SATISCHANDRA DOSHI, V. JTCIT 21(3),

MA 457/MUM/2012

• Counselvise Citation: [2012] 123 COUNSELVISE.COM (IT) 9469 (ITAT-MUMBAI)
• Duration Of Justice: 4 month(s) 19 day(s)
• Appeal Type: Miscellaneous Application
• Pronouncement Date: 30-11-2012
• Appeal Filed By: Assessee
• Order Result: Allowed
• Bench Allotted: H
• Assessment Year: 2006-2007
• Appeal Filed On: 11-07-2012
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Keywords: Business income; Speculation loss; Speculative transactions
• Section: 43(5)

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL MUMBAI H BENCH MUMBAI BENCHES, MUMBAI BEFORE SHRI VIJAY PAL RAO, JM & SHRI RAJENDRA, AM MISCELLANEOUS APPLICATION NO. 457/MUM/2012 ARISING OUT OF ITA NO. 6604/MUM/2009 (ASST YEAR2006-07 ) MR SATISHCHANDRA S DOSHI ETEMIA A/1602 HIRANANDANI GARDEN MAIN STREET, POWAI MUMBAI 76 VS THE JT COMMR OF INCOME TAX 21(3), MUMBAI (APPLICANT (RESPONDENT) PAN NO AACPD8612R AACPD8612R AACPD8612R AACPD8612R ASSESSEE BY SH TEJ SHAH REVENUE BY SH DINESH KUMAR DT.OF HEARING 23 RD NOV 2012 DT OF PRONOUNCEMENT 30 TH NOV 2012 ORDEER PER VIJAY PAL RAO, JM THIS MISCELLANEOUS APPLICATION BY THE ASSESSEE IS DIRECTED AGAINST THE ORDER DATED 30.3.2012 OF THIS TRIBUNAL WHEREIN THE APPEA L OF THE ASSESSEE IN ITA NO. 6604/MUM/2009 FOR THE ASSESSMENT YEAR 2006-07 ALONG WITH OTHER APPEALS OF THE ASSESSEE AND REVENUE WERE DISPOSED OFF. 2 THE ASSESSEE HAS POINTED OUT IN THE MISCELLANEOUS APPLICATION THAT WHILE DISPOSING THE APPEAL OF THE ASSESSEE FOR THE ASSESS MENT YEAR 2006-07, THE TRIBUNAL HAS NOT ADJUDICATED THE GROUND NO.2 AS PER THE REVI SED GROUNDS OF APPEAL FILED BY THE ASSESSEE. 3 WE HAVE HEARD THE LD AR OF THE ASSESSEE AS WELL A S THE LD DR AND CONSIDERED THE RELEVANT MATERIAL ON RECORD. THE ASSESSEE HAD RAISED THE FOLLOWING REVISED GROUND IN THE APPEAL IN ITA NO.6604/MUM/2009. MA 457/M/2012 MR SATISHCHANDRA S DOSHI . 2 1 THE LD COMMISSIONER OF INCOME TAX(APPEALS) HAS ERRE D IN LAW AND IN FACTS IN TREATING SHORT TERM CAPITAL GAIN ARISING OUT OF TRANSITIONS UNDERTAKEN WITHIN A PERIOD OF 30 DAYS AS BUSINESS INCOME INSTE AD OF SHORT TERM CAPITAL GAIN. 2 THE LD IT(A) FAILED TO CONSIDER GROUND NO.7 BEFORE H IM IN RELATION TO TREATMENT OF LOSS IN DERIVATIVE TRANSACTION PRIOR TO 26.1.2006 S SPECULATION LOSS AND IN NOT ALLOWING SET OFF OF SUCH LOSS AGAINST PR OFITS IN DERIVATIVE TRANSACTIONS AFTER 25.1.2006. 