Asst. CIT, Circle-1, Nashik V. Shri Maharajkrishna Bansilal Birmani, Nashik

ITA 807/PUN/2013

• Counselvise Citation: 80724514 RSA 2013
• Duration Of Justice: 1 year(s) 7 month(s) 20 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 26-11-2014
• Appeal Filed By: Department
• Order Result: Partly Allowed
• Bench Allotted: A
• Next Hearing Date: 10-11-2014
• Assessment Year: 2009-2010
• Appeal Filed On: 05-04-2013
• Result in Favour of: Partly Allowed
• Court: TRIBUNAL
• Assessee Lawyers: SUNIL PATHAK
• Keywords: Business income; Transactions in derivatives; Speculation loss
• Section: 43(5)

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL PUNE BENCH A, PUNE BEFORE MS. SUSHMA CHOWLA, JUDICIAL MEMBER AND SHRI R.K. PANDA, ACCOUNTANT MEMBER ITA NO. 807/PN/2013 (ASSESSMENT YEAR 2009-10) ACIT, CIRCLE-1, NASHIK .. APPELLANT VS. SHRI MAHARAJKRISHNA BANSILAL BIRMANI DEEPAK MAHAL, LAM ROAD, DEOLALI CAMP, DISTRICT : NASHIK PAN NO. AAXPB8907C .. RESPONDENT ASSESSEE BY : SHRI SUNIL PATHAK & SHRI NIKHIL PATHAK REVENUE BY : SHRI RAJESH DAMOR DATE OF HEARING : 10-11-2014 DATE OF PRONOUNCEMENT : 26-11-2014 ORDER PER R.K. PANDA, AM : THIS APPEAL FILED BY THE REVENUE IS DIRECTED AGAINS T THE ORDER DATED 16-01-2013 OF THE CIT(A)-I, NASHIK RELATING T O A.Y. 2009-10. 2. GROUND OF APPEAL NO.1 BY THE REVENUE READS AS UN DER : WHETHER ON THE FACTS AND IN THE CIRCUMSTANCES OF THE CASE, THE LD.CIT(A)-I, NASHIK WAS JUSTIFIED IN DELETING THE DISA LLOWANCE TO THE EXTENT OF RS.44,48,393/- WHICH WAS MADE ON ACCOUNT OF SET OFF BROUGHT FORWARD LOSSES INCURRED FROM SPECULATIVE BUSINESS . 2.1 FACTS OF THE CASE, IN BRIEF, ARE THAT THE ASSES SEE IS AN INDIVIDUAL ENGAGED IN THE BUSINESS OF MANUFACTURE A ND TRADING OF METAL DETECTORS AND TRADING IN DERIVATIVES OF SHARE S. HE FILED HIS RETURN OF INCOME ON 25-09-2009 DECLARING TOTAL INCO ME OF 2 RS.61,25,130/-. DURING THE COURSE OF ASSESSMENT PR OCEEDINGS, THE AO NOTED FROM THE COMPUTATION OF TOTAL INCOME THAT THE ASSESSEE HAD CLAIMED SET OFF OF BROUGHT FORWARD LOSSES AMOUN TING TO RS.99,09,974/- AGAINST BUSINESS INCOME/CAPITAL GAIN S. FROM THE DETAILS FURNISHED BY THE ASSESSEE, HE NOTED THAT TH IS AMOUNT OF SET OFF OF BROUGHT FORWARD LOSSES COMPRISES OF BROUGHT FORWARD BUSINESS LOSSES OF RS.55,50,514/- PERTAINING TO A.Y . 