DCIT, CIRCLE 1(1)(1), AHMEDABAD, AHMEDABAD vs. CITYGOLD ENTERTAINMENT LIMITED, AHMEDABAD

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ITA 786/AHD/2026Status: DisposedITAT Ahmedabad16 October 2026AY 2015-165 pages

In favour of the assessee: the Revenue's appeal was dismissed. From the AI summary of this appeal.

AI SummaryDismissed

What did the Tribunal hold?

The Tribunal upheld the order of the CIT(A), dismissing the Revenue's appeal. The Tribunal found that the CIT(A) had correctly applied Section 43(5) of the Income Tax Act, 1961, CBDT Circular No. 03/2010, and various judicial precedents. The reasoning was that transactions in derivatives conducted through a recognized stock broker on a recognized stock exchange, and supported by documents, do not fall within the ambit of 'speculative transactions' as defined under Section 43(5). The CIT(A)'s finding that foreign currency does not fall within the definition of 'commodity' for the purpose of speculative transactions was also affirmed. The CBDT circular further clarified that such derivative transactions are non-speculative if they arise on actual settlement and meet the conditions under Section 43(5)(d). Consequently, the loss of Rs. 3,32,22,796 was held to be a business loss and allowable. The Revenue's appeal was dismissed. The assessee's cross-objection regarding the validity of reopening was not adjudicated on merits and was treated as dismissed, with liberty to the assessee to raise it elsewhere.

What were the facts?

The Revenue filed an appeal against the order of the Commissioner of Income Tax (Appeals) (NFAC), Delhi, dated January 13, 2026, concerning Assessment Year 2015-16. The appeal challenged the CIT(A)'s decision to treat a loss incurred by the assessee, Citygold Entertainment Limited, on foreign exchange derivative transactions as a business loss rather than a speculative loss. The CIT(A) had relied on Section 43(5) of the Income Tax Act, 1961, CBDT Circular No. 03/2010, and various ITAT decisions. The Assessing Officer had disallowed a loss of Rs. 3,32,22,796. The assessee also filed cross-objections regarding the validity of the assessment reopening.

What were the issues?

1. Whether the loss incurred by the assessee on foreign exchange derivative transactions is to be treated as a business loss or a speculative loss, in light of Section 43(5) of the Income Tax Act, 1961? Assessee's Contentions (as reflected in CIT(A)'s order and Tribunal's acceptance): - Transactions in derivatives on notified recognized stock exchanges are not speculative transactions as per Section 43(5)(d) and (e) of the Act. - Foreign exchange cover is not a contract for the purchase of a share or stock, nor does it fall within the purview of 'commodity', thus not satisfying the characteristics of a speculative transaction. - Indian ITAT Benches have consistently held that foreign currency does not fall within the purview of 'commodity' as defined in Section 43(5). - CBDT Circular No. 03/2010 clarifies that derivative transactions on recognized exchanges are not speculative, provided conditions under Section 43(5)(d) are fulfilled and the loss arises on actual settlement, not a notional or marked-to-market entry. - The resultant loss is a business loss and allowable. - Relied on various ITAT decisions including IVF Advisors P. Ltd. vs. ACIT, DCIT v. Dsons Projects Ltd., Nand Nandan Agarwal v. DCIT, and Adani Enterprises Ltd. v. ACIT. Revenue's Contentions: - The Revenue's Senior Departmental Representative could not point out any distinguishing facts or case laws to justify interference with the CIT(A)'s order.

Which sections of the Income-tax Act were involved?

Section 43(5),Section 250

AI-generated summary — verify with the full judgment below

Income Tax Appellate Tribunal, “C” BENCH, AHMEDABAD

Before: SHRI SANJAY GARG & SHRI NARENDRA PRASAD SINHA

For Appellant: Shri Parimalsinh B Parmar, AR
For Respondent: Shri Arvind Kumar Namdeo, Sr. D.R
Hearing: 30/07/2026

IN THE INCOME TAX APPELLATE TRIBUNAL “C” BENCH, AHMEDABAD BEFORE: SHRI SANJAY GARG, JUDICIAL MEMBER AND SHRI NARENDRA PRASAD SINHA, ACCOUNTANT MEMBER आयकर अपील सं./I.T.A. No. 786/Ahd/2026 A/w. CROSS OBJECTION No.35/Ahd/2026 (िनधा�रण वष� / Assessment Year : 2015-16) बनाम DCIT Citygold Entertainment / Circle 1(1)(1), Limited Vs. Ahmedabad 2nd Floor, Sarthak Annexe, Nr. Fun Republic, Satellite, Ahmedabad, Gujarat – 380015 & Citygold Entertainment DCIT Limited Circle 1(1)(1), Ahmedabad 2nd Floor, Sarthak Annexe, Nr. Fun Republic, Satellite, Ahmedabad, Gujarat - 380015 �थायी लेखा सं./जीआइआर सं./PAN/GIR No. : AACCC6278R (Appellant / Cross Objector) .. (Respondent) Assessee by : Shri Parimalsinh B Parmar, AR Revenue by : Shri Arvind Kumar Namdeo, Sr. D.R. Date of Hearing 30/07/2026 16/10/2026 Date of Pronouncement (आदेश)/ORDER Per Sanjay Garg, Judicial Member: The captioned appeal by the Revenue and corresponding cross objections by the assessee have been preferred against

ITA No.786/Ahd/2026 A/w. CO No.35/Ahd/2026 [Citygold Entertainment Limited] A.Y. 2015-16 - 2 – the order of the Ld. Commissioner of Income Tax (Appeals), National Faceless Appeal Centre (hereinafter referred to as “NFAC”), Delhi (hereinafter referred to as “CIT(A)”), dated 13.01.2026 passed under Section 250 of the Income Tax Act, 1961 (hereinafter referred to as the “Act”) and relates to Assessment Year (A.Y.) 2015-16.

