M/S. D & H SECHRON ELECTRODES PVT. LTD., Indore V. THE JCIT Range-1, Indore

MA 08/Ind/2018

• Counselvise Citation: [2018] 124 COUNSELVISE.COM (IT) 7062 (ITAT-INDORE)
• Duration Of Justice: 3 month(s) 19 day(s)
• Appeal Type: Miscellaneous Application
• Pronouncement Date: 21-08-2018
• Appeal Filed By: Assessee
• Order Result: Allowed
• Bench Allotted: DB
• Assessment Year: 2011-2012
• Appeal Filed On: 02-05-2018
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Assessee Lawyers: S N AGRAWALCA
• Keywords: Business income; Depreciation; Transactions in derivatives; Retrospective amendment; Speculation loss; Capital expenditure; Speculative transactions
• Section: 43(5); 28; 15

Judgement Text

D&H SECHRON ELECTRODES PVT. LTD APPEAL NO MA 08/IND/2018 ARISING OUT OF ITA NO.62/ IND/2015 1 , , IN THE INCOME TAX APPELLATE TRIBUNAL, INDORE BENCH, INDORE BEFORE SHRI KUL BHARAT, JUDICIAL MEMBER AND SHRI MANISH BORAD, ACCOUNTANT MEMBER APPEAL NO. MA 08/IND/2018 ARISING OUT OF ITA NO.62/IND/2015 ASSESSMENT YEAR: 2011-12 REVENUE BY SHRI YOGESH MISHRA , SR. DR ASSESSEE BY SHRI S.N. AGRAWAL,CA DATE OF HEARING 27.7.2018 DATE OF PRONOUNCEMENT 21.08.2018 O R D E R PER MANISH BORAD, AM. THIS MISCELLANEOUS PETITION FILED BY TH E ASSESSEE PERTAINING TO THE A.Y. 2011-12 IS DIRECTED AGAINST THE ORDER O F HON'BLE I.T.A.T., INDORE BENCH, INDORE DATED 28.02.2018. 2. THE ASSESSEE HAS POINTED OUT THAT APPARENT MISTA KE HAS OCCURRED IN THE ORDER OF THE TRIBUNAL BY SUBMITTING AS FOLLOWS; D&H SECHRON ELECTRODES PVT.LTD, 44-46 INDUSTRIAL ESTATE, KILA MAIDAN, INDORE VS. JOINT COMMISSIONER OF INCOME TAX, RANGE-1, INDORE ( APPELLANT ) (RESPONDENT ) PAN NO.AAACD6111E D&H SECHRON ELECTRODES PVT. LTD APPEAL NO MA 08/IND/2018 ARISING OUT OF ITA NO.62/ IND/2015 2 1. '01} THAT ON THE FACTS AND IN THE CIRCUMSTANCES OF THE C ASE, THE LD CIT[A] ERRED IN APPROVING THE TREATMENT AS GIVEN BY THE LD AO BY TREATING THE LOSS INCURRED BY THE ASSESSEE ON FUTURE & OPTION TRANSACTIONS OF RS 96,67,872/- AS A SPECULATIVE LOSS IN PLACE OF NORMAL BUSINESS LOSS A S CLAIMED BY THE ASSESSEE AS PER EXPRESS PROVISION OF SECTION 43[5] Q[ THE ACT WITHOUT PROPERLY APPRECIATING THE FACTS OF THE CASE AND SUBMISSION MADE BEFORE HI M. 02.] THAT ON THE FACTS AND IN THE CIRCUMSTANCES OF THE CASE THE LEARNED CIT(A) ERRED IN CONFIRMING THE CHARGING OF INTEREST U/S 23 4B AND 234(' O F THE ACT. THE SAID AMOUNT OF INTEREST WAS CHARGED EXCESSIVELY THE SAME REQUIRES TO BE CHARGED AS PER LAW. ' 03] THAT DURING THE COURSE OF HEARING OF ABOVE AP PEAL FOLLOWING POINTS WERE RAISED AND PUT FORTH BEFORE THE HON'BLE BENCH :- 1. LOSS FROM F&O TRANSACTIONS IS A NORMAL BUSINESS LOSS AS PER PROVISION OF SECTION 43(5)(D) OF THE INCOME TAX ACT . 2. THE INCOME OF THE ASSESSEE FIRST COMPUTED AS PER CH APTER IV AND IF THE RESULTING FIGURE IS A LOSS, IN THAT CASE ONLY P ROVISION AS MENTIONED IN THE EXPL. TO SECTION 74(4) OF THE ACT IS APPLICA BLE. 3 THE ASSESSEE PLACED RELIANCE ON THE DECISION OF T HE HON'BLE CALCUTTA HIGH COURT WHEREIN IT WAS CATEGORICALLY STATED THAT PROVISION AS MENTIONED IN EXPLANATION TO SECTION 73[4] OF THE AC T IS NOT APPLICABLE IN CASE OF F & 0 TRANSACTIONS. FOR THIS PREPOSITION DECISION OF HO N'BLE DELHI BENCH OF ITAT IN THE CASE OF MIS SUCON INDIA LIMITED [ITANO 45191 DELL 2013 DT 18-01-2017] WAS ALSO RELIED UPON. 4 THE AMENDMENT IN EXPLANATION TO SECTION 73[4] OF THE ACT BY THE FINANCE ACT 2014 WAS ALSO REFERRED WHEREIN IT WAS C LEARLY MENTIONED THAT TRANSACTIONS WHICH WERE SPECIFICALLY EXCLUDED FROM THE DEFINITION OF SPECULATIVE LOSS AS PER PROVISION OF SECTION 43[51 OF THE ACT, IN THAT CASE, D&H SECHRON ELECTRODES PVT. LTD APPEAL NO MA 08/IND/2018 ARISING OUT OF ITA NO.62/ IND/2015 3 EXPLANATION TO SECTION 73[4] OF THE ACT DOES NOT AP PLY AND FOR APPLICABILITY OF THE AMENDED PROVISION WITH RETROSPECTIVE EFFECT DECISION OF !ION'BLE KOLKATA BENCH IN THE CASE OF LONGVIEW TRADE & CREDIT P. LIMITED [APPEAL NO ITA NO 6101 KOLL 2017 DT 30-08-2017] WAS REFERRED. 4.1 THAT IN THE PRESENT APPEAL, THE ASSESSEE COMPA NY HAD DECLARED POSITIVE INCOME UNDER THE HEAD OF LNCOME FROM BUSIN ESS & PROFESSION AND GROSS TOTAL INCOME OF THE ASSESSEE WAS ALSO AT A POSITIVE FIGURE. THAT AS PER PROVISION OF SECTION 43[5][D] OF THE ACT, TH E LOSS FROM FUTURE & OPTION TRANSACTION HAS TO BE CONSIDERED AS A NORMAL BUSINESS LOSS AND WHEN THE RESULTING AMOUNT UNDER THE HEAD INCOME [RO M BUSINESS & PROFESSION IS AT A POSITIVE FIGURE, IN THAT CASE PR OVISION AS MENTIONED IN EXPLANATION TO SECTION 73[4] OF THE ACT IS NOT APPL ICABLE. 