2001-02, RS.31,88,893/- PERTAINING TO A.Y. 2005-06 AND RS.11 ,68,567/- FOR A.Y. 2006-07. HE NOTED THAT AS PER THE RETURNS OF INCOME FOR THE A.YRS. 2001-02, 2005-06 AND 2006-07, THESE LOSSES H AVE ARISEN OUT OF SPECULATIVE TRANSACTIONS AS PER THE PROVISIONS O F SECTION 43(5) OF THE ACT AND ALSO CLAIMED AS SPECULATIVE LOSSES CARR IED FORWARD IN THESE RETURNS. HOWEVER, NOW THE ASSESSEE IS SETTIN G OFF THESE SPECULATIVE LOSSES AGAINST BUSINESS INCOME OF THE C URRENT YEAR. HE, THEREFORE, ASKED THE ASSESSEE TO JUSTIFY THE CLAIM OF SET OFF OF SUCH BROUGHT FORWARD LOSS. REJECTING THE VARIOUS EXPLAN ATIONS GIVEN BY THE ASSESSEE AND FOLLOWING THE DECISION OF THE KOLK ATA BENCH OF THE TRIBUNAL IN THE CASE OF SHREE CAPITAL SERVICES LTD. VS. ACIT REPORTED IN 2009-TIOL-542-ITAT-KOL-SB AND THE DECIS ION OF THE HONBLE BOMBAY HIGH COURT IN THE CASE OF CIT VS. BH ARAT RUIA (HUF) VIDE ITA NO.1539/2010 THE AO REJECTED THE CLA IM OF SET OFF OF BROUGHT FORWARD LOSSES AMOUNTING TO RS.99,07,974 /-. 3. IN APPEAL THE LD.CIT(A) PARTLY ALLOWED THE APPEA L FILED BY THE ASSESSEE. HE HELD THAT THE AMOUNTS IN RESPECT OF DERIVATIVE TRANSACTIONS IN SHARES INCURRED BY THE ASSESSEE IN A.YRS. 2001-02 AND 2005-06 ARE ELIGIBLE TO BE SET OFF AGAINST INCO ME FROM 3 DERIVATIVE TRANSACTION IN SHARES OF A.Y. 2006-07 AN D ONWARDS OF THE SAME BUSINESS. HE HELD THAT LOSSES PERTAINING TO A .YRS. 2001-02 AND 2005-06 CAN BE SET OFF AGAINST THE INCOME OF SH ARE DERIVATIVE TRANSACTION OF THE YEAR AMOUNTING TO RS.32,79,826/- . HE FURTHER HELD THAT THE LOSS OF SHARE DERIVATIVES TRANSACTION FOR A.Y. 2006-07 HAS TO BE ASSESSED AS NON-SPECULATIVE LOSS AND THER EFORE THE SAID LOSS OF RS.11,68,567/- HAS TO BE SET OFF AGAINST TH E REGULAR BUSINESS INCOME OF THE ASSESSEE. HE ACCORDINGLY GAVE RELIEF TO THE EXTENT OF RS.44,48,393/- AND SUSTAINED THE BALANCE DISALLOWAN CE. WHILE DOING SO, THE LD.CIT(A) FOLLOWED THE DECISION OF TH E MUMBAI BENCH OF THE TRIBUNAL IN THE CASE OF GAJENDRA KUMAR T. AGARWAL VS. ITO REPORTED IN (2011) 11 TAXMANN.COM 236. 4. AGGRIEVED WITH SUCH ORDER OF THE CIT(A) THE REVE NUE IS IN APPEAL BEFORE US 5. THE LD. DEPARTMENTAL REPRESENTATIVE STRONGLY CHA LLENGED THE ORDER OF THE CIT(A). HE SUBMITTED THAT THE HONBLE BOMBAY HIGH COURT IN THE CASE OF BHARAT RUIA (HUF) (SUPRA) HAS HELD THAT PRIOR TO THE A.Y. 2006-07, TRANSACTIONS IN EXCHANGE TRADE D FINANCIAL DERIVATIVES ARE SPECULATIVE TRANSACTIONS AS THE AME NDMENT TO SECTION 43(5) OF THE I.T. ACT IS PROSPECTIVE. SIMILAR VIEW HAS BEEN TAKEN BY THE KOLKATA BENCH OF THE TRIBUNAL IN THE CASE OF S HREE CAPITAL SERVICES LTD. (SUPRA). HE SUBMITTED THAT THE LD.CI T(A) WAS NOT JUSTIFIED IN GIVING RELIEF TO THE EXTENT OF RS.44,4 8,393/- OUT OF THE DISALLOWANCE OF RS.99,07,974/- MADE BY THE AO. HE ACCORDINGLY 4 SUBMITTED THAT THE ORDER OF THE CIT(A) BE REVERSED AND THAT OF THE AO BE RESTORED. 