GAJENDRA KUMAR T. AGARWAL, MUMBAI V. DCIT 11(2), MUMBAI

ITA 799/MUM/2011

• Counselvise Citation: [2014] 120 COUNSELVISE.COM (IT) 6678 (ITAT-MUMBAI)
• Duration Of Justice: 3 year(s) 4 month(s) 15 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 12-06-2014
• Appeal Filed By: Assessee
• Order Result: Allowed
• Bench Allotted: G
• Next Hearing Date: 12-06-2014
• Assessment Year: 2007-2008
• Appeal Filed On: 28-01-2011
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: R K SAHU
• Keywords: Business income; Speculation loss
• Section: 43(5); 263

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL 'G' BENCH, MUMBAI BEFORE SHRI D. MANMOHAN, VICE PRESIDENT AND SHRI N.K. BILLAIYA, ACCOUNTANT MEMBER ITA NO. 799/MUM/2011 (ASSESSMENT YEAR: 2007-08) SHRI GAJENDRA KUMAR T. AGARWAL DCIT, CIRCLE 11(2) C/O. SHANKARLAL JAIN & ASSCIATES 12, ENGINEER BLDG, 25 PRINCESS STREET, MUMBAI 400022 VS. MUMBAI PAN - AABPA7286R APPELLANT RESPONDENT APPELLANT BY: SHRI S.L. JAIN RESPONDENT BY: SHRI R.K. SAHU DATE OF HEARING: 12.06.2014 DATE OF PRONOUNCEMENT: 12.06.2014 O R D E R PER D. MANMOHAN, V.P. THIS APPEAL BY THE ASSESSEE IS DIRECTED AGAINST THE ORDER PASSED BY THE CIT(A)-3, MUMBAI AND IT PERTAINS TO A.Y. 2007-08. 2. FOLLOWING GROUNDS WERE URGED BY THE ASSESSEE BEFORE US: - 1. THE LEARNED CIT(A) ERRED IN CONFIRMING NON-SET OFF OF EARLIER YEARS LOSSES OF RS.2,77,27,261/- AGAINST DERIVATIVE INCOM E EARNED DURING THE YEAR OF RS.3,39,59,797/-, WITHOUT PROPER LY APPRECIATING THE FACTS OF THE CASE AND LAW APPLICABLE THERETO. 2. THE LEARNED CIT(A) FAILED TO APPRECIATE THAT APP ELLANT INCURRED LOSSES IN DERIVATIVE TRANSACTIONS IN A.YS. 2001-02 TO 2005-06 AND EARNED PROFIT IN CURRENT YEAR IN DERIVATIVE TRANSAC TIONS. HENCE, APPELLANT IS ENTITLED TO SET OFF DERIVATIVE LOSSES OF EARLIER YEARS AGAINST INCOME OF DERIVATIVE TRANSACTIONS. 3. THE LEARNED CIT(A) ERRED IN CONFIRMING ORDER OF THE ASSESSING OFFICER BY MERELY FOLLOWING DECISION OF SPECIAL BEN CH IN THE CASE OF 124 TTJ (KOL) (SB) 740, WITHOUT APPRECIATING THE DI STINGUISHING FEATURES AND THE FACT THAT APPELLANT HAS A VESTED R IGHT TO SET OFF LOSSES IN REGARD TO EARLIER YEARS IN SAME NATURE OF TRANSACTIONS AND SUCH VESTED RIGHT CANNOT BE TAKEN AWAY MERELY O N ACCOUNT OF AMENDMENT OF THE LAW IN LATER ASSESSMENT YEARS. ITA NO. 799/MUM/2011 SHRI GAJENDRA KUMAR T. AGARWAL 2 3. FACTS NECESSARY FOR DISPOSAL OF THE APPEAL ARE STAT ED IN BRIEF. THE ASSESSEE IS A CHARTERED ACCOUNTANT BY PROFESSION. F OR THE YEAR UNDER CONSIDERATION HE CLAIMED SET OFF OF BROUGHT FORWARD LOSSES AGAINST THE INCOME SHOWN IN THE P & L ACCOUNT. IN THE SCRUTINY ASSESSMENT PROCEEDINGS THE AO NOTICED THAT THE ASSESSEE DECLARED INCOME FR OM DERIVATIVES WHICH HAS TO BE TAXED AS BUSINESS INCOME. FOR A.Y. 2001-0 2 THE ASSESSEE DECLARED SPECULATION LOSS WHICH WAS CARRIED FORWARD TO NEXT YEAR. SIMILARLY, FOR ASSESSMENT YEARS 2002-03 AND 2003-04 SPECULATION LO SS WAS DECLARED WHICH COULD BE SET OFF ONLY AGAINST SPECULATION PRO FIT. HE REFERRED TO PROVISIONS OF SECTION 43(5) OF THE ACT TO CONCLUDE THAT BROUGHT FORWARD SPECULATION LOSSES CANNOT BE ADJUSTED AGAINST BUSIN ESS PROFIT OF THE CURRENT YEAR. THE LEARNED CIT(A) HAVING CONFIRMED THE ORDER OF THE AO, ASSESSEE IS IN APPEAL BEFORE THE TRIBUNAL. 