4.2 THE ASSESSEE IN PARA 1.13.1 OF WRITTEN SYNOPS IS FILED BY THE APPELLANT THE SAID ISSUE HAS BEEN DEALT IN DETAIL. A SIMILAR VIEW WAS ALSO EXPRESSED BY THE HON'BLE KOLKATA BENCH OF ITAT IN T HE CASE OF ITO VS M/S ARION COMMERCIAL P LIMITED [ ITA NO 10101 KOLL 2011 DT 29-12-2011 ] AS DISCUSSED IN PARA 1.13.2 OF THE SYNOPSIS. IN PARA 1 .14.3 OF THE SYNOPSIS, DECISION OF HON'BLE SPECIAL BENCH WAS REFERRED IN T HE CASE OF CONCORD COMMERCIAL P LIMITED AS REPORTED IN 95 ITD 117 WHER EIN SIMILAR VIEW WAS EXPRESSED. 4.3 THAT IN PARA 1.15.2 OF THE SYNOPSIS, DECISION OF HON'BLE DELHI HIGH COURT IN THE CASE OF DLF COMMERCIAL DEVELOPMENT LIM ITED WAS REFERRED WHEREIN IN PARA 7 OF THE SAID ORDER, THE HON'BLE HI GH COURT HAS HELD THAT THE SCOPE OF DEFINITION OF PROVISION OF SECTION 43 [5] OF THE ACT IS APPLICABLE TO THE PRO VISION OF SECTION 2 8 TO 41 OF THE ACT. IN PARA 1.15.3 OF THE SYNOPSIS, PARA 8 OF THE DECISION OF THE HON' B1E DELHI HIGH COURT WAS DISCUSSED IN DETAIL WHEREIN IT WAS STATED THAT FIRST COMPUTATION OF D&H SECHRON ELECTRODES PVT. LTD APPEAL NO MA 08/IND/2018 ARISING OUT OF ITA NO.62/ IND/2015 4 TOTAL INCOME HAS TO BE PREPARED AS PER CHAPTER IV, IN SECTION II AND IF THE RESU1TIN~ FIGURE WAS AT A LOSS THAN PROVISI ON OF SECTION 73 [41 GETS ATTRACTED ON THE SAME. 4.4 THAT IN PARA 1.15.5. AND 1.15.6 OF THE SYNOPS IS, PARA 11 AND 12 OF THE DECISION OF THE HON'B1E DELHI HIGH COURT IN THE CASE OF DLF COMMERCIAL DEVELOPMENTS LIMITED WAS DISCUSSED WHERE IN IT WAS HELD BY THE HON'B1E HIGH COURT THAT WHERE THERE WAS LOSS FR OM F & 0 BUSINESS THEN PROVISION OF SECTION 73[41 OF THE ACT IS APPLI CABLE FOR CARRIED FORWARD OF LOSSES PURPOSE ONLY. 4.5 IN THE PRESENT APPEAL IN HAND, THERE WAS NO L OSS UNDER CHAPTER IV, SECTION D RATHER HUGE PROFIT WAS DECLARED BY THE AS SESSEE. HENCE, PROVISION OF SECTION 73[41 OF THE ACT IS NOT APPLIC ABLE, RATHER THE PARA 7 & 8 OF THE DECISION OF THE HON'B1E DELHI HIGH COURT I S APPLICABLE WHICH SAYS THAT FOR CALCULATING THE BUSINESS INCOME, INCO ME HAS TO BE COMPUTED AS PER PROVISIONS OF SECTION 28 TO 41 READ WITH SECTION 43[5][D1 OF THE INCOME TAX ACT. 4.6 THAT IN VIEW OF THE ABOVE, IT IS SUBMITTED TH AT HON'BLE BENCH BAS NOT DECIDED THE CRUCIAL ASPECT OF THIS APPEAL WHICH WAS ARGUED IN DETAILED AND ALSO MENTIONED IN THE WRITTEN SYNOPSIS AS FILED BEFORE THC HON'BLE BENCH. HENCE, HON'BLE BENCB IS VERY KINDLY REQUESTE D TO RECALL ITS ORDER AND DECIDE THE ISSUE AFRESH IN LIGHT OF THE ABOVE D ISCUSSION. 3. 4. THE LD. COUNSEL FOR THE ASSESSEE REFERRING TO THE W RITTEN SUBMISSIONS MENTIONED IN THIS MISCELLANEOUS APPLICA TION SUBMITTED THAT WHILE ADJUDICATING THE GROUNDS RAISED IN THE A PPEAL FILED, THE HON'BLE TRIBUNAL HAS NOT CONSIDERED THE JUDGMENTS O F HON'BLE HIGH D&H SECHRON ELECTRODES PVT. LTD APPEAL NO MA 08/IND/2018 ARISING OUT OF ITA NO.62/ IND/2015 5 COURT OF CALCUTTA IN THE CASE OF ASIAN FINANCIAL SERVICES LTD. V/S CIT (2016) 70 TAXMAN.COM 9, KOLKATTA AS WELL AS THE DECISION OF HON'BLE DELHI BENCH OF THE I.T.A.T. IN THE CASE OF SUCON INDIA LTD V/S ACIT, INCOME-TAX ACT, 1961, NO.4519/DEL/2013 OR DER DATED 18.01.2017 WHEREIN THE ISSUE WAS DECIDED IN FAVOUR OF THE ASSE SSEE. HE FURTHER SUBMITTED THAT THE HON'BLEBLE TRIBUNAL DISMISSED THE ASSESSEES APPEAL MAINLY RELYING ON THE JUDGMENT OF HON'BLE DELHI HIGH COURT IN THE CASE OF CIT V/S DLF COMMERCIAL DEV. LTD 261 CTR 126 BUT ON THE SAME ISSUE HON'BLE HIGH COURT OF CALCUT TA IN THE CASE OF ASIAN FINANCIAL SERVICES LTD (SUPRA) AFTER DULY CONSIDERING THE JUDGMENT OF HON'BLE HIGH COURT OF D ELHI IN CIT VS DLF COMMERCIAL DEV. LTD (SUPRA) HAS HELD THAT LOSS INCURRED ON ACCOUNT OF TRADING OF DERIVATIVES REFERRED IN SECUR ITY CONTRACT (REGULATION) ACT CARRIED OUT IN RECOGNIZED STOCK E XCHANGE CANNOT BE TERMED AS SPECULATIVE TRANSACTION AND ALSO CANNO T BE EQUATED TO THE PURCHASE AND SALE OF SHARES AS PROVIDED IN EXPL ANATION TO SECTION 73(4) OF THE ACT AND THEREFORE SAME IS ELIG IBLE FOR BEING SET OFF AS A BUSINESS LOSS AGAINST ANY OTHER BUSINESS I NCOME. LD. COUNSEL FOR THE ASSESSEE FURTHER REFERRING TO JUDGM ENTS OF HON'BLE D&H SECHRON ELECTRODES PVT. LTD APPEAL NO MA 08/IND/2018 ARISING OUT OF ITA NO.62/ IND/2015 6 SUPREME COURT IN THE CASE OF VEGETABLE PRODUCT LTD REPORTED IN 88 ITR 192 SUBMITTED THAT THE DECISION OF JURISDICTIONAL HIGH COURT IS NOT AVAILABLE AND THE ISSUE HAS BEEN DECIDED CONTRA RY TO EACH OTHER BY OTHER HON'BLE HIGH COURTS THEN IN SUCH SITUATION S JUDGMENT FAVOURABLE TO THE ASSESSEE SHOULD BE FOLLOWED. THE LD. COUNSEL FOR THE ASSESSEE THEREFORE PRAYED THAT THE VIEW TAKEN B Y HON'BLE HIGH COURT OF CALCUTTA IN THE CASE OF ASIAN FINANCIAL SERVICES LTD (SUPRA) SHOULD HAVE BEEN FOLLOWED BY THE TRIBUNAL AND AS TH IS IS AN APPARENT MISTAKE, THE SAME NEEDS TO BE RECTIFIED. 