6. THE LD. COUNSEL FOR THE ASSESSEE ON THE OTHER HA ND HEAVILY RELIED ON THE ORDER OF THE CIT(A). REFERRING TO TH E DECISION OF THE PUNE BENCH OF THE TRIBUNAL IN THE CASE OF AVINASH N IVRUTTI BHOSALE VS. CIT VIDE ITA NO.862/PN/2013 ORDER DATED 30-04-2 013 HE SUBMITTED THAT IDENTICAL ISSUE HAS BEEN DECIDED IN FAVOUR OF THE ASSESSEE BY FOLLOWING THE DECISION OF THE MUMBAI BE NCH OF THE TRIBUNAL IN THE CASE OF GAJENDRA KUMAR T. AGARWAL ( SUPRA). HE ACCORDINGLY SUBMITTED THAT THIS BEING A COVERED MAT TER IN FAVOUR OF THE ASSESSEE THE GROUND RAISED BY THE REVENUE SHOUL D BE DISMISSED. 7. WE HAVE CONSIDERED THE RIVAL ARGUMENTS MADE BY B OTH THE SIDES, PERUSED THE ORDERS OF THE ASSESSING OFFICER AND THE CIT(A) AND THE PAPER BOOK FILED ON BEHALF OF THE ASSESSEE. WE HAVE ALSO CONSIDERED THE VARIOUS DECISIONS CITED BEFORE US. THE ONLY ISSUE TO BE DECIDED IN THE INSTANT CASE IS AS TO WHETHER THE LOSS FROM BUSINESS OF DERIVATIVES FOR THE ASSESSMENT YEARS PRIOR TO A. Y. 2006-07 CAN BE SET OFF AGAINST THE PROFIT FROM THE SAME BUSINESS O F THE CURRENT YEAR. WE FIND THE PUNE BENCH OF THE TRIBUNAL IN THE CASE OF AVINASH NIVRUTTI BHOSALE VIDE ITA NO.862/PN/2013 ORDER DATE D 30-04- 2014, FOLLOWING THE DECISION OF THE MUMBAI BENCH OF THE TRIBUNAL IN THE CASE OF GAJENDRA KUMAR T. AGARWAL (SUPRA) AN D THE DECISION OF THE PUNE BENCH OF THE TRIBUNAL IN THE CASE OF KA SAT SECURITIES PVT. LTD., HAS ALLOWED THE SET OFF OF BROUGHT FORWA RD LOSSES FROM 5 DERIVATIVE TRANSACTION OF EARLIER YEARS AGAINST TH E PROFIT FROM DERIVATIVE TRANSACTION OF A.Y. 2007-08 BY OBSERVING AS UNDER : 11. WE HAVE CONSIDERED THE RIVAL ARGUMENTS MADE BY B OTH THE SIDES, PERUSED THE ORDERS OF THE ASSESSING OFFICER AND THE LD. CIT AND THE PAPER BOOK FILED ON BEHALF OF THE ASSESSEE. WE HAVE ALSO CONSIDERED THE VARIOUS DECISIONS CITED BEFORE US. WE FI ND THE LD.CIT INVOKED JURISDICTION U/S.263 OF THE INCOME TAX ACT ON THE GROUND THAT LOSS INCURRED BY THE ASSESSEE DURING THE PREV IOUS YEAR RELEVANT TO ASSESSMENT YEAR 2005-06 WOULD CONTINUE TO RETAIN ITS CHARACTER AS SPECULATION LOSS AND THE SAME CANNOT BE S ET OFF AGAINST THE PROFIT EARNED BY THE ASSESSEE FROM THE DERIV ATIVE TRANSACTIONS DURING A.Y. 2007-08 WHICH HAS TO BE ASSESSE D AS BUSINESS INCOME. ACCORDING TO THE LD.CIT THE AMENDM ENT TO SECTION 43(5)(D) WAS BROUGHT INTO EFFECT PROSPECTIVELY FROM 01-04- 2006 AND WOULD THEREFORE ONLY APPLY TO DERIVATIVE T RANSACTIONS CARRIED OUT THROUGH RECOGNISED STOCK EXCHANGES FROM 01 -04-2006 ONWARDS, I.E. FROM THE A.Y. 2006-07. HE ACCORDINGLY DIRECTED THE AO TO DISALLOW THE SAID CLAIM AND TO ASSESS THE BUSINESS PROFIT OF RS.17,72,448/-. NO DOUBT, THERE IS NO DISCUSSION IN THE ASSESSMENT ORDER AND THE AO HAS ACCEPTED THE CLAIM OF THE ASSESSEE ON THE BASIS OF THE COMPUTATION STATEMENT FILED BY THE ASSESSEE C LAIMING THE SET OFF OF THE SPECULATION LOSS OF RS.17,72,448/- FR OM THE CURRENT YEARS INCOME FROM DERIVATIVE TRANSACTIONS. 