DCIT, CHENNAI V. Sri Vasavi Gold & Bullion Pvt. Ltd., CHENNAI

ITA 659/CHNY/2016

• Counselvise Citation: [2016] 131 COUNSELVISE.COM (IT) 8588 (ITAT-CHENNAI)
• Duration Of Justice: 5 month(s) 28 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 15-09-2016
• Appeal Filed By: Department
• Order Result: Dismissed
• Bench Allotted: A
• Assessment Year: 2011-2012
• Appeal Filed On: 18-03-2016
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: SHIVA SRINIVAS
• Assessee Lawyers: M P SENTHIL KUMAR
• Section: 43(5)

Judgement Text

, , IN THE INCOME TAX APPELLATE TRIBUNAL A BENCH, CHENNAI . . . , .. ' #$, & '( BEFORE SHRI N.R.S. GANESAN, JUDICIAL MEMBER AND SHRI D.S. SUNDER SINGH, ACCOUNTANT MEMBER ./ ITA NO.659/MDS/2016 * +* / ASSESSMENT YEAR : 2011-12 THE DEPUTY COMMISSIONER OF INCOME TAX, CORPORATE CIRCLE 6(2), CHENNAI - 600 034. V. M/S SRI VASAVI GOLD & BULLION PVT. LTD., 137, NSC BOSE ROAD, SOWCARPET, CHENNAI - 600 079. PAN : AAFCS 5675 R (-./ APPELLANT) (/0-./ RESPONDENT) -. 1 2 / APPELLANT BY : SHRI SHIVA SRINIVAS, JCIT /0-. 1 2 / RESPONDENT BY : SHRI M.P. SENTHIL KUMAR, ADVOC ATE ' 1 3& / DATE OF HEARING : 28.07.2016 45+ 1 3& / DATE OF PRONOUNCEMENT : 15.09.2016 / O R D E R PER N.R.S. GANESAN, JUDICIAL MEMBER: THIS APPEAL OF THE ASSESSEE IS DIRECTED AGAINST THE ORDER OF THE COMMISSIONER OF INCOME TAX (APPEALS) 15, CHEN NAI, DATED 16.12.2015 AND PERTAINS TO ASSESSMENT YEAR 2011-12. 2. SHRI SHIVA SRINIVAS, THE LD. DEPARTMENTAL REPRES ENTATIVE, SUBMITTED THAT THE ONLY ISSUE ARISES FOR CONSIDERAT ION IS WITH REGARD 2 I.T.A. NO.659/MDS/16 TO ADDITION OF ` 60,66,466/-. ACCORDING TO THE LD. D.R., THE ASSESS EE CLAIMED THE SUM OF ` 60,66,466/- AS LOSS IN OPEN MARKET TRADING. ACCORDING TO THE LD. D.R., THE ASSESSEE TRADED IN M ULTI COMMODITY EXCHANGE. THE ASSESSEE CLAIMED THAT THE TRANSACTIO N IS ONLY A BUSINESS TRANSACTION. REFERRING TO SECTION 43(5) O F THE INCOME-TAX ACT, 1961 (IN SHORT 'THE ACT'), THE LD. D.R. SUBMIT TED THAT THE ASSESSEE COULD NOT PRODUCE NECESSARY MATERIAL BEFOR E THE ASSESSING OFFICER TO PROVE THAT THE TRANSACTION WAS CARRIED OUT THROUGH MULTI COMMODITY STOCK EXCHANGE. NO PROPER STAMPED VOUCHER OR CONTRACT NOTE WAS PRODUCED BEFORE THE AS SESSING OFFICER. EVEN ASSUMING FOR A MOMENT THAT THE TRANS ACTION WAS CARRIED OUT THROUGH MULTI COMMODITY EXCHANGE STOCK EXCHANGE, THE BUSINESS WAS CARRIED OUT BY THE ASSESSEE ONLY F OR THREE MONTHS, THEREFORE, IT HAS TO BE CONSIDERED AS SPECULATIVE B USINESS, HENCE, THE SAME CANNOT BE SET OFF AGAINST THE OTHER INCOME OF THE ASSESSEE. 