAS BEEN INCLUDED IN THE DEFINITION OF SECURITIES. THE TERM DERIVATIVE HAS BEEN DEFINED IN SECURITIES CONTRACTS (REGULATIONS) RIVATIVE INCLUDES: - A. A SECURITY DERIVED FROM A DEBT INSTRUMENT, SHARE, LOAN, WHETHER SECURED OR UNSECURED, RISK INSTRUMENT OR CONTRACT FOR DIFFERENCES OR ANY OTHER FORM OF SECURITY; B. A CONTRACT WHICH DERIVES ITS VALUE FROM THE PRICES, OR ES, OF UNDERLYING SECURITIES; IT IS FURTHER PROVIDED BY SEBI THAT IN AUG.2008 SEBI PERMITTED EXCHANGE TRADED CURRENCY DERIVATIVE. 7.4 CONSIDERING THE RELEVANT PROVISIONS OF THE RELEVANT ACTS, DISCUSSED HEREIN ABOVE IN THE LIGHT OF HONBLE MADRAS HIGH COURT AND THE ANSWERS GIVEN TO FREQUENTLY ASKED QUESTIONS BY THE SEBI AND THE INCORPORATION OF EXCHANGE TRADED CURRENCY DERIVATIVE AUGUST, 2008, THERE REMAIN NO IOTA OF DOUBT THAT THE TRANSACTION OF THE ASSESSEE CANNOT BE TREATED AS SPECULATIVE TRANSACTION. WE HAVE ALSO GONE THROUGH THE COPIES ITA NO. 651/KOL/2018 ASSESSMENT YEAR: 2013-14 RAMPURIA INDUSTRIES & INVESTMENTS LTD . TIES. THE DEFINITION OF ELIGIBLE TRANSACTION MENTIONED HEREIN ABOVE CLEARLY SHOW THAT THE TRANSACTION MUST HAVE BEEN CARRIED OUT ELECTRONICALLY IN ACCORDANCE WITH THE PROVISIONS OF SECURITIES CONTRACTS (REGULATION) ACT AND THE RULES AND REGULATIONS OR BYE LAWS MADE OR DIRECTIONS ISSUED UNDER THIS ACT OR BY BANKS OR MUTUAL FUNDS ON A RECOGNIZED STOCK EXCHANGE AND WHICH IS SUPPORTED BY TIME STAMPED CONTRACT NOTE ISSUED BY SUCH STOCK BROKER OR INTERMEDIARY TO EVERY CLIENT INDICATING IN THE CONTRA CT NOTE 7.2 IT WOULD BE PERTINENT TO CONSIDER THE DECISION OF HONBLE MADRAS HIGH COURT IN THE CASE OF RAJSHREE SUGAR & CHEMICALS LTD. VS. AXIS BANK LTD., AIR 2011 (MAD) 144, DERIVATIVE HAS BEEN DEFINED TO INCLUDE FOREIGN CURRENCY AS AN UNDERLYING SECURITY OF THE DERIVATIVE. THE RELEVANT EXTRACT OF THE CASE IS QUOTED BELOW: WHAT ARE THESE DERIVATIVES WHICH HAVE GAINED SUCH A GREAT DEAL OF DERIVATIVES ARE FINANCIAL INSTRUMENTS WHOSE VALUES DEPEND ON THE VALUE OF OTHER UNDERLYING FINANCIAL INSTRUMENTS. THE INTERNATIONAL ACCOUNTING STANDARD (IAS) 39, DEFINES A DERIVATIVE IS A FINANCIAL INSTRUMENT: (A) HANGES IN RESPONSE TO THE CHANGE IN A SPECIFIED INTEREST RATE, SECURITY PRICE, COMMODITY PRICE, FOREIGN EXCHANGE RATE, INDEX OF PRICES OR RATES, A CREDIT RATING OR CREDIT INDEX, OR SIMILAR VARIABLE (SOMETIMES CALLED THE UNDERLYING); (B) THAT REQUIRES NO INITIAL NET INVESTMENT OR LITTLE INITIAL NET INVESTMENT RELATIVE TO OTHER TYPES OF CONTRACTS THAT HAVE A SIMILAR RESPONSE TO CHANGES IN MARKET CONDITIONS; AND (C) THAT IS SETTLED AT A FUTURE DATE. ACTUALLY, FROM VALUES OF UNDERLYING ASSETS. THESE UNDERLYING ASSETS CAN BE COMMODITIES, METALS, ENERGY RESOURCES, AND FINANCIAL ASSETS SUCH AS SHARES, BONDS, 7.3 FURTHER, THE SEBI WEBSITE IN ITS SECTION FREQUENTLY ASKED QUESTIONS HAS EXP LAINED THE MEANING OF DERIVATIVE AS UNDER: Q 1. WHAT ARE DERIVATIVES? A. THE TERM DERIVATIVE INDICATES THAT IT HAS NO INDEPENDENT VALUE, I.E. ITS VALUE IS ENTIRELY DERIVED FROM THE VALUE OF THE UNDERLYING ASSET. THE UNDERLYING ASSET CAN BE COMMODITIES, BULLION, CURRENCY, LIVE STOCK OR ANYTHING ELSE. IN OTHER WORDS, DERIVATIVE MEANS A FORWARD, FUTURE OPTION OR ANY OTHER HYBRID CONTRACT OF PRE DETERMINED FIXED DURATION, LINKED FOR THE PURPOSE OF CONTRACT FULFILLMENT TO THE VALUE REAL OR FINANCIAL ASSET OR TO AN INDEX OF SECURITIES. WITH SECURITIES LAWS (SECOND AMENDMENT) ACT,1999, DERIVATIVES HAS BEEN INCLUDED IN THE DEFINITION OF SECURITIES. THE TERM DERIVATIVE HAS BEEN DEFINED IN SECURITIES CONTRACTS (REGULATIONS) A. A SECURITY DERIVED FROM A DEBT INSTRUMENT, SHARE, LOAN, WHETHER SECURED OR UNSECURED, RISK INSTRUMENT OR CONTRACT FOR DIFFERENCES OR ANY OTHER FORM OF SECURITY; B. A CONTRACT WHICH DERIVES ITS VALUE FROM THE PRICES, OR IT IS FURTHER PROVIDED BY SEBI THAT IN 7.4 CONSIDERING THE RELEVANT PROVISIONS OF THE RELEVANT ACTS, DISCUSSED HEREIN ABOVE IN THE LIGHT OF HONBLE MADRAS HIGH COURT AND THE ANSWERS GIVEN TO FREQUENTLY ASKED QUESTIONS BY THE SEBI AND THE INCORPORATION OF EXCHANGE TRADED CURRENCY DERIVATIVE AUGUST, 2008, THERE REMAIN NO IOTA OF DOUBT THAT THE TRANSACTION OF THE ASSESSEE CANNOT BE TREATED AS SPECULATIVE TRANSACTION. WE HAVE ALSO GONE THROUGH THE COPIES OF THE CONTRACT NOTES INCORPORATED IN THE PAPER BOOK FILED BEFORE US. A PERUSAL OF THE CONT RACT NOTE SHOWS THAT THE ASSESSEE HAS EITHER ENTERED INTO CALL OPTION OR PUT OPTION AND ON THE SETTLEMENT DAY THE TRANSACTION HAS BEEN SETTLED BY DELIVERY, EITHER THE ASSESSEE HAS PAID US DOLLAR ON THE SETTLEMENT DAY OR HAS TAKEN DELIVERY OF US DOLLAR. 7. 5 TO SUM UP, THE DERIVATIVES INCLUDE FOREIGN CURRENCY AND CALL OPTION/ PUT OPTION, ARE TRANSACTIONS OF DERIVATIVE MARKETS AND CANNOT BE TERMED AS SPECULATIVE IN NATURE. CONSIDERING THE TOTALITY OF THE FACTS AND IN THE LIGHT OF THE JUDICIAL DISCUSSION HEREI N ABOVE, WE HAVE NO HESITATION IN SETTING ASIDE THE ORDER OF LD. CIT(A). APPEAL FILED BY THE ASSESSEE IS ACCORDINGLY ALLOWED. 8. THE AGRA BENCH OF THE TRIBUNAL IN THE CASE OF CONSIDERED THIS ISSUE AND HELD AS FOLLOWS: 10. THE LD. CIT(A) HAS, THEREFORE, CONSIDERED THE TRANSACTIONS ENTERED INTO BY THE ASSESSEE, TO BE SPECULATIVE TRANSACTIONS. THE LOSS INCURRED BY THE ASSESSEE HAS, THEREBY, NOT BEEN ALLOWED TO BE SET OFF AGAINST OTHER BUSINESS INCOME OF THE ASSESSEE. THE LD. C IT(A) HAS HELD THAT THESE TRANSACTIONS IN CURRENCY DERIVATIVES, 'MARKED TO MARKET' TRANSACTIONS. 11. NOW, THE EXPLANATION 2 BELOW SECTION 28 OF THE ACT PROVIDES THAT WHERE SPECULATIVE TRANSACTIONS EARNED BY AN ASSESSEE ARE OF SUCH NATURE AS TO CONSTITUTE A SAID SPECULATION BUSINESS SHALL BE DEEMED TO BE DISTINCT AND SEPARATE FROM ANY OTHER BUSINESS. SECTION 73(1) PROHIBITS THE LOSS ON SPECULATION BUSINESS BEING ADJUSTED AGAINST INCOME FROM ANY OTHER BUSINESS. THUS, THE MAIN ISSUE UP FOR CONSID WHETHER THE TRADING CURRENCY DERIVATIVE TRANSACTIONS CONDUCTED BY THE ASSESSEE CONSTITUTE 'SPECULATIVE TRANSACTIONS'. 12. THE TERM 'SPECULATIVE TRANSACTION' HAS BEEN DEFINED UNDER SECTION 43(5) OF THE ACT TO MEAN A TRANSACTION IN WHICH A CONTRAC INCLUDING STOCK AND SHARES IS PERIODICALLY OR ULTIMATELY SETTLED OTHERWISE THAN BY ACTUAL DELIVERY OR TRANSFER OF THE COMMODITY OR SCRIPT. HOWEVER, THERE ARE FIVE EXCEPTIONS TO THIS GENERAL RULE PROVIDED BY WAY (E), WHERE THE TRANSACTION, DESPITE HAVING BEEN SETTLED OTHERWISE THAN BY ACTUAL DELIVERY, IS NOT TO BE TREATED AS A 'SPECULATIVE TRANSACTION'. THE ASSESSEE'S CONTENTION IS THAT HIS CASE FALLS UNDER CLAUSE (D) OF THE 13. CLAUSE (D) OF THE PROVISO TO SECTION 43(5) PROVIDES THAT 'AN ELIGIBLE TRANSACTION IN RESPECT OF TRADING IN DERIVATIVES REFERRED TO IN CLAUSE (AC) OF SECTION 2 OF THE SECURITIES CONTRACT (REGULATION) ACT, 1956 (42 EXCHANGE SHALL NOT BE DEEMED TO BE A SPECULATIVE TRANSACTION. THE EXPLANATION 1 TO SECTION 43(5) OF THE IT ACT FURTHER DEFINES CERTAIN WORDS REFERRED TO IN THE SAID CLAUSE (D), AS UNDER: (I) 'ELIGIBLE TRANSACTION' MEANS ANY TRANSACTION, (A) CARRIED OUT ELECTRONICALLY ON SCREEN SUB 7 RAMPURIA INDUSTRIES & INVESTMENTS LTD OF THE CONTRACT NOTES INCORPORATED IN THE PAPER BOOK FILED BEFORE US. A PERUSAL OF THE RACT NOTE SHOWS THAT THE ASSESSEE HAS EITHER ENTERED INTO CALL OPTION OR PUT OPTION AND ON THE SETTLEMENT DAY THE TRANSACTION HAS BEEN SETTLED BY DELIVERY, EITHER THE ASSESSEE HAS PAID US DOLLAR ON THE SETTLEMENT DAY OR HAS TAKEN DELIVERY OF US 5 TO SUM UP, THE DERIVATIVES INCLUDE FOREIGN CURRENCY AND CALL OPTION/ PUT OPTION, ARE TRANSACTIONS OF DERIVATIVE MARKETS AND CANNOT BE TERMED AS SPECULATIVE IN NATURE. CONSIDERING THE TOTALITY OF THE FACTS AND IN THE LIGHT OF THE JUDICIAL DISCUSSION N ABOVE, WE HAVE NO HESITATION IN SETTING ASIDE THE ORDER OF LD. CIT(A). APPEAL FILED BY THE ASSESSEE IS ACCORDINGLY ALLOWED. THE AGRA BENCH OF THE TRIBUNAL IN THE CASE OF NAND NANDAN AGRAWAL (SUPRA) CONSIDERED THIS ISSUE AND HELD AS FOLLOWS: - THE LD. CIT(A) HAS, THEREFORE, CONSIDERED THE TRANSACTIONS ENTERED INTO BY THE ASSESSEE, TO BE SPECULATIVE TRANSACTIONS. THE LOSS INCURRED BY THE ASSESSEE HAS, THEREBY, NOT BEEN ALLOWED TO BE SET OFF AGAINST OTHER BUSINESS INCOME OF THE ASSESSEE. THE LD. IT(A) HAS HELD THAT THESE TRANSACTIONS IN CURRENCY DERIVATIVES, 'MARKED TO MARKET' NOW, THE EXPLANATION 2 BELOW SECTION 28 OF THE ACT PROVIDES THAT WHERE SPECULATIVE TRANSACTIONS EARNED BY AN ASSESSEE ARE OF SUCH NATURE AS TO CONSTITUTE A SAID SPECULATION BUSINESS SHALL BE DEEMED TO BE DISTINCT AND SEPARATE FROM ANY OTHER BUSINESS. SECTION 73(1) PROHIBITS THE LOSS ON SPECULATION BUSINESS BEING ADJUSTED AGAINST INCOME FROM ANY OTHER BUSINESS. THUS, THE MAIN ISSUE UP FOR CONSID WHETHER THE TRADING CURRENCY DERIVATIVE TRANSACTIONS CONDUCTED BY THE ASSESSEE CONSTITUTE 'SPECULATIVE TRANSACTIONS'. THE TERM 'SPECULATIVE TRANSACTION' HAS BEEN DEFINED UNDER SECTION 43(5) OF THE ACT TO MEAN A TRANSACTION IN WHICH A CONTRAC T FOR THE PURCHASE OR SALE OF ANY COMMODITY, INCLUDING STOCK AND SHARES IS PERIODICALLY OR ULTIMATELY SETTLED OTHERWISE THAN BY ACTUAL DELIVERY OR TRANSFER OF THE COMMODITY OR SCRIPT. HOWEVER, THERE ARE FIVE EXCEPTIONS TO THIS GENERAL RULE PROVIDED BY WAY OF A PROVISO CONTAINING CLAUSES (A) TO (E), WHERE THE TRANSACTION, DESPITE HAVING BEEN SETTLED OTHERWISE THAN BY ACTUAL DELIVERY, IS NOT TO BE TREATED AS A 'SPECULATIVE TRANSACTION'. THE ASSESSEE'S CONTENTION IS THAT HIS CASE FALLS UNDER CLAUSE (D) OF THE PROVISO TO SECTION 43(5) OF THE IT ACT. CLAUSE (D) OF THE PROVISO TO SECTION 43(5) PROVIDES THAT 'AN ELIGIBLE TRANSACTION IN RESPECT OF TRADING IN DERIVATIVES REFERRED TO IN CLAUSE (AC) OF SECTION 2 OF THE SECURITIES CONTRACT (REGULATION) ACT, 1956 (42 OF 1956) CARRIED OUT IN A RECOGNISED STOCK EXCHANGE SHALL NOT BE DEEMED TO BE A SPECULATIVE TRANSACTION. THE EXPLANATION 1 TO SECTION 43(5) OF THE IT ACT FURTHER DEFINES CERTAIN WORDS REFERRED TO IN THE SAID CLAUSE 'ELIGIBLE TRANSACTION' MEANS ANY TRANSACTION, CARRIED OUT ELECTRONICALLY ON SCREEN - BASED SYSTEM THROUGH A STOCK BROKER OR SUB -BROKER OR THROUGH ... ITA NO. 651/KOL/2018 ASSESSMENT YEAR: 2013-14 RAMPURIA INDUSTRIES & INVESTMENTS LTD . OF THE CONTRACT NOTES INCORPORATED IN THE PAPER BOOK FILED BEFORE US. A PERUSAL OF THE RACT NOTE SHOWS THAT THE ASSESSEE HAS EITHER ENTERED INTO CALL OPTION OR PUT OPTION AND ON THE SETTLEMENT DAY THE TRANSACTION HAS BEEN SETTLED BY DELIVERY, EITHER THE ASSESSEE HAS PAID US DOLLAR ON THE SETTLEMENT DAY OR HAS TAKEN DELIVERY OF US 5 TO SUM UP, THE DERIVATIVES INCLUDE FOREIGN CURRENCY AND CALL OPTION/ PUT OPTION, ARE TRANSACTIONS OF DERIVATIVE MARKETS AND CANNOT BE TERMED AS SPECULATIVE IN NATURE. CONSIDERING THE TOTALITY OF THE FACTS AND IN THE LIGHT OF THE JUDICIAL DISCUSSION N ABOVE, WE HAVE NO HESITATION IN SETTING ASIDE THE ORDER OF LD. CIT(A). APPEAL NAND NANDAN AGRAWAL (SUPRA) HAS THE LD. CIT(A) HAS, THEREFORE, CONSIDERED THE TRANSACTIONS ENTERED INTO BY THE ASSESSEE, TO BE SPECULATIVE TRANSACTIONS. THE LOSS INCURRED BY THE ASSESSEE HAS, THEREBY, NOT BEEN ALLOWED TO BE SET OFF AGAINST OTHER BUSINESS INCOME OF THE ASSESSEE. THE LD. IT(A) HAS HELD THAT THESE TRANSACTIONS IN CURRENCY DERIVATIVES, 'MARKED TO MARKET' NOW, THE EXPLANATION 2 BELOW SECTION 28 OF THE ACT PROVIDES THAT WHERE SPECULATIVE TRANSACTIONS EARNED BY AN ASSESSEE ARE OF SUCH NATURE AS TO CONSTITUTE A BUSINESS, THE SAID SPECULATION BUSINESS SHALL BE DEEMED TO BE DISTINCT AND SEPARATE FROM ANY OTHER BUSINESS. SECTION 73(1) PROHIBITS THE LOSS ON SPECULATION BUSINESS BEING ADJUSTED AGAINST INCOME FROM ANY OTHER BUSINESS. THUS, THE MAIN ISSUE UP FOR CONSID ERATION IS WHETHER THE TRADING CURRENCY DERIVATIVE TRANSACTIONS CONDUCTED BY THE ASSESSEE THE TERM 'SPECULATIVE TRANSACTION' HAS BEEN DEFINED UNDER SECTION 43(5) OF THE ACT T FOR THE PURCHASE OR SALE OF ANY COMMODITY, INCLUDING STOCK AND SHARES IS PERIODICALLY OR ULTIMATELY SETTLED OTHERWISE THAN BY ACTUAL DELIVERY OR TRANSFER OF THE COMMODITY OR SCRIPT. HOWEVER, THERE ARE FIVE OF A PROVISO CONTAINING CLAUSES (A) TO (E), WHERE THE TRANSACTION, DESPITE HAVING BEEN SETTLED OTHERWISE THAN BY ACTUAL DELIVERY, IS NOT TO BE TREATED AS A 'SPECULATIVE TRANSACTION'. THE ASSESSEE'S CONTENTION IS PROVISO TO SECTION 43(5) OF THE IT ACT. CLAUSE (D) OF THE PROVISO TO SECTION 43(5) PROVIDES THAT 'AN ELIGIBLE TRANSACTION IN RESPECT OF TRADING IN DERIVATIVES REFERRED TO IN CLAUSE (AC) OF SECTION 2 OF THE SECURITIES OF 1956) CARRIED OUT IN A RECOGNISED STOCK EXCHANGE SHALL NOT BE DEEMED TO BE A SPECULATIVE TRANSACTION. THE EXPLANATION 1 TO SECTION 43(5) OF THE IT ACT FURTHER DEFINES CERTAIN WORDS REFERRED TO IN THE SAID CLAUSE BASED SYSTEM THROUGH A STOCK BROKER OR (B) WHICH, IS SUPPORTED BY A TIME STAMPED CONTRACT NOTE ISSUED BY SUCH STOCK BROKER OR SUB IDENTITY NUMBER ALLOTTED ANY ACT REFERRED TO IN SUB PERMANENT ACCOUNT NUMBER ALLOTTED (II) 'RECOGNISED STOCK EXCHANGE' MEANS A RECOGNISED STOCK EXCHANGE AS REFERRED TO IN CLAUSE (F) OF SECTION 2 OF SECURITIES CONTRACT (REGULATION) ACT, 1956 (42 OF 1956) AND WHICH FULFILLS SUCH CONDITIONS AS MAY BE PRESCRIBED AND NOTIFIE THIS PURPOSE' 14. CONCERNING THE SATISFACTION OF THE CONDITION WITH REGARD TO AN ELIGIBLE TRANSACTION, IT IS A PERUSAL OF THE CONTRACT NOTES, PLACED AT APB 56 TO 237 SHOWS THAT THE TRANSACTIONS ARE IN RELATION TO TRANSACTIONS CARRIED OUT THROUGH AN ON SYSTEM ( CURRENCY DERIVATIVES SEGMENT OF MCX STOCK EXCHANGE LTD.), THROUGH A STOCK BROKER, NAMELY, MANSUKH SECURITIES & FINANCE LTD. (SEBI REGN. NO. INE260781431, TRADING MEMBER CODE NO.38500, PAN: AAACMIV01D). THE CONTRACT NOTES BEAR THE UNIQUE IDENTITY CODE AZNNI NOTES ALSO MENTION ORDER NUMBERS, ORDER TIME, TRADE NO. AND TRADE TIME, BESIDES OTHER DETAILS. THUS, ALL THE CONDITIONS OF AN 'ELIGIBLE TRANSACTION' ARE SATISFIED. SO FAR AS THE CONDITION OF A 'RECOGN ISED STOCK EXCHANGE' IS CONCERNED, THE TRANSACTION HAS BEEN CARRIED OUT AT MCX STOCK EXCHANGE LTD., WHICH IS RECOGNISED BY SO 1327(E) DATED 22.05.2009 (NOTE 24 AT PAGE 1.322 OF TAXMANN'S INCOME TAX ACT, 2017). THUS THIS CONDITION IS ALSO SATISFIED. 