11.1 WE FIND THE LD.CIT INSTEAD OF SETTING ASIDE THE ORDER TO THE FILE OF THE ASSESSING OFFICER FOR DENOVO ASSESSMENT OF THIS ISSUE HAS DECIDED THE ISSUE ON MERIT HIMSELF AND HAS DIRECTED TH E AO TO DISALLOW THE SAID CLAIM AND ASSESSEE THE BUSINESS PROFIT. HO WEVER, ON MERIT THE ISSUE STANDS DECIDED IN FAVOUR OF THE ASSESSEE BY THE DECISION OF THE MUMBAI BENCH OF THE TRIBUNAL IN THE CASE OF GAJENDRA KUMAR T. AGARWAL (SUPRA) WHERE IT HAS BEEN HELD THAT ASSESSEE IS ELIGIBLE FOR SETTING OFF OF LOSS OF BUSINESS OF DE ALING IN DERIVATIVES INCURRED IN THE ASSESSMENT YEARS PRIOR TO A.Y . 2006-07 AGAINST THE PROFITS OF THE SAME BUSINESS IN A.Y. 2006-07. THE RELEVANT OBSERVATION OF THE TRIBUNAL FROM PARA 27 TO 30 READ AS UNDER : 27. AS A RESULT OF THE AMENDMENT IN S. 43(5) W.E.F. 1ST APRIL, 2006, LOSSES INCURRED IN DERIVATIVE TRADING ARE HELD T O BE ELIGIBLE FOR BEING SET OFF AGAINST NORMAL BUSINESS PROFITS, AS DER IVATE TRADING ITSELF IS TREATED AS A NON-SPECULATIVE BUSINESS, AND LOSSES OF ANY NON-SPECULATIVE BUSINESSES CAN BE ADJUSTED PROFITS OF ANY NON- SPECULATIVE BUSINESS. IRONICALLY, HOWEVER, THIS APPAREN TLY WELL INTENDED MEASURE OF RELIEF TO THE ASSESSEE HAS RESULTED IN AN ABSURD SITUATION IN WHICH PAST LOSSES OF DERIVATIVES TRADING CAN NOT BE SET OFF AGAINST PROFITS OF DERIVATIVES TRADING ITSELF. WHAT WAS MEANT TO BE A SOURCE OF RELIEF HAS TURNED INTO A CAUSE OF MISERY . THAT IS CLEARLY AN ABSURDITY. AS TO WHAT SHOULD BE DONE IN SUC H A SITUATION, WE FIND GUIDANCE FROM THE OBSERVATIONS MADE BY HON'BL E SUPREME COURT, IN THE CASE OF CIT VS. HINDUSTAN BULK CARRIERS (2003) 179 CTR (SC) 362 : (2003) 259 ITR 449 (SC), AS FOLLOWS : 'A CONSTRUCTION WHICH REDUCES THE STATUTE TO A FUTILIT Y HAS TO BE AVOIDED. A STATUTE OR ANY ENACTING PROVISION THEREIN MUST BE SO CONSTRUED AS TO MAKE IT EFFECTIVE AND OPERATIVE ON TH E PRINCIPLE 6 EXPRESSED IN MAXIM UT RES MAGISVALEAT QUAM PEREAT I.E., A LIBERAL CONSTRUCTION SHOULD BE PUT UPON WRITTEN INSTRUMENTS, SO AS TO UPHOLD THEM, IF POSSIBLE, AND CARRY INTO EFFECT THE I NTENTION OF THE PARTIES. [SEE BROOM'S LEGAL MAXIMS (10TH EDITION), P. 361, CRAIES ON STATUTES (7TH EDITION) P. 95 AND MAXWELL ON STATU TES (11TH EDITION) P. 221]. A STATUTE IS DESIGNED TO BE WORKABLE AND THE INTERPRET ATION THEREOF BY A COURT SHOULD BE TO SECURE THAT OBJECT UNLESS CRUCI AL OMISSION OR CLEAR DIRECTION MAKES THAT END UNATTAINABLEWHITN EY VS. IRC (1926) AC 37 P. 52 REFERRED