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Income Tax Appellate Tribunal, ‘A’ BENCH, CHENNAI
Before: SHRI N.R.S. GANESAN & SHRI D.S. SUNDER SINGH
आदेश /O R D E R
PER N.R.S. GANESAN, JUDICIAL MEMBER:
This appeal of the assessee is directed against the order of the Commissioner of Income Tax (Appeals) – 15, Chennai, dated 16.12.2015 and pertains to assessment year 2011-12.
Shri Shiva Srinivas, the Ld. Departmental Representative, submitted that the only issue arises for consideration is with regard to addition of `60,66,466/-. According to the Ld. D.R., the assessee claimed the sum of `60,66,466/- as loss in open market trading.
According to the Ld. D.R., the assessee traded in Multi Commodity Exchange. The assessee claimed that the transaction is only a business transaction. Referring to Section 43(5) of the Income-tax Act, 1961 (in short 'the Act'), the Ld. D.R. submitted that the assessee could not produce necessary material before the Assessing Officer to prove that the transaction was carried out through Multi Commodity Stock Exchange. No proper stamped voucher or contract note was produced before the Assessing Officer. Even assuming for a moment that the transaction was carried out through Multi Commodity Exchange Stock Exchange, the business was carried out by the assessee only for three months, therefore, it has to be considered as speculative business, hence, the same cannot be set off against the other income of the assessee.
The Ld. Departmental Representative further submitted that the assessee’s main business is retail gold jewellery. Therefore, Explanation to Section 73(4) would come into operation. Hence, the transaction of purchase and sale of derivatives has to be construed as speculative transaction. Therefore, the loss suffered by the assessee cannot be set off against the other income of the assessee. Referring to the order of the CIT(Appeals), the Ld. D.R. submitted that the CIT(Appeals) by referring to the Notification dated 22.05.2009, found that the derivative is a financial instrument whose value depends upon the value of other underlying financial instrument which requires no initial net investment or little initial net investment that would be settled at a future date, therefore, Explanation to Section 73(4) of the Act would come into operation.
The CIT(Appeals) has also found that derivatives are not shares, therefore, they are excluded from the ambit of Section 73(4) of the Act. According to the Ld. D.R., the CIT(Appeals) is not correct in allowing the claim of the assessee.
On the contrary, Shri M.P. Senthil Kumar, the Ld.counsel for the assessee, submitted that admittedly, the assessee is engaged in the business of jewellery. The assessee traded in derivatives in the Multi Commodity Stock Exchange. Referring to proviso to Section 43(5) of the Act, the Ld.counsel submitted that when trading was made in derivatives through a recognized Stock Exchange, the same cannot be deemed to be a speculative transaction.
Therefore, according to the Ld. counsel, provisions of Section 73(4) is not applicable at all.
We have considered the rival submissions on either side and perused the relevant material available on record. In this case, the assessee is trading in derivatives in the Multi Commodity Stock Exchange, which was recognized. Therefore, the same cannot be treated as speculative transaction within the meaning of Section 43(5) of the Act. In other words, the transaction made in derivatives through Multi Commodities Stock Exchange was exempted under proviso (d) to Section 43(5) of the Act. Therefore, this Tribunal do not find any reason to interfere with the order of the lower authority and accordingly the same is confirmed.
In the result, the appeal filed by the Revenue is dismissed.