15. THE THIRD CONDITION IS 'TRADING IN DERIVATIVES' REFERRED TO IN CLAUSE (AC) OF SECTION 2 OF THE SECURITIES CONTRACT (REGULATION) ACT, 1956 (42 OF 1956). IN THE CASE OF IVF ADVISORS (P.) LTD. V. ASSTT. CIT 277), THE MUMBAI TRIBUNAL, HAS REFERRED TO THE DEFINITION OF DERIVATIVES AS CONTAINED IN CLAUSE (AC) OF SECTION 2 OF THE SECURITIES CONTRACT (REGULATION) ACT, 1956, REFERRED TO BY THE HON'BLE MADRAS HIGH COURT IN ITS DECISION IN THE CASE OF RAJ CHEMICALS LTD. V. AXIS BANK LTD. AIR 2011 MAD 144, WHERE THE TERM 'DERIVATIVES' HAS BEEN DEFINED TO INCLUDE FOREIGN CURRENCY AS UNDERLYING SECURITY OF DERIVATIVES, ALSO REFERRED TO FAQ AVAILABLE ON THE SEBI WEBSITE AND THE FACT THAT THE SEBI EXCHANGE TRADED CURRENCY DERIVATIVES IN AUGUST, 2008 AND CAME TO THE CONCLUSION THAT (PARA 7.5, APB 276) DERIVATIVES INCLUDE FOREIGN CURRENCY AND CALL OPTION/PUT OPTION, ARE TRANSACTIONS OF DERIVATIVE MARKETS. THUS, AS RIGHTLY SUBMITTED, THE TRAD CURRENCY DERIVATIVES MADE BY THE ASSESSEE IS COVERED BY THE DEFINITION OF 'DERIVATIVES' AS CONTAINED IN CLAUSE (D) OF THE PROVISO TO SECTION 43(5) OF THE IT ACT. THIS POSITION ALSO STANDS ACCEPTED BY THE CBDT IN ITS INSTRUCTION NO. 3/2010 (APB 342 THE ASSESSEE FULLY COMPLIES WITH THE CONDITIONS PRESCRIBED UNDER CLAUSE (D) OF PROVISO TO SECTION 43(5) OF THE ACT, READ WITH THE EXPLANATION THERETO. 16. THE LD. CIT(A) HAS TAKEN DUE NOTE OF THE CONTENTION OF ASSESSEE THAT THE TRANSACTIONS OF CURRENCY DERIVATIVES WERE CONDUCTED THROUGH A RECOGNISED STOCK BROKER, ON A RCCOGNISED STOCK EXCHANGE AND THEY WERE DULY SUPPORTED BY TIME STAMPED CONTRACT NOTES. HE EXAMINED THE PROVISIONS OF SECTION 43(5) OF THE IT ACT AND THE PROVISO THERETO AND HELD TH CLAUSE (A) OF THE PROVISO TO SECTION 43(5) OF THE ACT (I.E., THE TRANSACTIONS COULD NOT BE TREATED AS HEDGING TRANSACTIONS), BUT TO BE CONSIDERED UNDER CLAUSE (D) OF THE PROVISO TO SECTION 43(5) OF THE IT ACT AND IN THE LIGHT OF THE CASES RELIED ON BY THE ASSESSEE. HE HAS THEN REFERRED TO SECTION 73(1) AND EXPLANATION 2 TO SECTION 28. HE ALSO REFERRED TO 8 RAMPURIA INDUSTRIES & INVESTMENTS LTD WHICH, IS SUPPORTED BY A TIME STAMPED CONTRACT NOTE ISSUED BY SUCH STOCK BROKER OR SUB - BROKER OR ... INDICATING IN THE CONTRACT NOTE THE UNIQUE CLIENT IDENTITY NUMBER ALLOTTED ANY ACT REFERRED TO IN SUB PERMANENT ACCOUNT NUMBER ALLOTTED UNDER THIS ACT; 'RECOGNISED STOCK EXCHANGE' MEANS A RECOGNISED STOCK EXCHANGE AS REFERRED TO IN CLAUSE (F) OF SECTION 2 OF SECURITIES CONTRACT (REGULATION) ACT, 1956 (42 OF 1956) AND WHICH FULFILLS SUCH CONDITIONS AS MAY BE PRESCRIBED AND NOTIFIE S BY THE CENTRAL GOVERNMENT FOR THIS PURPOSE' CONCERNING THE SATISFACTION OF THE CONDITION WITH REGARD TO AN ELIGIBLE TRANSACTION, IT IS A PERUSAL OF THE CONTRACT NOTES, PLACED AT APB 56 TO 237 SHOWS THAT THE TRANSACTIONS ARE IN RELATION TO TRANSACTIONS CARRIED OUT THROUGH AN ON CURRENCY DERIVATIVES SEGMENT OF MCX STOCK EXCHANGE LTD.), THROUGH A STOCK BROKER, NAMELY, MANSUKH SECURITIES & FINANCE LTD. (SEBI REGN. NO. INE260781431, TRADING MEMBER CODE NO.38500, PAN: AAACMIV01D). THE CONTRACT NOTES BEAR THE UNIQUE IDENTITY CODE AZNNI AND PAN OF THE ASSESSEE I.E., AQZPA3204D. THE CONTRACT NOTES ALSO MENTION ORDER NUMBERS, ORDER TIME, TRADE NO. AND TRADE TIME, BESIDES OTHER DETAILS. THUS, ALL THE CONDITIONS OF AN 'ELIGIBLE TRANSACTION' ARE SATISFIED. SO FAR AS THE ISED STOCK EXCHANGE' IS CONCERNED, THE TRANSACTION HAS BEEN CARRIED OUT AT MCX STOCK EXCHANGE LTD., WHICH IS RECOGNISED BY SO 1327(E) DATED 22.05.2009 (NOTE 24 AT PAGE 1.322 OF TAXMANN'S INCOME TAX ACT, 2017). THUS THIS CONDITION IS ALSO SATISFIED. THIRD CONDITION IS 'TRADING IN DERIVATIVES' REFERRED TO IN CLAUSE (AC) OF SECTION 2 OF THE SECURITIES CONTRACT (REGULATION) ACT, 1956 (42 OF 1956). IN THE CASE OF IVF ADVISORS (P.) LTD. V. ASSTT. CIT [2015] 55 TAXMANN.COM 469 (MUM.- TRIB 277), THE MUMBAI TRIBUNAL, HAS REFERRED TO THE DEFINITION OF DERIVATIVES AS CONTAINED IN CLAUSE (AC) OF SECTION 2 OF THE SECURITIES CONTRACT (REGULATION) ACT, 1956, REFERRED TO BY THE HON'BLE MADRAS HIGH COURT IN ITS DECISION IN THE CASE OF RAJ CHEMICALS LTD. V. AXIS BANK LTD. AIR 2011 MAD 144, WHERE THE TERM 'DERIVATIVES' HAS BEEN DEFINED TO INCLUDE FOREIGN CURRENCY AS UNDERLYING SECURITY OF DERIVATIVES, ALSO REFERRED TO FAQ AVAILABLE ON THE SEBI WEBSITE AND THE FACT THAT THE SEBI EXCHANGE TRADED CURRENCY DERIVATIVES IN AUGUST, 2008 AND CAME TO THE CONCLUSION THAT (PARA 7.5, APB 276) DERIVATIVES INCLUDE FOREIGN CURRENCY AND CALL OPTION/PUT OPTION, ARE TRANSACTIONS OF DERIVATIVE MARKETS. THUS, AS RIGHTLY SUBMITTED, THE TRAD CURRENCY DERIVATIVES MADE BY THE ASSESSEE IS COVERED BY THE DEFINITION OF 'DERIVATIVES' AS CONTAINED IN CLAUSE (D) OF THE PROVISO TO SECTION 43(5) OF THE IT ACT. THIS POSITION ALSO STANDS ACCEPTED BY THE CBDT IN ITS INSTRUCTION NO. 3/2010 (APB 342 THE ASSESSEE FULLY COMPLIES WITH THE CONDITIONS PRESCRIBED UNDER CLAUSE (D) OF PROVISO TO SECTION 43(5) OF THE ACT, READ WITH THE EXPLANATION THERETO. THE LD. CIT(A) HAS TAKEN DUE NOTE OF THE CONTENTION OF ASSESSEE THAT THE CURRENCY DERIVATIVES WERE CONDUCTED THROUGH A RECOGNISED STOCK BROKER, ON A RCCOGNISED STOCK EXCHANGE AND THEY WERE DULY SUPPORTED BY TIME STAMPED CONTRACT NOTES. HE EXAMINED THE PROVISIONS OF SECTION 43(5) OF THE IT ACT AND THE PROVISO THERETO AND HELD TH AT THE CASE OF THE ASSESSEE COULD NOT BE COVERED UNDER CLAUSE (A) OF THE PROVISO TO SECTION 43(5) OF THE ACT (I.E., THE TRANSACTIONS COULD NOT BE TREATED AS HEDGING TRANSACTIONS), BUT TO BE CONSIDERED UNDER CLAUSE (D) OF THE PROVISO IT ACT AND IN THE LIGHT OF THE CASES RELIED ON BY THE ASSESSEE. HE HAS THEN REFERRED TO SECTION 73(1) AND EXPLANATION 2 TO SECTION 28. HE ALSO REFERRED TO ITA NO. 651/KOL/2018 ASSESSMENT YEAR: 2013-14 RAMPURIA INDUSTRIES & INVESTMENTS LTD . WHICH, IS SUPPORTED BY A TIME STAMPED CONTRACT NOTE ISSUED BY SUCH STOCK BROKER OR ... INDICATING IN THE CONTRACT NOTE THE UNIQUE CLIENT IDENTITY NUMBER ALLOTTED ANY ACT REFERRED TO IN SUB -CLAUSE (A) AND THE 'RECOGNISED STOCK EXCHANGE' MEANS A RECOGNISED STOCK EXCHANGE AS REFERRED TO IN CLAUSE (F) OF SECTION 2 OF SECURITIES CONTRACT (REGULATION) ACT, 1956 (42 OF 1956) AND WHICH S BY THE CENTRAL GOVERNMENT FOR CONCERNING THE SATISFACTION OF THE CONDITION WITH REGARD TO AN ELIGIBLE TRANSACTION, IT IS A PERUSAL OF THE CONTRACT NOTES, PLACED AT APB 56 TO 237 SHOWS THAT THE TRANSACTIONS ARE IN RELATION TO TRANSACTIONS CARRIED OUT THROUGH AN ON -SCREEN BASED CURRENCY DERIVATIVES SEGMENT OF MCX STOCK EXCHANGE LTD.), THROUGH A STOCK BROKER, NAMELY, MANSUKH SECURITIES & FINANCE LTD. (SEBI REGN. NO. INE260781431, TRADING MEMBER CODE NO.38500, PAN: AAACMIV01D). THE CONTRACT NOTES BEAR THE AND PAN OF THE ASSESSEE I.E., AQZPA3204D. THE CONTRACT NOTES ALSO MENTION ORDER NUMBERS, ORDER TIME, TRADE NO. AND TRADE TIME, BESIDES OTHER DETAILS. THUS, ALL THE CONDITIONS OF AN 'ELIGIBLE TRANSACTION' ARE SATISFIED. SO FAR AS THE ISED STOCK EXCHANGE' IS CONCERNED, THE TRANSACTION HAS BEEN CARRIED OUT AT MCX STOCK EXCHANGE LTD., WHICH IS RECOGNISED BY SO 1327(E) DATED 22.05.2009 (NOTE 24 AT PAGE 1.322 OF TAXMANN'S INCOME TAX ACT, 2017). THUS THIS THIRD CONDITION IS 'TRADING IN DERIVATIVES' REFERRED TO IN CLAUSE (AC) OF SECTION 2 OF THE SECURITIES CONTRACT (REGULATION) ACT, 1956 (42 OF 1956). IN THE CASE OF IVF TRIB .) (APB 272 - 277), THE MUMBAI TRIBUNAL, HAS REFERRED TO THE DEFINITION OF DERIVATIVES AS CONTAINED IN CLAUSE (AC) OF SECTION 2 OF THE SECURITIES CONTRACT (REGULATION) ACT, 1956, REFERRED TO BY THE HON'BLE MADRAS HIGH COURT IN ITS DECISION IN THE CASE OF RAJ SHREE SUGAR & CHEMICALS LTD. V. AXIS BANK LTD. AIR 2011 MAD 144, WHERE THE TERM 'DERIVATIVES' HAS BEEN DEFINED TO INCLUDE FOREIGN CURRENCY AS UNDERLYING SECURITY OF DERIVATIVES, ALSO REFERRED TO FAQ AVAILABLE ON THE SEBI WEBSITE AND THE FACT THAT THE SEBI PERMITTED EXCHANGE TRADED CURRENCY DERIVATIVES IN AUGUST, 2008 AND CAME TO THE CONCLUSION THAT (PARA 7.5, APB 276) DERIVATIVES INCLUDE FOREIGN CURRENCY AND CALL OPTION/PUT OPTION, ARE TRANSACTIONS OF DERIVATIVE MARKETS. THUS, AS RIGHTLY SUBMITTED, THE TRAD ING OF CURRENCY DERIVATIVES MADE BY THE ASSESSEE IS COVERED BY THE DEFINITION OF 'DERIVATIVES' AS CONTAINED IN CLAUSE (D) OF THE PROVISO TO SECTION 43(5) OF THE IT ACT. THIS POSITION ALSO STANDS ACCEPTED BY THE CBDT IN ITS INSTRUCTION NO. 3/2010 (APB 342 -343). THUS, THE ASSESSEE FULLY COMPLIES WITH THE CONDITIONS PRESCRIBED UNDER CLAUSE (D) OF PROVISO THE LD. CIT(A) HAS TAKEN DUE NOTE OF THE CONTENTION OF ASSESSEE THAT THE CURRENCY DERIVATIVES WERE CONDUCTED THROUGH A RECOGNISED STOCK BROKER, ON A RCCOGNISED STOCK EXCHANGE AND THEY WERE DULY SUPPORTED BY TIME STAMPED CONTRACT NOTES. HE EXAMINED THE PROVISIONS OF SECTION 43(5) OF THE IT ACT AND THE AT THE CASE OF THE ASSESSEE COULD NOT BE COVERED UNDER CLAUSE (A) OF THE PROVISO TO SECTION 43(5) OF THE ACT (I.E., THE TRANSACTIONS COULD NOT BE TREATED AS HEDGING TRANSACTIONS), BUT TO BE CONSIDERED UNDER CLAUSE (D) OF THE PROVISO IT ACT AND IN THE LIGHT OF THE CASES RELIED ON BY THE ASSESSEE. HE HAS THEN REFERRED TO SECTION 73(1) AND EXPLANATION 2 TO SECTION 28. HE ALSO REFERRED TO CBDT INSTRUCTION NO. 3/2010 DATED 23.03.2010 AND BASED ON HIS INTERPRETATION OF THE SAID INSTRUCTION , IT WAS HELD THAT THE LOSS INCURRED BY THE ASSESSEE WAS A NOTIONAL LOSS AS BEING CARRIED OUT IN 'MARKED TO MARKET' AND THUS, THE LD. CIT(A) DENIED THE BENEFIT OF SET OFF OF LOSSES. 17. INSTRUCTION NO. 3/2010, DATED 23.03.2010, ISSUED BY THE CBDT (APB 342 RIGHTLY CONTENDED, IS AN INTERNAL INSTRUCTION ISSUED BY THE BOARD FOR THE GUIDANCE OF ITS OFFICERS WITH REGARD TO THE MATTER PERTAINING TO TRADING IN CURRENCY DERIVATIVES. IT IS BROADLY DIVIDED INTO TWO PARTS. ONE IS ACTUAL LOSS IN FOREX DERIVATIVE DRAWN THE ATTENTION OF THE OFFICERS TO THE STATUTORY PROVISIONS CONTAINED IN CLAUSE (D) OF THE PROVISO TO SECTION 43(5) READ WITH THE EXPLANATION THEREOF. THIS PART OF THE INSTRUCTION SUPPORTS THE CASE OF ASSESSEE, AS ABOVE. THE SECOND PAR INSTRUCTION IS REGARDING LOSS ON ACCOUNT OF 'MARKED INSTRUCTION, LOSSES ARISING ON ACCOUNT OF THE POSITION HELD IN A FINANCIAL INSTRUMENT BASED ON MARKET PRICE ON THE CLOSING DAY OF AN ACCOUNTING PERIOD IS NOT TH RATHER, IT IS A NOTIONAL LOSS AND SHOULD NOT BE ALLOWED. 