TO IN CIT VS. S. TEJA SI NGH AIR 1959 SC 352 AND GURSAHAISAIGAL VS. CIT AIR 1963 SC 1062. THE COURTS WILL HAVE TO REJECT THAT CONSTRUCTION WHIC H WILL DEFEAT THE PLAIN INTENTION OF THE LEGISLATURE EVEN THOUGH T HERE MAY BE SOME INEXACTITUDE IN THE LANGUAGE USEDSALMON VS. BUNC OMBE (1886) 11 AC 627 P. 634 (PC), CURTIS VS. STOVIN (1889 ) 22 CBD 513 REFERRED TO IN S. TEJA SINGH'S CASE (SUPRA). IF THE CHOICE IS BETWEEN TWO INTERPRETATIONS, THE NAR ROWER OF WHICH WOULD FAIL TO ACHIEVE THE MANIFEST PURPOSE OF THE LEG ISLATION WE SHOULD AVOID. WHENEVER IT IS POSSIBLE TO DO SO, IT MUST BE DONE TO CON STRUE THE PROVISIONS WHICH APPEAR TO CONFLICT SO THAT THEY HARMO NISE. IT SHOULD NOT BE LIGHTLY ASSUMED THAT PARLIAMENT HAD GIVE N WITH ONE HAND WHAT IT TOOK AWAY WITH THE OTHER.' 28. HON'BLE SUPREME COURT, IN THE CASE OF K.P. VARGH ESE VS. ITO &ANR. (1981) 24 CTR (SC) 358 : (1981) 131 ITR 597 ( SC), HAS FURTHER HELD THAT THE TASK OF INTERPRETATION IS NOT A MECHANICAL TASK AND, QUOTED WITH APPROVAL, JUSTICE HAND'S OBSERVATION THAT 'IT IS ONE OF THE SUREST INDEXES OF A MATURE AND DEVELOPED JURISPR UDENCE NOT TO MAKE A FORTRESS OUT OF THE DICTIONARY BUT TO REMEM BER THAT STATUTES ALWAYS HAVE SOME PURPOSE OR OBJECT TO ACCOMPLISH , WHOSE SYMPATHETIC AND IMAGINATIVE DISCOVERY IS THE SUREST GUID E TO THEIR MEANING'. THEIR LORDSHIPS, INTER ALIA, OBSERVED AS FOLL OWS : '... THE TASK OF INTERPRETATION OF A STATUTORY ENACTM ENT IS NOT A MECHANICAL TASK. IT IS MORE THAN A MERE READING OF MA THEMATICAL FORMULAE BECAUSE FEW WORDS POSSESS THE PRECISION OF MATHE MATICAL SYMBOLS. IT IS AN ATTEMPT TO DISCOVER THE INTENT OF THE LEGISLATURE FROM THE LANGUAGE USED BY IT AND IT MUST ALWAYS BE REM EMBERED THAT LANGUAGE IS AT BEST AN IMPERFECT INSTRUMENT FOR T HE EXPRESSION OF HUMAN THOUGHT AND, AS POINTED OUT BY LORD DENNIN G, IT WOULD BE IDLE TO EXPECT EVERY STATUTORY PROVISION TO BE 'DRAFT ED WITH DIVINE PRESCIENCE AND PERFECT CLARITY'. WE CAN DO NO BETTER THAN REPEAT THE FAMOUS WORDS OF JUDGE LEARNED HAND WHEN HE SAID : '...........IT IS TRUE THAT THE WORDS USED, EVEN IN TH EIR LITERAL SENSE, ARE THE WRITING: BE IT A STATUTE, A CONTRACT OR ANYTHIN G ELSE. BUT IT IS ONE OF THE SUREST INDEXES OF A MATURE AND DEVELOPED JURISPR UDENCE NOT TO MAKE A FORTRESS OUT OF THE DICTIONARY; BUT TO REME MBER THAT STATUTES ALWAYS HAVE SOME PURPOSE OR OBJECT TO ACCOMPLISH , WHOSE SYMPATHETIC AND IMAGINATIVE DISCOVERY IS THE SUREST GUID E TO THEIR MEANING.' 