3. THE LD. DEPARTMENTAL REPRESENTATIVE FURTHER SUBM ITTED THAT THE ASSESSEES MAIN BUSINESS IS RETAIL GOLD JEWELLE RY. THEREFORE, EXPLANATION TO SECTION 73(4) WOULD COME INTO OPERAT ION. HENCE, THE TRANSACTION OF PURCHASE AND SALE OF DERIVATIVES HAS TO BE CONSTRUED 3 I.T.A. NO.659/MDS/16 AS SPECULATIVE TRANSACTION. THEREFORE, THE LOSS SU FFERED BY THE ASSESSEE CANNOT BE SET OFF AGAINST THE OTHER INCOME OF THE ASSESSEE. REFERRING TO THE ORDER OF THE CIT(APPEAL S), THE LD. D.R. SUBMITTED THAT THE CIT(APPEALS) BY REFERRING TO THE NOTIFICATION DATED 22.05.2009, FOUND THAT THE DERIVATIVE IS A FI NANCIAL INSTRUMENT WHOSE VALUE DEPENDS UPON THE VALUE OF OTHER UNDERLY ING FINANCIAL INSTRUMENT WHICH REQUIRES NO INITIAL NET INVESTMENT OR LITTLE INITIAL NET INVESTMENT THAT WOULD BE SETTLED AT A FUTURE DATE, THEREFORE, EXPLANATION TO SECTION 73(4) OF THE ACT WOULD COME INTO OPERATION. THE CIT(APPEALS) HAS ALSO FOUND THAT DERIVATIVES AR E NOT SHARES, THEREFORE, THEY ARE EXCLUDED FROM THE AMBIT OF SECT ION 73(4) OF THE ACT. ACCORDING TO THE LD. D.R., THE CIT(APPEALS) I S NOT CORRECT IN ALLOWING THE CLAIM OF THE ASSESSEE. 4. ON THE CONTRARY, SHRI M.P. SENTHIL KUMAR, THE LD .COUNSEL FOR THE ASSESSEE, SUBMITTED THAT ADMITTEDLY, THE ASSESS EE IS ENGAGED IN THE BUSINESS OF JEWELLERY. THE ASSESSEE TRADED IN DERIVATIVES IN THE MULTI COMMODITY STOCK EXCHANGE. REFERRING TO P ROVISO TO SECTION 43(5) OF THE ACT, THE LD.COUNSEL SUBMITTED THAT WHEN TRADING WAS MADE IN DERIVATIVES THROUGH A RECOGNIZED STOCK EXCHANGE, THE SAME CANNOT BE DEEMED TO BE A SPECULATIVE TRANSACTI ON. 4 I.T.A. NO.659/MDS/16 THEREFORE, ACCORDING TO THE LD. COUNSEL, PROVISIONS OF SECTION 73(4) IS NOT APPLICABLE AT ALL. 5. WE HAVE CONSIDERED THE RIVAL SUBMISSIONS ON EITH ER SIDE AND PERUSED THE RELEVANT MATERIAL AVAILABLE ON RECORD. IN THIS CASE, THE ASSESSEE IS TRADING IN DERIVATIVES IN THE MULTI COM MODITY STOCK EXCHANGE, WHICH WAS RECOGNIZED. THEREFORE, THE SAM E CANNOT BE TREATED AS SPECULATIVE TRANSACTION WITHIN THE MEANI NG OF SECTION 43(5) OF THE ACT. IN OTHER WORDS, THE TRANSACTION MADE IN DERIVATIVES THROUGH MULTI COMMODITIES STOCK EXCHANGE WAS EXEMPT ED UNDER PROVISO (D) TO SECTION 43(5) OF THE ACT. THEREFORE , THIS TRIBUNAL DO NOT FIND ANY REASON TO INTERFERE WITH THE ORDER OF THE LOWER AUTHORITY AND ACCORDINGLY THE SAME IS CONFIRMED. 6. IN THE RESULT, THE APPEAL FILED BY THE REVENUE I S DISMISSED. ORDER PRONOUNCED ON 15 TH SEPTEMBER, 2016 AT CHENNAI. SD/- SD/- ( . . ' #$ ) ( . . . ) (D.S. SUNDER SINGH) (N.R.S. GANESAN) & / ACCOUNTANT MEMBER /JUDICIAL MEMBER /CHENNAI, 7 /DATED, THE 15 TH SEPTEMBER, 2016. KRI. 5 I.T.A. NO.659/MDS/16 1 /3#8 98+3 /COPY TO: 1. -. /APPELLANT 2. /0-. /RESPONDENT 3. ' :3 () /CIT(A)-15, CHENNAI-34 4. ' :3 /CIT-6, CHENNAI-34 5. 8; /3 /DR 6. * < /GF.