18. THE LD. CIT(A), WITHOUT LOOKING INTO THE POSITION HELD BY THE ASSESSEE AS ON THE CLOSE OF THE FINANCIAL YEAR AND AS TO WHAT WAS THE LOSS ON SUCH POSITION, WHICH, AT MOST, IN ACCORD ANCE WITH THE BOARD'S INSTRUCTION, MAY BE HELD TO BE A NOTIONAL LOSS, HAS HELD THE WHOLE OF THE TRADING LOSS TO BE A NOTIONAL LOSS. THE ASSESSEE CONTENDS THAT THOUGH THE TRANSACTIONS ENTERED BY IT IN CURRENCY DERIVATIVES ARE 'MARKED O NLY TRANSACTION OF 1,200 NOS. OF LOT OF CURRENCY DERIVATIVES SOLD BY THE ASSESSEE FOR A TOTAL AMOUNT OF RS. 65,555,211, WHICH, ON ACCOUNT OF BEING 'MARKED TO MARKET', RESULTED INTO A LOSS OF RS. 51,789/ AND HENCE, GOING BY THE REASONING OF THE LD. CIT (A), AT THE MOST, LOSS OF RS.51,789/ ONLY COULD BE DISALLOWED AND THE BALANCE RS. 16,57,332/ EVEN THE SAID (NOTIONAL) LOSS OF RS. 51,789/ YEAR 2014- 15, TOGETHER WITH THE LOSS OF RS.1,184,370/ YEAR 2014- 15, AS THERE NO CONTRACT OUTSTANDING AS ON 31.03.2014. IT HAS BEEN CLARIFIED THAT THE ASSESSEE HAD TRADED IN TOTAL SEVEN SERIES OF CONTRACTS DURING THE YEAR (APB 238). LEDGER ACCOUNTS IN RESPECT OF EACH SERIES OF CONTRACTS ARE PLACED AT APB 239 TO 245. ALL SERIES OF CONTRACTS EXCEPT FOR USD (26.04.2013) (APB 240) HAD EXPIRED BEFORE THE CLOSE OF THE FINANCIAL YEAR, ON 31.03.2013 AND THUS, THERE WAS NO OCCASION THAT CONTRACTS FOR THOSE SERIES OF TRANSACTIONS COULD BE OUTSTANDING AS ON 31.03.2013. 19. THE LOGIC OF THE BOARD IN TERMING LOSS IN RESPECT OF UNEXPIRED CONTRACTS (OR, IN OTHER WORDS, IN RESPECT OF POSITION HELD AS AT THE CLOSE OF ACCOUNTING PERIOD) HAS NOT FO UND FAVOUR WITH THE COURTS AND EVEN THE LOSS ON ACCOUNT OF 'MARKED TO MARKET' IN RESPECT OF SUCH OUTSTANDING POSITION COULD NOT BE TREATED AS NOTIONAL LOSS, BECAUSE SAME IS BASED / ON THE TIME OF CO ST OR MARKET VALUE. THE HON'BLE BOMBAY HIGH COURT, BY ITS ORDER DATED 15.10.2016, IN ITA NO. 896/2014, IN 'CIT VS. MUNJANI BROTHERS' (COPY PLACED ON RECORD), DISMISSED THE REVENUE'S APPEAL, WHERE THE SUBSTANTIAL QUESTION OF LAW FOR THE CONSIDERATION OF THE HON'BLE HIGH COURT WAS AS UNDER: 'WHETHER ON THE /ACTS AND IN CIRCUMSTANCES OF THE CASE AND IN LAW, THE TRIBUNAL WAS RIGHT IN DELETING THE ADDITION OF RS. 59,90,341/ ON ACCOUNT OF DISALLOWANCE OF MARK TO MARKET LOSS ON FOREI CONTRACT LOSS AND NOT APPRECIATING THE FACT THAT THE SAID LOSS WAS NOT A NOTIONAL LOSS AND CANNOT BE ALLOWED' 9 RAMPURIA INDUSTRIES & INVESTMENTS LTD CBDT INSTRUCTION NO. 3/2010 DATED 23.03.2010 AND BASED ON HIS INTERPRETATION OF THE , IT WAS HELD THAT THE LOSS INCURRED BY THE ASSESSEE WAS A NOTIONAL LOSS AS BEING CARRIED OUT IN 'MARKED TO MARKET' AND THUS, THE LD. CIT(A) DENIED THE BENEFIT OF INSTRUCTION NO. 3/2010, DATED 23.03.2010, ISSUED BY THE CBDT (APB 342 RIGHTLY CONTENDED, IS AN INTERNAL INSTRUCTION ISSUED BY THE BOARD FOR THE GUIDANCE OF ITS OFFICERS WITH REGARD TO THE MATTER PERTAINING TO TRADING IN CURRENCY DERIVATIVES. IT IS BROADLY DIVIDED INTO TWO PARTS. ONE IS ACTUAL LOSS IN FOREX DERIVATIVE S. THE BOARD HAS DRAWN THE ATTENTION OF THE OFFICERS TO THE STATUTORY PROVISIONS CONTAINED IN CLAUSE (D) OF THE PROVISO TO SECTION 43(5) READ WITH THE EXPLANATION THEREOF. THIS PART OF THE INSTRUCTION SUPPORTS THE CASE OF ASSESSEE, AS ABOVE. THE SECOND PAR INSTRUCTION IS REGARDING LOSS ON ACCOUNT OF 'MARKED -TO- MARKET' LOSSES. AS PER THE INSTRUCTION, LOSSES ARISING ON ACCOUNT OF THE POSITION HELD IN A FINANCIAL INSTRUMENT BASED ON MARKET PRICE ON THE CLOSING DAY OF AN ACCOUNTING PERIOD IS NOT TH RATHER, IT IS A NOTIONAL LOSS AND SHOULD NOT BE ALLOWED. THE LD. CIT(A), WITHOUT LOOKING INTO THE POSITION HELD BY THE ASSESSEE AS ON THE CLOSE OF THE FINANCIAL YEAR AND AS TO WHAT WAS THE LOSS ON SUCH POSITION, WHICH, AT MOST, IN ANCE WITH THE BOARD'S INSTRUCTION, MAY BE HELD TO BE A NOTIONAL LOSS, HAS HELD THE WHOLE OF THE TRADING LOSS TO BE A NOTIONAL LOSS. THE ASSESSEE CONTENDS THAT THOUGH THE TRANSACTIONS ENTERED BY IT IN CURRENCY DERIVATIVES ARE 'MARKED -TO- MARKET', THERE WAS NLY TRANSACTION OF 1,200 NOS. OF LOT OF CURRENCY DERIVATIVES SOLD BY THE ASSESSEE FOR A TOTAL AMOUNT OF RS. 65,555,211, WHICH, ON ACCOUNT OF BEING 'MARKED TO MARKET', RESULTED INTO A LOSS OF RS. 51,789/ - (APB 240) AGAINST A TOTAL LOSS OF RS. 1,709,120.61/ AND HENCE, GOING BY THE REASONING OF THE LD. CIT (A), AT THE MOST, LOSS OF RS.51,789/ ONLY COULD BE DISALLOWED AND THE BALANCE RS. 16,57,332/ - WAS LIABLE TO BE ALLOWED. EVEN THE SAID (NOTIONAL) LOSS OF RS. 51,789/ - WAS LIABLE TO BE ALLOWED FOR ASSESSMENT 15, TOGETHER WITH THE LOSS OF RS.1,184,370/ - SUSTAINED DURING ASSESSMENT 15, AS THERE NO CONTRACT OUTSTANDING AS ON 31.03.2014. IT HAS BEEN CLARIFIED THAT THE ASSESSEE HAD TRADED IN TOTAL SEVEN SERIES OF CONTRACTS DURING THE YEAR (APB 238). LEDGER ACCOUNTS IN RESPECT OF EACH SERIES OF CONTRACTS ARE PLACED AT APB 239 TO 245. ALL SERIES OF CONTRACTS EXCEPT FOR USD (26.04.2013) (APB 240) HAD EXPIRED BEFORE THE CLOSE OF THE FINANCIAL YEAR, ON 31.03.2013 AND THUS, THERE WAS NO OCCASION THAT CONTRACTS FOR THOSE SERIES OF TRANSACTIONS COULD BE OUTSTANDING AS ON 31.03.2013. THE LOGIC OF THE BOARD IN TERMING LOSS IN RESPECT OF UNEXPIRED CONTRACTS (OR, IN OTHER WORDS, IN RESPECT OF POSITION HELD AS AT THE CLOSE OF ACCOUNTING PERIOD) HAS NOT UND FAVOUR WITH THE COURTS AND EVEN THE LOSS ON ACCOUNT OF 'MARKED TO MARKET' IN RESPECT OF SUCH OUTSTANDING POSITION COULD NOT BE TREATED AS NOTIONAL LOSS, BECAUSE SAME IS BASED / ON THE TIME - TESTED AND WELL ACCEPTED THEORY OF VALUING STOCK AT LOWER ST OR MARKET VALUE. THE HON'BLE BOMBAY HIGH COURT, BY ITS ORDER DATED 15.10.2016, IN ITA NO. 896/2014, IN 'CIT VS. MUNJANI BROTHERS' (COPY PLACED ON RECORD), DISMISSED THE REVENUE'S APPEAL, WHERE THE SUBSTANTIAL QUESTION OF LAW FOR THE HON'BLE HIGH COURT WAS AS UNDER: 'WHETHER ON THE /ACTS AND IN CIRCUMSTANCES OF THE CASE AND IN LAW, THE TRIBUNAL WAS RIGHT IN DELETING THE ADDITION OF RS. 59,90,341/ - MADE BY THE ASSESSING OFFICER ON ACCOUNT OF DISALLOWANCE OF MARK TO MARKET LOSS ON FOREI GN EXCHANGE FORWARD CONTRACT LOSS AND NOT APPRECIATING THE FACT THAT THE SAID LOSS WAS NOT A NOTIONAL LOSS AND CANNOT BE ALLOWED' ITA NO. 651/KOL/2018 ASSESSMENT YEAR: 2013-14 RAMPURIA INDUSTRIES & INVESTMENTS LTD . CBDT INSTRUCTION NO. 3/2010 DATED 23.03.2010 AND BASED ON HIS INTERPRETATION OF THE , IT WAS HELD THAT THE LOSS INCURRED BY THE ASSESSEE WAS A NOTIONAL LOSS AS BEING CARRIED OUT IN 'MARKED TO MARKET' AND THUS, THE LD. CIT(A) DENIED THE BENEFIT OF INSTRUCTION NO. 3/2010, DATED 23.03.2010, ISSUED BY THE CBDT (APB 342 -343) AS RIGHTLY CONTENDED, IS AN INTERNAL INSTRUCTION ISSUED BY THE BOARD FOR THE GUIDANCE OF ITS OFFICERS WITH REGARD TO THE MATTER PERTAINING TO TRADING IN CURRENCY DERIVATIVES. IT IS S. THE BOARD HAS DRAWN THE ATTENTION OF THE OFFICERS TO THE STATUTORY PROVISIONS CONTAINED IN CLAUSE (D) OF THE PROVISO TO SECTION 43(5) READ WITH THE EXPLANATION THEREOF. THIS PART OF THE INSTRUCTION SUPPORTS THE CASE OF ASSESSEE, AS ABOVE. THE SECOND PAR T OF THE SAID MARKET' LOSSES. AS PER THE INSTRUCTION, LOSSES ARISING ON ACCOUNT OF THE POSITION HELD IN A FINANCIAL INSTRUMENT BASED ON MARKET PRICE ON THE CLOSING DAY OF AN ACCOUNTING PERIOD IS NOT TH E ACTUAL LOSS. THE LD. CIT(A), WITHOUT LOOKING INTO THE POSITION HELD BY THE ASSESSEE AS ON THE CLOSE OF THE FINANCIAL YEAR AND AS TO WHAT WAS THE LOSS ON SUCH POSITION, WHICH, AT MOST, IN ANCE WITH THE BOARD'S INSTRUCTION, MAY BE HELD TO BE A NOTIONAL LOSS, HAS HELD THE WHOLE OF THE TRADING LOSS TO BE A NOTIONAL LOSS. THE ASSESSEE CONTENDS THAT THOUGH THE MARKET', THERE WAS NLY TRANSACTION OF 1,200 NOS. OF LOT OF CURRENCY DERIVATIVES SOLD BY THE ASSESSEE FOR A TOTAL AMOUNT OF RS. 65,555,211, WHICH, ON ACCOUNT OF BEING 'MARKED TO MARKET', (APB 240) AGAINST A TOTAL LOSS OF RS. 1,709,120.61/ - AND HENCE, GOING BY THE REASONING OF THE LD. CIT (A), AT THE MOST, LOSS OF RS.51,789/ - WAS LIABLE TO BE ALLOWED. WAS LIABLE TO BE ALLOWED FOR ASSESSMENT SUSTAINED DURING ASSESSMENT 15, AS THERE NO CONTRACT OUTSTANDING AS ON 31.03.2014. IT HAS BEEN CLARIFIED THAT THE ASSESSEE HAD TRADED IN TOTAL SEVEN SERIES OF CONTRACTS DURING THE YEAR (APB 238). LEDGER ACCOUNTS IN RESPECT OF EACH SERIES OF CONTRACTS ARE PLACED AT APB 239 TO 245. ALL SERIES OF CONTRACTS EXCEPT FOR USD (26.04.2013) (APB 240) HAD EXPIRED BEFORE THE CLOSE OF THE FINANCIAL YEAR, ON 31.03.2013 AND THUS, THERE WAS NO OCCASION THAT CONTRACTS FOR THOSE SERIES OF TRANSACTIONS COULD BE OUTSTANDING AS ON 31.03.2013. THE LOGIC OF THE BOARD IN TERMING LOSS IN RESPECT OF UNEXPIRED CONTRACTS (OR, IN OTHER WORDS, IN RESPECT OF POSITION HELD AS AT THE CLOSE OF ACCOUNTING PERIOD) HAS NOT UND FAVOUR WITH THE COURTS AND EVEN THE LOSS ON ACCOUNT OF 'MARKED TO MARKET' IN RESPECT OF SUCH OUTSTANDING POSITION COULD NOT BE TREATED AS NOTIONAL LOSS, BECAUSE TESTED AND WELL ACCEPTED THEORY OF VALUING STOCK AT LOWER ST OR MARKET VALUE. THE HON'BLE BOMBAY HIGH COURT, BY ITS ORDER DATED 15.10.2016, IN ITA NO. 896/2014, IN 'CIT VS. MUNJANI BROTHERS' (COPY PLACED ON RECORD), DISMISSED THE REVENUE'S APPEAL, WHERE THE SUBSTANTIAL QUESTION OF LAW FOR THE 'WHETHER ON THE /ACTS AND IN CIRCUMSTANCES OF THE CASE AND IN LAW, THE TRIBUNAL MADE BY THE ASSESSING OFFICER GN EXCHANGE FORWARD CONTRACT LOSS AND NOT APPRECIATING THE FACT THAT THE SAID LOSS WAS NOT A NOTIONAL THE SAID APPEAL AROSE FROM THE ORDER DATED 19.09.2013 PASSED BY THEITAT, MUMBAI, PASSED IN ITA NO. 7628/MUM/2011 (COPY FILED) HON'BLE TRIBUNAL IN THE CASE OF THE SAME ASSESSEE IN ITA NO. 6065/MUM/2012, VIDE ORDER DATED 2.12.2014 (COPE PLACED ON RECORD). THE HON'BLE HIGH COURT, HELD THAT NO SUBSTANTIAL QUESTION OF LAW WAS INVOLVED IN THE MATTER IN 1.10.2016, PASSED IN THE CASE OF CIT V. D. CHETAN & CO., 300/243 TAXMAN 356 (BOM.) 20. THE HON'BLE BOMBAY HIGH COURT, IN ITA NO. 30 OF 2015, VIDE ORDER DATED 24.07.2017 IN THE CASE OF CIT V. PAPER PRODUCTS LTD. (COPY FILED), RELYING ON THE SUPREME COURT DECISION IN THE CASE OF CIT V. WOODWARD GOVERNOR INDIA (P.) LTD. 312 ITR 254/179 TAXMAN 326 IN FOREIGN CURRENCY TRANSACTIONS IN DERIVATIVES HAS TO BE CONSIDERED AS ON THE LAST DATE OF THE AC COUNTING YEAR AND IS DEDUCTIBLE UNDER SECTION 37(1) OF THE ACT AND AFFIRMED THE ORDER DATED 28.03.2014 PASSED BY THE TRIBUNAL IN ITA NO. 7761/MUM/2012. 21. REMARKABLY, THOUGH THE REASONING OF THE BOARD TO TERM THE LOSS ON ACCOUNT OF 'MARKET TO MARKET' TRAN DISAPPROVED BY THE COURTS, IT RESURFACED IN THE INCOME COMPUTATION AND DISCLOSURE STANDARDS (THE 'ICDS') NOTIFIED ON 29.09.2016, MADE EFFECTIVE FROM THE ACCOUNTING PERIOD BEGINNING ON 1.04.2016, I.E., A ACCOUNTING POLICIES, IN PARAGRAPH 4 HELD THAT: '4. ACCOUNTING POLICIES ADOPTED BY A PERSON SHALL BE SUCH SO AS TO REPRESENT A TRUE AND FAIR VIEW OF THE STATE OF AFFAIRS AND INCOME OF THE BUSINESS, PROFESSI VOCATION. FOR THIS PURPOSE, (I) THE TREATMENT AND PRESENTATION OF TRANSACTION AND EVENTS SHALL BE GOVERNED BY THEIR SUBSTANCE AND NOT MERELY BY THE LEGAL FORM; AND (II) MARKED TO MARKET LOSS OR AN EXPECTED LOSS SHALL NOT BE RECOGNISED UNLESS THE RECOGNITION OF SUCH LOSS IS IN ACCORDANCE WITH THE PROVISIONS OF ANY OTHER INCOME COMPUTATION AND DISCLOSURE STANDARD.' 22. THE HON'BLE DELHI HIGH COURT, BY ITS RECENT DECISION TAX CONSULTANTS V. UNION OF INDIA (DELHI) , WHILE HOLDING CERTAIN 'ICDS' AS ULTRA CONCEPT OF PRUDENCE IN ICDS I IS PER SE CONTRARY TO THE PROVISIONS OF THE ACT AND THEREFORE, IT CANNOT BE COUNTENANCED. WHILE HOLDING SO, THE HON'BLE DELHI HIGH COURT IN PARA 61 OF ITS JUDGMENT HELD THAT: 'THE PETITIONERS RIGHTLY POINT OUT THAT CASES NOT GOVERNED BY ANY SPECIFIC ICDS ARE GOVERNED BY ICDS- I, CBDT HAS IN ICDS TO- MARKET LOSSES ARE NOT BE RECOGINIZED/ALLOWED. IT IS RIGHTLY POINTED OUT BY THE PETITIONER S THAT THE CONCEPT OF PRUDENCE IS EMBEDDED IN SECTION 37(1) OF THE ACT WHICH ALLOWS DEDUCTION IN RESPECT OF EXPENSES 'LAID OUT' OR 'EXPANDED' FOR THE PURPOSE OF BUSINESS. THE CONCEPT OF PRUDENCE IS INHERENT IN THIS.' 23. THUS, THE INSTRUCTION NO. 3/2010 D SO FAR AS IT TERMS THE LOSS IN RESPECT OF THE POSITION HELD AS AT THE END OF THE ACCOUNTING PERIOD AS A 'NOTIONAL LOSS' AND CALLS FOR DISALLOWANCE OF THE SAME AND THIS ASPECT WAS DISCUSSED IN VARIOUS CASES 10 RAMPURIA INDUSTRIES & INVESTMENTS LTD THE SAID APPEAL AROSE FROM THE ORDER DATED 19.09.2013 PASSED BY THEITAT, MUMBAI, PASSED IN ITA NO. 7628/MUM/2011 (COPY FILED) . A SIMILAR VIEW WAS TAKEN BY THE HON'BLE TRIBUNAL IN THE CASE OF THE SAME ASSESSEE IN ITA NO. 6065/MUM/2012, VIDE ORDER DATED 2.12.2014 (COPE PLACED ON RECORD). THE HON'BLE HIGH COURT, HELD THAT NO SUBSTANTIAL QUESTION OF LAW WAS INVOLVED IN THE MATTER IN VIEW OF ITS ORDER DATED 1.10.2016, PASSED IN THE CASE OF CIT V. D. CHETAN & CO., [2016] 75 300/243 TAXMAN 356 (BOM.) . A COPY OF THE SAID ORDER HAS BEEN FILED. THE HON'BLE BOMBAY HIGH COURT, IN ITA NO. 30 OF 2015, VIDE ORDER DATED 24.07.2017 IN THE CASE OF CIT V. PAPER PRODUCTS LTD. (COPY FILED), RELYING ON THE SUPREME COURT DECISION IN THE CASE OF CIT V. WOODWARD GOVERNOR INDIA (P.) LTD. 312 ITR 254/179 TAXMAN 