7 WE MUST NOT ADOPT A STRICTLY LITERAL INTERPRETATION O F... BUT WE MUST CONSTRUE ITS LANGUAGE HAVING REGARD TO THE OBJECT AND PURPOSE WHICH THE LEGISLATURE HAD IN VIEW IN ENACTING THAT P ROVISION AND IN THE CONTEXT OF THE SETTING IN WHICH IT OCCURS. WE CAN NOT IGNORE THE CONTEXT AND THE COLLECTION OF THE PROVISIONS IN WHICH . . ., APPEARS, BECAUSE, AS POINTED OUT BY JUDGE LEARNED HAND IN THE MOST FELICITOUS LANGUAGE : INTERPRET '. . . THE MEANING O F SENTENCE MAY BE MORE THAN THAT OF THE SEPARATE WORDS, AS A MELODY IS M ORE THAN THE NOTES, AND NO DEGREE OF PARTICULARITY CAN EVER OBVIA TE RECOURSE TO THE SETTING IN WHICH ALL APPEAR, AND WHICH ALL COLLE CTIVELY CREATE.........' 29. IN VIEW OF THE GUIDANCE SO GIVEN BY THEIR LORDSH IPS, WE HAVE TO PROCEED ON THE BASIS THAT DESPITE 'INEXACTITU DE IN THE LANGUAGE USED', AS WAS THE EXPRESSION APPROVED BY HON'BL E SUPREME COURT, THE PROVISIONS OF CARRY FORWARD AND SE T OFF ARE TO BE CONSTRUED IN A MANNER SO AS NOT TO DEFEAT THE PLAI N AND UNAMBIGUOUS INTENTION OF THE LEGISLATURE. IN OUR CONSI DERED VIEW, THIS AMENDMENT WAS TO PROVIDE RELIEF TO THE TAXPAYERS AND IS TO BE VIEWED AS BENEFICIAL PROVISIONS, AS SUCH, AND ONE CANNOT POSSIBLY PROCEED ON THE BASIS THAT THE OBJECT OF MAKING AMENDM ENT IN S. 43(5) WAS TO KILL THE BROUGHT FORWARD LOSSES OF DEALING IN DERIVATIVES OR MAKE THEM INELIGIBLE FOR BEING SET OFF AGAINST THE PROFITS OF THE SAME BUSINESS IN SUBSEQUENT YEARS. WHATEVER MAY BE CHARACTERIZATION OF INCOME FOR THE PURPOSE OF INTRA- ASSESSMENT YEAR SET OFF IN THE RELEVANT ASSESSMENT YEAR, AND IRRESPE CTIVE OF THE FACT THAT SUCH A CHARACTERIZATION HAS ACHIEVED FINALI TY IN ASSESSMENT, THE LOSSES AND PROFITS FROM DEALING IN DERIVATI VES MUST BE CHARACTERIZED ON A UNIFORM BASIS IN THE ASSESSMENT YEA R IN WHICH SET OFF IS CLAIMED. VIEWED IN THIS PERSPECTIVE AL SO, THE CLASSIFICATION OF BUSINESS FOR THE LIMITED PURPOSE OF SET OFF OF PAST LOSSES, INTO SPECULATIVE AND NON-SPECULATIVE, IS TO BE D ONE ON A UNIFORM BASIS, AND, WHICHEVER WAY ONE LOOKS AT IT, THE LOSSES INCURRED IN THE SAME BUSINESS IN EARLIER ASSESSMENT YEARS AR E TO BE TREATED AS ELIGIBLE FOR SET OFF AGAINST PROFITS OF THE SAME BUSINESS, SUBJECT TO FULFILMENT OF OTHER CONDITIONS, IN THE SUBSE QUENT ASSESSMENT YEARS. FOR THIS REASON ALSO, THE ASSESSEE DESERVES T O BE GRANTED SET OFF OF BROUGHT FORWARD LOSSES FROM BUSINESS OF DEALING IN DERIVATIVES, INCURRED IN ASSESSMENT YEARS PRIOR TO A SST. YR. 2006- 07 AGAINST PROFITS OF THE SAME BUSINESS IN ASST. YRS. 2006- 07 AND SUBSEQUENT ASSESSMENT YEARS. 