5. ON THE OTHER HAND THE DEPARTMENTAL REPRESENTATIVE O PPOSED THE SUBMISSIONS MADE BY LD. COUNSEL FOR THE ASSESSE E AND RELIED THE FINDINGS OF THE TRIBUNAL. 6. WE HAVE HEARD RIVAL CONTENTIONS AND PERUSED RECORDS PLACED BEFORE US. THROUGH THIS MISCELLANEOUS APPLICATION IT HAS BEEN PLEADED THAT AN APPARENT MISTAKE ON RECORD HAS CROP PED UP IN THE ORDER OF TRIBUNAL AS THE JUDGMENTS AND DECISIONS FA VOURING THE ASSESSEE WHICH WERE PLACED ON RECORD DURING THE COU RSE OF HEARING, HAVE NOT BEEN CONSIDERED BY THE TRIBUNAL WHILE ADJU DICATING THE D&H SECHRON ELECTRODES PVT. LTD APPEAL NO MA 08/IND/2018 ARISING OUT OF ITA NO.62/ IND/2015 7 ISSUE. FROM PERUSAL OF TRIBUNAL ORDER DATED 28.2.18 WE FIND THAT THE SOLE ISSUE WAS REGARDING TREATMENT OF FUTURE AN D OPTION LOSS OF RS.96,67,872/- AS TO WHETHER IT IS TO BE TREATED A S SPECULATION LOSS BY VIRTUE OF SECTION 73 OF THE ACT OR IN THE ALTERN ATIVE THE ASSESSEE IS ELIGIBLE TO SET OFF OF THIS F&O LOSS AGAINST OTHER BUSINESS INCOME OF THE ASSESSEE. 7. WE FIND THAT WHILE ADJUDICATING THE ISSUE IN DETAIL WE REFERRED AND RELIED TO THE JUDGMENT OF HON'BLE HIGH COURT OF DELHI IN THE CASE OF CIT V/S DLF COMMERCIAL DEV. LTD (SUPRA) IN COMING TO THE CONCLUSION THAT THE TRANSACTIONS OF FUTURE AND OPTI ONS ARE BASED ON STOCK AND SHARES AND THE ASSESSEE IS COVERED BY THE EXPLANATION TO SECTION 73 OF THE ACT AND THEREFORE THE ALLEGED LOS S WAS HELD TO BE SPECULATIVE LOSS NOT ELIGIBLE FOR SET OFF AGAINST O THER BUSINESS INCOME OF THE ASSESSEE. 8. WE FURTHER OBSERVE FROM THE PERUSAL OF PAPER BOOK A S WELL AS THE CASES REFERRED AND RELIED BY LD. COUNSEL FOR TH E ASSESSEE THAT RELIANCE WAS ALSO PLACED ON THE JUDGMENT OF HON'BLE HIGH COURT, CALCUTTA IN THE CASE OF ASIAN FINANCIAL SERVICES LTD ( SUPRA) WHICH D&H SECHRON ELECTRODES PVT. LTD APPEAL NO MA 08/IND/2018 ARISING OUT OF ITA NO.62/ IND/2015 8 WAS FURTHER FOLLOWED BY THE COORDINATE BENCH OF DEL HI IN THE CASE OF M/S. SUCON INDIA LTD (SUPRA) AND IN BOTH THESE JUDG MENTS THE DECISION OF HON'BLE HIGH COURT OF DELHI IN CASE OF DLF COMMERCIAL DEV. LTD (SUPRA) HAS BEEN DULY CONSIDERED AND THE D ECISION HAS BEEN GIVEN IN FAVOUR OF THE ASSESSEE TREATING THE D ERIVATIVE LOSS AS A BUSINESS LOSS NOT COVERED EXPLANATION TO U/S 73 OF THE ACT. 9. WE FIND THAT A MISTAKE APPARENT FROM RECORD HAS OCC URRED IN THE IMPUGNED ORDER OF THE TRIBUNAL DATED 28.2.2018 AS THE JUDGMENTS FAVOURING THE ASSESSEE WERE NOT CONSIDERE D WHILE ADJUDICATING THE ISSUE. WE THEREFORE RECALL OUR FI NDINGS GIVEN IN PARA 10, 11 AND 12 OF OUR APPELLATE ORDER DATED 28. 2.2018 AND INSERT THE FOLLOWING FINDINGS IN PLACE THEREOF. PARA-10: THE LD. COUNSEL FOR THE ASSESSEE HAS REFERRED TO VA RIOUS JUDGMENTS AND IT HAS BEEN PLEADED THAT THE VERY SAM E ISSUE HAS BEEN DEALT BY HON'BLE HIGH COURT OF CALCUTTA IN THE CASE OF ASIAN FINANCIAL SERVICES LTD (SUPRA) AND THE HON'BLE COURT AFTER CONSIDERING THE JUDGMENTS OF HON'BLE HIGH COU RT OF DELHI D&H SECHRON ELECTRODES PVT. LTD APPEAL NO MA 08/IND/2018 ARISING OUT OF ITA NO.62/ IND/2015 9 IN THE CASE OF DLF COMMERCIAL DEV. LTD (SUPRA) HAVE HELD THAT WE ARE INCLINED TO THANK THAT THE CLAUSE OF THE SE NTENCE WHICH FALL SQUARELY QUALIFIES THE WORD SHARES AND NOT THE WORD DERIVATIVES. WE HAVE NO DIFFICULTY IN ACCEPTING THE VIEWS OF THE DELHI HIGH COURT WHEN THEY SAY THAT SHARES FALL SQU ARELY WITHIN THE EXPLANATION TO SECTION 73(4) BUT WE ARE UNABLE TO AGREE WHEN DERIVATIVES ARE TREATED AT PAR WITH THE SHARES BECAUSE THE LEGISLATURE HAS TREATED THEM DIFFERENTLY. PARA-11: FURTHER CO-ORDINATE BENCH IN THE CASE OF ACIT V/S M /S. SUCON INDIA LTD (SUPRA) HELD THAT THE TREATMENT OF SET OF F OF LOSS ON ACCOUNT OF TRADING OF DERIVATIVES AND THE I.T.A.T., DELHI IN THEIR DECISION FAVOURING THE ASSESSEE CONSIDERED BOTH TH E JUDGMENTS OF HIGH