326 , HELD THAT THE LOSS DUE TO FOREIGN EXCHANGE FLUCTUATION IN FOREIGN CURRENCY TRANSACTIONS IN DERIVATIVES HAS TO BE CONSIDERED AS ON THE LAST DATE COUNTING YEAR AND IS DEDUCTIBLE UNDER SECTION 37(1) OF THE ACT AND AFFIRMED THE ORDER DATED 28.03.2014 PASSED BY THE TRIBUNAL IN ITA NO. 7761/MUM/2012. REMARKABLY, THOUGH THE REASONING OF THE BOARD TO TERM THE LOSS ON ACCOUNT OF 'MARKET TO MARKET' TRAN SACTIONS, AS CONTAINED IN INSTRUCTION NO. 3/2010, WAS DISAPPROVED BY THE COURTS, IT RESURFACED IN THE INCOME COMPUTATION AND DISCLOSURE STANDARDS (THE 'ICDS') NOTIFIED ON 29.09.2016, MADE EFFECTIVE FROM THE ACCOUNTING PERIOD BEGINNING ON 1.04.2016, I.E., A SSESSMENT YEAR 2017- 18. THE 'ICDS' ACCOUNTING POLICIES, IN PARAGRAPH 4 HELD THAT: '4. ACCOUNTING POLICIES ADOPTED BY A PERSON SHALL BE SUCH SO AS TO REPRESENT A TRUE AND FAIR VIEW OF THE STATE OF AFFAIRS AND INCOME OF THE BUSINESS, PROFESSI VOCATION. FOR THIS PURPOSE, THE TREATMENT AND PRESENTATION OF TRANSACTION AND EVENTS SHALL BE GOVERNED BY THEIR SUBSTANCE AND NOT MERELY BY THE LEGAL FORM; AND MARKED TO MARKET LOSS OR AN EXPECTED LOSS SHALL NOT BE RECOGNISED UNLESS THE RECOGNITION OF SUCH LOSS IS IN ACCORDANCE WITH THE PROVISIONS OF ANY OTHER INCOME COMPUTATION AND DISCLOSURE STANDARD.' THE HON'BLE DELHI HIGH COURT, BY ITS RECENT DECISION IN THE CASE OF THE CHAMBER OF TAX CONSULTANTS V. UNION OF INDIA [2017] 87 TAXMANN.COM 92/[2018 ] 252 TAXMAN 77 , WHILE HOLDING CERTAIN 'ICDS' AS ULTRA -VIRUS, HELD THAT NON- ACCEPTANCE OF THE CONCEPT OF PRUDENCE IN ICDS I IS PER SE CONTRARY TO THE PROVISIONS OF THE ACT AND THEREFORE, IT CANNOT BE COUNTENANCED. WHILE HOLDING SO, THE HON'BLE DELHI HIGH COURT IN PARA 61 OF ITS JUDGMENT HELD THAT: 'THE PETITIONERS RIGHTLY POINT OUT THAT CASES NOT GOVERNED BY ANY SPECIFIC ICDS ARE I, CBDT HAS IN ICDS - I NOTIFIED THAT EXPECTED LOSSES AND MARKED MARKET LOSSES ARE NOT BE RECOGINIZED/ALLOWED. IT IS RIGHTLY POINTED OUT BY THE S THAT THE CONCEPT OF PRUDENCE IS EMBEDDED IN SECTION 37(1) OF THE ACT WHICH ALLOWS DEDUCTION IN RESPECT OF EXPENSES 'LAID OUT' OR 'EXPANDED' FOR THE PURPOSE OF BUSINESS. THE CONCEPT OF PRUDENCE IS INHERENT IN THIS.' THUS, THE INSTRUCTION NO. 3/2010 D ATED 23.03.2010 IS NOT IN ACCORDANCE WITH LAW, IN SO FAR AS IT TERMS THE LOSS IN RESPECT OF THE POSITION HELD AS AT THE END OF THE ACCOUNTING PERIOD AS A 'NOTIONAL LOSS' AND CALLS FOR DISALLOWANCE OF THE SAME AND THIS ASPECT WAS DISCUSSED IN VARIOUS CASES REFERRED BEFORE LEARNED CIT (APPEALS) ALSO. ITA NO. 651/KOL/2018 ASSESSMENT YEAR: 2013-14 RAMPURIA INDUSTRIES & INVESTMENTS LTD . THE SAID APPEAL AROSE FROM THE ORDER DATED 19.09.2013 PASSED BY THEITAT, MUMBAI, . A SIMILAR VIEW WAS TAKEN BY THE HON'BLE TRIBUNAL IN THE CASE OF THE SAME ASSESSEE IN ITA NO. 6065/MUM/2012, VIDE ORDER DATED 2.12.2014 (COPE PLACED ON RECORD). THE HON'BLE HIGH COURT, HELD THAT NO VIEW OF ITS ORDER DATED [2016] 75 TAXMANN.COM THE HON'BLE BOMBAY HIGH COURT, IN ITA NO. 30 OF 2015, VIDE ORDER DATED 24.07.2017 IN THE CASE OF CIT V. PAPER PRODUCTS LTD. (COPY FILED), RELYING ON THE SUPREME COURT DECISION IN THE CASE OF CIT V. WOODWARD GOVERNOR INDIA (P.) LTD. [2009] , HELD THAT THE LOSS DUE TO FOREIGN EXCHANGE FLUCTUATION IN FOREIGN CURRENCY TRANSACTIONS IN DERIVATIVES HAS TO BE CONSIDERED AS ON THE LAST DATE COUNTING YEAR AND IS DEDUCTIBLE UNDER SECTION 37(1) OF THE ACT AND AFFIRMED THE ORDER DATED 28.03.2014 PASSED BY THE TRIBUNAL IN ITA NO. 7761/MUM/2012. REMARKABLY, THOUGH THE REASONING OF THE BOARD TO TERM THE LOSS ON ACCOUNT OF SACTIONS, AS CONTAINED IN INSTRUCTION NO. 3/2010, WAS DISAPPROVED BY THE COURTS, IT RESURFACED IN THE INCOME COMPUTATION AND DISCLOSURE STANDARDS (THE 'ICDS') NOTIFIED ON 29.09.2016, MADE EFFECTIVE FROM THE ACCOUNTING 18. THE 'ICDS' -1 RELATING TO '4. ACCOUNTING POLICIES ADOPTED BY A PERSON SHALL BE SUCH SO AS TO REPRESENT A TRUE AND FAIR VIEW OF THE STATE OF AFFAIRS AND INCOME OF THE BUSINESS, PROFESSI ON OR THE TREATMENT AND PRESENTATION OF TRANSACTION AND EVENTS SHALL BE GOVERNED BY THEIR MARKED TO MARKET LOSS OR AN EXPECTED LOSS SHALL NOT BE RECOGNISED UNLESS THE RECOGNITION OF SUCH LOSS IS IN ACCORDANCE WITH THE PROVISIONS OF ANY OTHER INCOME COMPUTATION AND IN THE CASE OF THE CHAMBER OF ] 252 TAXMAN 77 ACCEPTANCE OF THE CONCEPT OF PRUDENCE IN ICDS I IS PER SE CONTRARY TO THE PROVISIONS OF THE ACT AND THEREFORE, IT CANNOT BE COUNTENANCED. WHILE HOLDING SO, THE HON'BLE DELHI HIGH COURT IN 'THE PETITIONERS RIGHTLY POINT OUT THAT CASES NOT GOVERNED BY ANY SPECIFIC ICDS ARE I NOTIFIED THAT EXPECTED LOSSES AND MARKED - MARKET LOSSES ARE NOT BE RECOGINIZED/ALLOWED. IT IS RIGHTLY POINTED OUT BY THE S THAT THE CONCEPT OF PRUDENCE IS EMBEDDED IN SECTION 37(1) OF THE ACT WHICH ALLOWS DEDUCTION IN RESPECT OF EXPENSES 'LAID OUT' OR 'EXPANDED' FOR THE ATED 23.03.2010 IS NOT IN ACCORDANCE WITH LAW, IN SO FAR AS IT TERMS THE LOSS IN RESPECT OF THE POSITION HELD AS AT THE END OF THE ACCOUNTING PERIOD AS A 'NOTIONAL LOSS' AND CALLS FOR DISALLOWANCE OF THE SAME AND THIS ASPECT WAS 24. THE ASSESSEE ALSO PLACED RELIANCE ON THE ORDER DATED 13.02.2017 PASSED BY THE INCOME TAX APPELLATE TRIBUNAL, 'SMC KISHOR V. ACIT' IN (ITA NO. 4952/DEL/2016 (PAG THE RETURNED INCOME WAS MADE BY THE AO UNDER SECTION 143(1) OF THE ACT IN RESPECT OF LOSS OF RS. 1,550,100 ON FOREIGN CURRENCY DERIVATIVES. THE TRIBUNAL, ALLOWING THE APPEAL ON THE MERITS OF THE CASE, FOLLOWED THE DE ADVISORS (P) LTD.' (APB 272 LTD.' (APB 317 -341). 25. IN THE CASE OF INVENTURES KNOWLEDGE SERVICES (P.) LTD. V. ITO TAXMANN.COM 94 (MUMBAI PROVISO TO SECTION 43(5) AND THE NOTIONAL LOSS IN RESPECT OF UNEXPIRED / UNSETTLED CONTRACTS WERE DISCUSSED. 26. IN 'INVENTURES KNOWLEDGE SERVICES' (SUPRA), IT HAS BEEN HELD AS FOLLOWS: '7. LD. D R ON THE OTHER HAND RELIED UPON THE ORDERS OF THE AUTHORITIES BELOW. THE LD. DR SUBMITTED THAT THESE FORWARD FOREIGN EXCHANGE CONTRACTS ARE NOT BACKED BY ANY BUSINESS TRANSACTIONS AND THESE ARE NOT HEDGING TRANSACTIONS AND MARKED TO MARKET TRANSACTION CANN DATED 23TH MARCH 2010. THE LD DR RELIED UPON THE ORDERS OF TRIBUNAL MUMBAI IN ARASKA DIAMOND (P.) LTD. V. ASSTT. CIT THESE LOSSES ARE SPECULATIVE IN NATURE AND CANNOT BE ALLOWED TO BE SET OFF AGAINST BUSINESS INCOME OTHER THAN SPECULATIVE INCOME. 8. WE HAVE HEARD THE RIVAL SUBMISSIONS AND CAREFULLY PERUSED THE RELEVANT MATERIAL O N RECORD AND CASE LAWS RELIED UPON BY THE PARTIES. WE HAVE OBSERVED THAT THE ASSESSEE COMPANY IS A DOMESTIC COMPANY REGISTERED WITH THE DEVELOPMENT COMMISSIONER, VISHAKHAPATNAM SPECIAL ECONOMIC ZONE AS AN APPROVED SEZ AND IS A KPO PRIMARILY INVOLVED IN THE FOR THE CLIENTS ACROSS AMERICA AND THE ASSESSEE COMPANY IS BILLING ITS OVERSEAS CLIENTS IN FOREIGN CURRENCY. THE ASSESSEE COMPANY HAS A TURNOVER OF RS. 5.83 CRORES DURING THE ASSESSMENT YEAR UNDER CONSIDERATION. WE HAVE OBSERVED T COMPANY HAS ENTERED INTO FORWARD FOREIGN EXCHANGE CONTRACTS AND THE CONTRACT WORTH USD 4 MILLION WERE OUTSTANDING AS UN WHICH THE ASSESSEE COMPANY HAS BOOKED MARKED TO MARKET LOSS OF RS. 1,09,98,560/- ON THE DA MOVEMENT OF VALUE OF UNITED STATES DOLLAR VIS BASED ON PREVAILING RATE AS ON 31 BEFORE WE PROCEED FURTHER, IT WOULD BE RELEVANT TO ANALYSE THE PROVISIONS OF SECTION 43(5) OF THE ACT READ WITH PROVISO (D) AND EXPLANATION 1 TO SECTION 43(5) OF THE ACT WHICH READS AS UNDER: DEFINITIONS OF CERTAIN TERMS RELEVANT TO INCOME FROM PROFITS AND GAINS OF BUSINESS OR PROFESSION. 43. IN SECTIONS 28 TO 41 AND IN THIS SEC REQUIRES ** 11 RAMPURIA INDUSTRIES & INVESTMENTS LTD THE ASSESSEE ALSO PLACED RELIANCE ON THE ORDER DATED 13.02.2017 PASSED BY THE INCOME TAX APPELLATE TRIBUNAL, 'SMC -3 ' BENCH, NEW DELHI, IN THE CASE OF 'SRI KAMAL KISHOR V. ACIT' IN (ITA NO. 4952/DEL/2016 (PAG E 74 - 85). IN THIS CASE, ADJUSTMENT TO THE RETURNED INCOME WAS MADE BY THE AO UNDER SECTION 143(1) OF THE ACT IN RESPECT OF LOSS OF RS. 1,550,100 ON FOREIGN CURRENCY DERIVATIVES. THE TRIBUNAL, ALLOWING THE APPEAL ON THE MERITS OF THE CASE, FOLLOWED THE DE CISION OF THE ITAT, MUMBAI IN THE CASE 'IVF ADVISORS (P) LTD.' (APB 272 - 277) AND IN THE CASE OF 'INVENTURES KNOWLEDGE SERVICES (P) IN THE CASE OF INVENTURES KNOWLEDGE SERVICES (P.) LTD. V. ITO [2016] 156 ITD 727/65 94 (MUMBAI - TRIB.) , BOTH THE ISSUES, I.E., APPLICABILITY OF CLAUSE (D) OF THE PROVISO TO SECTION 43(5) AND THE NOTIONAL LOSS IN RESPECT OF UNEXPIRED / UNSETTLED CONTRACTS WERE DISCUSSED. IN 'INVENTURES KNOWLEDGE SERVICES' (SUPRA), IT HAS BEEN HELD AS FOLLOWS: R ON THE OTHER HAND RELIED UPON THE ORDERS OF THE AUTHORITIES BELOW. THE LD. DR SUBMITTED THAT THESE FORWARD FOREIGN EXCHANGE CONTRACTS ARE NOT BACKED BY ANY BUSINESS TRANSACTIONS AND THESE ARE NOT HEDGING TRANSACTIONS AND MARKED TO MARKET TRANSACTION CANN OT BE ALLOWED AS PER INSTRUCTION OF CBDT NO. 3/2010 DATED 23TH MARCH 2010. THE LD DR RELIED UPON THE ORDERS OF TRIBUNAL MUMBAI IN ARASKA DIAMOND (P.) LTD. V. ASSTT. CIT [ 2015] 152 ITD 203 (MUM.) THESE LOSSES ARE SPECULATIVE IN NATURE AND CANNOT BE ALLOWED TO BE SET OFF AGAINST BUSINESS INCOME OTHER THAN SPECULATIVE INCOME. 8. WE HAVE HEARD THE RIVAL SUBMISSIONS AND CAREFULLY PERUSED THE RELEVANT N RECORD AND CASE LAWS RELIED UPON BY THE PARTIES. WE HAVE OBSERVED THAT THE ASSESSEE COMPANY IS A DOMESTIC COMPANY REGISTERED WITH THE DEVELOPMENT COMMISSIONER, VISHAKHAPATNAM SPECIAL ECONOMIC ZONE AS AN APPROVED SEZ AND IS A KPO PRIMARILY INVOLVED IN THE REVENUE CYCLE MANAGEMENT FOR THE CLIENTS ACROSS AMERICA AND THE ASSESSEE COMPANY IS BILLING ITS OVERSEAS CLIENTS IN FOREIGN CURRENCY. THE ASSESSEE COMPANY HAS A TURNOVER OF RS. 5.83 CRORES DURING THE ASSESSMENT YEAR UNDER CONSIDERATION. WE HAVE OBSERVED T COMPANY HAS ENTERED INTO FORWARD FOREIGN EXCHANGE CONTRACTS AND THE CONTRACT WORTH USD 4 MILLION WERE OUTSTANDING AS UN - EXPIRED AS ON 31ST MARCH 2009 ON WHICH THE ASSESSEE COMPANY HAS BOOKED MARKED TO MARKET LOSS OF RS. ON THE DA TE OF BALANCE SHEET AS AT 31ST MARCH 2009 BASED ON THE MOVEMENT OF VALUE OF UNITED STATES DOLLAR VIS -A- VIS IN RELATION TO INDIAN RUPEES BASED ON PREVAILING RATE AS ON 31 -03-2009. BEFORE WE PROCEED FURTHER, IT WOULD BE RELEVANT TO ANALYSE THE PROVISIONS OF SECTION 43(5) OF THE ACT READ WITH PROVISO (D) AND EXPLANATION 1 TO SECTION 43(5) OF THE ACT WHICH READS AS UNDER: DEFINITIONS OF CERTAIN TERMS RELEVANT TO INCOME FROM PROFITS AND GAINS OF BUSINESS 43. IN SECTIONS 28 TO 41 AND IN THIS SEC TION, UNLESS THE CONTEXT OTHERWISE ** ITA NO. 651/KOL/2018 ASSESSMENT YEAR: 2013-14 RAMPURIA INDUSTRIES & INVESTMENTS LTD . THE ASSESSEE ALSO PLACED RELIANCE ON THE ORDER DATED 13.02.2017 PASSED BY THE ' BENCH, NEW DELHI, IN THE CASE OF 'SRI KAMAL 85). IN THIS CASE, ADJUSTMENT TO THE RETURNED INCOME WAS MADE BY THE AO UNDER SECTION 143(1) OF THE ACT IN RESPECT OF LOSS OF RS. 1,550,100 ON FOREIGN CURRENCY DERIVATIVES. THE TRIBUNAL, ALLOWING THE APPEAL CISION OF THE ITAT, MUMBAI IN THE CASE 'IVF 277) AND IN THE CASE OF 'INVENTURES KNOWLEDGE SERVICES (P) [2016] 156 ITD 727/65 , BOTH THE ISSUES, I.E., APPLICABILITY OF CLAUSE (D) OF THE PROVISO TO SECTION 43(5) AND THE NOTIONAL LOSS IN RESPECT OF UNEXPIRED / UNSETTLED IN 'INVENTURES KNOWLEDGE SERVICES' (SUPRA), IT HAS BEEN HELD AS FOLLOWS: R ON THE OTHER HAND RELIED UPON THE ORDERS OF THE AUTHORITIES BELOW. THE LD. DR SUBMITTED THAT THESE FORWARD FOREIGN EXCHANGE CONTRACTS ARE NOT BACKED BY ANY BUSINESS TRANSACTIONS AND THESE ARE NOT HEDGING TRANSACTIONS AND MARKED OT BE ALLOWED AS PER INSTRUCTION OF CBDT NO. 3/2010 DATED 23TH MARCH 2010. THE LD DR RELIED UPON THE ORDERS OF TRIBUNAL MUMBAI IN 2015] 152 ITD 203 (MUM.) TO CONTEND THAT THESE LOSSES ARE SPECULATIVE IN NATURE AND CANNOT BE ALLOWED TO BE SET OFF AGAINST 8. WE HAVE HEARD THE RIVAL SUBMISSIONS AND CAREFULLY PERUSED THE RELEVANT N RECORD AND CASE LAWS RELIED UPON BY THE PARTIES. WE HAVE OBSERVED THAT THE ASSESSEE COMPANY IS A DOMESTIC COMPANY REGISTERED WITH THE DEVELOPMENT COMMISSIONER, VISHAKHAPATNAM SPECIAL ECONOMIC ZONE AS AN REVENUE CYCLE MANAGEMENT FOR THE CLIENTS ACROSS AMERICA AND THE ASSESSEE COMPANY IS BILLING ITS OVERSEAS CLIENTS IN FOREIGN CURRENCY. THE ASSESSEE COMPANY HAS A TURNOVER OF RS. 5.83 CRORES DURING THE ASSESSMENT YEAR UNDER CONSIDERATION. WE HAVE OBSERVED T HAT ASSESSEE COMPANY HAS ENTERED INTO FORWARD FOREIGN EXCHANGE CONTRACTS AND THE CONTRACT EXPIRED AS ON 31ST MARCH 2009 ON WHICH THE ASSESSEE COMPANY HAS BOOKED MARKED TO MARKET LOSS OF RS. TE OF BALANCE