ITA No.786/Ahd/2026 (Revenue’s appeal)

2.

The short issue involved in Revenue’s appeal is as to whether the loss incurred by the assessee on account of transactions in relation to Foreign Exchange Derivative to be treated as business loss or speculative loss.

3.

The Ld. CIT(A), after duly considering the relevant provision of Section 43(5) of the Act and also relying upon the CBDT Circular No.03/2010, dated 23.03.2010 and further relying upon the various decisions of the Co-ordinate Benches of Income Tax Appellate Tribunal, has held that the transactions entered in the derivatives on the notified recognized stock exchanges in view of Section 43(5)(d) and (e) of the Act, are not speculative transactions and fall under the category of normal business activities. The relevant part of the order of the Ld. CIT(A) is reproduced as under:

“5.3 The AO has neither disputed the genuineness of transactions nor produced any evidence to show they were not carried on recognized exchanges. The Assessing Officer has not examined the applicability of provisions of section 43(5)(d) and (e) of the Income Tax Act, 1961. On perusal of the same it is evident that the transactions entered in the

ITA No.786/Ahd/2026 A/w. CO No.35/Ahd/2026 [Citygold Entertainment Limited] A.Y. 2015-16 - 3 – derivatives on the notified recognized stock exchanges are not speculative transactions in accordance with Income Tax Act, 1961 and it falls under the category of normal business activities carried out by the person. Foreign exchange cover was not a contract for the purchase of a share or stock and did not fall within the purview of the term commodity and hence the characteristics of a speculative transaction is not satisfied. Since the definition of speculative transaction itself was not applicable, treating the transaction as speculative in nature was not sustainable in law. 5.4 Indian Income Tax Appellate Tribunals (ITAT) have consistently held that foreign currency does not fall within the purview of the term "commodity as defined in Section 43(5) of the Income Tax Act. 5.5 CBDT circular No.03/2010 dated 23.03.2010 clarifies that derivative transactions on recognized exchanges are not speculative. It states: "...where a loss on a forex-derivative transaction arises on actual settlement/conclusion of contract and is not a notional or marked to market book entry... such transaction shall be considered as non- speculative provided the conditions under section 43(5)(d) are fulfilled." 5.6 Accordingly, in view of the above facts, legal provisions, CBDT circulars, and judicial precedents, it is concluded that where transactions of currency derivatives are conducted by the appellant through a recognised stock broker on a recognised stock exchange and are duly supported by documents. Therefore such transactions do not fall within the ambit of 'speculative transactions' as defined under section 43(5). The resultant loss is a business loss and is allowable under the Act. Therefore, the disallowance of Rs. 3,32,22,796 made by the Assessing Officer is devoid of merit and is directed to be deleted.”

4.

The issue is also squarely covered by the various decisions of the Co-ordinate Benches of the Tribunal. Some of which relied upon by the assessee are as under:

i. IVF Advisors P. Ltd. vs. ACIT - (2015) 55 taxmann.com 469 (Mumbai); ii. DCIT v. Dsons Projects Ltd. - ITA 2016/Ahd/2016; iii. Nand Nandan Agarwal v. DCIT - (2018) 90 taxmann.com 3 (Agra); iv. Adani Enterprises Ltd. v. ACIT - (2015) 55 taxmann.com 375 (Ahd); v. CBDT's Instruction No.03/2010 dated 23.03.2010;

ITA No.786/Ahd/2026 A/w. CO No.35/Ahd/2026 [Citygold Entertainment Limited] A.Y. 2015-16 - 4 – 5. The Ld. DR could not point out any distinguishing fact or case laws before us justifying our interference in the impugned order of the Ld. CIT(A). Therefore, the impugned order of the Ld. CIT(A) is, hereby, upheld and there is no merit in the appeal of the Revenue and the same is, accordingly, dismissed.

6.

In the result, appeal of the Revenue stands dismissed.

CO No.35/Ahd/2026 7. So far as the cross objection filed by the assessee is concerned, the assessee has agitated against the validity of the reopening of the assessment. Since, we have decided the issue on merits, therefore, the legal ground taken by the assessee is not adjudicated at this stage and is kept open with liberty to the assessee to raise the same at the appropriate forum, if need be. With the above observations, the Cross Objection of the assessee is treated as dismissed.

8.

In the combined result, the appeal of the Revenue and corresponding cross objections of the assessee stand dismissed.

This Order is pronounced on 16/10/2026

Sd/- Sd/- (NARENDRA PRASAD SINHA) (SANJAY GARG) ACCOUNTANT MEMBER JUDICIAL MEMBER Ahmedabad; Dated 16/10/2026 S. K. SINHA True Copy आदेश क� �ितिल�प अ�े�षत/Copy of the Order forwarded to : अपीलाथ� / The Appellant 1. ��यथ� / The Respondent. 2.

ITA No.786/Ahd/2026 A/w. CO No.35/Ahd/2026 [Citygold Entertainment Limited] A.Y. 2015-16 - 5 – संबंिधत आयकर आयु� / Concerned CIT 3. 4. आयकर आयु�(अपील) / The CIT(A)- �वभागीय �ितिनिध, आयकर अपीलीय अिधकरण, अहमदाबाद / DR, ITAT, Ahmedabad 5. 6. गाड� फाईल / Guard file. आदेशानुसार/ BY ORDER,

उप/सहायक पंजीकार (Dy./Asstt. Registrar) आयकर अपीलीय अिधकरण, अहमदाबाद / ITAT, Ahmedabad

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