COURT OF DELHI IN THE CASE OF DLF COMMERCIA L DEV. LTD (SUPRA) AND CALCUTTA HIGH COURT IN THE CASE OF ASIA N FINANCIAL SERVICES LTD (SUPRA) AND DECIDED IN FAVOUR OF THE A SSESSEE BY FOLLOWING THE JUDGMENT OF HON'BLE APEX COURT IN THE CASE OF VEGETABLE PRODUCT LTD (SUPRA) OBSERVING AS FOLLOWS; D&H SECHRON ELECTRODES PVT. LTD APPEAL NO MA 08/IND/2018 ARISING OUT OF ITA NO.62/ IND/2015 10 3.7 WE HAVE HEARD THE RIVAL SUBMISSION OF THE PART IES AND PERUSED THE RELEVANT MATERIAL ON THE RECORD. IN THE GROUNDS RAI SED BY THE ASSESSEE, TWO ISSUES EMERGE BEFORE US. THE FIRST ISSUE IS WHETHER LOSS FROM DEALING IN DERIVATIVE TRANSACTION CAN BE SET OF AGAINST BUSINE SS INCOME OR NOT. SECOND ISSUE BEFORE US IS WHETHER LOSS FROM THE PURCHASE A ND SALE OF SHARES CAN BE SET OF AGAINST THE BUSINESS INCOME IN TERMS OF SECT ION 73 OF THE ACT. 3.7.1 REGARDING THE FIRST ISSUE, THE ASSESSEE HAS S HOWN LOSS ON DERIVATIVES TRADING ON NSE/BSE RS.17 ,27,16,630/- AND CLAIMED T O SET OFF THE SAME AGAINST BUSINESS INCOME. THE LEARNED CIT(DR) SUBMIT TED THAT ISSUE IN QUESTION IS COVERED BY THE DECISION OF THE HON'BLE DELHI HIGH COURT IN THE CASE OF CIT VS. DLF COMMERCIAL DEVELOPERS LTD.(SUPRA). WE FIND THAT THE HON'BLE HIGH COURT REFERRED TO BOT H SECTION 73 AND SECTION 43 OF THE INCOME-TAX ACT AND DECISIONS AVAILABLE ON THE ISSUE IN DISPUTE AND HELD THAT LOSS FROM THE DERIVATIVE TRANSACTIONS WAS SPECULATIVE FO R THE PURPOSE OF SECTION 73 OF THE ACT AND, THEREFORE, COULD NOT BE ADJUSTED AGAINST B USINESS PROFIT. THE RELEVANT FINDING OF THE HON'BLE HIGH COURT IS REPRODUCED AS UNDER: '6. BEFORE A DISCUSSION ON THE MERITS OF THE APPEAL, IT WOULD BE ESSENTIAL TO EXTRACT THE RELEVANT PROVISIONS OF THE INCOME TAX ACT. SECTION 73 (WITH EXPLANATION), TO THE EXTENT IT IS RELEVANT, READS A S FOLLOWS: 'LOSSES IN SPECULATION BUSINESS. 73. (1) ANY LOSS, COMPUTED IN RESPECT OF A SPECULATION BUSINESS CARRIED ON BY THE ASSESSEE, SHALL NOT BE SET OFF EXCEPT AGAINS T PROFITS AND GAINS, IF ANY, OF ANOTHER SPECULATION BUSINESS. (2) WHERE FOR ANY ASSESSMENT YEAR ANY LOSS COMPUTED IN RESPECT OF A SPECULATION BUSINESS HAS NOT BEEN WHOLLY SET OFF UN DER SUB-SECTION (1), SO MUCH OF THE LOSS AS IS NOT SO SET OFF OR THE WHOLE LOSS WHERE THE ASSESSEE D&H SECHRON ELECTRODES PVT. LTD APPEAL NO MA 08/IND/2018 ARISING OUT OF ITA NO.62/ IND/2015 11 HAD NO INCOME FROM ANY OTHER SPECULATION BUSINESS, SHALL, SUBJECT TO THE OTHER PROVISIONS OF THIS CHAPTER, BE CARRIED FORWARD TO THE FOLLOWING ASSESSMENT YEAR, AND- (I) IT SHALL BE SET OFF AGAINST THE PROFITS AND GAI NS, IF ANY, OF ANY SPECULATION BUSINESS CARRIED ON BY HIM ASSESSABLE F OR THAT ASSESSMENT YEAR; AND (II) IF THE LOSS CANNOT BE WHOLLY SO SET OFF, THE A MOUNT OF LOSS NOT SO SET OFF SHALL BE CARRIED FORWARD TO THE FOLLOWING ASSESSMEN T YEAR AND SO ON. (3) IN RESPECT OF ALLOWANCE ON ACCOUNT OF DEPRECIAT ION OR CAPITAL EXPENDITURE ON SCIENTIFIC RESEARCH, THE PROVISIONS OF SUB-SECTION (2) OF SECTION 72 SHALL APPLY IN RELATION TO SPECULATION B USINESS AS THEY APPLY IN RELATION TO ANY OTHER BUSINESS. (4) NO LOSS SHALL BE CARRIED FORWARD UNDER THIS SEC TION FOR MORE THAN [FOUR} ASSESSMENT YEARS IMMEDIATELY SUCCEEDING THE ASSESSM ENT YEAR FOR WHICH THE LOSS WAS FIRST COMPUTED. EXPLANATION.-WHERE ANY PART OF THE BUSINESS OF A COMPANY [OTHER THAN A COMPANY WHOSE GROSS TOTAL INCOME CONSISTS MAINLY OF INCOME WHICH IS CHARGEABLE UNDER THE HEADS 'INTEREST ON SECURITIES', 'INCOME FROM HO USE PROPERTY', 'CAPITAL GAINS' AND 'INCOME FROM OTHER S OURCES '1, OR A COMPANY THE PRINCIPAL BUSINESS OF WHICH IS THE BUSINESS OF BANKING OR THE GRANTING OF LOANS AND ADVANCES) CONSISTS IN THE PURCHASE AND SA LE OF SHARES OF OTHER COMPANIES, SUCH COMPANY SHALL, FOR THE PURPOS ES OF THIS SECTION, BE DEEMED TO BE CARRYING ON A SPECULATION BUSINESS TO THE EXTENT TO WHICH THE BUSINESS CONSISTS OF THE PURCHASE AND SALE OF SUCH SHARES.