4. AT THE TIME OF HEARING THE LEARNED COUNSEL FOR THE ASSESSEE SUBMITTED THAT THE ISSUE STANDS SQUARELY COVERED BY THE DECIS ION OF THE ITAT G BENCH, MUMBAI IN ASSESSEES OWN CASE FOR A.Y. 2006- 07 WHEREIN THE BENCH OBSERVED THAT THE ASSESSEE DESERVES TO BE GRANTED S ET OFF OF BROUGHT FORWARD LOSSES FROM BUSINESS OF DEALING IN DERIVATIVES, INC URRED IN ASSESSMENT YEARS PRIOR TO A.Y. 2006-07, AGAINST PROFITS OF THE SAME BUSINESS IN A.Y. 2006-07 AND SUBSEQUENT ASSESSMENT YEARS. THE LEARNED COUNSE L ALSO PLACED BEFORE US A COPY OF THE DECISION OF THE HON'BLE BOMBAY HIG H COURT TO SUBMIT THAT THE HON'BLE HIGH COURT ADMITTED ONLY ONE QUESTION O F LAW, I.E. WITH REGARD TO VALIDITY OF PROCEEDINGS UNDER SECTION 263 OF THE AC T IMPLYING THEREBY THAT THE SET OFF OF DERIVATIVE LOSSES IS ACCEPTED BY THE HON'BLE HIGH COURT. AT ANY RATE, IN THE LIGHT OF THE DECISION OF THE ITAT (ITA NO. 1798/MUM/2010 DATED 31.05.2011) THE LEARNED COUNSEL FOR THE ASSESSEE SU BMITTED THAT THE ASSESSEE IS ENTITLED TO CARRY FORWARD AND SET OFF O F THE LOSSES FROM DERIVATIVE TRANSACTIONS IN THE EARLIER YEARS AGAINST BUSINESS PROFIT EARNED IN THIS YEAR. 5. ON THE OTHER HAND, THE LEARNED D.R. STRONGLY RELIED UPON THE ORDERS PASSED BY THE AO AS WELL AS THE CIT(A). 6. WE HAVE CAREFULLY CONSIDERED THE RIVAL SUBMISSIONS AND PERUSED THE RECORD. IT IS NOT IN DISPUTE THAT IDENTICAL ISSUE H AS COME UP BEFORE THE ITAT, ITA NO. 799/MUM/2011 SHRI GAJENDRA KUMAR T. AGARWAL 3 MUMBAI BENCHES IN ASSESSEES OWN CASE FOR EARLIER Y EAR WHEREIN THE TRIBUNAL HAD TAKEN A VIEW THAT CLASSIFICATION OF TH E TRANSACTION, I.E. DEALING IN DERIVATIVES MUST BE ON UNIFORM BASIS AND LOSSES FROM DEALINGS IN DERIVATIVES IN EARLIER YEARS SHOULD BE PERMITTED TO BE CARRIED FORWARD AND SET OFF AGAINST THE PROFITS OF THE SAME BUSINESS IN SUB SEQUENT YEARS. 7. BY RESPECTFULLY FOLLOWING THE AFORECITED DECISION W E HOLD THAT THE ASSESSEE IS ENTITLED TO CLAIM SET OFF OF EARLIER YE ARS LOSSES AGAINST THE DERIVATIVE PROFITS OF THE CURRENT YEAR AND DIRECT A CCORDINGLY. 8. IN THE RESULT, APPEAL FILED BY THE ASSESSEE IS ALLO WED. ORDER PRONOUNCED IN THE OPEN COURT ON 12 TH JUNE, 2014. SD/- SD/- (N.K. BILLAIYA) (D. MANMOHAN) ACCOUNTANT MEMBER VICE PRESIDENT MUMBAI, DATED: 12 TH JUNE, 2014 COPY TO: 1. THE APPELLANT 2. THE RESPONDENT 3. THE CIT(A) 3, MUMBAI 4. THE CIT 11, MUMBAI CITY 5. THE DR, G BENCH, ITAT, MUMBAI BY ORDER //TRUE COPY// ASSISTANT REGISTRAR ITAT, MUMBAI BENCHES, MUMBAI N.P.