SMT. PRABHA SUKHANI,NEW DELHI vs. ITO, 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.”

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.

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.