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Income Tax Appellate Tribunal, “C” BENCH, AHMEDABAD
Before: SHRI PRADIP KUMAR KEDIA & SHRI MAHAVIR PRASAD, JUDICIAL MEMEBR
आदेश/O R D E R
PER PRADIP KUMAR KEDIA - AM:
The captioned appeal has been filed at the instance of the Revenue against the order of the CIT(A)-1, Ahmedabad (‘CIT(A)’ in short), dated 23.05.2016 arising in the assessment order dated 30.01.2015 passed by the Assessing Officer (AO) under s. 143(3) of
ITA No. 2016/Ahd/16 [DCIT vs. Dsons Projects Pvt. Ltd.] A.Y. 2012-13 - 2 -
the Income Tax Act, 1961 (the Act) concerning assessment year 2012- 13.
The grounds of appeal raised by the Revenue reads as under:-
“That the ld. CIT(A) erred in law and on facts in deleting the addition of Rs.74,18,448/- made on account of disallowance of speculation loss.”
Briefly stated, the assessee, a domestic company, is engaged in the business of trading in commodities like gold, silver, bullion etc. and shares as well as carried out derivative transactions at commodity exchanges. The return filed by the assessee concerning AY 2012-13 was subjected to scrutiny assessment. The AO inter alia observed that the assessee has claimed losses of Rs.74,18,448/- against the transactions in currency derivatives carried out with MCFX. The AO accordingly invoked the provisions of Section 43(5) of the Act and made a bizarre observation that transactions of trading in commodity derivative has not been carried on delivery basis but settled otherwise than delivery and consequently the loss arising therefrom is speculative in nature.
In the first appeal, the CIT(A) revisited the factual aspects as well as the legal position in this regard and found that the case of the assessee is squarely covered by the exceptions provided as per Clause (d) to Section 43(5) of the Act. The relevant operative part of the order of the CIT(A) reads as under:
“5.5 I have gone through the facts of the case, findings of A.O. in assessment order, submissions of the appellant and provisions of section 43(5) of the Act. The A.O. as per provisions of sub-section (5) of section 43 of the Act treated transaction in which contract for
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purchase or sale of any commodities including stock and shares is periodically and ultimately settled otherwise than actual delivery as speculative transactions, whereas, the A.R. of the appellant stated that as per provisions of section 43(5)(d), any eligible transaction carried out on recognized stock exchange in derivatives shall not be deemed to be speculative transaction. The A.R. of the appellant further stated that NSE and MCX are recognized for derivative transactions on 25.01.2006 and 25.05.2009 respectively. Therefore, transactions in currency derivatives on future basis in the year under consideration are in the nature of business transactions and not in the nature of speculative transactions. The A.R. of the appellant also relied upon following judgments of Jurisdictional Tribunal, other Tribunals and Courts, where it is held that the derivatives include foreign currency and call option/put option are transactions of derivative markets cannot be termed as speculative in nature, as held by Mumbai Tribunal in the case of IVF Advisors Pvt. vs. ACIT (supra). Going through the provisions of the Act u/s. 43(5)(d) and decisions of the Tribunals and Courts, the currency derivative transactions in recognized stock exchanges are treated as business transactions and losses from such transactions is business loss and not speculative loss as treated by A.O. Accordingly, the A.O. is directed to consider losses from currency derivatives in the NSE and MCX, recognized stock exchanges as business loss. The disallowance of losses in NSE is already considered as allowable in ground decided above and the disallowance of losses in MCX of Rs. 74,18,448/- is deleted. This ground of appeal is allowed.”
We have heard rival submissions on the issue and also perused the orders of the AO and CIT(A). We find lack of merit in the appeal of the Revenue at the first instance. The CIT(A) rightly held that the assessee executed currency transactions in derivative segment on the platform of recognized stock exchange which is in the realm of ‘eligible transaction’ and covered by the exceptions provided to
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Section 43(5)(d) of the Act. In view of the provisions of Section 43(5)(d) of the Act read with Section 2 of Securities Contracts (Regulation) Act, 1956, such derivative transactions of the nature of currency futures are to be excluded from the ambit of the speculative transactions. Consequently, the loss arising from exchange traded currency derivatives has been rightly regarded as normal business loss by the CIT(A). We do not find any infirmity in the order of the CIT(A).
In the result, the appeal of the Revenue is dismissed.
This Order pronounced in Open Court on 04/09/2018
Sd/- Sd/- (MAHAVIR PRASAD) (PRADIP KUMAR KEDIA) JUDICIAL MEMBER ACCOUNTANT MEMBER Ahmedabad: Dated 04/09/2018 True Copy S. K. SINHA आदेश क� ��त�ल�प अ�े�षत / Copy of Order Forwarded to:- 1. राज�व / Revenue 2. आवेदक / Assessee 3. संबं�धत आयकर आयु�त / Concerned CIT 4. आयकर आयु�त- अपील / CIT (A) 5. �वभागीय ��त�न�ध, आयकर अपील�य अ�धकरण, अहमदाबाद / DR, ITAT, Ahmedabad 6. गाड� फाइल / Guard file. By order/आदेश से,
उप/सहायक पंजीकार आयकर अपील�य अ�धकरण, अहमदाबाद ।