RIDHI VINCOM PVT. LTD.,KOLKATA vs. I.T.O., WARD - 4(1),, KOLKATA

The issue raised in ground no.1 is against the order of learned CIT (A) in confirming the disallowance of ₹93,38,052/- as made by the learned AO in respect of future trading transactions treating the same as speculative loss and the ground no.2 and 3 are without prejudice ground.

In the appellate proceedings, the learned CIT (A) dismissed the appeal of the assessee on the ground that the loss of ₹92,38,052/- was a speculative loss.

After hearing the rival contentions and perusing the materials available on record, we find that assessee has incurred loss from its business activity of derivative trading and commodity from foreign exchange. Now the issue before us is whether the said loss is a speculative loss or is covered under the exceptions as envisaged and provided u/s 43(5)(d) of the Act. The learned CIT (A) while dismissing the appeal of the assessee in Para no.5.6 of the appellate order noted that assessee has not submitted documentary evidences in support of his claim and accordingly, he upheld the decision of the learned AO that business activity of the trading in commodity on foreign exchange for A.Y. 2013-14 (pre amendment) will be treated as speculative loss. We find that the said observation of the learned CIT (A) is “5. We have carefully considered the rival submissions and perused the assessment order as well as the order of the CIT(A) together with case laws cited and other documents referred to an relied upon as per Rule 18(6) of the Income Tax [Appellate Tribunal] Rules, 1963. 5.1 The solitary issue confronted in the present appeal is on treatment of loss arising from derivative transactions in currency segment in the matter of set off and carry forward. It is the case of the assessee that it has entered into derivatives transactions in “7.4 Considering the relevant provisions of the relevant Acts, discussed herein above in the light of Hon’ble Madras High Court and the answers given to frequently asked questions by the SEBI and the incorporation of exchange traded currency derivative from August, 2008, there remain no iota of doubt that the transaction of the assessee cannot be treated as speculative transaction. We have also gone through the copies of the contract notes incorporated in the paper book filed before us. A perusal of the contract note shows that the assessee has either entered into call option or put option and on the settlement day the transaction has been settled by delivery, either the assessee has paid US dollar on the settlement day or has taken delivery of US dollar. 7.5 To sum up, the derivatives include foreign currency and call option/ put option, are transactions of derivative markets and cannot be termed as speculative in nature. Considering the totality of the facts and in the light of the judicial discussion herein above, we have no hesitation in setting aside the order of Ld. CIT(A). Appeal filed by the assessee is accordingly allowed.”

Therefore, considering the facts of the assessee’s case in the light of aforesaid decisions, we are of the view that loss incurred by the assessee in trading in commodity on foreign currency is not speculative loss. Accordingly, we allow the ground no.1 by setting aside the order of the learned CIT (A).

In the result, the appeal of the assessee is allowed.