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2011 (1) TMI 152 - ITAT, MUMBAIAddition of income – Assessee has filed return of income offering income from consultancy & brokerage of Rs. 2,48,46,172, short term capital gain of Rs. 89,28,352 and incomes from other sources of Rs. 1,05,849 - The assessee submitted during the assessment proceedings that the income from derivative transaction should be treated as STCG after the insertion of clause (d) of section 43(5) of Income Tax Act from A.Y. 2006-07 - A.O. treated the transactions entered before 24.1.2006 as speculative transactions and profit there on was treated as speculative profits: - Held that: - Since the assessee has not taken delivery, the question of treating the transactions as investment does not arise and these transactions are to be considered under the head 'Profits and Gains of Business'. - Since the assessee has not taken delivery, the question of treating the transactions as investment does not arise and these transactions are to be considered under the head 'Profits and Gains of Business'. Effective date for treating the transactions as non-speculative - cl. (d) of section 43(5) is prospective in nature and will be effective from the date from which the legislature made it effective, i.e., 1st April, 2006 and will be applicable to asst. yr. 2006-07 onwards - The notification is by way of a subordinated legislation but cannot override the principal legislation enacted by the Parliament. It only clarifies but will not override unless statutorily so prescribed. Since there is no dispute to the fact that the transactions in the present case in F&O segment are the eligible transactions carried out in a recognized stock exchange, loss in such transactions cannot be deemed to be transaction in speculation business. The same being considered as regular business transaction, loss incurred in the same is to be treated as business loss and not loss in speculation business. - A.O. is directed to treat the profit/loss on derivatives as non-speculative business profits as per the provisions of the Act effective from 1.4.2006.
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