LOHIA SECURITIES LTD.,KOLKATA vs. DCIT, CIRCLE-6, KOLKATA, KOLKATA

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ITA 608/KOL/2017Status: DisposedITAT Kolkata13 November 2019AY 2009-103 pages

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

AI SummaryAllowed

What did the Tribunal hold?

The Tribunal, in accordance with the majority view, held that the Explanation to Section 73 does not differentiate between delivery-based and derivative transactions. Aggregation of share trading loss and profit from derivatives should be done before applying Explanation to Section 73.

What were the facts?

The assessee company treated its entire share trading activity, comprising both delivery-based and non-delivery-based transactions, as one composite business. It claimed set off of losses from delivery-based trading against profits from derivative trading.

What were the issues?

Whether loss on delivery-based share transactions is speculation loss under Section 73, and if Explanation to Section 73 is applicable to the facts.

Which sections of the Income-tax Act were involved?

Section 73

AI-generated summary — verify with the full judgment below

Income Tax Appellate Tribunal, “A”, BENCH KOLKATA

Before: SHRI A.T. VARKEY, JM &DR. A.L.SAINI, AM

For Appellant: Shri Dilip Kumar Patni, FCA
For Respondent: Shri Supriyo Pal, JCIT, Sr. DR
Hearing: 22/10/2019Pronounced: 13/11/2019

आदेश / O R D E R

Per Dr. A. L. Saini, AM:

Since there was a difference of opinion between the ld. Members constituting the Division Bench of ITAT, Kolkata with regard to the following questions, the matter was referred to Third Member u/s 255(4) of the I.T. Act for his opinion:

1.

Whether the loss incurred on purchase and sale of shares in respect of delivery based transactions could be construed as speculation loss within the meaning of Explanation to Section 73 of the Act in the facts and circumstances of the case?

2 Lohia Securities Ltd. Assessment Year:2009-10 2. Whether the provisions of Explanation to Section 73 of the Act per se could be made applicable to the facts and circumstances of the instant case?

2.

Hon’ble President, ITAT nominated Shri P. M. Jagtap, Hon’ble Vice President (KZ) as Third Member. The Hon’ble Third Member vide his order dated 01/10/2019 has concurred with the findings of ld. Accountant Member observing the followings:

“17. The legal position that emanates from the judicial pronouncements discussed above thus is that the Explanation to Section 73 does not differentiate between “delivery based transactions” and “derivative transactions in F & O segment” and the same applies to the entire business of purchase and sale of shares, whether such trading is delivery based or non-delivery based, whether there is profit or loss from such business. In the present case, the assessee- company has treated the entire activity of purchase and sale of shares, which comprised of both the delivery based and non-delivery based trading as one composite business and accordingly claimed set off of the loss incurred in delivery based trading against profit derived from derivative trading. If the ratio of the judicial pronouncements discussed above is applied to the facts of the assessee’s case, it follows that the aggregation of the share trading loss and profit form derivatives transaction should be done before application of Explanation to section 73 of the Act and since there was surplus profit on such aggregation, Explanation to section 73 would not be applicable. I, therefore, agree with the view taken by the ld. Accountant Member.

18.

In the light of the above discussion, the matter may now be placed before the regular Bench for an appropriate order in accordance with law.” Therefore, in accordance with the majority view, the appeal of the assessee is allowed.

Order pronounced in the Court on 13.11.2019

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