DCIT-1(3)(2), MUMBAI vs. M/S WEISSER TRADING COMPANY PVT LTD., MUMBAI

This appeal in A.Y.2012-13 arises out of the order by the ld. Commissioner of Income Tax (Appeals)-3, Mumbai in appeal No.CIT(A)-3/IT-10122/2018-19 dated 30/04/2019 (ld. CIT(A) in short) against the order of assessment passed u/s.143(3) of the Income Tax Act, 1961 (hereinafter referred to as Act) dated 19/01/2015 by the ld. DCIT (1)(3)(2), Mumbai (hereinafter referred to as ld. AO).

Whether on the facts and in the circumstances of the case and in law, the Id. CIT(A) erred in allowing the loss of the assessee as business loss derived by the assessee on currency derivative transaction by relying on the judgement of IVF Advisors (P) Ltd. [39 ITR(Trib.)541], wherein, the facts of the said case, is entirely different than the facts of the case of the assessee.

We have heard rival submissions and perused the materials available on record. We find identical grounds were adjudicated by this Tribunal in assessee’s own case in for A.Y.2013-14 dated 18/01/2018. Both the parties mutually agreed that there is no change in facts and circumstances of the instant case for this assessment year when compared to the facts prevailing in A.Y.2013-14. The facts of the assessment year 2013-14 together with the decision rendered thereon are reproduced hereunder for the sake of convenience:-

I have considered rival contentions and found that the issue under consideration is squarely covered by the decision of the Co-ordinate Bench in case of IVF Advertisers Pvt. Ltd., 39 ITR 541, wherein Tribunal held as under:- “The assesses was an investment management consultant. For the assessment year 2009-10, it claimed loss-on account of foreign currency futures. The Assessing Officer held that the loss could not be allowed in the light of the provisions of section 43(5) of the Income-tax Act, 1961 read with section 2(ac) of the Securities Contracts (Regulation) Act, 1956. The Commissioner (Appeals) confirmed this. On appeal: Held, allowing the appeal, that derivatives include foreign currency. Call options or put options were transactions of derivative markets and could not be termed speculative in nature. Therefore, the loss claimed by the assessee on account of foreign currency futures was allowable."

The question raised in this appeal reads as under:- "On the facts and circumstances of the case, and in law, the learned Commissioner of Income-tax (Appeals) ought to have held that clause (d) of the proviso to section 43(5) of the Income-tax Act, 1961 ('the Act')/ was applicable to the transactions in foreign currency futures entered into by the appellant and therefore that the loss from these transactions was not in the nature of speculation loss."

The Tribunal decided the issue as under:- “considering the relevant provisions of the relevant Acts, discussed here-in-above in the light of the hon'ble Madras High Court and the answers given to frequently asked questions by the Securities and Exchange Board India 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 a 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. 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 hereinabove, we have no hesitation in setting aside the order of the learned Commissioner of Income-tax (Appeals). The appeal filed by the assessee is accordingly allowed.”

As the facts and circumstances during the year are same, respectfully following the order of the Tribunal, this ground of assessee’s appeal is allowed.”

In the result, appeal of the Revenue is dismissed.