30. FOR THE REASONS SET OUT ABOVE, WE ARE OF THE CONSIDERED VIEW THAT THE ASSESSEE WAS INDEED ELIGIBLE FOR SETTING OF LO SSES OF BUSINESS OF DEALING IN DERIVATIVES, INCURRED IN THE ASSESSM ENT YEARS PRIOR TO THE ASST. YR. 2006-07, AGAINST THE PROFITS OF THE SAME BUSINESS IN ASST. YR. 2006-07. THERE WAS NO INFIRMITY IN THE AO GRANTING THE SAID SET OFF. THE ASSESSMENT ORDER, SUBJECTE D TO IMPUGNED REVISION PROCEEDINGS, THUS COULD NOT BE HELD TO BE ERRONEOUS .AND PREJUDICIAL TO THE INTEREST OF THE RE VENUE. ACCORDINGLY, WE QUASH THE IMPUGNED REVISION PROCEEDIN GS, AND SET ASIDE LEARNED CIT'S ORDER IN CHALLENGE BEFORE US. 31. IN THE RESULT, THE APPEAL IS ALLOWED. 11.2 WE FIND FOLLOWING THE ABOVE DECISION THE COORDI NATE BENCH OF THE TRIBUNAL IN THE CASE OF KASAT SECURITIES PVT. L TD. (SUPRA) HAS ALLOWED THE CLAIM OF SET OFF OF CARRY FORWARD OF LOSS ON ACCOUNT OF 8 TRANSACTIONS IN DERIVATIVES FROM THE PROFIT OF THE SAME BUSINESS IN A.Y. 2006-07. 11.3 IN VIEW OF THE ABOVE PRECEDENTS, WE HOLD THAT T HE LD. CIT WAS NOT JUSTIFIED IN DIRECTING THE AO TO DISALLOW THE SET OFF OF THE SPECULATION LOSS OF RS.17,72,448/- AGAINST THE PROFIT FR OM SAME BUSINESS IN A.Y. 2007-08. ACCORDINGLY, THE ORDER OF T HE CIT ON THIS ISSUE IS SET-ASIDE AND THE GROUND RAISED BY THE ASSESSEE IS AL LOWED. 7.1 SO FAR AS THE DECISION OF THE HONBLE BOMBAY HI GH COURT IN THE CASE OF BHARAT RUIA (SUPRA) IS CONCERNED, WHICH IS RELIED ON BY THE LD. DEPARTMENTAL REPRESENTATIVE, WE FIND THE SA ME IS NOT APPLICABLE TO THE FACTS OF THE PRESENT CASE. THE H ONBLE HIGH COURT IN THE SAID DECISION HAS HELD THAT THE LOSSES OF DE RIVATIVE TRANSACTIONS IN SHARES FOR ASSESSMENT YEARS PRIOR T O A.Y. 2006-07 ARE TO BE TREATED AS SPECULATIVE LOSSES. HOWEVER, THE ISSUE BEFORE US IS AS TO WHETHER LOSSES OF DERIVATIVE TRANSACTIONS IN SHARES FOR ASSESSMENT YEARS PRIOR TO A.Y. 2006-07 CAN BE SET O FF AGAINST DERIVATIVE TRANSACTION INCOME IN A.Y. 2006-07 AND O NWARDS OF THE SAME BUSINESS. IN THIS VIEW OF THE MATTER AND RESP ECTFULLY FOLLOWING THE DECISION OF THE COORDINATE BENCHES OF THE TRIBU NAL, WE UPHOLD THE ORDER OF THE CIT(A) IN DELETING THE DISALLOWANC E TO THE EXTENT OF RS.44,48,393/-. THE GROUND RAISED BY THE REVENUE I S ACCORDINGLY DISMISSED. 8. GROUND OF APPEAL NO.2 BY THE REVENUE READS AS UN DER : WHETHER ON THE FACTS AND IN THE CIRCUMSTANCES OF THE CASE, THE LD.CIT(A)-I, NASHIK WAS JUSTIFIED IN DELETING THE HOUSE PROPERTY INCOME OF RS.8,750/- INSPITE OF THE FACT THAT ASSET IS NOT ALLOWABLE TO BE USED FOR THE PURPOSE OF ANY BUSINESS CARRIED ON BY TH E ASSESSEE 8.1 FACTS OF THE CASE, IN BRIEF, ARE THAT THE AO DU RING THE COURSE OF ASSESSMENT PROCEEDINGS NOTED THAT THE ASSESSEE H AS SHOWN NIL INCOME FROM HOUSE PROPERTY ALTHOUGH THE BALANCE SHE ET SUBMITTED 9 BY THE ASSESSEE SHOWS 5 FLATS AT SHIVA SOCIETY UNDE R THE GROUP FIXED ASSETS. ON BEING QUESTIONED