SHEET AS AT 31ST MARCH 2009 BASED ON THE VIS IN RELATION TO INDIAN RUPEES BEFORE WE PROCEED FURTHER, IT WOULD BE RELEVANT TO ANALYSE THE PROVISIONS OF SECTION 43(5) OF THE ACT READ WITH PROVISO (D) AND EXPLANATION 1 TO SECTION 43(5) DEFINITIONS OF CERTAIN TERMS RELEVANT TO INCOME FROM PROFITS AND GAINS OF BUSINESS TION, UNLESS THE CONTEXT OTHERWISE ** (5) 'SPECULATIVE TRANSACTION' MEANS A TRANSACTION IN WHICH A CONTRACT FOR THE PURCHASE OR 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 PROVIDED THAT FOR THE PURPOSES OF THIS CLAUSE (A) TO (C)** (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 1956) CARRIED OUT IN A RECOGNISED STOCK EXCHANGE; OR (E) ** SHALL NOT BE DEEMED TO PURPOSES OF CLAUSE (D), THE EXPRESSIONS TRANSACTION,- (A) CARRIED OUT ELECTRONICALLY ON SCREEN SUB- BROKER OR SUCH OTHER INT SECURITIES AND EXCHANGE BOARD OF INDIA ACT, 1992 (15 OF 1992) IN ACCORDANCE WITH THE PROVISIONS OF THE SECURITIES CONTRACTS (REGULATION) ACT, 1956 (42 OF 1956) OR THE SECURITIES AND EXCHANGE BOARD OF INDIA ACT, DEPOSITORIES ACT, 1996 (22 OF 1996) AND THE RULES, REGULATIONS OR BYE OR DIRECTIONS ISSUED UNDER THOSE ACTS OR BY BANKS OR MUTUAL FUNDS ON A RECOGNISED STOCK EXCHANGE; AND (B) WHICH IS SUPPORTED BY A TIME STAMPED CONTRACT NOTE ISSUED BY SUCH STOCK BROKER OR SUB- BROKER OR SUCH OTHER INTERMEDIARY TO EVERY CLIENT INDICATING IN THE CONTRACT NOTE THE UNIQUE CLIENT IDENTITY NUMBER ALLOTTED UNDER ANY ACT REFERRED TO IN SUB-CLAUSE ( A) AND PERMANENT ACCOUNT NUMBER ALLOTTED UNDER THIS ACT; (II) 'RECOGNISED STOCK EXCHANGE' MEANS A RECOGNISED STOCK EXCHANGE AS REFERRED TO IN CLAUSE (F) OF SECTION 2 OF THE SECURITIES CONTRACTS (REGULATION) ACT, 1956 (42 OF 1956) AND WHICH FULFILS SUCH CO THE CENTRAL GOVERNMENT FOR THIS PURPOSE;' SECTION 43(5) OF THE ACT PROVIDES THAT A TRANSACTION IN WHICH A CONTRACT FOR THE PURCHASE OR SALE OF ANY COMMODITY, INCLUDING STOCKS AND SHARES, IS PERIODICALLY OR ULT IMATELY SETTLED OTHERWISE THAN BY ACTUAL DELIVERY OR TRANSFER OF THE COMMODITY OR SCRIPS WHILE PROVISO(D) TO SECTION 43(5) OF THE ACT INTER ELIGIBLE TRANSACTION IN RESPECT OF TRADING IN DERIVATIVES REFERRED TO IN CLAUSE (AC) OF SECTIO N 2 OF THE SECURITIES CONTRACTS (REGULATION) ACT, 1956 CARRIED OUT IN A RECOGNIZED STOCK EXCHANGE SHALL NOT BE DEEMED TO BE A SPECULATIVE TRANSACTION. WE WOULD, ALSO LIKE TO REFER TO THE RELEVANT DEFINITIONS AS CONTAINED IN THE SECURITIES CONTRACT (REGULA SECTION 2(AC) OF THE SECURITIES CONTRACT (REGULATION) ACT, 1956 READS AS UNDER: SECTION 2 IN THE SECURITIES CONTRACTS (REGULATION) ACT, 1956 2 DEFINITIONS. - IN THIS ACT, UNLESS THE CONTEXT OTHERWISE REQUIRES, 12 RAMPURIA INDUSTRIES & INVESTMENTS LTD (5) 'SPECULATIVE TRANSACTION' MEANS A TRANSACTION IN WHICH A CONTRACT FOR THE PURCHASE OR 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 : PROVIDED THAT FOR THE PURPOSES OF THIS CLAUSE ** (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 1956) CARRIED OUT IN A RECOGNISED STOCK EXCHANGE; OR ** SHALL NOT BE DEEMED TO BE A SPECULATIVE TRANSACTION, EXPLANATION 1. PURPOSES OF CLAUSE (D), THE EXPRESSIONS - (I) 'ELIGIBLE TRANSACTION' MEANS ANY (A) CARRIED OUT ELECTRONICALLY ON SCREEN - BASED SYSTEMS THROUGH A STOCK BROKER OR BROKER OR SUCH OTHER INT ERMEDIARY REGISTERED UNDER SECTION 12 OF THE SECURITIES AND EXCHANGE BOARD OF INDIA ACT, 1992 (15 OF 1992) IN ACCORDANCE WITH THE PROVISIONS OF THE SECURITIES CONTRACTS (REGULATION) ACT, 1956 (42 OF 1956) OR THE SECURITIES AND EXCHANGE BOARD OF INDIA ACT, 1992 (15 OF 1992) OR THE DEPOSITORIES ACT, 1996 (22 OF 1996) AND THE RULES, REGULATIONS OR BYE OR DIRECTIONS ISSUED UNDER THOSE ACTS OR BY BANKS OR MUTUAL FUNDS ON A RECOGNISED STOCK EXCHANGE; AND (B) WHICH IS SUPPORTED BY A TIME STAMPED CONTRACT NOTE ISSUED BY SUCH STOCK BROKER OR SUCH OTHER INTERMEDIARY TO EVERY CLIENT INDICATING IN THE CONTRACT NOTE THE UNIQUE CLIENT IDENTITY NUMBER ALLOTTED UNDER ANY ACT REFERRED TO A) AND PERMANENT ACCOUNT NUMBER ALLOTTED UNDER THIS ACT; (II) 'RECOGNISED STOCK EXCHANGE' MEANS A RECOGNISED STOCK EXCHANGE AS REFERRED TO IN CLAUSE (F) OF SECTION 2 OF THE SECURITIES CONTRACTS (REGULATION) ACT, 1956 (42 OF 1956) AND WHICH FULFILS SUCH CO NDITIONS AS MAY BE PRESCRIBED AND NOTIFIED BY THE CENTRAL GOVERNMENT FOR THIS PURPOSE;' SECTION 43(5) OF THE ACT PROVIDES THAT A TRANSACTION IN WHICH A CONTRACT FOR THE PURCHASE OR SALE OF ANY COMMODITY, INCLUDING STOCKS AND SHARES, IS PERIODICALLY OR IMATELY SETTLED OTHERWISE THAN BY ACTUAL DELIVERY OR TRANSFER OF THE COMMODITY OR SCRIPS WHILE PROVISO(D) TO SECTION 43(5) OF THE ACT INTER - ALIA PROVIDES THAT AN ELIGIBLE TRANSACTION IN RESPECT OF TRADING IN DERIVATIVES REFERRED TO IN CLAUSE (AC) N 2 OF THE SECURITIES CONTRACTS (REGULATION) ACT, 1956 CARRIED OUT IN A RECOGNIZED STOCK EXCHANGE SHALL NOT BE DEEMED TO BE A SPECULATIVE TRANSACTION. WE WOULD, ALSO LIKE TO REFER TO THE RELEVANT DEFINITIONS AS CONTAINED IN THE SECURITIES CONTRACT (REGULA TION) ACT, 1956 AS UNDER: SECTION 2(AC) OF THE SECURITIES CONTRACT (REGULATION) ACT, 1956 READS AS UNDER: SECTION 2 IN THE SECURITIES CONTRACTS (REGULATION) ACT, 1956 IN THIS ACT, UNLESS THE CONTEXT OTHERWISE REQUIRES, ITA NO. 651/KOL/2018 ASSESSMENT YEAR: 2013-14 RAMPURIA INDUSTRIES & INVESTMENTS LTD . (5) 'SPECULATIVE TRANSACTION' MEANS A TRANSACTION IN WHICH A CONTRACT FOR THE PURCHASE OR SALE OF ANY COMMODITY, INCLUDING STOCKS AND SHARES, IS PERIODICALLY OR ULTIMATELY SETTLED OTHERWISE THAN BY THE ACTUAL DELIVERY OR TRANSFER OF THE ** (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 1956) ** BE A SPECULATIVE TRANSACTION, EXPLANATION 1. - FOR THE (I) 'ELIGIBLE TRANSACTION' MEANS ANY BASED SYSTEMS THROUGH A STOCK BROKER OR ERMEDIARY REGISTERED UNDER SECTION 12 OF THE SECURITIES AND EXCHANGE BOARD OF INDIA ACT, 1992 (15 OF 1992) IN ACCORDANCE WITH THE PROVISIONS OF THE SECURITIES CONTRACTS (REGULATION) ACT, 1956 (42 OF 1956) OR 1992 (15 OF 1992) OR THE DEPOSITORIES ACT, 1996 (22 OF 1996) AND THE RULES, REGULATIONS OR BYE -LAWS MADE OR DIRECTIONS ISSUED UNDER THOSE ACTS OR BY BANKS OR MUTUAL FUNDS ON A RECOGNISED (B) WHICH IS SUPPORTED BY A TIME STAMPED CONTRACT NOTE ISSUED BY SUCH STOCK BROKER OR SUCH OTHER INTERMEDIARY TO EVERY CLIENT INDICATING IN THE CONTRACT NOTE THE UNIQUE CLIENT IDENTITY NUMBER ALLOTTED UNDER ANY ACT REFERRED TO A) AND PERMANENT ACCOUNT NUMBER ALLOTTED UNDER THIS ACT; (II) 'RECOGNISED STOCK EXCHANGE' MEANS A RECOGNISED STOCK EXCHANGE AS REFERRED TO IN CLAUSE (F) OF SECTION 2 OF THE SECURITIES CONTRACTS (REGULATION) ACT, 1956 (42 NDITIONS AS MAY BE PRESCRIBED AND NOTIFIED BY SECTION 43(5) OF THE ACT PROVIDES THAT A TRANSACTION IN WHICH A CONTRACT FOR THE PURCHASE OR SALE OF ANY COMMODITY, INCLUDING STOCKS AND SHARES, IS PERIODICALLY OR IMATELY SETTLED OTHERWISE THAN BY ACTUAL DELIVERY OR TRANSFER OF THE COMMODITY ALIA PROVIDES THAT AN ELIGIBLE TRANSACTION IN RESPECT OF TRADING IN DERIVATIVES REFERRED TO IN CLAUSE (AC) N 2 OF THE SECURITIES CONTRACTS (REGULATION) ACT, 1956 CARRIED OUT IN A RECOGNIZED STOCK EXCHANGE SHALL NOT BE DEEMED TO BE A SPECULATIVE TRANSACTION. WE WOULD, ALSO LIKE TO REFER TO THE RELEVANT DEFINITIONS AS CONTAINED IN THE SECTION 2(AC) OF THE SECURITIES CONTRACT (REGULATION) ACT, 1956 READS AS UNDER: ** (AC ) 'DERIVATIVE' INCLUDES (A) A SECURITY DERIVED FROM A DEBT INSTRUMENT, SHARE, LOAN, WHETHER SECURED OR UNSECURED, RISK INSTRUMENT OR CONTRACT FOR DIFFERENCES OR ANY OTHER FORM OF SECURITY; (B) A CONTRACT WHICH DERIVES ITS VALUE FROM THE PRICES, OR INDEX UNDERLYING SECURITIES; SECTION 2(H) OF THE SECURITIES CONTRACT (REGULATION) ACT, 1956 READS AS UNDER: SECTION 2 IN THE SECURITIES CONTRACTS (REGULATION) ACT, 1956 2 DEFINITIONS. - IN THIS ACT, UNLESS THE CONTEXT OTHERWISE REQUIRES, (H) 'SECURITIES' INCLUDE ** (IA) DERIVATIVE; ** FROM THE ABOVE, IT IS CLEAR THAT SPECULATIVE TRANSACTION IS A TRANSACTION IN WHICH CONTRACT FOR PURCHASE AND SALE OF ANY COMMODITY IS SETTLED OTHERWISE THAN BY ACTUAL DELIVERY. IT IS NOT IN DISPUTE THAT IN CASE OF TRANSACTION IN DERIVATIVES, THE TRANSACTIO N IS ALWAYS SETTLED OTHERWISE THAN BY ACTUAL DELIVERY. THE DERIVATIVE DERIVES ITS VALUE FROM UNDERLYING ASSET WHICH CAN BE SECURITIES, COMMODITIES, BULLION, CURRENCY ETC. AND IN THIS INSTANT CASE, TLIE DERIVATIVE TRANSACTION UNDERTAKEN BY THE ASSESSEE COMP TRANSACTION IS FOREIGN CURRENCY. THE WORD COMMODITY IS USED IN BROADEST SENSE IN SECTION 43(5) OF THE ACT AS IT MENTIONS IN THE SECTION 43(5) OF THE ACT THAT THE COMMODITY INCLUDES STOCK AND SHARES. THUS, DERIVATIVE DEFINITION OF THE WORD 'COMMODITY' AS HELD IN SHREE CAPITAL SERVICES LTD. (SUPRA). HENCE, DERIVATIVE TRANSACTIONS IN FOREIGN CURRENCY SHALL BE EXEMPTED FROM PURVIEW OF SPECULATIVE TRANSACTIONS U/S 43(5) OF THE ACT PROVIDED OTHER CON AS CONTAINED IN PROVISO (D) READ WITH EXPLANATION 1 TO SECTION 43(5) OF THE ACT ARE FULFILLED. OUR VIEW IS FORTIFIED BY THE MEMORANDUM EXPLAINING THE PROVISIONS IN THE FINANCE BILL, 2005 WHICH INTRODUCED CLAUSE (D) ((2005) 194 CTR(ST.) 147, THE PUR POSE OF INTRODUCTION OF CLAUSE (D) HAS BEEN EXPLAINED, WHICH READS AS UNDER: 'MEASURES TO RATIONALIZE THE TAX TREATMENT OF DERIVATIVE TRANSACTION. UNDER THE EXISTING PROVISIONS (CL.( SALE OF ANY COMMODITY INCLUDING STOCKS AND SHARES IS DEEMED TO BE A 'SPECULATIVE TRANSACTION', IF IT IS SETTLED OTHERWISE THAN BY ACTUAL DELIVERY. HOWEVER, CERTAIN CATEGORIES OF TRANSACTIONS ARE EXCLUDED FROM FURTHER, THE UNABSORBED SPECULATION LOSSES ARE ALLOWED TO BE CARRIED FORWARD FOR EIGHT YEARS FOR SET RESTRICTIONS WERE ESSENTIALLY DESIGNED AS AN ANTI CLAIMS OF ARTIFICIALLY GENERATED LOSSES IN THE ABSENCE OF AN APPROPRIATE INSTITUTIONAL INFRASTRUCTURE. 13 RAMPURIA INDUSTRIES & INVESTMENTS LTD ** ) 'DERIVATIVE' INCLUDES (A) A SECURITY DERIVED FROM A DEBT INSTRUMENT, SHARE, LOAN, WHETHER SECURED OR UNSECURED, RISK INSTRUMENT OR CONTRACT FOR DIFFERENCES OR ANY OTHER FORM OF (B) A CONTRACT WHICH DERIVES ITS VALUE FROM THE PRICES, OR INDEX UNDERLYING SECURITIES; SECTION 2(H) OF THE SECURITIES CONTRACT (REGULATION) ACT, 1956 READS AS UNDER: SECTION 2 IN THE SECURITIES CONTRACTS (REGULATION) ACT, 1956 IN THIS ACT, UNLESS THE CONTEXT OTHERWISE REQUIRES, 'SECURITIES' INCLUDE - ** ** FROM THE ABOVE, IT IS CLEAR THAT SPECULATIVE TRANSACTION IS A TRANSACTION IN WHICH CONTRACT FOR PURCHASE AND SALE OF ANY COMMODITY IS SETTLED OTHERWISE THAN BY ACTUAL DELIVERY. IT IS NOT IN DISPUTE THAT IN CASE OF TRANSACTION IN DERIVATIVES, THE N IS ALWAYS SETTLED OTHERWISE THAN BY ACTUAL DELIVERY. THE DERIVATIVE DERIVES ITS VALUE FROM UNDERLYING ASSET WHICH CAN BE SECURITIES, COMMODITIES, BULLION, CURRENCY ETC. AND IN THIS INSTANT CASE, TLIE DERIVATIVE TRANSACTION UNDERTAKEN BY THE ASSESSEE COMP ANY, THE UNDERLYING ASSET OF DERIVATIVE TRANSACTION IS FOREIGN CURRENCY. THE WORD COMMODITY IS USED IN BROADEST SENSE IN SECTION 43(5) OF THE ACT AS IT MENTIONS IN THE SECTION 43(5) OF THE ACT THAT THE COMMODITY INCLUDES STOCK AND SHARES. THUS, DERIVATIVE WILL BE INCLUDED IN THE DEFINITION OF THE WORD 'COMMODITY' AS HELD IN SHREE CAPITAL SERVICES LTD. (SUPRA). HENCE, DERIVATIVE TRANSACTIONS IN FOREIGN CURRENCY SHALL BE EXEMPTED FROM PURVIEW OF SPECULATIVE TRANSACTIONS U/S 43(5) OF THE ACT PROVIDED OTHER CON AS CONTAINED IN PROVISO (D) READ WITH EXPLANATION 1 TO SECTION 43(5) OF THE ACT ARE FULFILLED. OUR VIEW IS FORTIFIED BY THE MEMORANDUM EXPLAINING THE PROVISIONS IN THE FINANCE BILL, 2005 WHICH INTRODUCED CLAUSE (D) ((2005) 194 CTR(ST.) 147, THE POSE OF INTRODUCTION OF CLAUSE (D) HAS BEEN EXPLAINED, WHICH READS AS UNDER: 'MEASURES TO RATIONALIZE THE TAX TREATMENT OF DERIVATIVE TRANSACTION. UNDER THE EXISTING PROVISIONS (CL.