} SECTION 43, TO THE EXTENT IT IS RELEVANT, READS AS FOLLOWS: 43. IN SECTIONS 28 TO 41 A ND IN THIS SECTION, UNLESS THE CONTEXT OTHERWISE REQUIRES- ********** ********* D&H SECHRON ELECTRODES PVT. LTD APPEAL NO MA 08/IND/2018 ARISING OUT OF ITA NO.62/ IND/2015 12 (5) 'SPECULATIVE TRANSACTION' MEANS A TRANSACTION I N WHICH A CONTRACT FOR THE PURCHASE OF SALE OF ANY COMMODITY, INCLUDING STOCKS AND SHARES, IS PERIODICALLY OR ULTIMATELY SETTLED OTHERWISE THAN B Y THE ACTUAL DELIVERY 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 MANUFACTURING OR MERCHANDISE BUSINESS TO GUARD AGAINST LOSS THROUGH FUTURE PRICE FLUCTUATION S 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 HOLDI NGS 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 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 I N DERIVATIVES REFERRED TO IN CLAUSE {(A C)} OF SECTION 2 OF THE SECURITIES CONTRACTS (REGULATION) ACT, 1956 (42 OF 1956) CARRIED OUT IN A RECOGNIZED STOCK EXCHANGE;} SHALL NOT BE DEEMED TO BE A SPECULATIVE TRANSACTION , [EXPLANATION - FOUR THE PURPOSE OF THIS CLAUSE, THE EXPRESSIONS _ (A) CARRIED OUT ELECTRONICALLY ON SCREEN-BASED SYST EMS THROUGH A STOCK BROKER OR SUB-BROKER OR SUCH OTHER INTERMEDIARY REG ISTERED 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) D&H SECHRON ELECTRODES PVT. LTD APPEAL NO MA 08/IND/2018 ARISING OUT OF ITA NO.62/ IND/2015 13 ACT, 1956 (42 OF 1956) OR THE SECURITIES AND EXCHANGE BOARD OF INDIA ACT, 1992 OR THE DEPOSITORIES ACT, 1996 (22 OF 1996) AND THE RULES, REGULATIONS OR BYE-LAWS MADE OR DIRECTIONS ISSUED UNDER THOSE A CTS OR BY BANKS OR MUTUAL FUNDS ON A RECOGNIZED STOCK EXCHANGE; ;AND (B) WHICH IS SUPPORTED BY A TIME STAMPED CONTRACT N OTE ISSUED BY SUCH STOCK BROKER OR SUB-BROKER OR SUCH OTHER INTERMEDIA RY TO EVERY CLIENT INDICATING IN THE CONTRACT NOTE THE UNIQUE CLIENT I DENTITY NUMBER ALLOTTED UNDER ANY ACT REFERRED TO IN SUB-CLAUSE (A) AND PER MANENT ACCOUNT NUMBER ALLOTTED UNDER THIS ACT; (II) 'RECOGNIZED STOCK EXCHANGE' MEANS A RECOGNIZED 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 CONDITIONS AS MAY BE PRESCRIBED AND NOTIFIED BY THE CENTRAL GOVER NMENT FOR THIS PURPOSE;} IT IS APPARENT, FACIALLY, THAT THE TERM 'SPECULATIV E TRANSACTION' HAS BEEN DEFINED ONLY IN SECTION 43(5). AT THE SAME TIME, IT IS QUALIFIED THAT THE SCOPE OF THE DEFINITION IS RESTRICTED IN ITS APPLIC ATION TO WORKING OUT THE MANDATE OF SECTIONS 28 TO 41 OF THE ACT. IN TERMS OF THE EXPLANATION TO SECTION 73(4), IN THE CASE OF A COMPANY, BUSINESS OF PURCHASE AND SALE OF SHARES IS DEEMED TO BE SPECULATION BUSINESS. HOW EVER, CERTAIN COMPANIES ARE EXCLUDED FROM THIS EXPLANATION, WHICH ARE: (I) A COMPANY WHOSE GROSS TOTAL INCOME CONSISTS MAI NLY OF INCOME WHICH IS CHARGEABLE UNDER THE HEADS 'INTEREST ON SECURITI ES', 'INCOME FROM HOUSE PROPERTY', 'CAPITAL GAINS' AND 'INCOME FROM O THER SOURCES'. (II) A COMPANY, THE PRINCIPAL BUSINESS OF WHICH IS THE BUSINESS OF BANKING OR THE GRANTING OF LOANS AND ADVANCES. SECTION 43 DEFINES, FOR THE PURPOSE OF SECTIONS 28 TO 41, CERTAIN TERMS. THE LATTER PROVISIONS FALL IN CHAPTER IV, IN SECTION 0, WHICH DEAL WITH D&H SECHRON ELECTRODES PVT. LTD APPEAL NO MA 08/IND/2018 ARISING OUT OF ITA NO.62/ IND/2015 14 COMPUTATION OF BUSINESS INCOME. THE SAID PROVISIONS PROVIDE FOR MATTER RELATING TO COMPUTATION OF SUCH INCOME, RENT TAXES, INSURANCE OF BUILDINGS, REPAIRS OF PLANT AND MACHINERY, DEPRECIATION, RESER VES FOR SHIPPING BUSINESS, REHABILITATION FUND, EXPENDITURE ON CERTA IN ELIGIBLE OBJECTS OR SCHEMES, DEDUCTIONS, AMOUNTS NOT DEDUCTIBLE, PROFIT S CHARGEABLE TO TAX, ETC. THE ASSESSEE IS NO DOUBT CORRECT IN CONTENDING THAT THE ONLY DEFINITION OF DERIVATIVES IS TO BE FOUND IN SECTION 43(5); YET THE COURT CANNOT IGNORE OR OVERLOOK THAT THE DEFINITION - TO THE EXTENT, IT EX CLUDES SUCH TRANSACTIONS FROM THE MISCHIEF OF THE EXPRESSION 'SPECULATIVE TR ANSACTIONS' IS CONFINED IN ITS APPLICATION. PARLIAMENTARY INTENDMENT THAT S UCH TRANSACTIONS ARE ALSO EXCLUDED FROM THE MISCHIEF OF EXPLANATION TO S ECTION 73 (4), HOWEVER, IS NOT BORNE OUT. IN THIS CONTEXT, IT WOULD BE INSTRUCTIVE TO NOTICE THAT IN RAJSHREE SUGARS AND CHEMICALS LTD (SUPRA), THE MADRAS HIGH COURT NOTICE D, RATHER DRAMATICALLY, THAT THAT .. 