THE ITO-4(2)(3), MUMBAI V. SHRI. JAYESH D PAREKH, MUMBAI

ITA 6512/MUM/2008

• Counselvise Citation: [2010] 136 COUNSELVISE.COM (IT) 2226 (ITAT-MUMBAI)
• Duration Of Justice: 1 year(s) 5 month(s) 27 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 07-05-2010
• Appeal Filed By: Department
• Order Result: Allowed
• Bench Allotted: J
• Next Hearing Date: 23-04-2010
• Assessment Year: 2004-2005
• Appeal Filed On: 10-11-2008
• Result in Favour of: Revenue
• Court: TRIBUNAL
• Department Lawyers: L K AGRAWAL
• Keywords: Transactions in derivatives; Speculation loss; Futures and options; Set aside
• Section: 43(5)

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL MUMBAI BENCH J : MUMBAI BEFORE SHRI D.K. AGARWAL, (JM) AND SHRI T.R. SOOD, (AM) ITA NO.6512/MUM/2008 ASSESSMENT YEAR : 2004-05 INCOME TAX OFFICER WARD-4(2)(3) ROOM NO.647, 6 TH FLOOR AAYAKAR BHAVAN M.K. ROAD MUMBAI-400 020. ..( APPELLANT ) VS. SHRI JAYESH D. PAREKH ROOM NO.15, 4 TH FLOOR ENGINEER BUILDING, 265 PRINCESS STREET MUMBAI-400 002. ..( RESPONDENT ) P.A. NO. (AACPP 9859 N) APPELLANT BY : SHRI L.K. AGRAWAL RESPONDENT BY : NONE O R D E R PER D.K. AGARWAL (JM). THIS APPEAL PREFERRED BY THE REVENUE IS DIRECTED AGAIN ST THE ORDER DATED 28.8.2008 PASSED BY THE LD. CIT(A) FOR TH E ASSESSMENT YEAR 2004-05 TAKING FOLLOWING GROUNDS:- 1. ON THE FACTS AND IN THE CIRCUMSTANCES OF THE CA SE AND IN LAW, THE LEARNED CIT(A) HAS ERRED IN DIRECTI NG THE ASSESSING OFFICER TO TREAT THE LOSS ON DERIVATIVES TRANSACTIONS AS NON SPECULATION LOSS OVERLOOKING TH E FACT THAT THE EXPLANATORY NOTES THE FINANCE ACT 2005 CLE ARLY STATED THAT TRANSACTIONS IN DERIVATIVES SHALL CEASE TO BE SPECULATIVE ONLY FROM THE DAY THE STOCK EXCHANGE FU LFILL THE CONDITIONS TO BE PRESCRIBED BY THE CENTRAL GOVT . AND IT ITA NO.6512/M/08 A.Y:04-05 2 WAS ONLY W.E.F. 25 TH JANUARY, 2006 THAT THE NOTIFICATION TO THAT EFFECT WAS ISSUED. 2. ON THE FACTS AND IN THE CIRCUMSTANCES OF THE CA SE LEARNED CIT(A) ERRED IN NOT CONSIDERING THAT THE PR OVISOS TO 43(5) ARE MAINLY TO COVER THE LOSSES THAT MAY AR ISE BY WAY OF HOLDING THE STOCKS AND NOT TO COVER CASES OF SIMULTANEOUS PURCHASE AND SALE OF SHARES/DERIVATIVE WITH A VIEW TO EARNING PROFITS OUT OF PRICE DIFFERENTIAL S IN DIFFERENT SEGMENTS. 3. ON THE FACTS IN THE CIRCUMSTANCE OF THE CASE, T HE LEARNED CIT(A) ERRED IN HOLDING THE TRANSACTION IN DERIVATIVES TO BE NON SPECULATION LOSS WHEN ADMITTE DLY THE TRANSACTION WERE SETTLED OTHERWISE THEN BY ACTU AL DELIVERY OR TRANSFER. 