( 5) OF S.43) A TRANSACTION FOR THE PURCHASE AND SALE OF ANY COMMODITY INCLUDING STOCKS AND SHARES IS DEEMED TO BE A 'SPECULATIVE TRANSACTION', IF IT IS SETTLED OTHERWISE THAN BY ACTUAL DELIVERY. HOWEVER, CERTAIN CATEGORIES OF TRANSACTIONS ARE EXCLUDED FROM THE PURVIEW OF SAID PROVISION. FURTHER, THE UNABSORBED SPECULATION LOSSES ARE ALLOWED TO BE CARRIED FORWARD FOR EIGHT YEARS FOR SET - OFF AGAINST SPECULATION PROFITS IN SUBSEQUENT YEARS. THESE RESTRICTIONS WERE ESSENTIALLY DESIGNED AS AN ANTI - EVASION MEASURE CLAIMS OF ARTIFICIALLY GENERATED LOSSES IN THE ABSENCE OF AN APPROPRIATE INSTITUTIONAL INFRASTRUCTURE. ITA NO. 651/KOL/2018 ASSESSMENT YEAR: 2013-14 RAMPURIA INDUSTRIES & INVESTMENTS LTD . ** (A) A SECURITY DERIVED FROM A DEBT INSTRUMENT, SHARE, LOAN, WHETHER SECURED OR UNSECURED, RISK INSTRUMENT OR CONTRACT FOR DIFFERENCES OR ANY OTHER FORM OF (B) A CONTRACT WHICH DERIVES ITS VALUE FROM THE PRICES, OR INDEX OF PRICES, OF SECTION 2(H) OF THE SECURITIES CONTRACT (REGULATION) ACT, 1956 READS AS UNDER: ** ** FROM THE ABOVE, IT IS CLEAR THAT SPECULATIVE TRANSACTION IS A TRANSACTION IN WHICH CONTRACT FOR PURCHASE AND SALE OF ANY COMMODITY IS SETTLED OTHERWISE THAN BY ACTUAL DELIVERY. IT IS NOT IN DISPUTE THAT IN CASE OF TRANSACTION IN DERIVATIVES, THE N IS ALWAYS SETTLED OTHERWISE THAN BY ACTUAL DELIVERY. THE DERIVATIVE DERIVES ITS VALUE FROM UNDERLYING ASSET WHICH CAN BE SECURITIES, COMMODITIES, BULLION, CURRENCY ETC. AND IN THIS INSTANT CASE, TLIE DERIVATIVE TRANSACTION ANY, THE UNDERLYING ASSET OF DERIVATIVE TRANSACTION IS FOREIGN CURRENCY. THE WORD COMMODITY IS USED IN BROADEST SENSE IN SECTION 43(5) OF THE ACT AS IT MENTIONS IN THE SECTION 43(5) OF THE ACT THAT THE WILL BE INCLUDED IN THE DEFINITION OF THE WORD 'COMMODITY' AS HELD IN SHREE CAPITAL SERVICES LTD. (SUPRA). HENCE, DERIVATIVE TRANSACTIONS IN FOREIGN CURRENCY SHALL BE EXEMPTED FROM PURVIEW OF SPECULATIVE TRANSACTIONS U/S 43(5) OF THE ACT PROVIDED OTHER CON DITIONS AS CONTAINED IN PROVISO (D) READ WITH EXPLANATION 1 TO SECTION 43(5) OF THE ACT ARE FULFILLED. OUR VIEW IS FORTIFIED BY THE MEMORANDUM EXPLAINING THE PROVISIONS IN THE FINANCE BILL, 2005 WHICH INTRODUCED CLAUSE (D) ((2005) 194 CTR(ST.) 147, THE POSE OF INTRODUCTION OF CLAUSE (D) HAS BEEN EXPLAINED, WHICH READS AS UNDER: 'MEASURES TO RATIONALIZE THE TAX TREATMENT OF DERIVATIVE TRANSACTION. 5) OF S.43) A TRANSACTION FOR THE PURCHASE AND SALE OF ANY COMMODITY INCLUDING STOCKS AND SHARES IS DEEMED TO BE A 'SPECULATIVE TRANSACTION', IF IT IS SETTLED OTHERWISE THAN BY ACTUAL DELIVERY. HOWEVER, CERTAIN THE PURVIEW OF SAID PROVISION. FURTHER, THE UNABSORBED SPECULATION LOSSES ARE ALLOWED TO BE CARRIED FORWARD FOR OFF AGAINST SPECULATION PROFITS IN SUBSEQUENT YEARS. THESE EVASION MEASURE TO PREVENT CLAIMS OF ARTIFICIALLY GENERATED LOSSES IN THE ABSENCE OF AN APPROPRIATE RECENT SYSTEMIC AND TECHNOLOGICAL CHANGES INTRODUCED BY STOCK MARKETS HAVE RESULTED IN SUFFICIENT TRANSPARENCY TO PREVENT GENERATING FICTITI ARTIFICIAL TRANSACTIONS OR SHIFTING OF INCIDENCE OF LOSS FROM ONE PERSON TO ANOTHER. THE SCREEN BASED COMPUTERIZED TRADING PROVIDES FOR AN EXCELLENT AUDIT TRAIL. THEREFORE, THE PRESENT DISTINCTION BETWEEN SPECULATIVE AND NON TRANSACTIONS, PARTICULARLY RELATING TO DERIVATIVES IS NO MORE REQUIRED. THE PROPOSED AMENDMENT THEREFORE, SEEKS TO PROVIDE THAT AN ELIGIBLE TRANSACTION CARRIED OUT IN RESPECT OF TRADING IN DERIVATIVES IN A RECOGNIZED STOCK EXCHANGE SHALL NOT BE DEEMED TO ALSO SEEKS TO NOTIFY RELEVANT RULES ETC. REGARDING CONDITIONS TO BE FULFILLED BY RECOGNIZED EXCHANGES IN THIS REGARD. FURTHER IT IS ALSO PROPOSED TO AMEND SUB (4) OF S.73 SO AS TO REDUCE THE PERIOD OF EIGHT ASSESSMENT YEARS TO FOUR ASSESSMENT YEARS. THESE AMENDMENTS WILL TAKE EFFECT FROM 1ST APRIL 2006 AND WILL, ACCORDINGLY, APPLY IN RELATION TO ASST. YS 2006 FROM THE ABOVE IT IS EVID OUT THROUGH RECOGNIZED STOCK EXCHANGES ARE EXEMPTED FROM THE PURVIEW OF SPECULATION TRANSACTIONS U/S 43(5) OF THE ACT PROVIDED OTHER CONDITIONS ARE SATISFIED BECAUSE OF RECENT AND SYSTEMIC AND TECHN STOCK EXCHANGES. WE HAVE OBSERVED THAT THE ASSESSEE COMPANY HAS ENTERED INTO DERIVATIVE TRANSACTIONS IN FOREIGN CURRENCY THROUGH SEBI REGISTERED BROKER WHO IS A MEMBER NATIONAL STOCK EXCHANGE OF INDIA LIMITED AND THESE DERIV CARRIED ON THROUGH NATIONAL STOCK EXCHANGE OF INDIA WHICH IS A RECOGNIZED STOCK EXCHANGE AND THESE TRANSACTIONS ARE BACKED BY TIME STAMPED CONTRACT NOTES CARRYING UNIQUE CLIENT IDENTITY NUMBER AND PAN ALLOTTED UNDER THE ACT. THE RELI ANCE OF THE LD. DR ON THE CASE OF ARASKA DIAMOND (P.) LTD. (SUPRA) IS MISCONCEIVED AS IN THIS CASE THE ASSESSEE DID NOT FULFILL THE CONDITIONS AS STIPULATED UNDER SECTION 43(5) OF THE ACT READ WITH PROVISO AND EXPLANATION THERETO TO ENTITLE THE ASSESSEE TO CORNERS OF EXEMPTION FROM BEING TREATED AS NON MANDATE OF SECTION 43(5) OF THE ACT. THUS, WE HOLD THAT THESE DERIVATIVE TRANSACTIONS IN FOREIGN CURRENCY AS ENTERED INTO BY THE ASSESSEE COMPANY DULY FULFIL ALL THE CONDITIONS AS SPECIFIED U/S 43(5) OF THE ACT READ WITH PROVISO (D) AND EXPLANATION 1 TO SECTION 43(5) OF THE ACT. WE FURTHER HOLD THAT THESE TRANSACTIONS ARE COVERED BY THE EXCEPTION AS CONTAINED IN PROVISO (D) TO SECTION 43(5) OF THE ACT AND HENCE ARE NOT SPECULATIVE TRANSACTIONS AS DEFINED UNDER SECTION 43(5) OF THE ACT. THUS, WE HOLD THAT LOSS OF RS. 1,09,98,560/- INCURRED BY THE COMPANY ON DERIVATIVE TRANSACTIONS IN FOREIGN CURRENCY IN THE INSTANT APPEAL IS N CONTAINED IN SECTION 43(5) OF THE ACT. REGARDING CONTENTION OF THE REVENUE THAT, THESE MARKED TO MARKET LOSS OF RS. 1,09,98,560/- AS AT 31ST MARCH 2009 IS A NOTIONAL OR CONTINGENT LOSS AND CANNOT BE ALLOWED A S REVENUE EXPENDITURE AS IN VIEW OF REVENUE THE ASSESSEE COMPANY HAS CLAIMED THE LOSSES ON UNEXPIRED DERIVATIVE TRANSACTIONS IN FOREIGN CURRENCY BASED ON THE PREVAILING EXCHANGE RATES OF UNITED STATES DOLLAR VIS TO INDIAN RUPEE AS ON THE 14 RAMPURIA INDUSTRIES & INVESTMENTS LTD RECENT SYSTEMIC AND TECHNOLOGICAL CHANGES INTRODUCED BY STOCK MARKETS HAVE RESULTED IN SUFFICIENT TRANSPARENCY TO PREVENT GENERATING FICTITI OUS LOSSES THROUGH ARTIFICIAL TRANSACTIONS OR SHIFTING OF INCIDENCE OF LOSS FROM ONE PERSON TO ANOTHER. THE SCREEN BASED COMPUTERIZED TRADING PROVIDES FOR AN EXCELLENT AUDIT TRAIL. THEREFORE, THE PRESENT DISTINCTION BETWEEN SPECULATIVE AND NON TRANSACTIONS, PARTICULARLY RELATING TO DERIVATIVES IS NO MORE REQUIRED. THE PROPOSED AMENDMENT THEREFORE, SEEKS TO PROVIDE THAT AN ELIGIBLE TRANSACTION CARRIED OUT IN RESPECT OF TRADING IN DERIVATIVES IN A RECOGNIZED STOCK EXCHANGE SHALL NOT BE DEEMED TO BE A SPECULATIVE TRANSACTION. THE PROPOSED AMENDMENT ALSO SEEKS TO NOTIFY RELEVANT RULES ETC. REGARDING CONDITIONS TO BE FULFILLED BY RECOGNIZED EXCHANGES IN THIS REGARD. FURTHER IT IS ALSO PROPOSED TO AMEND SUB (4) OF S.73 SO AS TO REDUCE THE PERIOD OF CARRY FORWARD OF SPECULATION LOSSES FROM EIGHT ASSESSMENT YEARS TO FOUR ASSESSMENT YEARS. THESE AMENDMENTS WILL TAKE EFFECT FROM 1ST APRIL 2006 AND WILL, ACCORDINGLY, APPLY IN RELATION TO ASST. YS 2006 -07 AND SUBSEQUENT YEARS.' FROM THE ABOVE IT IS EVID ENT THAT THE ELIGIBLE TRANSACTIONS IN DERIVATIVES CARRIED OUT THROUGH RECOGNIZED STOCK EXCHANGES ARE EXEMPTED FROM THE PURVIEW OF SPECULATION TRANSACTIONS U/S 43(5) OF THE ACT PROVIDED OTHER CONDITIONS ARE SATISFIED BECAUSE OF RECENT AND SYSTEMIC AND TECHN OLOGICAL CHANGES INTRODUCED BY WE HAVE OBSERVED THAT THE ASSESSEE COMPANY HAS ENTERED INTO DERIVATIVE TRANSACTIONS IN FOREIGN CURRENCY THROUGH SEBI REGISTERED BROKER WHO IS A MEMBER NATIONAL STOCK EXCHANGE OF INDIA LIMITED AND THESE DERIV ATIVE TRANSACTIONS ARE CARRIED ON THROUGH NATIONAL STOCK EXCHANGE OF INDIA WHICH IS A RECOGNIZED STOCK EXCHANGE AND THESE TRANSACTIONS ARE BACKED BY TIME STAMPED CONTRACT NOTES CARRYING UNIQUE CLIENT IDENTITY NUMBER AND PAN ALLOTTED UNDER THE ACT. THE ANCE OF THE LD. DR ON THE CASE OF ARASKA DIAMOND (P.) LTD. (SUPRA) IS MISCONCEIVED AS IN THIS CASE THE ASSESSEE DID NOT FULFILL THE CONDITIONS AS STIPULATED UNDER SECTION 43(5) OF THE ACT READ WITH PROVISO AND EXPLANATION THERETO TO ENTITLE THE ASSESSEE TO BRING FORWARD CONTRACT IN FOREIGN CURRENCY WITHIN FOUR CORNERS OF EXEMPTION FROM BEING TREATED AS NON - SPECULATIVE TRANSACTION AS PER MANDATE OF SECTION 43(5) OF THE ACT. THUS, WE HOLD THAT THESE DERIVATIVE TRANSACTIONS IN FOREIGN CURRENCY AS ENTERED BY THE ASSESSEE COMPANY DULY FULFIL ALL THE CONDITIONS AS SPECIFIED U/S 43(5) OF THE ACT READ WITH PROVISO (D) AND EXPLANATION 1 TO SECTION 43(5) OF THE ACT. WE FURTHER HOLD THAT THESE TRANSACTIONS ARE COVERED BY THE EXCEPTION AS CONTAINED IN TO SECTION 43(5) OF THE ACT AND HENCE ARE NOT SPECULATIVE TRANSACTIONS AS DEFINED UNDER SECTION 43(5) OF THE ACT. THUS, WE HOLD THAT LOSS OF RS. INCURRED BY THE COMPANY ON DERIVATIVE TRANSACTIONS IN FOREIGN CURRENCY IN THE INSTANT APPEAL IS N OT A SPECULATIVE LOSS WITHIN THE DEFINITION AS CONTAINED IN SECTION 43(5) OF THE ACT. REGARDING CONTENTION OF THE REVENUE THAT, THESE MARKED TO MARKET LOSS OF RS. AS AT 31ST MARCH 2009 IS A NOTIONAL OR CONTINGENT LOSS AND CANNOT S REVENUE EXPENDITURE AS IN VIEW OF REVENUE THE ASSESSEE COMPANY HAS CLAIMED THE LOSSES ON UNEXPIRED DERIVATIVE TRANSACTIONS IN FOREIGN CURRENCY BASED ON THE PREVAILING EXCHANGE RATES OF UNITED STATES DOLLAR VIS - TO INDIAN RUPEE AS ON THE DATE OF BALANCE SHEET AS AT 31ST MARCH 2009 WHILE THE ITA NO. 651/KOL/2018 ASSESSMENT YEAR: 2013-14 RAMPURIA INDUSTRIES & INVESTMENTS LTD . RECENT SYSTEMIC AND TECHNOLOGICAL CHANGES INTRODUCED BY STOCK MARKETS HAVE OUS LOSSES THROUGH ARTIFICIAL TRANSACTIONS OR SHIFTING OF INCIDENCE OF LOSS FROM ONE PERSON TO ANOTHER. THE SCREEN BASED COMPUTERIZED TRADING PROVIDES FOR AN EXCELLENT AUDIT TRAIL. THEREFORE, THE PRESENT DISTINCTION BETWEEN SPECULATIVE AND NON -SPECULATIVE TRANSACTIONS, PARTICULARLY RELATING TO DERIVATIVES IS NO MORE REQUIRED. THE PROPOSED AMENDMENT THEREFORE, SEEKS TO PROVIDE THAT AN ELIGIBLE TRANSACTION CARRIED OUT IN RESPECT OF TRADING IN DERIVATIVES IN A RECOGNIZED STOCK EXCHANGE BE A SPECULATIVE TRANSACTION. THE PROPOSED AMENDMENT ALSO SEEKS TO NOTIFY RELEVANT RULES ETC. REGARDING CONDITIONS TO BE FULFILLED BY RECOGNIZED EXCHANGES IN THIS REGARD. FURTHER IT IS ALSO PROPOSED TO AMEND SUB -S. CARRY FORWARD OF SPECULATION LOSSES FROM THESE AMENDMENTS WILL TAKE EFFECT FROM 1ST APRIL 2006 AND WILL, ACCORDINGLY, ENT THAT THE ELIGIBLE TRANSACTIONS IN DERIVATIVES CARRIED OUT THROUGH RECOGNIZED STOCK EXCHANGES ARE EXEMPTED FROM THE PURVIEW OF SPECULATION TRANSACTIONS U/S 43(5) OF THE ACT PROVIDED OTHER CONDITIONS ARE OLOGICAL CHANGES INTRODUCED BY WE HAVE OBSERVED THAT THE ASSESSEE COMPANY HAS ENTERED INTO DERIVATIVE TRANSACTIONS IN FOREIGN CURRENCY THROUGH SEBI REGISTERED BROKER WHO IS A MEMBER ATIVE TRANSACTIONS ARE CARRIED ON THROUGH NATIONAL STOCK EXCHANGE OF INDIA WHICH IS A RECOGNIZED STOCK EXCHANGE AND THESE TRANSACTIONS ARE BACKED BY TIME STAMPED CONTRACT NOTES CARRYING UNIQUE CLIENT IDENTITY NUMBER AND PAN ALLOTTED UNDER THE ACT. THE ANCE OF THE LD. DR ON THE CASE OF ARASKA DIAMOND (P.) LTD. (SUPRA) IS MISCONCEIVED AS IN THIS CASE THE ASSESSEE DID NOT FULFILL THE CONDITIONS AS STIPULATED UNDER SECTION 43(5) OF THE ACT READ WITH PROVISO AND EXPLANATION THERETO TO BRING FORWARD CONTRACT IN FOREIGN CURRENCY WITHIN FOUR SPECULATIVE TRANSACTION AS PER THUS, WE HOLD THAT THESE DERIVATIVE TRANSACTIONS IN FOREIGN CURRENCY AS ENTERED BY THE ASSESSEE COMPANY DULY FULFIL ALL THE CONDITIONS AS SPECIFIED U/S 43(5) OF THE ACT READ WITH PROVISO (D) AND EXPLANATION 1 TO SECTION 43(5) OF THE ACT. WE FURTHER HOLD THAT THESE TRANSACTIONS ARE COVERED BY THE EXCEPTION AS CONTAINED IN TO SECTION 43(5) OF THE ACT AND HENCE ARE NOT SPECULATIVE TRANSACTIONS AS DEFINED UNDER SECTION 43(5) OF THE ACT. THUS, WE HOLD THAT LOSS OF RS. INCURRED BY THE COMPANY ON DERIVATIVE TRANSACTIONS IN FOREIGN OT A SPECULATIVE LOSS WITHIN THE DEFINITION AS REGARDING CONTENTION OF THE REVENUE THAT, THESE MARKED TO MARKET LOSS OF RS. AS AT 31ST MARCH 2009 IS A NOTIONAL OR CONTINGENT LOSS AND CANNOT S REVENUE EXPENDITURE AS IN VIEW OF REVENUE THE ASSESSEE COMPANY HAS CLAIMED THE LOSSES ON UNEXPIRED DERIVATIVE TRANSACTIONS IN FOREIGN CURRENCY - A-VIS IN RELATION DATE OF BALANCE SHEET AS AT 31ST MARCH 2009 WHILE THE ACTUAL LOSS HAS NOT YET CRYSTALLIZED IN THE VIEW OF REVENUE BECAUSE THE DERIVATIVE TRANSACTIONS HAD NOT YET BEEN SQUARED/SETTLED AS ON THE DATE OF BALANCE SHEET AS AT 31ST MARCH 2009, WE ARE GUIDED BY T MUMBAI IN BANK OF BAHRAIN & KUWAIT (SUPRA) AS DETAILED HERE IN UNDER: '..., 59. WE, ACCORDINGLY, HOLD THAT WHERE A FORWARD CONTRACT IS ENTERED INTO BY THE ASSESSEE TO SELL THE FOREIGN CURRENCY AT AN AGREED PRICE AT A BEYOND THE LAST DATE OF ACCOUNTING PERIOD, THE LOSS IS INCURRED TO THE ASSESSEE ON ACCOUNT OF EVALUATION OF THE CONTRACT ON THE LAST DATE OF THE ACCOUNTING PERIOD I.E. BEFORE THE DATE OF MATURITY OF THE FORWARD CONTRACT.' THE TRANSACT ION IN DERIVATIVES IN FOREIGN CURRENCY AS ENTERED INTO BY THE ASSESSEE COMPANY ARE SIMILAR TO FORWARD CONTRACT IN FOREIGN CURRENCY AS DISCUSSED IN THE DECISION OF BANK OF BAHRAIN & KUWAIT (SUPRA). RESPECTFULLY FOLLOWING THE DECISION OF TRIBUNAL, SPECIAL BE THAT THE MARKED TO MARKET LOSSES OF RS. 1,09,98,560/ COMPANY DUE TO THE MOVEMENT IN THE PREVAILING EXCHANGE RATE OF FOREIGN CURRENCY I.E. UNITED STATES DOLLAR VIS DATE OF BALANCE SHEET VIZ 31ST MARCH 2009 IS NOT A NOTIONAL OR CONTINGENT LOSS RATHER IT IS AN ASCERTAINED LIABILITY WHICH HAS CRYSTALLIZED WHEREBY A PENDING OBLIGATION OF DERIVATIVE CONTRACT ON THE BALANCE SHEET DATE I.E DETERMINABLE WITH REASONABLE CERTAINTY AND ACCURACY. THE ACCOUNTING STANDARD 11 PRESCRIBED BY ICAI ALSO STIPULATE THAT IN SITUATION LIKE THIS WHEN THE DERIVATIVE TRANSACTION IN FOREIGN CURRENCY HAS NOT BEEN SETTLED/SQUARED DURING THE AC COUNTING PERIOD, THE EFFECT OF EXCHANGE RATE DIFFERENCE ON THE UN FOREIGN CURRENCY CONTRACTS AS AT THE END OF ACCOUNTING PERIOD IS TO BE ACCOUNTED FOR IN THE BOOKS OF ACCOUNT PREPARED FOR THE AFORE RELIANCE OF THE DR O MISCONCEIVED AS IN THE INSTANT CASE UNDER APPEAL IT IS NOT A CONTINGENT OR NOTIONAL LIABILITY RATHER IT IS AN ASCERTAINED LIABILITY WHICH HAS CRYSTALLIZED AND CAN BE DETERMINED WITH REASONABLE CERTAINTY PREVAILING BETWEEN UNITED STATES DOLLARS VIS ON THE DATE OF BALANCE SHEET AS AT 31ST MARCH 2009. HENCE , WE HOLD THAT THE SAID LOSS OF RS. 1,09,98,560/ TO MARKET LOSS ARISING ON THE DATE OF BALANCE SHEET AS AT 31ST MARCH 2009 ON ACCOUNT OF UN- EXPIRED DERIVATIVE TRANSACTIONS IN FOREIGN CURRENCY ENTERED BY THE ASSESSEE COMPANY ARISING DUE TO THE ADVERSE MOVEMENT IN THE EXCHANGE RAT PREVAILING BETWEEN UNITED STATE DOLLAR VIS THE DATE OF BALANCE SHEET AS AT 31ST MARCH 2009 CAN NOT BE CONSIDERED AS NOTIONAL OR CONTINGENT LOSS RATHER IT IS AN ASCERTAINED LOSS WHICH HAS ALREADY OCCURRED DURING THE CERTAINTY AND ACCURACY AND IS A FAIT ACCOMPLI AS HELD IN OIL & NATURAL GAS CORPN. LTD. (SUPRA). 