'DERIVATIVES ARE TIME BOMBS AND FINANCIAL WEAPONS O F MASS DESTRUCTION' SAID WARREN BUFFETT, ONE OF THE WORLD' S GREATEST INVESTORS, WHO OVERTOOK MICROSOFT MAESTRO IN 2008 TO BECOME THE RI CHEST MAN IN THE WORLD AND WHO IS KNOWN AS THE 'SAGE OF OMAHA OR ORACLE OF OMAHA'. DERIVATIVES, ACCORDING TO HIM, CAN PUSH COMPANIES ON TO A SPIRAL THAT CAN LEAD TO A CORPORATE MELT DOWN .... ' THE HIGH COURT THEN, AFT ER EXAMINING THE NATURE AND CHARACTERISTICS OF DERIVATIVES TRANSACTIONS, OB SERVED THAT: '5. WHAT ARE THESE 'DERIVATIVES' WHICH HAVE GAINED SUCH A GREAT DEAL OF NOTORIETY? IN SIMPLE TERMS, DERIVATIVES ARE FINANCI AL INSTRUMENTS WHOSE VALUES DEPEND ON THE VALUE OF OTHER UNDERLYING FINA NCIAL INSTRUMENTS. THE INTERNATIONAL ACCOUNTING STANDARD (LAS) 39, DEFINES 'DERIVATIVES' AS FOLLOWS: A DERIVATIVE IS A FINANCIAL INSTRUMENT: (A) WHOSE VALUE CHANGES IN RESPONSE TO THE CHANGE I N A SPECIFIED INTEREST D&H SECHRON ELECTRODES PVT. LTD APPEAL NO MA 08/IND/2018 ARISING OUT OF ITA NO.62/ IND/2015 15 RATE, SECURITY PRICE, COMMODITY PRICE, FOREIGN EXCH ANGE RATE, INDEX OF PRICES OR RATES, A CREDIT RATING OR CREDIT INDEX, OR SIMIL AR VARIABLE (SOMETIMES CALLED THE 'UNDERLYING'); (B) THAT REQUIRES NO INITIAL NET INVESTMENT OR LITT LE INITIAL NET INVESTMENT RELATIVE TO OTHER TYPES OF CONTRACTS THAT HAVE A SI MILAR 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 C OMMODITIES, METALS, ENERGY RESOURCES, AND FINANCIAL ASSETS SUCH AS SHARES, BONDS, AND FOREIGN CURRENCIES.' IT IS NO DOUBT, TEMPTING TO HOLD THAT SINCE THE EXP RESSION 'DERIVATIVES' IS DEFINED ONLY IN SECTION 43 (5) AND SINCE IT EXCLUDES SUCH TRANSACTIONS FROM THE ODIUM OF SPECULATIVE TRANSACTIONS, AND FUR THER THAT SINCE THAT HAS NOT BEEN EXCLUDED FROM SECTION 73, YET, THE COURT W OULD BE DOING VIOLENCE TO PARLIAMENTARY INTENDMENT. THIS IS BECAUSE A DEFI NITION ENACTED FOR ONLY A RESTRICTED PURPOSE OR OBJECTIVE SHOULD NOT BE APP LIED TO ACHIEVE OTHER ENDS OR PURPOSES. DOING SO WOULD BE CONTRARY TO THE STATUTE. THUS CONTEXTUAL APPLICATION OF A DEFINITION OR TERM IS S TRESSED; WHEREVER THE CONTEXT AND SETTING OF A PROVISION INDICATES AN INT ENTION THAT AN EXPRESSION DEFINED IN SOME OTHER PLACE IN THE ENACTMENT, CANNO T BE APPLIED, THAT INTENT PREVAILS, REGARDLESS OF WHETHER STANDARD EXC LUSIONARY TERMS (SUCH AS 'UNLESS THE CONTEXT OTHERWISE REQUIRES') ARE USE D. IN THE VANGUARD FIRE & GENERAL INSURANCE CO. LTD., MADRAS V. MIS. FRASER AND ROSS & ANR AIR 1960 SC 971 IT WAS HELD THAT: 'IT IS WELL SETTLED THAT ALL STATUTORY DEFINITIONS OR ABBREVIATIONS MUST BE READ SUBJECT TO THE QUALIFICATION VARIOUSLY EXPRESS ED IN THE DEFINITION CLAUSES WHICH CREATED THEM AND IT MAY BE THAT EVEN WHERE TH E DEFINITION IS EXHAUSTIVE D&H SECHRON ELECTRODES PVT. LTD APPEAL NO MA 08/IND/2018 ARISING OUT OF ITA NO.62/ IND/2015 16 INASMUCH AS' THE WORD DEFINED IS SAID TO MEAN A CER TAIN THING, IT IS POSSIBLE FOR THE WORD TO HAVE A SOMEWHAT DIFFERENT MEANING IN DI FFERENT SECTIONS OF THE ACT DEPENDING UPON THE SUBJECT OR THE CONTEXT. THAT IS WHY ALL DEFINITIONS IN STATUTES GENERALLY BEGIN WITH THE QUALIFYING WORDS SIMILAR TO THE WORDS USED IN THE PRESENT CASE, NAMELY, UNLESS THERE IS ANYTHING REPUGNANT IN THE SUBJECT OR CONTEXT. THEREFORE IN FINDING OUT THE MEANING OF TH E WORD ' INSURER' IN VARIOUS SECTIONS OF THE ACT, THE MEANING TO BE ORDINARILY G IVEN TO IT IS THAT GIVEN IN THE DEFINITION CLAUSE. BUT THIS IS NOT INFLEXIBLE AND T HERE MAY BE SECTIONS IN THE ACT WHERE THE MEANING MAY HAVE TO BE DEPARTED FROM ON A CCOUNT OF THE SUBJECT OR CONTEXT IN WHICH THE WORD HAS BEEN USED AND THAT WI LL BE GIVING EFFECT TO THE OPENING SENTENCE IN THE DEFINITION SECTION, NAMELY, UNLESS THERE IS ANYTHING REPUGNANT IN THE SUBJECT OR CONTEXT. IN VIEW OF THIS QUALIFICATION, THE COURT HAS NOT ONLY TO LOOK AT THE WORDS BUT ALSO TO LOOK AT T HE CONTEXT, THE COLLOCATION AND THE OBJECT OF SUCH WORDS RELATING TO SUCH MATTER AND INTERPRET TH E MEANING INTENDED TO BE CONVEYED BY THE USE OF THE WORDS UNDER THE CIRCUMSTANCES. ' SIMILARLY, IN N.K. JAIN AND DRS. V C.K. SHAH AND DR S. AIR 1991 SC 1289, IT WAS HELD THAT: '4. THE SUBJECT MATTER AND THE CONTEXT IN WHICH A PARTICULAR WORD IS USED ARE OF GREAT IMPORTANCE AND IT IS AXIOMATIC THAT THE OBJEC T UNDERLYING THE ACT MUST ALWAYS BE KEPT IN VIEW IN CONSTRUING THE CONT EXT IN WHICH A PARTICULAR WORD IS USED ' 11. THE STATED OBJECTIVE OF SECTION 73- APPARENT FROM THE TENOR OF ITS LANGUAGE IS TO DENY SPECULATIVE BUSINESSES THE BENEFIT OF CARRY FORWARD OF LOSSES. EXPLANATION TO SECTION 73 (4) HAS BEEN ENACTED TO C LARIFY BEYOND ANY SHADOW OF DOUBT THAT SHARE BUSINESS OF CERTAIN TYPES OR CLASSES OF COMPANIES ARE DEEMED TO BE SPECULATIVE. THAT IN ANOTHER PART OF THE STATUTE, WHICH DEALS WITH COMPUTATION OF BUSINESS INCOME, DERIVATIVES ARE EXCLUDED FROM THE DEFINITION OF SPECULATIVE TRANSACTIONS, ONLY UNDERL INES THAT SUCH EXCLUSION IS LIMITED FOR THE PURPOSE OF THOSE PROVISIONS OR SECT IONS. TO BORROW THE MADRAS D&H SECHRON ELECTRODES PVT. LTD APPEAL NO MA 08/IND/2018 ARISING OUT OF ITA NO.62/ IND/2015 17 HIGH COURT'S EXPRESSION, 'DERIVATIVES ARE ASSETS, W HOSE VALUES ARE DERIVED FROM VALUES OF UNDERLYING ASSETS'; IN THE PRESENT CASE, BY ALL ACC OUNTS THE DERIVATIVES ARE BASED ON STOCKS AND SHARES, WHICH F ALL SQUARELY WITHIN THE EXPLANATION TO SECTION 73 (4). THEREFORE, IT IS IDL E TO CONTEND THAT DERIVATIVES DO NOT FALL WITHIN THAT PROVISION, WHEN THE UNDER/Y ING ASSET ITSELF DOES NOT QUALIFY FOR THE BENEFIT, AS THEY (DERIVATIVES - ONC E REMOVED FROM IT AND ENTIRELY DEPENDENT ON STOCKS AND SHARES, FOR DETERMINATION O F THEIR VALUE). 