4. ON THE FACTS AND IN THE CIRCUMSTANCES OF THE CA SE AND IN LAW, THE IMPUGNED ORDER OF THE LEARNED CIT(A ) IS CONTRARY TO LAW AND CONSEQUENTLY ON MERITS IT DESER VES TO BE SET ASIDE AND THAT OF THE ASSESSING OFFICER REST ORED. 2. AT THE TIME OF HEARING NONE WAS PRESENT ON BEHALF OF THE ASSESSEE NOR FILED ANY APPLICATION FOR ADJOURNMENT OF TH E CASE. IT WAS, THEREFORE, DECIDED TO DISPOSE OF THE APPEAL EXPARTE, Q UA THE ASSESSEE, ON MERITS, AFTER HEARING THE LD. DR. 3. THE LD. DR SUBMITS THAT THIS ISSUE IS FULLY COVERE D IN FAVOUR OF THE REVENUE AND AGAINST THE ASSESSEE BY THE DECISION OF THE SPECIAL BENCH OF THE TRIBUNAL IN SHREE CAPITAL SERVICES LTD., THEREFORE, THE ISSUE MAY BE DECIDED ACCORDINGLY. 4. HAVING CAREFULLY HEARD THE SUBMISSIONS OF THE LD. D.R. AND PERUSING THE MATERIAL AVAILABLE ON RECORD WE FIND ME RIT IN THE PLEA OF THE LD. DR. IN SHREE CAPITAL SERVICES LTD. VS. ACIT ( 2009) 121 ITD 498(KOL.)(SB); (2009) 318 ITR (AT) 1(KOL.)(SB), IT HAS BEEN HELD (AT PAGE-2 OF 318 ITR HEADNOTE): ITA NO.6512/M/08 A.Y:04-05 3 HELD ACCORDINGLY, DISMISSING THE APPEAL, THAT THE TRANSACTION IN DERIVATIVES WAS A SPECULATIVE TRANSA CTION AS PROVIDED UNDER SECTION 43(5) AND THE TRANSACTION IN DERIVATIVES WAS NOT EXEMPTED FROM THE PURVIEW OF SPECULATIVE TRANSACTION UNDER SECTION 43(5) AND THE ASSESSING OFFICER WAS RIGHT IN TREATING THE LOSS AS SPECULATION LOSS IN TERMS OF SECTION 43(5) OF THE I NCOME TAX ACT, 1961 RESPECTFULLY FOLLOWING THE ORDER OF THE TRIBUNAL SUPRA , WE HOLD THAT THE LOSS ON FUTURES AND OPTIONS TRANSACTIONS IS A SPECULATI VE TRANSACTION, NOT EXEMPTED FROM THE PURVIEW OF SPECULATIVE TRANSACTIO N U/S.43(5) OF THE INCOME TAX ACT, 1961 (THE ACT) AND THE AO WAS RIGH T IN TREATING THE LOSS AS SPECULATION LOSS IN TERMS OF SEC.43(5) OF THE A CT. ACCORDINGLY THE ORDER PASSED BY THE LD. CIT(A) IS REVE RSED AND THAT OF AO IS RESTORED. THE GROUNDS TAKEN BY THE REVENUE ARE THEREFORE ALLOWED. 5. IN THE RESULT, REVENUE APPEAL STANDS ALLOWED. ORDER PRONOUNCED IN THE OPEN COURT ON 7.5.2010. SD/- SD/- (T.R. SOOD) ( D.K. AGARWAL ) ACCOUNTANT MEMBER JUDICIAL MEMBER MUMBAI, DATED: 7.5.2010. JV. COPY TO: THE APPELLANT THE RESPONDENT THE CIT, CONCERNED, MUMBAI THE CIT(A) CONCERNED, MUMBAI THE DR BENCH TRUE COPY BY ORDER DY/ASSTT. REGISTRAR, ITAT, MUMBAI. ITA NO.6512/M/08 A.Y:04-05 4 DETAILS DATE INITIALS DESIGNATION 1 DRAFT DICTATED ON 23.4.10 SR.PS/PS 2 DRAFT PLACED BEFORE AUTHOR 26.4.10 SR.PS/PS 3 DRAFT PROPOSED & PLACED BEFORE THE SECOND MEMBER JM/AM 4 DRAFT DISCUSSED/APPROVED BY SECOND MEMBER JM/AM 5. APPROVED DRAFT COMES TO THE SR.PS/PS SR.PS/PS 6. KEPT FOR PRONOUNCEMENT ON 7.5.10 SR.PS/PS 7. FILE SENT TO THE BENCH CLERK 11.5.10 SR.PS/PS 8 DATE ON WHICH THE FILE GOES TO THE HEAD CLERK 9 DATE OF DISPATCH OF ORDER