ITO, WD-30(1), KOLKATA, KOLKATA vs. SHRI DINKAR MAHESWARI, KOLKATA

On a perusal of the grounds of appeal of the revenue, we note that the sole issue is against the action of the Ld. CIT(A), who have treated the derivative loss of Rs.74,32,789/- as business loss instead of speculation loss, which according to revenue was done in violation of Rule 46A of the I. T. Rules, 1962 by accepting fresh evidence without giving an opportunity to the AO. We also note that the assessee has filed the Cross Objection in support of the order of Ld. CIT(A).

We have heard Ld. AR and carefully perused the material available on record. We find that the AO treated the loss incurred on derivative trading of Rs.75,32,789/- as speculation loss which was claimed by the assessee as normal business loss. On appeal, the Ld. CIT(A) held that the action of the AO in the treatment of loss incurred by the assessee on derivative trading as speculation loss is erroneous and misconceived and not based on actual facts and circumstances of the instant case. The Ld. CIT(A) has taken note of the fact that the AO has not taken note of the relevant provision of law while denying the claim of the assessee as loss (business loss) because the AO overlooked the insertion of proviso (d) to sub-section (5) of Sec. 43 which was inserted by the Finance Act, 2005, which provides that “an eligible transaction i.r.o trading in derivatives referred to in clause (ac) of Sec. 2 of the Securities Contracts (Regulation) Act, 1956 (42 of 1996) carried out in a recognized stock exchange shall not be deemed to be a speculative transaction”. Hence, the Ld. CIT(A) taking note of the fact that the derivative trading was done by the assessee on the National Stock Exchange which is a recognized Stock Exchange directed the AO to treat the loss of Rs.75,32,789/- from trading in derivatives as normal business loss of the assessee and allowed the same to be carried forward as a business loss. Aggrieved by the said action of Ld. CIT(A), the revenue is before us. We find that the Ld. CIT(A) has allowed the claim of the assessee by taking note of proviso (d) to sub-section (5) of section 43 of the Finance Act, 2005 (supra). The Ld. CIT(A) has rightly allowed the claim of assessee by taking due note of the provisions of the Act cited supra and the facts stated above, therefore we find no infirmity in his order and the same is hereby upheld. Therefore, the appeal of revenue is dismissed. The Cross Objection filed by the assessee is in support of the order of Ld. CIT(A), therefore, the same is also dismissed being infructuous.

In the result, both the appeal of revenue and the Cross Objection of assessee are dismissed.