3.1 IT IS APPARENT AND MANIFEST FROM THE IMPUGNED O RDER DATED 30.3.2012 THAT THIS GROUND NO.2 OF THE ASSESSEES APPEAL HAS NOT B EEN ADJUDICATED AND ACCORDINGLY THERE IS AN APPARENT MISTAKE ON THE FAC E OF THE RECORD, WHICH IS REQUIRED TO BE RECTIFIED U/S 254(2) OF THE I T ACT. 4 THE LD AR HAS POINTED OUT THAT THIS ISSUE IS COVE RED BY THE ORDER OF THE TRIBUNAL DATED 15.6.2011 IN THE CASE OF SHRI HITESH SATISHCH ANDRA DOSHI IN ITA NO. 6497/MUM/2009 AND THEREFORE, THIS ISSUE HAS TO BE D ECIDED IN FAVOUR OF THE ASSESSEE BY FOLLOWING THE EARLIER ORDER OF THIS TRIBUNAL. 4.1 ON THE OTHER HAND, THE LD DR HAS RELIED UPON TH E ORDER OF THE ASSESSING OFFICER. 5 WE HAVE CONSIDERED THE RIVAL SUBMISSIONS AS WELL AS THE RELEVANT MATERIAL ON RECORD. THOUGH, THIS ISSUE HAS NOT BEEN ADJUDICATE D BY THE COMMISSIONER OF INCOME TAX (APPEALS) AS INDICATED IN THE GROUND NO.2 RAISE D BY THE ASSESSEE; HOWEVER, THE ISSUE HAS BEEN CONSIDERED AND DECIDED BY THE COORDI NATE BENCH OF THE TRIBUNAL IN THE CASE OF SHRI HITESH SATISHCHANDRA DOSHI AND ONE OF US, THE JUDICIAL MEMBER, IS THE AUTHOR OF THE SAID ORDER. FURTHER, THE DISPUTE IS ONLY WITH REGARD TO THE APPLICABILITY OF THE AMENDMENT IN SECTION 43(5)(D) AND NOTIFICATION ISSUED BY THE CBDT ; THEREFORE, WE PROPOSE TO ADJUDICATE THIS ISS UE INSTEAD OF REMANDING THE SAME TO THE COMMISSIONER OF INCOME TAX(APPEALS). THE CO ORDINATE BENCH OF THIS TRIBUNAL MA 457/M/2012 MR SATISHCHANDRA S DOSHI . 3 HAS ADJUDICATED THIS ISSUE IN PARAS 19 & 20 OF ORDE R DATED 15.6.2011 IN THE CASE OF SHRI HITESH SATISHCHANDA DOSHI AS UNDER: 19 WE HAVE CONSIDERED THE RIVAL CONTENTIONS AND RELE VANT MATERIAL AVAILABLE ON RECORD. THE ASSESSING OFFICER HELD THAT THE DERIVATIVE TRANSACTION PRIOR TO 25.1.2006 ARE SPECULATIVE IN NATURE AND FROM 25.1.2006 TO 31.3.2006 ARE AS BUSINESS INCOME. THE ASSESSING OFFICERS VIEW IS BASED ON THE NOTIFICATION ISSUED BY THE CBDT ON RECOGNIZING STOC K EXCHANGE W.E.F 25.1.2006 FOR CARRYOUT THE DERIVATIVE TRADING AS PER THE PROVISION S OF SEC. 43(5)(D). THE CIT(A) UPHELD THE ACTION OF THE ASSESSING OFFICER BY TREATING THE DERIVATIVE TRANSACTION AS SPECULATIVE IN NATURE UP TO 25.1.2006 AND THEREAFTER, AS BUSINESS INCOME. 20 AS POINTED OUT BY THE LD AR, WE FIND THIS ISSUE HAS BEEN CONSIDERED AND DECIDED BY THE TRIBUNAL IN THE CASE OF PREM ASSO CIATES ADVERTISING & MARKETING (SUPRA) WHEREIN IT HAS BEEN HELD AS UNDER: 7. WE FIND THAT I T IS UNDISPUTED POSITION THAT THE STOCK EXCHANGES, ON WHICH THE IMPUGNED TRANSACTIONS WERE CARRIED OUT , WE RE DULY NOTIFIED ON 25TH JANUARY 2006, AND THAT IN ACCORDANCE WITH TH E VIEWS OF THE CO-ORDINATE BENCH IN THE CASE OF ANAND BUILDWEL L ( SUPRA), AS ALSO WITH THE VIEWS OF HONBLE GUJARAT HIGH COURT IN THE CASE O F CLARIS LIFE SCIENCES (SUPRA), ONCE THE APPROVAL IS GRANTED IN THE RELEVANT PREVIOUS YEAR, AND IN THE ABSENCE OF ANYTHING INDICATED TO T HE CONTRARY, THE APPROVAL HAS TO BE TAKEN AS EFFECTIVE FROM THE BEGIN NING OF THE RELEVANT YEAR. THE ISSUE IS THUS COVERED, IN FAVOUR OF THE LINE OF REASONING ADOPTED BY THE ASSESSEE, BY DECISION OF TH E COORDINATE BENCH IN THE CASE OF ANAND BROTHERS (SUPRA) AND BY H ONBLE GUJARAT HIGH COURT S JUDGMENT IN THE CASE OF CLARIS LIFE SCIENCES (SUPRA). RESPECTFULLY FOLLOWING THESE DECISIONS, WE UPHOLD T HE GRIEVANCE OF THE ASSESSEE AND HOLD THAT THE DERIVATE TRANSACTIONS, ENT ERED INTO BY THE ASSESSEE AT THE RECOGNIZED STOCK EXCHANGES EVEN PRI OR TO THE DATE OF NOTIFICATION IN THE RELEVANT PREVIOUS YEAR, ARE TO B E TREATED AS COVERED BY THE EXCLUSION CLAUSE SET OUT IN SECTION 43(5)(D) . THE ASSESSEE GETS THE RELIEF ACCORDINGLY. 20.1 FURTHER, THE TRIBUNAL IN THE CASE OF NIPRA FINA NCIAL SERVICES P LTD (SUPRA AGAIN HAD AN OCCASION TO CONSIDER AND ADJUDICATE THE SAME ISSUE IN PARAS 8 & 9, WHICH ARE AS UNDER: 8. IN THE CASE OF G.K. ANAND BROS. BUILDWELL (P.) LTD VS. I.T.O. [2009] 34 SOT 439 (DELHI) IT HAS BEEN HELD AS FOLLOWS FOR THE ASSESSMENT YEAR 2006-07 WITH RESPECT TO SPECULATIVE TRANSACTIONS THE QUESTION WHETHER THE LOSS ARISING IN FUTURE AND OPTION TRANSACTION CARRI ED OUT IN A RECOGNIZED STOCK EXCHANGE IS TO BE TREATED AS A BUSIN ESS LOSS AND NOT AS LOSS IN SPECULATION BUSINESS HAS BEEN AFFIRMATIV E. FURTHER IT HAS BEEN HELD AS FOLLOWS: MA 457/M/2012 MR SATISHCHANDRA S DOSHI . 4 SECTION 43(5) DEFINES SPECULATIVE TRANSACTION WHI CH MEANS A TRANSACTION IN WHICH A CONTRACT FOR THE PURCHASE OR SA LE OF ANY COMMODITY INCLUDING STOCKS AND SHARES IS PERIODICAL OR ULTIMATELY SETTLED OTHERWISE THAN BY THE ACTUAL DELIVERY OR THE TRANSFER OF COMMODITY OR SCRIPS. PROVISO BELOW SECTION 43(5) CAR VES OUT EXCEPTIONS TO SECTION 43(5). AS PER CLAUSE (D) OF T HE SAID PROVISO AN ELIGIBLE TRANSACTION IN RESPECT OF TRADING IN DERIV ATIVES REFERRED TO IN THE SECURITIES CONTRACTS (REGULATION) ACT, 1956 CARRIED OUT IN A RECOGNIZED STOCK EXCHANGE SHALL NOT BE DEEMED TO BE A SPECULATIVE TRANSACTION. CLAUSE (D) IN THE PROVIS O WAS INSERTED BY THE FINANCE ACT, 2005 WITH EFFECT FROM 1-4-2006. TH EREFORE, IF A TRANSACTION FALLS WITHIN CLAUSE (D) OF THE PROVISO, A TRANSACTION IT WILL NOT BE DEEMED TO BE A SPECULATIVE TRANSACTION IN RESP ECT OF TRANSACTION PERTAINING TO ASSESSMENT YEAR 2006-07. U NDER CLAUSE (D) OF THE PROVISO, A TRANSACTION IS NOT A SPECULATI VE TRANSACTION PROVIDED IT IS AN ELIGIBLE TRANSACTION WITHIN THE ME ANING OF CLAUSE (1) OF