ACIT, NEW DELHI vs. M/S. A.R. CHADHA & CO. INDIA PVT. LTD., NEW DELHI

The grounds of appeal are as under:- “1.(i) On the facts and in the circumstances of the case, the Ld.CIT(A) has erred in relying upon the order of his predecessor for Assessment Year 2008-09 which has been set aside by the Hon’ble ITAT vide dated 5/10/2012. (ii) On the facts and in the circumstances of the case, the Ld.CIT(A) has erred in law and on facts in directing the A.O to allow the set off of speculation loss of Rs.1,15,01,196/-.

The assessee is engaged in the business of Dealership for products of JCB India Ltd. (Sales, Services and Spares) and share trading. It has also shown rental income and income from long term capital gain during the year under consideration. The assessee has claimed speculation loss arising from shares under the “Future & Options” of Rs.1,15,01,196/-. This amount had been shown in the profit and loss account of the assessee as an expenditure. The Assessing Officer observed that Section 73(1) of the Act stated that “Any loss computed in respect of speculation business carried on by the assessee, shall not be set of except against profits and gains, if any of another speculation business.” The Assessing Officer further observed that as per this provision the speculative loss of the assessee is disallowed from the business loss. The Assessing Officer observed that speculative loss shall have to be treated separately and shall not be allowed to be set off against any other profit or gain of the business and shall be required to be carried forward and set off as per the provisions of Section 73. The AO held that addition on this account has also been made in the previous year relevant to assessment year 2009-10 at Rs.20,46,450/- which was under appeal before the Ld.CIT(A). Accordingly, an addition of Rs.1,15,01,196/- was disallowed being a speculative loss by the Assessing Officer.

Being aggrieved by the Assessment Order, the Assessee filed appeal before the CIT(A), wherein the CIT(A) has followed the earlier Assessment Year 2008-09 order of the CIT(A) dated 26.09.2011 which was in favour of assessee on this issue.

The Ld. DR submitted that the speculative loss has to be treated separately and should not be allowed to be set off against any other profit or gain of the business and is required to be carried forward and set off as per the provisions of Section 73 and thus the Assessing Officer rightly disallowed speculative loss of the assessee from business income.

The Ld. AR submitted that the order of the CIT(A) in Assessment Year 2008-09 was further appealed by the Revenue before the ITAT. The ITAT remanded back the said issue to the file of the Assessing Officer.

We have heard both the parties and perused the records. The issue which is contested herein is identical issue arising in A.Y. 2008-09. The ITAT in order dated 05.10.2012 (AY 2008-09) held in para 13.1 that “….The case of assessee before us relates to AY 2008-09 and therefore, applicability of aforesaid cl. (d) of s. 43(5) of the Act is required to be examined. Since neither the AO nor the ld. CIT(A) examined the applicability of said clause (d) nor relevant facts and figures are before us, we consider it fair and appropriate to set aside the order of the ld. CIT(A) and restore the matter to the file of the AO for deciding the aforesaid issue raised in ground no. 3 in the appeal before us, afresh in accordance with law, after allowing sufficient opportunity to the assessee. Needless to say that while redeciding the issue the AO shall pass a speaking order, bringing out clearly as to the nature of derivatives and as to whether or not the transactions in the said derivatives were speculative in nature or were eligible transactions within the meaning of clause (d) of the proviso to the section 43(5) of the Act. With these observations, ground no. 3 in the appeal is disposed off.”

In result, the appeal of the Revenue is partly allowed for statistical purpose.