M/S. LUCAS ESTATES PVT. LTD.,KOLKATA vs. ITO, WARD-6(2), KOLKATA, KOLKATA

This appeal by the Assessee arises out of the order of the Learned Commissioner of Income Tax(Appeals)-2, Kolkata [in short the ld CIT(A)] in Appeal No.899/CIT(A)-2/14-15 dated 26.03.2013 against the order passed by the ITO, Ward-6(2), Kolkata [ in short the ld AO] under section 143(3) of the Income Tax Act, 1961 (in short “the Act”) dated 04.03.2013 for the Assessment Year 2010-11.

Ground nos. 1,5 and 6 raised by the assessee are general in nature and do not require any specific adjudication.

The only issue to adjudicated in this appeal is as to whether the Ld. CIT(A) was justified in not admitting the additional ground for treatment of loss of Rs. 10.67 lacs as the currency loss, in the facts and circumstances of the case.

The brief facts of this issue is that the assessee is a private limited company and had filed its return of income for the assessment year 2010-11 on 15.09.2010 declaring total income of Rs. NIL. The assessee is a non-banking finance company. The assessee is also engaged in the business of trading of shares. The Ld. AO observed that the assessee had claimed a loss of Rs. 36,26,239/- on account of derivative transactions and had included the same under the head ‘purchase of shares’ in Schedule 11 to the profit and loss account. The Ld. AO observed that the said derivative loss of Rs. 36,26,239/- included a loss of Rs. 10,67, 396/- incurred by the assessee out of currency trading through MCX Stock Exchange. This loss of Rs. 10,67,396/- was treated by the Ld. AO as speculation loss and accordingly, did not allow the same to be set off against business profit declared by the assessee.

The assessee did not raise any ground of appeal with regard to this issue in the original grounds of appeal before the Ld. CIT(A). At the time of hearing before the ld CITA, the assessee raised an additional ground disputing the treatment of derivative loss of Rs. 10,67,397/- as speculation loss by the ld. AO. The Ld. 2

We have heard the rival submissions. At the outset, we find that the issue of incurrence of derivative loss of Rs. 10.67 lacs had not been adjudicated on merits. The additional ground raised by the assessee before the Ld. CIT(A) had not been admitted at all on the ground that the issue requires verification of fresh facts. But we find that the Ld. AO had already observed on verification of the contract notes filed by the assessee in this regard, which is clearly mentioned in the assessment order, had treated the loss incurred on currency transaction as speculation loss. Hence, we are convinced that there is no requirement of verification of fresh facts as stated by the Ld. CIT(A). Accordingly, we are not in agreement with the action of the Ld. CIT(A) in this regard. However, we find that the Ld. AO had not given any finding in his assessment order after the perusal of the contract notes, as to whether: i) The said loss has been incurred on account of currency transaction; ii) Whether the said transaction was carried out through recognized MCX Stock Exchange; iii) Whether the assessee had taken delivery of the subject mentioned transaction while making purchase thereon; 3

We had already stated hereinabove that the ld. AO had not given a categorical finding with respect to aforesaid three aspects stated hereinabove so as to decide whether the subject mentioned transaction is a speculative transaction or a regular business transaction. Hence, we deem it fit and appropriate, in the interest of justice and fair play, to direct the ld. AO to give a clear finding as to whether the subject mentioned loss on account of derivative had occurred on account of currency transaction or not. We further direct that if the said loss was incurred on account of currency transaction and where delivery had been taken by the assessee and where the said transaction has been carried out through MCX Stock Exchange, then the same should be treated only as a regular trading loss incurred by the assessee and not as speculation loss, by placing reliance on CBDT 4

In the result, the appeal of the assessee is partly allowed for statistical purposes subject to directions given hereinabove.