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Income Tax Appellate Tribunal, DELHI BENCH ‘F’, NEW DELHI
ORDER PER C.M.Garg, J.M.
This appeal by the assessee has been filed against the order of the CIT(A)-XXVI, New Delhi dated 24.09.2012 passed in first appeal no. 162/2011-12 for AY 2009-10.
2 Smt. Prabha Sukhani 2. Ground nos. 2 & 3 of the assessee are of general in nature which require no adjudication. Sole remaining ground no. 1 reads as follows : “ That the Authorities below have erred in law in holding that the amendments made in the provisions of section 43(5)(d) and section 73(4) of the Income Tax Act, 1961, by the Finance Act, 2005, is prospective and therefore precludes the assessee from claiming set off of unabsorbed losses suffered in the FAO equity derivative markets, in the Asstt. Years. 2000-01 and 2001-02, against the profits earned in the FAO equity derivative markets in the Asstt. Year 2009- 10 under reference.”
We have heard arguments of both the sides. First of all, the Ld. Assessees’ Representative (AR) pointed out that as per the order of ITAT “G” Bench Mumbai dated 31.5.2011 passed in for AY 2006-07 in the case of Gajendra Kumar T. Agarwal vs. ITO provisions of section 43(5) (d) and section 73 of the Income Tax Act, 1961 are retrospective and the assessee deserves to be granted set off of brought forward losses from the business dealing in derivatives, incurred in assessment years prior to AY 2006-07 against profits of the same business in AY 2006-07 and subsequent years.
The Ld. DR supported the action of the AO as well as CIT(A) which confirmed the assessment order on this issue of set off of brought forward losses. However, he could not controvert the preposition laid down by the ITAT Mumbai in the case of Gajendra Kumar T. Agarwal Vs. ITO (Supra) wherein para 29 & 30 was held thus :
3 Smt. Prabha Sukhani 29. In view of the guidance so given by Their Lordships, we have to proceed on the basis that despite 'inexactitude in the language used', as was the expression approved by Hon'ble Supreme Court, the provisions of carry forward and set off are to be construed in a manner so as not to defeat the plain and unambiguous intention of the legislature. In our considered view, this amendment was to provide relief to the taxpayers and is to be viewed as beneficial provisions, as such, and one cannot possibly proceed on the basis that the object of making amendment in Section 43(5) was to kill the brought forward losses of dealing in derivatives or make them ineligible for being set off against the profits of the same business in subsequent years. Whatever may be characterization of income for the purpose of intra assessment year set off in the relevant assessment year, and irrespective of the fact that such a characterization has achieved finality in assessment, the losses and profits from dealing in derivatives must be characterized on a uniform basis in the assessment year in which set off is claimed. Viewed in this perspective also, the classification of business for the limited purpose of set off of past losses, into speculative and non-speculative, is to be done on a uniform basis, and, whichever way one looks at it, the losses incurred in the same business in earlier assessment years are to be treated as eligible for set off against profits of the same business, subject to fulfilment of other conditions, in the subsequent assessment years. For this reason also, the assessee deserves to be granted set off of brought forward losses from business of dealing in derivatives, incurred in assessment years prior to assessment year 2006-07 against profits of the same business in assessment years 2006-07 and subsequent assessment years.
For the reasons set out above, we are of the considered view that the assessee was indeed eligible for setting of losses of business of dealing in derivatives, incurred in the assessment years prior to the assessment year 2006-07, against the profits of Assessment year: 2006-07 the same 4 Smt. Prabha Sukhani business in assessment year 2006-07. There was no infirmity in the Assessing Officer granting the said set off. The assessment order, subjected to impugned revision proceedings, thus could not be held to be erroneous .and prejudicial to the interest of the revenue. Accordingly, we quash the impugned revision proceedings, and set aside learned Commissioner's order in challenge before us.
In the present case the AO held that the brought forward speculative losses for AY 2001-02 & 2002-03 can be adjusted only agaisnt speculative gains. The AO held that the nature of the speculative losses of earlier years before amendment can not be treated as business losses and set off of same can not be granted for AY 2009- 10. Further, from relevant operative para 6 at page 6 of first appellate order we observe that the CIT(A) uphold the conclusion of the AO by observing that the amendment in section 43(5) by Finance Act, 2005, w.e.f. 1.4.2006, prospectively mandates that the transactions in derivatives were no longer treated as “ speculative transactions” and treated as “ Eligible Transactions” the resultant profits or loss is constituted as “ Business Loss/ Profit”. She further noted that the amendment made is prospective, with effect from AY 2006-07 and the assessee has nto shown any gains from the speculation business and only business gains has been shown, hence AO was right in disallowing the set off of speculative losses for AY 2001-02 & 2002- 03.
5 Smt. Prabha Sukhani 11. At the same time, from the preposition laid down by the ITAT Mumbai in the case of Gajendra Kumar T. Agarwal vs. ITO (Supra) we clearly observe that one can not possibily proceed on the basis that the object of making amendment in section 43(5) was to kill the brought forward losses of dealing in derivatives or make them in eligible for being set off against the profits of the same business in subsequent years. In this case the assessee claimed set off of losses of AY 2001-02 incured by him in derivatives transactions which was denied by the AO on the same ground which has been taken by the authorities below in the present case. But as per preposition laid down by the Tribunal order (supra) the assessee deserves to be granted set off of brought forward losses from business dealing in derivatives, incurred in the assessment years prior to AY 2006-07 against profit of the same business in AY 2006-07 and subsequent assessment years.
On specific querry from the bench, the Ld. DR could not show us legal preposition on order of any competent authorities which could lead us to agree with the conclusion of the CIT(A) on the issue. Thus, since in the present case also the assessee sought set off of brought forward losses from derivative transactions of AY 2001-02 & 2002-03 in AY 2009-10, which was denied by the AO, we respectfully follow the order of ITAT, Mumbai (supra) and consequently, sole ground of the assessee is allowed and the AO is directed to grant set off losses for AY 2001-02 & 2002-03 from derivative business from the business 6 Smt. Prabha Sukhani profits / gains of AY 2009-10 to the assessee. Accordingly, sole ground of the assessee is allowed.
In the result, appeal of the assessee is allowed. Order Pronounced in the Court on 01/07/2016.