12. IN THE LIGHT OF THE ABOVE DISCUSSION, IT IS HEL D THAT THE TRIBUNAL ERRED IN LAW IN HOLDING THAT THE ASSESSEE WAS ENTITLED TO CA RRY FORWARD ITS LOSSES; THE QUESTION FRAMED IS ANSWERED IN FAVOUR OF THE REVENUE AND AGAINST THE ASSESSEE. THE APPEAL IS, THEREFORE, ALLOWED; THERE SHALL BE NO ORDER AS TO COSTS.' 3.7.2 ON THE OTHER HAND, THE LEARNED COUNSEL OF THE ASSESSEE RELIED ON THE DECISION OF THE HON'BLE HIGH COURT OF CALCUTTA IN T HE CASE OF ASIAN FINANCIAL SERVICES LTD. VS. COMMISSIONER OF INCOME TAX-3, KOL KATA (SUPRA). IN THE SAID CASE ONE OF THE QUESTIONS RAISED WAS THAT, WHETHER ON THE TRUE AND PROPER INTERPRETATION OF THE EXPLANATION TO SECTION 73 OF THE INCOME-TAX ACT, 1961, THE TRIBUNAL WAS JUSTIFIED IN LAW IN HOLDING THAT LOSS OF RS.3,24,76,185/- INCURRED IN ELIGIBLE TRANSACTION WITHIN THE MEANING OF PROVI SO (D) TO SECTION 43(5) NOT INVOLVING ANY PURCHASE/SALE OF SHARES AS SUCH WAS S PECULATION LOSS? 3.7.3 THE HON'BLE HIGH COURT OF CALCUTTA DISAGREED WITH THE DECISION OF THE HON'BLE DELHI HIGH COURT AND HELD AS UNDER: 'IT WOULD APPEAR THAT THE ACTIVITIES APPEARING IN C LAUSES (A) TO (E) ARE NOT TO BE DEEMED TO BE SPECULATIVE TRANSACTIONS. THEREFORE , THIS COMES WITHIN THE CATEGORY OF DEEMED BUSINESS WHICH IS HOWEVER DISTINCT AND SEPAR ATE FROM ANY OTHER BUSINESS. NOW, THE QUESTION IS, WHETHER L OSS ARISING OUT OF SUCH DEEMED BUSINESS CAN BE SET OFF AGAINST THE PROFIT ARISING OUT OF OTHER BUSINESS OR BUSINESSES WHICH MAY FOR CLARITY BE CAL LED PROPER BUSINESS. D&H SECHRON ELECTRODES PVT. LTD APPEAL NO MA 08/IND/2018 ARISING OUT OF ITA NO.62/ IND/2015 18 UNDER SECTION 70 OF THE ACT, THE ASSESSEE IS ENTITLED TO HAVE THE LOSS SET OFF AGAINST HIS INCOME FROM ANY OTHER SOURCE UNDER THE SAME HEAD UNLESS OTHERWISE PROVIDED. THEREFORE ANSWER TO THE QUESTIO N IS THAT THE ASSESSEE IS ENTITLED TO HAVE THE LOSS ARISING OUT OF DEEMED BUSINESS SET OFF AGAINST THE INCOME ARISING OUT OF BUSINESS PROPER UNLESS OTHERWISE PROVIDED. THE QUESTION HOWEVER REMAINS WHETHER THE EXPLANATION TO SUB-SECTION (4) OF SECTION 73 RELIED UPON BY MR. LODH PROVIDES OTHERWI SE. A PLAIN READING OF THE EXPLANATION QUOTED ABOVE CANNOT BE SAID TO HAVE PRO VIDED OTHERWISE. IN THAT CASE THE IRRESISTIBLE CONCLUSION IS THAT THE ASSESS EE IS ENTITLED TO SET OFF SUCH LOSS ARISING OUT OF DEEMED BUSINESS AGAINST THE INCOME ARISING OUT OF BUSINESS PROPER. THE LEARNED TRIBUNAL HAS SUPPORTED THE CONTENTION OF THE REVENUE RELYING UPON THE JUDGMENT OF THE DELHI HIGH COURT QUOTED ABOVE. THE VIEWS EXPRESSED BY THE HON'BLE DELHI HIGH COURT ARE CONTA INED IN A PART OF THE SENTENCE, WHICH IS AS FOLLOWS: 'BY ALL ACCOUNTS THE DERIVATIVES ARE BASED ON STOCK S AND SHARES, WHICH FALL SQUARELY WITHIN THE EXPLANATION TO SECTION 73( 4)' WE ARE INCLINED TO THINK THAT THE CLAUSE OF THE SEN TENCE WHICH FALL SQUARELY .... ', QUALIFIES THE WORD 'SHARES' AND NOT THE WOR D 'DERIVATIVES'. WE HAVE NO DIFFICULTY IN ACCEPTING THE VIEWS OF THE DELHI HIGH COURT WHEN THEY SAY THAT SHARES FALL SQUARELY WITHIN THE EXPLANATION TO SECTION 73(4) BUT WE ARE UNABLE TO AGREE WHEN DERIVATIVES ARE TREATED AT PAR WITH THE SHARES BECAUSE THE LEGISLATURE HAS TREATED THEM DIFFERENTL Y.' 3.7.4 IN THE CASE OF ASIAN FINANCIAL SERVICES LTD. (SUPRA), THE HON'BLE CALCUTTA HIGH COURT ACCORDINGLY ANSWERED THE QUESTI ON IN NEGATIVE. 