9. THUS IN VIEW OF OUR ABOVE FOREGOING DISCUSSIONS, WE ALLOW THE APPEAL OF THE ASSESSEE COMPANY ON FOLLO 1. THAT THE ASSESSEE COMPANY HAS ENTERED INTO DERIVATIVE TRANSACTIONS IN FOREIGN CURRENCY THROUGH RECOGNISED STOCK EXCHANGE AND HAS COMPLIED WITH THE OTHER CONDITIONS AS STIPULATED IN SECTION 43(5) READ WITH PROVISO(D) AND EXPLANATION 1 T 43(5) OF THE ACT FOR WHICH COGENT MATERIAL IS BROUGHT ON RECORD. 15 RAMPURIA INDUSTRIES & INVESTMENTS LTD ACTUAL LOSS HAS NOT YET CRYSTALLIZED IN THE VIEW OF REVENUE BECAUSE THE DERIVATIVE TRANSACTIONS HAD NOT YET BEEN SQUARED/SETTLED AS ON THE DATE OF BALANCE SHEET AS AT 31ST MARCH 2009, WE ARE GUIDED BY T HE DECISION OF TRIBUNAL SPECIAL BENCH, MUMBAI IN BANK OF BAHRAIN & KUWAIT (SUPRA) AS DETAILED HERE IN UNDER: '..., 59. WE, ACCORDINGLY, HOLD THAT WHERE A FORWARD CONTRACT IS ENTERED INTO BY THE ASSESSEE TO SELL THE FOREIGN CURRENCY AT AN AGREED PRICE AT A FUTURE DATE FALLING BEYOND THE LAST DATE OF ACCOUNTING PERIOD, THE LOSS IS INCURRED TO THE ASSESSEE ON ACCOUNT OF EVALUATION OF THE CONTRACT ON THE LAST DATE OF THE ACCOUNTING PERIOD I.E. BEFORE THE DATE OF MATURITY OF THE FORWARD CONTRACT.' ION IN DERIVATIVES IN FOREIGN CURRENCY AS ENTERED INTO BY THE ASSESSEE COMPANY ARE SIMILAR TO FORWARD CONTRACT IN FOREIGN CURRENCY AS DISCUSSED IN THE DECISION OF BANK OF BAHRAIN & KUWAIT (SUPRA). RESPECTFULLY FOLLOWING THE DECISION OF TRIBUNAL, SPECIAL BE NCH, MUMBAI IN BANK OF BAHRAIN & KUWAIT (SUPRA) WE HOLD THAT THE MARKED TO MARKET LOSSES OF RS. 1,09,98,560/ - DETERMINED BY THE ASSESSEE COMPANY DUE TO THE MOVEMENT IN THE PREVAILING EXCHANGE RATE OF FOREIGN CURRENCY I.E. UNITED STATES DOLLAR VIS -A-VIS IN RELATION TO INDIAN RUPEE AS ON THE DATE OF BALANCE SHEET VIZ 31ST MARCH 2009 IS NOT A NOTIONAL OR CONTINGENT LOSS RATHER IT IS AN ASCERTAINED LIABILITY WHICH HAS CRYSTALLIZED WHEREBY A PENDING OBLIGATION OF DERIVATIVE CONTRACT ON THE BALANCE SHEET DATE I.E 31ST MARCH 2009 IS DETERMINABLE WITH REASONABLE CERTAINTY AND ACCURACY. THE ACCOUNTING STANDARD 11 PRESCRIBED BY ICAI ALSO STIPULATE THAT IN SITUATION LIKE THIS WHEN THE DERIVATIVE TRANSACTION IN FOREIGN CURRENCY HAS NOT BEEN SETTLED/SQUARED DURING THE COUNTING PERIOD, THE EFFECT OF EXCHANGE RATE DIFFERENCE ON THE UN FOREIGN CURRENCY CONTRACTS AS AT THE END OF ACCOUNTING PERIOD IS TO BE ACCOUNTED FOR IN THE BOOKS OF ACCOUNT PREPARED FOR THE AFORE - STATED ACCOUNTING PERIOD. THE RELIANCE OF THE DR O N INSTRUCTION NO 17/2008 DATED 26TH NOVEMBER 2008 IS MISCONCEIVED AS IN THE INSTANT CASE UNDER APPEAL IT IS NOT A CONTINGENT OR NOTIONAL LIABILITY RATHER IT IS AN ASCERTAINED LIABILITY WHICH HAS CRYSTALLIZED AND CAN BE DETERMINED WITH REASONABLE CERTAINTY BASED UPON THE ADVERSE EXCHANGE RATE PREVAILING BETWEEN UNITED STATES DOLLARS VIS - A VIS IN RELATION TO INDIAN RUPEES AS ON THE DATE OF BALANCE SHEET AS AT 31ST MARCH 2009. HENCE , WE HOLD THAT THE SAID LOSS OF RS. 1,09,98,560/ - INCURRED BY THE ASSESSEE COM PANY ON ACCOUNT OF MARKED TO MARKET LOSS ARISING ON THE DATE OF BALANCE SHEET AS AT 31ST MARCH 2009 ON EXPIRED DERIVATIVE TRANSACTIONS IN FOREIGN CURRENCY ENTERED BY THE ASSESSEE COMPANY ARISING DUE TO THE ADVERSE MOVEMENT IN THE EXCHANGE RAT PREVAILING BETWEEN UNITED STATE DOLLAR VIS -A- VIS IN RELATION TO INDIAN RUPEE AS ON THE DATE OF BALANCE SHEET AS AT 31ST MARCH 2009 CAN NOT BE CONSIDERED AS NOTIONAL OR CONTINGENT LOSS RATHER IT IS AN ASCERTAINED LOSS WHICH HAS ALREADY OCCURRED DURING THE ASSESSMENT YEAR WHICH CAN BE COMPUTED WITH REASONABLE CERTAINTY AND ACCURACY AND IS A FAIT ACCOMPLI AS HELD IN OIL & NATURAL GAS CORPN. 9. THUS IN VIEW OF OUR ABOVE FOREGOING DISCUSSIONS, WE ALLOW THE APPEAL OF THE ASSESSEE COMPANY ON FOLLO WING REASONS: THAT THE ASSESSEE COMPANY HAS ENTERED INTO DERIVATIVE TRANSACTIONS IN FOREIGN CURRENCY THROUGH RECOGNISED STOCK EXCHANGE AND HAS COMPLIED WITH THE OTHER CONDITIONS AS STIPULATED IN SECTION 43(5) READ WITH PROVISO(D) AND EXPLANATION 1 T 43(5) OF THE ACT FOR WHICH COGENT MATERIAL IS BROUGHT ON RECORD. ITA NO. 651/KOL/2018 ASSESSMENT YEAR: 2013-14 RAMPURIA INDUSTRIES & INVESTMENTS LTD . ACTUAL LOSS HAS NOT YET CRYSTALLIZED IN THE VIEW OF REVENUE BECAUSE THE DERIVATIVE TRANSACTIONS HAD NOT YET BEEN SQUARED/SETTLED AS ON THE DATE OF BALANCE SHEET AS HE DECISION OF TRIBUNAL SPECIAL BENCH, MUMBAI IN BANK OF BAHRAIN & KUWAIT (SUPRA) AS DETAILED HERE IN UNDER: '..., 59. WE, ACCORDINGLY, HOLD THAT WHERE A FORWARD CONTRACT IS ENTERED INTO BY THE FUTURE DATE FALLING BEYOND THE LAST DATE OF ACCOUNTING PERIOD, THE LOSS IS INCURRED TO THE ASSESSEE ON ACCOUNT OF EVALUATION OF THE CONTRACT ON THE LAST DATE OF THE ACCOUNTING PERIOD I.E. ION IN DERIVATIVES IN FOREIGN CURRENCY AS ENTERED INTO BY THE ASSESSEE COMPANY ARE SIMILAR TO FORWARD CONTRACT IN FOREIGN CURRENCY AS DISCUSSED IN THE DECISION OF BANK OF BAHRAIN & KUWAIT (SUPRA). RESPECTFULLY FOLLOWING THE DECISION NCH, MUMBAI IN BANK OF BAHRAIN & KUWAIT (SUPRA) WE HOLD DETERMINED BY THE ASSESSEE COMPANY DUE TO THE MOVEMENT IN THE PREVAILING EXCHANGE RATE OF FOREIGN RELATION TO INDIAN RUPEE AS ON THE DATE OF BALANCE SHEET VIZ 31ST MARCH 2009 IS NOT A NOTIONAL OR CONTINGENT LOSS RATHER IT IS AN ASCERTAINED LIABILITY WHICH HAS CRYSTALLIZED WHEREBY A PENDING 31ST MARCH 2009 IS DETERMINABLE WITH REASONABLE CERTAINTY AND ACCURACY. THE ACCOUNTING STANDARD - 11 PRESCRIBED BY ICAI ALSO STIPULATE THAT IN SITUATION LIKE THIS WHEN THE DERIVATIVE TRANSACTION IN FOREIGN CURRENCY HAS NOT BEEN SETTLED/SQUARED DURING THE COUNTING PERIOD, THE EFFECT OF EXCHANGE RATE DIFFERENCE ON THE UN -EXPIRED FOREIGN CURRENCY CONTRACTS AS AT THE END OF ACCOUNTING PERIOD IS TO BE ACCOUNTED STATED ACCOUNTING PERIOD. THE N INSTRUCTION NO 17/2008 DATED 26TH NOVEMBER 2008 IS MISCONCEIVED AS IN THE INSTANT CASE UNDER APPEAL IT IS NOT A CONTINGENT OR NOTIONAL LIABILITY RATHER IT IS AN ASCERTAINED LIABILITY WHICH HAS CRYSTALLIZED AND CAN BE BASED UPON THE ADVERSE EXCHANGE RATE A VIS IN RELATION TO INDIAN RUPEES AS ON THE DATE OF BALANCE SHEET AS AT 31ST MARCH 2009. HENCE , WE HOLD THAT THE SAID PANY ON ACCOUNT OF MARKED TO MARKET LOSS ARISING ON THE DATE OF BALANCE SHEET AS AT 31ST MARCH 2009 ON EXPIRED DERIVATIVE TRANSACTIONS IN FOREIGN CURRENCY ENTERED BY THE ASSESSEE COMPANY ARISING DUE TO THE ADVERSE MOVEMENT IN THE EXCHANGE RAT E VIS IN RELATION TO INDIAN RUPEE AS ON THE DATE OF BALANCE SHEET AS AT 31ST MARCH 2009 CAN NOT BE CONSIDERED AS NOTIONAL OR CONTINGENT LOSS RATHER IT IS AN ASCERTAINED LOSS WHICH HAS ALREADY ASSESSMENT YEAR WHICH CAN BE COMPUTED WITH REASONABLE CERTAINTY AND ACCURACY AND IS A FAIT ACCOMPLI AS HELD IN OIL & NATURAL GAS CORPN. 9. THUS IN VIEW OF OUR ABOVE FOREGOING DISCUSSIONS, WE ALLOW THE APPEAL OF THE THAT THE ASSESSEE COMPANY HAS ENTERED INTO DERIVATIVE TRANSACTIONS IN FOREIGN CURRENCY THROUGH RECOGNISED STOCK EXCHANGE AND HAS COMPLIED WITH THE OTHER CONDITIONS AS STIPULATED IN SECTION 43(5) READ WITH PROVISO(D) AND EXPLANATION 1 T O THE SAID SECTION 2. THAT THE CONTRACT FOR DERIVATIVES IN FOREIGN CURRENCY ARE COMMODITY AS DEFINED U/S 43(5) OF THE ACT, THE UNDERLYING ASSET BEING FOREIGN CURRENCY AND ARE HENCE ENTITLED FOR EXEMPTION FROM BEING TREATED AS SPECULATIVE PROVIDED ALL OTHER CONDITIONS AS STIPULA COMPLIED WITH. 3. A BINDING OBLIGATION ACCRUED AGAINST THE ASSESSEE THE MINUTE IT ENTERED INTO CONTRACT FOR DERIVATIVE IN FOREIGN CURRENCY 4. A LIABILITY IS SAID TO HAVE CRYSTALLIZED WHEN A PENDING OBLIGATION ON THE BALANCE SHEE IS DETERMINATE WITH REASONABLE CERTAINTY. THE CONSIDERATIONS FOR ACCOUNTING THE INCOME ARE ENTIRELY ON DIFFERENT FOOTING. 5. AS PER AS- 11, WHEN THE TRANSACTION IS NOT SETTLED IN THE SAME ACCOUNTING PERIOD AS THAT IN WHICH IT OCCURRED, THE EXCHANGE DIFFERENCE ARISES OVER MORE THAN ONE ACCOUNTING PERIOD. 6. THE CONTRACT FOR DERIVATIVE IN FOREIGN CURRENCY HAVE ALL THE TRAPPING 7. IN THE ULTIMATE ANALYSIS, THERE IS NO REVENUE EFFECT AND IT IS ONLY THE TIMING OF TAXATION OF LOSS/PROFIT AND IN CASE THE DERIVATIVE CONTRACT IS SQUARED OFF/SETTLED IN THE SUCCEEDING YEAR, THE DIFFERENCE IN LOSS/PROFIT WILL BE HENCE ITS ALLOWABILITY IN THE CURRENT YEAR IS TAX NEUTRAL.' 27. THESE DISCUSSIONS WERE RELIED ON BY THE ASSESSEE BEFORE THE AUTHORITIES BELOW. 28. THUS, AS RIGHTLY CONTENDED, NOT ONLY WERE THE LOSSES INCURRED BY THE ASSESSEE ENTITLED TO BE HELD AS NON WAS ENTITLED TO BE ALLOWED TO BE SET OFF WITH OTHER INCOME AND NO PART OF SUCH LOSS COULD BE DISALLOWED BY HOLDING IT TO BE A 'NOTIONAL LOSS'. 9. APPLYING THE PROPOSITIONS OF LAW LAID DOWN IN THE ABOVE CASE THE CASE ON HAND, WE HAVE NO HESITATION IN HOLDING THAT THE LD. PR. CIT WAS WRONG IN COMING TO THE CONCLUSION THAT TH BE TREATED AS A BUSINESS LOSS UNDER THE PROVISIONS OF THE ACT. CONSIDERED THE LEGAL POSITION ON THIS ISSUE AS LAID DOWN BY VARIOUS TRIBUNALS AND HONBLE HIGH COURTS. THE CIR THE LD. PR. CIT IN HIS ORDER U/S 263 OF THE ACT IS HEREBY REVERSED ISSUE. 10. COMING TO THE ISSUE AS TO WHETHER THE ASSESSING OFFICER HAS APPLIED HIS MIND TO THE FACTS OF THE CASE, WE FIND THAT THE ASSESSING OFFICER HAS CALLED FOR EXPLANATION FROM THE ASSESSEE ON THIS ISSUE ON FIVE OCCASIONS AND THE ASSESSEE HAS SUBMITTED DETAILED REPLIES. HE HAS ALSO PRODUCED LEDGERS ALONG WITH SUPPORTING SAMPLE CONTRACT NOTES 16 RAMPURIA INDUSTRIES & INVESTMENTS LTD THAT THE CONTRACT FOR DERIVATIVES IN FOREIGN CURRENCY ARE COMMODITY AS DEFINED U/S 43(5) OF THE ACT, THE UNDERLYING ASSET BEING FOREIGN CURRENCY AND ARE HENCE ENTITLED FOR EXEMPTION FROM BEING TREATED AS SPECULATIVE PROVIDED ALL OTHER CONDITIONS AS STIPULA COMPLIED WITH. A BINDING OBLIGATION ACCRUED AGAINST THE ASSESSEE THE MINUTE IT ENTERED INTO CONTRACT FOR DERIVATIVE IN FOREIGN CURRENCY A LIABILITY IS SAID TO HAVE CRYSTALLIZED WHEN A PENDING OBLIGATION ON THE BALANCE SHEE IS DETERMINATE WITH REASONABLE CERTAINTY. THE CONSIDERATIONS FOR ACCOUNTING THE INCOME ARE ENTIRELY ON DIFFERENT FOOTING. 