THE EXPLANATION AND IT IS CARRIED ON AT THE RE COGNIZED STOCK EXCHANGE AS EXPLAINED IN CLAUSE (II) OF THE SAID EX PLANATION BELOW PROVISO TO SECTION 43(5)(D). THE RECOGNIZED STOCK EXCHANGE MEANS A RECOGNIZED STOCK EXCHANGE AS NOTIFIED BY THE CENTRAL GOVERNMENT FOR THIS PURPOSE. THEREFORE, EVEN IF THE N OTIFICATION IS FROM 25.01.2006 AS PER CLAUSE (D) INSERTED, THE SAM E WILL APPLY TO ALL THE TRANSACTION IN RELATION TO THE ASSESSMENT YEAR 20 06-07 AND ONWARDS. CLAUSE (D) DOES NOT MENTION THAT UNLESS T HE RECOGNIZED STOCK EXCHANGE IS NOTIFIED, THE TRANSACTION WILL NO T BE DEEMED TO BE A SPECULATIVE TRANSACTION. THE POWER TO NOTIFY THE STOCK EXCHANGE IS GRANTED UNDER THE STATUE AND, HENCE, ONC E THE RECOGNIZED STOCK EXCHANGE IS NOTIFIED, THE SAME WIL L APPLY IN RESPECT OF ALL ELIGIBLE TRANSACTIONS CARRIED OUT IN RELATION TO THE FINANCIAL YEAR RELEVANT TO THE ASSESSMENT YEAR 2006-0 7 AND ONWARDS. THE NOTIFICATION DATED 25.01.06 IS BY WAY OF A SUBORDINATED LEGISLATION BUT CANNOT OVER RIDE THE PRI NCIPAL LEGISLATION ENACTED BY THE PARLIAMENT. IT ONLY CLARI FIES BUT WILL NOT OVERRIDE UNLESS STATUTORILY SO PRESCRIBED. SINCE THE RE WAS NO DISPUTE TO THE FACT THAT THE TRANSACTIONS, IN THE IN STANT CASE, IN FUTURE AND OPTION SEGMENT WERE THE ELIGIBLE TRANSAC TIONS CARRIED OUT IN A RECOGNIZED STOCK EXCHANGE, LOSS IN SUCH TRA NSACTIONS COULD NOT BE DEEMED TO BE LOSS IN THE SPECULATION BUSINES S. THEREFORE, THE LOSS-IN-QUESTION WAS TO BE TREATED AS A BUSINES S LOSS AND NOT AS LOSS IN SPECULATIVE BUSINESS. (PARA 5) 9. FOLLOWING THE RATIO OF THE DECISION REPORTED IN 34 SOT 439 (DELHI) (SUPRA) WE CONFIRM THE ORDER OF THE CIT(A) IN DELETING THE ADDITION OF RS.22,74,113/- ON ACCOUNT OF SPECULATION LOSS AND E STIMATED EXPENSES INCURRED FOR THE SAME OF RS.15,99,813/-. THEREFORE, RESPECTFULLY FOLLOWING THE EARLIER ORDERS OF THE TRIBUNAL, WE DECIDE THE ISSUE IN FAVOUR OF THE ASSESSEE. MA 457/M/2012 MR SATISHCHANDRA S DOSHI . 5 5.1 FOLLOWING THE EARLIER ORDER OF THIS TRIBUNAL, A ND IN THE ABSENCE OF ANY CONTRARY DECISION BROUGHT BEFORE US, WE DECIDE THIS ISSUE IN FAVOUR OF THE ASSESSEE. ACCORDINGLY, GROUND NO.2 OF THE ASSESSEES APPAL IN ITA NO.6604/MUM/2009 IS STAND ALLOWED. 6 IN THE RESULT, THE MISCELLANEOUS APPLICATION FILE D BY THE ASSESSEE IS ALLOWED. ORDER PRONOUNCED IN THE OPEN COURT ON T HIS 30 TH DAY OF NOV 2012 SD/- SD/- ( RAJENDRA ) ACCOUNTANT MEMBER ( VIJAY PAL RAO ) JUDICIAL MEMBER PLACE: MUMBAI : DATED:30 TH , NOV 2012 RAJ* COPY FORWARDED TO: 1 APPELLANT 2 RESPONDENT 3 CIT 4 CIT(A) 5 DR /TRUE COPY/ BY ORDER DY /AR, ITAT, MUMBAI