Home Case Index All Cases Income Tax Income Tax + HC Income Tax - 2011 (4) TMI HC This
Forgot password New User/ Regiser ⇒ Register to get Live Demo
2011 (4) TMI 37 - HC - Income TaxSection 43(5) - Assessee is an HUF engaged in the business of trading in shares and securities, etc. - In the assessment year 2003-04, the assessee had entered into certain transactions in exchange traded derivatives which resulted in loss -The assessee claimed the above loss as business loss - In the assessment order passed under Section 143(3), the assessing officer rejected the contention of the assessee and held that the loss incurred was speculation loss covered under Section 43(5) of the Act - The appeal filed by the assessee against the order of the assessing officer was dismissed by C.I.T. - ITAT following the Coordinate Bench decision of the Tribunal in the case of Grishma Securities Pvt. Ltd. held that clause (d) to the proviso to Section 43(5) of the Act being retrospective in nature, the losses incurred from the derivative transactions could not be treated as speculation losses incurred by the assessee in AY 2003-04 - Various decisions of the ITAT wherein it is held that the derivative transactions are not speculative transactions, which do not correctly interpret Section 43(5) of the IT Act - Similarly, various decisions of the Apex Court relied upon by the counsel for the assessee in support of the contention that insertion of clause (d) to the proviso to Section 43(5) of the IT Act is retrospective in nature are also distinguishable on facts as the ratio laid down therein have no relevance in interpreting the provision of Section 43 (5) of the IT Act - The futures contracts cannot be equated with insurance contract, because, unlike futures contract, the insurance contract is not an article of trade which can be traded - Thus, the futures contract being an article of trade created by an authority under the 1956 Act, the transactions in futures contracts would constitute transaction in commodity under Section 43(5) of the IT Act.39) Held that : the exchange traded derivative transactions carried on by the assessee during AY 2003-04 are speculative transactions covered under Section 43(5) of the Act and the loss incurred in those transactions are liable to be treated as speculative loss and not business loss and clause (d) inserted to the proviso to Section 43(5) with effect from 1/4/2006 is prospective in nature and the ITAT was in error in holding that clause (d) to the proviso to Section 43(5) applied retrospectively so as to apply to the transactions carried on by the assessee during AY 2003-04 - Allow the appeal filed by the Commissioner of Income Tax
|