3.7.5 THE LEARNED COUNSEL SUBMITTED BEFORE US THAT BOTH THE DECISION ARE OF THE HIGH COURT OTHER THEN JURISDICTIONAL HIGH COURT, WH ICH IS THE PUNJAB AND HARYANA HIGH COURT IN THE CASE OF THE ASSESSEE. THE LEARNED COUNSEL RELYING ON THE DECISION OF THE HON'BLE SUPREME COURT IN THE CA SE OF VEGETABLE PRODUCT LTD., D&H SECHRON ELECTRODES PVT. LTD APPEAL NO MA 08/IND/2018 ARISING OUT OF ITA NO.62/ IND/2015 19 REPORTED IN 88 ITR 192 SUBMITTED THAT WHERE CONTRARY DECISION OF THE HON'B LE HIGH COURTS OTHER THAN THE JURISDICTIONAL HIGH COUR T ARE AVAILABLE, THEN IN SUCH A SITUATION, DECISION FAVOURABLE TO THE ASSESSEE SHOU LD BE FOLLOWED. THE HON'BLE SUPREME COURT IN THE CASE OF VEGETABLE PRODUCT LTD (SUPRA) HELD AS UNDER: '4. THERE IS NO DOUBT THAT THE ACCEPTANCE OF ONE OR THE OTHER INTERPRETATION SOUGHT TO BE PLACED ON S. 271 (1 ) (A) (I) BY THE P ARTIES WOULD LEAD TO SOME INCONVENIENT RESULT, BUT THE DUTY OF THE COURT IS T O READ THE SECTION, UNDERSTAND ITS LANGUAGE AND GIVE EFFECT TO THE SAME . IF THE LANGUAGE IS PLAIN, THE FACT THAT THE CONSEQUENCE OF GIVING EFFECT TO I T MAY LEAD TO SOME ABSURD RESULT IS NOT A FACTOR TO BE TAKEN INTO ACCOUNT IN INTERPRETING A PROVISION. IT IS FOR THE LEGISLATURE TO STEP IN AND REMOVE THE ABSUR DITY. ON THE OTHER HAND, IF TWO REASONABLE CONSTRUCTIONS OF A TAXING PROVISION ARE POSSIBLE, THAT CONSTRUCTION WHICH FAVOURS THE ASSESSEE MUST BE ADO PTED. THIS IS A WELL- ACCEPTED RULE OF CONSTRUCTION RECOGNIZED BY THIS CO URT IN SEVERAL OF ITS DECISIONS. HENCE, ALL THAT WE HAVE TO SEE IS, WHAT IS THE TRUE EFFECT OF THE LANGUAGE EMPLOYED IN S. 271 (1)(A) (I). IF WE FIND THAT LANGUAGE TO BE AMBIGUOUS OR CAPABLE OF MORE MEANINGS THAN ONE, THE N WE HAVE TO ADOPT THAT INTERPRETATION WHICH FAVOURS THE ASSESSEE, MOR E PARTICULARLY SO BECAUSE THE PROVISION RELATES TO IMPOSITION OF PENALTY.' 3.7.6 RESPECTFULLY FOLLOWING THE ABOVE DECISION OF THE HON'BLE SUPREME COURT IN THE CASE OF VEGETABLE PRODUCT LTD. (SUPRA) , WE ARE INCLINED TO FOLLOW THE DECISION OF THE HON'BLE CALCUTTA HIGH COURT ON THE ISSUE IN DISPUTE. ACCORDINGLY, WE HOLD THAT THE LOSS INCURRED ON DERI VATIVE TRANSACTION WAS NOT A SPECULATIVE LOSS AND IS ALLOWED TO BE ADJUSTE D AGAINST BUSINESS INCOME. D&H SECHRON ELECTRODES PVT. LTD APPEAL NO MA 08/IND/2018 ARISING OUT OF ITA NO.62/ IND/2015 20 PARA-12: FROM PERUSAL OF THE ABOVE DECISION OF COORDINATE BE NCH, WE ARE OF THE VIEW THAT THE JUDGMENT OF HON'BLE HIGH COURT OF KOLKATA IN THE CASE OF ASIAN FINANCIAL SERVICES LTD (SUPRA) IS SQUARELY APPLICABLE AS IN THE INSTANT ISSUE AND THERE IS NO JUDGMENT OF JU RISDICTIONAL HIGH COURT OF MADHYA PRADESH BUT THERE ARE CONTRARY DECI SIONS BY HON'BLE HIGH COURT OF DELHI IN THE CASE OF CIT V/S DLF COMMERCIAL DEV. LTD (SUPRA) IN FAVOUR OF THE REVENUE WHEREAS HON'BLE HIGH COURT OF CALCUTTA IN CASE OF ASIAN FINANCIAL SERVICES LTD V/S CIT (SUPRA) DECIDED IN FAVOUR OF THE ASSESSEE (AFTER DULY CONS IDERING THE JUDGMENT OF HON'BLE HIGH COURT OF DELHI IN THE CASE OF DLF COMMERCIAL DEV. LTD V/S CIT (SUPRA ). IN THE GIVEN CIRCUMSTANCES JUSTICE NEEDS TO BE GIVE N IN FAVOUR OF THE ASSESSEE AND WE THEREFORE RESPECTFULLY FOLLO WING THE JUDGMENT OF HON'BLE HIGH COURT OF CALCUTTA IN THE CASE OF CI T V/S ASIAN FINANCIAL SERVICES LTD (SUPRA) AS WELL AS THE DECIS ION OF COORDINATE BENCH OF DELHI IN THE CASE OF SUCON INDIA LTD V/S A CIT (SUPRA) ARE OF THE CONSIDERED VIEW THAT THE LOSS OF RS.96,67,87 2/- INCURRED BY D&H SECHRON ELECTRODES PVT. LTD APPEAL NO MA 08/IND/2018 ARISING OUT OF ITA NO.62/ IND/2015 21 THE ASSESSEE ON ACCOUNT OF FUTURE AND OPTION TRANSA CTIONS ENTERED DURING THE YEAR CANNOT BE TERMED AS SPECULATION LOS S IN VIEW OF THE EXPLANATION TO SECTION 73 OF THE ACT AND FURTHER WE ALSO HOLD THAT IMPUGNED LOSS CANNOT BE TERMED AS LOSS FROM PURCHAS E AND SALE OF SHARES AS PROVIDED IN EXPLANATION TO SECTION 73 OF THE ACT. WE FURTHER HELD THAT THE IMPUGNED LOSS OF RS.96,67,872 /- FALLS UNDER THE PROVISO (D) TO SECTION 43(5) OF THE ACT AND THE REFORE CANNOT BE TREATED AS SPECULATIVE LOSS AND AS SUCH THE ASSESSE E IS ELIGIBLE TO SET OFF THE IMPUGNED LOSS FROM FUTURE AND OPTION TR ANSACTIONS AGAINST OTHER BUSINESS INCOME EARNED BY THE ASSESSE E DURING THE YEAR. IN THE RESULT GROUND NO.1 RAISED BY THE ASSE SSEE IN I.T.A. NO. I.T.A/62/2015 IS ALLOWED. 10. IN THE RESULT THE MISCELLANEOUS APPLICATION OF THE ASSESSEE IS ALLOWED. THE ORDER PRONOUNCED IN THE OPEN COURT ON 21.8.2 018. SD/- SD/- ( KUL BHARAT) (MANISH BORAD) JUDICIAL MEMBER ACCOUNTANT MEMBER / DATED : 21 ST AUGUST, 2018 /DEV D&H SECHRON ELECTRODES PVT. LTD APPEAL NO MA 08/IND/2018 ARISING OUT OF ITA NO.62/ IND/2015 22 COPY TO: THE APPELLANT/RESPONDENT/CIT CONCERNED/CIT (A) CONCERNED/ DR, ITAT, INDORE/GUARD FILE. BY ORDER PRIVATE SECRETARY/DDO, INDORE