BY THE AO, IT WAS SUBMITTED THAT THE SAID FLATS ARE USED FOR ACCOMMODATION OF E MPLOYEES OF M/S.SHIVANAND ELECTRONICS. THE AO OBSERVED THAT SH IVANAND ELECTRONICS IS A PARTNERSHIP FIRM WHERE ASSESSEE IS A PARTNER. FURTHER, ASSESSEE HAS NOT BROUGHT THESE FLATS AS CO NTRIBUTION OF PARTNER IN THE FIRM AND THE FLATS ARE APPEARING AS ASSETS IN THE PERSONAL BALANCE SHEET OF THE ASSESSEE. HE THEREFO RE HELD THAT THE FLATS CANNOT BE SAID TO BE USED FOR THE PURPOSE OF ANY BUSINESS OR PROFESSION CARRIED ON BY THE ASSESSEE AND THEREFORE THE ANNUAL VALUE OF SUCH PROPERTIES IS CHARGEABLE TO INCOME TAX UNDE R THE HEAD INCOME FROM HOUSE PROPERTY. HE ACCORDINGLY DETER MINED THE ANNUAL RENTAL VALUE OF THE 5 FLATS AT RS.12,500/-. AFTER ALLOWING DEDUCTION U/S.24 TO THE TUNE OF RS.3,750/-, THE AO ADDED AN AMOUNT OF RS.8,750/- AS INCOME FROM HOUSE PROPERTY. IN APPEAL THE LD.CIT(A) DELETED THE ADDITION ON THE GROUND THAT T HE HOUSE PROPERTY UNDER CONSIDERATION WAS USED FOR THE PURPO SE OF BUSINESS OF THE FIRM IN WHICH THE ASSESSEE IS THE MAIN PARTN ER. 8.2 AGGRIEVED WITH SUCH ORDER OF THE CIT(A) THE REV ENUE IS IN APPEAL BEFORE US. 9. WE HAVE CONSIDERED THE RIVAL ARGUMENTS MADE BY B OTH THE SIDES, PERUSED THE ORDERS OF THE ASSESSING OFFICER AND THE CIT(A) AND THE PAPER BOOK FILED ON BEHALF OF THE ASSESSEE. IT IS AN UNDISPUTED FACT THAT THE FLATS ARE USED FOR ACCOMMO DATION OF EMPLOYEES OF SHIVANAND ELECTRONICS WHICH IS A PARTN ERSHIP FIRM AND 10 IN WHICH THE ASSESSEE IS A PARTNER. THE FLATS ARE APPEARING IN THE PERSONAL BALANCE SHEET OF THE ASSESSEE AND ARE NOT APPEARING IN THE BALANCE SHEET OF THE PARTNERSHIP FIRM. NONE OF THE EMPLOYEES OF THE ASSESSEE ARE STAYING IN THE FLATS AND THE FLATS ARE BEING OCCUPIED BY THE EMPLOYEES OF THE PARTNERSHIP FIRM. THEREFORE, IT CANNOT BE SAID THAT THE FLATS ARE USED FOR THE PURPOSE OF ANY BUSI NESS OR PROFESSION CARRIED ON BY THE ASSESSEE. WE THEREFORE FIND NO J USTIFICATION IN THE ORDER OF THE CIT(A) DELETING THE ADDITION MADE BY T HE ASSESSING OFFICER. ACCORDINGLY, THE ORDER OF THE CIT(A) IS S ET-ASIDE AND THAT OF THE ORDER OF THE ASSESSING OFFICER IS RESTORED. THE GROUND RAISED BY THE REVENUE IS ACCORDINGLY ALLOWED. 10. IN THE RESULT, THE APPEAL FILED BY THE REVENUE IS PARTLY ALLOWED. PRONOUNCED IN THE OPEN COURT ON 26-11-2014. SD/- SD/- (SUSHMA CHOWLA) (R.K. PANDA) JUDICIAL MEMBER ACCOUNTANT MEM BER PUNE DATED: 26 TH NOVEMBER, 2014 SATISH COPY OF THE ORDER FORWARDED TO : 1. ASSESSEE 2. DEPARTMENT 3. THE CIT(A)-I, NASHIK 4. THE CIT-I, NASHIK 5. THE D.R, A PUNE BENCH 6. GUARD FILE BY ORDER // TRUE COPY // ASSISTANT REGISTRAR ITAT, PUNE BENCHES, PUNE