11, WHEN THE TRANSACTION IS NOT SETTLED IN THE SAME ACCOUNTING PERIOD AS THAT IN WHICH IT OCCURRED, THE EXCHANGE DIFFERENCE ARISES OVER MORE THAN ONE ACCOUNTING PERIOD. THE CONTRACT FOR DERIVATIVE IN FOREIGN CURRENCY HAVE ALL THE TRAPPING IN THE ULTIMATE ANALYSIS, THERE IS NO REVENUE EFFECT AND IT IS ONLY THE TIMING OF TAXATION OF LOSS/PROFIT AND IN CASE THE DERIVATIVE CONTRACT IS SQUARED OFF/SETTLED IN THE SUCCEEDING YEAR, THE DIFFERENCE IN LOSS/PROFIT WILL BE BROUGHT TO TAX IN THE SUCCEEDING ASSESSMENT YEAR AND HENCE ITS ALLOWABILITY IN THE CURRENT YEAR IS TAX NEUTRAL.' THESE DISCUSSIONS WERE RELIED ON BY THE ASSESSEE BEFORE THE AUTHORITIES BELOW. THUS, AS RIGHTLY CONTENDED, NOT ONLY WERE THE LOSSES INCURRED BY THE ASSESSEE ENTITLED TO BE HELD AS NON - SPECULATIVE, BUT ALSO THE WHOLE OF THE LOSS SUSTAINED BY HIM WAS ENTITLED TO BE ALLOWED TO BE SET OFF WITH OTHER INCOME AND NO PART OF SUCH LOSS BE DISALLOWED BY HOLDING IT TO BE A 'NOTIONAL LOSS'. APPLYING THE PROPOSITIONS OF LAW LAID DOWN IN THE ABOVE CASE - LAW, WE HAVE NO HESITATION IN HOLDING THAT THE LD. PR. CIT WAS WRONG IN COMING TO THE CONCLUSION THAT TH E LOSS ON FOREIGN CURRENCY TRANSACTIONS IS NO BE TREATED AS A BUSINESS LOSS UNDER THE PROVISIONS OF THE ACT. THE LD. PR. CIT HAS NOT CONSIDERED THE LEGAL POSITION ON THIS ISSUE AS LAID DOWN BY VARIOUS TRIBUNALS AND HONBLE HIGH COURTS. THE CIR CULARS OF THE CBDT HAS BEEN IGNORED. THUS, THIS DIRECTION OF THE LD. PR. CIT IN HIS ORDER U/S 263 OF THE ACT IS HEREBY REVERSED AS BAD IN LAW, ON THIS COMING TO THE ISSUE AS TO WHETHER THE ASSESSING OFFICER HAS APPLIED HIS MIND TO THE CASE, WE FIND THAT THE ASSESSING OFFICER HAS CALLED FOR EXPLANATION FROM THE ASSESSEE ON THIS ISSUE ON FIVE OCCASIONS AND THE ASSESSEE HAS SUBMITTED DETAILED REPLIES. HE HAS ALSO PRODUCED LEDGERS ALONG WITH SUPPORTING SAMPLE CONTRACT NOTES ITA NO. 651/KOL/2018 ASSESSMENT YEAR: 2013-14 RAMPURIA INDUSTRIES & INVESTMENTS LTD . THAT THE CONTRACT FOR DERIVATIVES IN FOREIGN CURRENCY ARE COMMODITY AS DEFINED U/S 43(5) OF THE ACT, THE UNDERLYING ASSET BEING FOREIGN CURRENCY AND ARE HENCE ENTITLED FOR EXEMPTION FROM BEING TREATED AS SPECULATIVE PROVIDED ALL OTHER CONDITIONS AS STIPULA TED U/S 43(5) ARE A BINDING OBLIGATION ACCRUED AGAINST THE ASSESSEE THE MINUTE IT ENTERED INTO CONTRACT FOR A LIABILITY IS SAID TO HAVE CRYSTALLIZED WHEN A PENDING OBLIGATION ON THE BALANCE SHEE T DATE IS DETERMINATE WITH REASONABLE CERTAINTY. THE CONSIDERATIONS FOR ACCOUNTING THE INCOME 11, WHEN THE TRANSACTION IS NOT SETTLED IN THE SAME ACCOUNTING PERIOD AS THAT IN WHICH IT OCCURRED, THE EXCHANGE DIFFERENCE ARISES OVER MORE THAN ONE ACCOUNTING PERIOD. THE CONTRACT FOR DERIVATIVE IN FOREIGN CURRENCY HAVE ALL THE TRAPPING S OF STOCK-IN-TRADE. IN THE ULTIMATE ANALYSIS, THERE IS NO REVENUE EFFECT AND IT IS ONLY THE TIMING OF TAXATION OF LOSS/PROFIT AND IN CASE THE DERIVATIVE CONTRACT IS SQUARED OFF/SETTLED IN THE SUCCEEDING YEAR, BROUGHT TO TAX IN THE SUCCEEDING ASSESSMENT YEAR AND THESE DISCUSSIONS WERE RELIED ON BY THE ASSESSEE BEFORE THE AUTHORITIES BELOW. THUS, AS RIGHTLY CONTENDED, NOT ONLY WERE THE LOSSES INCURRED BY THE ASSESSEE SPECULATIVE, BUT ALSO THE WHOLE OF THE LOSS SUSTAINED BY HIM WAS ENTITLED TO BE ALLOWED TO BE SET OFF WITH OTHER INCOME AND NO PART OF SUCH LOSS LAW, TO THE FACTS OF WE HAVE NO HESITATION IN HOLDING THAT THE LD. PR. CIT WAS WRONG IN E LOSS ON FOREIGN CURRENCY TRANSACTIONS IS NO T ELIGIBLE TO THE LD. PR. CIT HAS NOT CONSIDERED THE LEGAL POSITION ON THIS ISSUE AS LAID DOWN BY VARIOUS TRIBUNALS AND THUS, THIS DIRECTION OF AS BAD IN LAW, ON THIS COMING TO THE ISSUE AS TO WHETHER THE ASSESSING OFFICER HAS APPLIED HIS MIND TO THE CASE, WE FIND THAT THE ASSESSING OFFICER HAS CALLED FOR EXPLANATION FROM THE ASSESSEE ON THIS ISSUE ON FIVE OCCASIONS AND THE ASSESSEE HAS SUBMITTED DETAILED REPLIES. HE HAS ALSO PRODUCED LEDGERS ALONG WITH SUPPORTING SAMPLE CONTRACT NOTES BEFORE THE A SSESSING OFFICER, DURING THE ASSESSMENT PROCEEDINGS ENTRIES IN THE ORDER SHEET. THUS, THIS IS NOT A CASE OF NON MENTIONING OF THE FACT OF VERIFICATION O AGAINST THE ASSESSEE AS THE MANNER IN WHICH THE ASSESSMENT ORDER IS CONTROL OF THE ASSESSEE. 10.1. A NUMBER OF HIGH COURTS HAVE CONSIDERED SIMILAR ISSUES AND HELD AS FOLLOWS : NARAYAN TATU AS PER EXPLANATION 2 BELOW SEC. 263 IS PASSED WITHOUT MAKING INQUIRIES OR VERIFICATION WHICH SHOULD HAVE BEEN MADE; HELD, THIS PROVISION DOES NOT AUTHORIZE OR GIVE U COMMISSIONER TO REVISE EACH AND EVERY ORDER, IF IN HIS OPINION, SAME HAS BEEN PASSED WITHOUT MAKING ENQUIRIES OR VERIFICATION WHICH SHOULD HAVE BEEN MADE. GABRIEL INDIA LTD. (BOM) 203 ITR 108 SECTION 263 OF THE INCOME INTERESTS OF REVENUE 99,326 DESCRIB ED 'AS PLANT RELAY OUT EXPENSES' AS REVENUE EXPENDITURE AND ITO, AFTER MAKING ENQUIRIES IN REGARD TO NATURE OF SAID EXPENDITURE AND CONSIDERING EXPLANATION FURNISHED BY ASSESSEE IN THAT REGARD, ALLOWED ASSESSEE'S CLAIM SUBSEQUENTLY, COMMISSIONER, EXERCIS OF ITO OBSERVING THAT ORDER OF ITO DID NOT CONTAIN DISCUSSION IN REGARD TO ALLOW ABILITY OF CLAIM FOR DEDUCTION WHICH INDICATED NON CLAIM OF ASSESSEE REQUIRED EXAMINATION AS TO WHET A REVENUE OR CAPITAL EXPENDITURE AND DIRECTED ITO TO MAKE A FRESH ASSESSMENT ON LINES INDICATED BY HIM COMMISSIONER FOR THAT OF ITO IS PERMISSIBLE CAN BE TERMED AS ERRONEOUS SIMPLY BECAUSE COMMISSIONER DOES NOT AGREE WITH HIS CONCLUSION - HELD, NO SIMPLY BECAUSE IN HIS ORDER HE DID NOT MAKE AN ELABORATE DISCUSSION NO - WHE THER PROVISIONS OF SECTION 263 WERE APPLICABLE TO INSTANT CASE AND COMMISSIONER WAS JUSTIFIED IN SETTING ASIDE ASSESSMENT ORDER MALABAR CO. LTD. VS. CIT (SC) (2000) 243 ITR 83 THE PHRASE 'PREJUDICIAL TO THE INTERESTS OF THE REVENUE' HAS TO BE CONJUNCTION WITH AN ERRONEOUS ORDER PASSED BY THE ASSESSING OFFICER. EVERY LOSS OF REVENUE AS A CONSEQUENCE OF AN ORDER OF THE ASSESSING OFFICER CANNOT BE TREATED AS PREJUDICIAL TO THE INTERESTS OF THE REVENUE, FOR EXAMPLE, WHEN AN ITO ADOPTS ONE O THE COURSES PERMISSIBLE IN LAW AND IT HAS RESULTED IN LOSS OF REVENUE; OR WHERE TWO VIEWS ARE POSSIBLE AND THE ITO HAS TAKEN ONE VIEW WITH WHICH THE COMMISSIONER DOES NOT AGREE, IT CANNOT BE TREATED AS AN ERRONEOUS ORDER PREJUDICIAL TO THE INTERESTS OF T HE REVENUE UNLESS THE VIEW TAKEN BY THE ITO IS UNSUSTAINABLE IN LAW. 17 RAMPURIA INDUSTRIES & INVESTMENTS LTD SSESSING OFFICER, DURING THE ASSESSMENT PROCEEDINGS AS IS CLEAR FROM THE ENTRIES IN THE ORDER SHEET. THUS, THIS IS NOT A CASE OF NON - APPLICATION OF MIND. NON MENTIONING OF THE FACT OF VERIFICATION O F AN ISSUE IN THE ASSESSMENT ORDER, CANNOT BE HELD AGAINST THE ASSESSEE AS THE MANNER IN WHICH THE ASSESSMENT ORDER IS A NUMBER OF HIGH COURTS HAVE CONSIDERED SIMILAR ISSUES AND HELD AS FOLLOWS : NARAYAN TATU RANE VS. ITO (2016) 70 TAXMANN.COM 227 (MUM) EXPLANATION 2 BELOW SEC. 263 , PROCEEDINGS CAN BE INITIATED WHERE AN ORDER IS PASSED WITHOUT MAKING INQUIRIES OR VERIFICATION WHICH SHOULD HAVE BEEN MADE; HELD, THIS PROVISION DOES NOT AUTHORIZE OR GIVE U NFETTERD POWER TO THE COMMISSIONER TO REVISE EACH AND EVERY ORDER, IF IN HIS OPINION, SAME HAS BEEN PASSED WITHOUT MAKING ENQUIRIES OR VERIFICATION WHICH SHOULD HAVE BEEN MADE. GABRIEL INDIA LTD. (BOM) 203 ITR 108 OF THE INCOME -TAX ACT, 1961 - REVISION - OF ORDERS PREJUDICIAL TO INTERESTS OF REVENUE - ASSESSMENT YEAR 1973-74 - ASSESSEE CLAIMED A SUM OF RS. ED 'AS PLANT RELAY OUT EXPENSES' AS REVENUE EXPENDITURE AND ITO, AFTER MAKING ENQUIRIES IN REGARD TO NATURE OF SAID EXPENDITURE AND CONSIDERING EXPLANATION FURNISHED BY ASSESSEE IN THAT REGARD, ALLOWED ASSESSEE'S CLAIM SUBSEQUENTLY, COMMISSIONER, EXERCIS ING POWERS UNDER SECTION 263, CANCELLED ORDER OF ITO OBSERVING THAT ORDER OF ITO DID NOT CONTAIN DISCUSSION IN REGARD TO ALLOW ABILITY OF CLAIM FOR DEDUCTION WHICH INDICATED NON - APPLICATION OF MIND AND THAT CLAIM OF ASSESSEE REQUIRED EXAMINATION AS TO WHET HER EXPENDITURE IN QUESTION WAS A REVENUE OR CAPITAL EXPENDITURE AND DIRECTED ITO TO MAKE A FRESH ASSESSMENT ON LINES INDICATED BY HIM - WHETHER UNDER SECTION 263 SUBSTITUTION OF JUDGMENT OF COMMISSIONER FOR THAT OF ITO IS PERMISSIBLE - HELD, NO - WHETHER CAN BE TERMED AS ERRONEOUS SIMPLY BECAUSE COMMISSIONER DOES NOT AGREE WITH HIS HELD, NO - WHETHER ITO'S ORDER COULD BE HELD TO BE 'ERRONEOUS' SIMPLY BECAUSE IN HIS ORDER HE DID NOT MAKE AN ELABORATE DISCUSSION THER PROVISIONS OF SECTION 263 WERE APPLICABLE TO INSTANT CASE AND COMMISSIONER WAS JUSTIFIED IN SETTING ASIDE ASSESSMENT ORDER - HELD, NO MALABAR CO. LTD. VS. CIT (SC) (2000) 243 ITR 83 THE PHRASE 'PREJUDICIAL TO THE INTERESTS OF THE REVENUE' HAS TO BE CONJUNCTION WITH AN ERRONEOUS ORDER PASSED BY THE ASSESSING OFFICER. EVERY LOSS OF REVENUE AS A CONSEQUENCE OF AN ORDER OF THE ASSESSING OFFICER CANNOT BE TREATED AS PREJUDICIAL TO THE INTERESTS OF THE REVENUE, FOR EXAMPLE, WHEN AN ITO ADOPTS ONE O THE COURSES PERMISSIBLE IN LAW AND IT HAS RESULTED IN LOSS OF REVENUE; OR WHERE TWO VIEWS ARE POSSIBLE AND THE ITO HAS TAKEN ONE VIEW WITH WHICH THE COMMISSIONER DOES NOT AGREE, IT CANNOT BE TREATED AS AN ERRONEOUS ORDER PREJUDICIAL TO THE HE REVENUE UNLESS THE VIEW TAKEN BY THE ITO IS UNSUSTAINABLE IN LAW. ITA NO. 651/KOL/2018 ASSESSMENT YEAR: 2013-14 RAMPURIA INDUSTRIES & INVESTMENTS LTD . AS IS CLEAR FROM THE APPLICATION OF MIND. NON - ISSUE IN THE ASSESSMENT ORDER, CANNOT BE HELD AGAINST THE ASSESSEE AS THE MANNER IN WHICH THE ASSESSMENT ORDER IS DRAFTED, IS NOT IN A NUMBER OF HIGH COURTS HAVE CONSIDERED SIMILAR ISSUES AND HELD AS FOLLOWS : - RANE VS. ITO (2016) 70 TAXMANN.COM 227 (MUM) , PROCEEDINGS CAN BE INITIATED WHERE AN ORDER IS PASSED WITHOUT MAKING INQUIRIES OR VERIFICATION WHICH SHOULD HAVE BEEN MADE; NFETTERD POWER TO THE COMMISSIONER TO REVISE EACH AND EVERY ORDER, IF IN HIS OPINION, SAME HAS BEEN PASSED WITHOUT MAKING ENQUIRIES OR VERIFICATION WHICH SHOULD HAVE BEEN MADE. OF ORDERS PREJUDICIAL TO ASSESSEE CLAIMED A SUM OF RS. ED 'AS PLANT RELAY OUT EXPENSES' AS REVENUE EXPENDITURE AND ITO, AFTER MAKING ENQUIRIES IN REGARD TO NATURE OF SAID EXPENDITURE AND CONSIDERING EXPLANATION FURNISHED BY ASSESSEE IN THAT REGARD, ALLOWED ASSESSEE'S CLAIM - ING POWERS UNDER SECTION 263, CANCELLED ORDER OF ITO OBSERVING THAT ORDER OF ITO DID NOT CONTAIN DISCUSSION IN REGARD TO ALLOW APPLICATION OF MIND AND THAT HER EXPENDITURE IN QUESTION WAS A REVENUE OR CAPITAL EXPENDITURE AND DIRECTED ITO TO MAKE A FRESH ASSESSMENT ON WHETHER UNDER SECTION 263 SUBSTITUTION OF JUDGMENT OF WHETHER ITO'S CONCLUSION CAN BE TERMED AS ERRONEOUS SIMPLY BECAUSE COMMISSIONER DOES NOT AGREE WITH HIS WHETHER ITO'S ORDER COULD BE HELD TO BE 'ERRONEOUS' SIMPLY BECAUSE IN HIS ORDER HE DID NOT MAKE AN ELABORATE DISCUSSION - HELD, THER PROVISIONS OF SECTION 263 WERE APPLICABLE TO INSTANT CASE AND HELD, NO THE PHRASE 'PREJUDICIAL TO THE INTERESTS OF THE REVENUE' HAS TO BE READ IN CONJUNCTION WITH AN ERRONEOUS ORDER PASSED BY THE ASSESSING OFFICER. EVERY LOSS OF REVENUE AS A CONSEQUENCE OF AN ORDER OF THE ASSESSING OFFICER CANNOT BE TREATED AS PREJUDICIAL TO THE INTERESTS OF THE REVENUE, FOR EXAMPLE, WHEN AN ITO ADOPTS ONE O F THE COURSES PERMISSIBLE IN LAW AND IT HAS RESULTED IN LOSS OF REVENUE; OR WHERE TWO VIEWS ARE POSSIBLE AND THE ITO HAS TAKEN ONE VIEW WITH WHICH THE COMMISSIONER DOES NOT AGREE, IT CANNOT BE TREATED AS AN ERRONEOUS ORDER PREJUDICIAL TO THE HE REVENUE UNLESS THE VIEW TAKEN BY THE ITO IS UNSUSTAINABLE IN LAW. 11. APPLYING THE PROPOSITIONS OF LAW LAID DOWN IN THE ABOVE REFERRED CASE FACTS OF THE CASE ON HAND, WE HOLD THAT THE ORDER PASSED U/ AS THE ASSESSING OFFICER IN THIS CASE CONSIDERED THE ISSUE, EXAMINED THE FACTS AND HAD TAKEN A LEGALLY POSSIBLE VIEW. 12. IN THE RESULT, APPEAL OF THE ASSESSEE IS ALLOWED. KOLKATA, THE SD/- [S.S. GODARA] JUDICIAL MEMBER DATED : 26.02.2020 {SC SPS} COPY OF THE ORDER FORWARDED TO: 1. RAMPURIA INDUSTRIES & INVESTMENTS LTD C/O. SUBASH AGARWAL & ASSOCIATES SIDDHA GIBSON 1, GIBSON LANE 2 ND FLOOR SUITE-213 KOLKATA 700 069 2. PR. COMMISSIONER OF INCOME TAX, CENTRAL (1), KOLKATA 3.CIT(A)- 4. CIT- , 5. CIT(DR), KOLKATA BENCHES, KOLKATA. 18 RAMPURIA INDUSTRIES & INVESTMENTS LTD APPLYING THE PROPOSITIONS OF LAW LAID DOWN IN THE ABOVE REFERRED CASE FACTS OF THE CASE ON HAND, WE HOLD THAT THE ORDER PASSED U/ S 263 OF THE ACT, IS BAD IN LAW ASSESSING OFFICER IN THIS CASE CONSIDERED THE ISSUE, EXAMINED THE FACTS AND HAD TAKEN A LEGALLY POSSIBLE VIEW. IN THE RESULT, APPEAL OF THE ASSESSEE IS ALLOWED. KOLKATA, THE 26 TH DAY OF FEBRUARY, 20 20 [ J. SUDHAKAR REDDY ACCOUNTANT MEMBER RAMPURIA INDUSTRIES & INVESTMENTS LTD ASSOCIATES PR. COMMISSIONER OF INCOME TAX, CENTRAL (1), KOLKATA 5. CIT(DR), KOLKATA BENCHES, KOLKATA. ASSISTANT REGISTRAR ITAT, KOLKATA BENCHES ITA NO. 651/KOL/2018 ASSESSMENT YEAR: 2013-14 RAMPURIA INDUSTRIES & INVESTMENTS LTD . APPLYING THE PROPOSITIONS OF LAW LAID DOWN IN THE ABOVE REFERRED CASE -LAW TO THE S 263 OF THE ACT, IS BAD IN LAW ASSESSING OFFICER IN THIS CASE CONSIDERED THE ISSUE, EXAMINED THE FACTS AND HAD 20 . SD/- J. SUDHAKAR REDDY ] ACCOUNTANT MEMBER TRUE COPY BY ORDER ASSISTANT REGISTRAR ITAT, KOLKATA BENCHES
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