TMI Blog2013 (1) TMI 284X X X X Extracts X X X X X X X X Extracts X X X X ..... over, when the main object of the member is well defined, and he is working in accordance to the same, it needs to be concluded that he is working as in his ordinary course of business as such member. Perusal of this shows that loss incurred by appellant, a member of MCX, a forward market exchange, due to jobbing to guard against loss from future price fluctuation arising in the ordinary course of its business as such member surely fell within the purview of exception contained in Cl. (c) of proviso to S. 43(5), hence could not be said to be speculative loss and should be considered as business loss. Perusal shows that after appraising the fact, it was concluded that transactions under consideration are of jobbing nature but same have not incurred during the regular course of business. In this regard, already submitted that said inference of regular course of business has been drawn without reading the entire sentence as whole as the word “as such member” is also there and it is undoubted fact that transaction have been entered as member and it is regular course of his business as member to entered such transactions, further it is important to note that only upon sale or purchas ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... involved in both these appeals, therefore, they are disposed off together. 3. Ground No. 1 in both the appeals, which is against passing order under section 153A/143(3) is bad in law was not pressed. Therefore, ground no. 1 for both the appeals is dismissed as not pressed. 4. Ground Nos. 3 and 4 in both the appeals respectively relate to penalty initiation proceedings under section 271AAA is pre-mature, was also not pressed. Therefore, these grounds are also dismissed as not pressed. 5. Ground No. 2 in both the appeals is against in holding that loss under consideration is not covered under proviso (c) of section 43(5) of the Act and further erred in considering the business loss of Rs. 1,34,62,163/- and Rs. 68,25,182/- as speculative loss respectively. This loss was not allowed to be set off against the business income. 6. Brief facts of the case as noted by ld. CIT (A) in his order in para 2.1 to 2.6.5 at pages 2 to 16 are as under :- 2.1 Facts of the case are that in the case of Tulip group of Jaipur to which the assessee belongs a search was conducted on 23/01/2009. Various books of accounts, loose papers and incriminating documents and assets have been found a ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 43(5) (c) of the Act exclude certain transactions from the definition of speculative transactions v) A contract entered into by a member of forward market or of a stock exchange in the course of any transaction in the nature of jobbing or arbitrage provided such transaction is entered into to guard against loss which may arise in the ordinary course of his business as such member. The benefit of the exception cannot be extended to all transactions of such members but only to those transactions in the nature of arbitrage or jobbing which are entered into to guard against loss which may arise in the ordinary course of business. Jobbing involves buying and selling on own account with differences arising from fluctuations in prices constituting income or loss from the transactions. In case of arbitrage, transactions are carried out by the member at different markets or at different exchanges with a view to gaining from the differences in the prices prevailing at both the markets or exchanges. The assessee vide notice u/s 142(1) of the Act dated 16/12/2010 was required to furnish details of transactions carried on by him in the ordinary course of business and details ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... perating a commodity exchange wherein persons having membership only can transact. The membership of the exchange is given only to those members who are interested in transacting in the prescribed commodities; the transaction in this market is entered into in the name of the members only. There is a pre-determined criterion for becoming member in the exchange, wherein, he is abides by the rules and regulation prescribed in this respect. MCX operate commodity exchange through specialized software on real time basis and every member has access to the server of the exchange through his own terminal. The entire working of the exchange is online and on real time basis in very transparent manner. According to the practices prevalent and business module designed by the MCX, a member can buy or sale any commodity transacted on said exchange for any quantity according to the available margins and for any future date, out of options provided by the exchange. Mostly MCX provides three future optional dates. Further at the time of buy or sale, member have to choose one date on which delivery of the commodity shall be made or taken, further member always have right to settle the purchase transa ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... lause (c) of Section 43(5) of Income-tax Act, 1961. Close perusal of said clause shows that - Contract must be entered by a member of forward market or a stock exchange. Such contracts must be made in course of any transaction in nature of jobbing or arbitrage. Such contract must be to guard against loss which may arise in the ordinary course of his business, as such member. It is relevant here to examine the facts of the assessee with the legal provisions contained in above referred clauses. (iv) It is a matter of fact that assessee is a member of MCX. MCX is an exchange provides opportunity to it s member to trade commodity on future dates, therefore, the MCX is a forward market and assessee under consideration is a member of forward market qualifying the first criteria of exception provided in clause (c) of section 45(3) of Income-tax Act, 1961. The forward market itself implies a market of future providing opportunity of trading in future. We also reproduced here the definition of forward market given in the lexicon law dictionary as follows : Forward Market - a market in which participants agree to trade some commodity, security or fore ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... es his activity as jobbing activity From the foregoing discussion of the legal position, as well as the facts of the case, it is clear that activity of the assessee is squarely falls under clause (c) to the section 43(5), which covers those transactions settled otherwise than by physical delivery even than not considered as speculative transactions under the income tax act. (vi) Similar view has been taken by Hon ble ITAT Delhi, in Komal Exports Vs. Assistant Commissioner of Income Tax, 19 SOT 602 (2008). Similar judgments was pronounced in CIT Vs. Shri Sharwan Kumar Agarwal, [2001] 249 ITR 0233. (vii) The assessee under consideration was given membership of MCX w.e.f. 28.03.2007 and the effective date for permitting to do operation was 29.08.2007 and since, the Cl. (c) of S. 43(5) is applicable on member of forward exchange. The transaction entered into by the assessee before the period 29.08.2007 and even after with M/s Trade swift Comdex Private Limited Moti Commodity Futures Private Limited not as a member have been shown and considered as Speculation Business Loss which amounted to Rs. Rs. 3,41,435/- for the year under consideration and not set off of same ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... Chand Jain, MCX. The financial result of MCX have been prepared under the trade name Prakash Chand Jain, MCX only to distinguish the individual affairs from the business affairs of Mr. Prakash Chand Jain, therefore, it is not correct that any trade concern is member of MCX rather Mr. Prakash Chand Jain is member of the MCX. It is also relevant to mention that a proprietor cannot do any business with himself because he can represent only one physical entity. From the foregoing discussion, it is clear that all transactions have been carried out by Mr. Prakash Chand Jain, as member and not as a client, therefore, jobbing loss arose by transacting such transactions is as member and generated during the regular course of business, hence falls under explanations C From the facts narrated hereinbefore and clarification made, we hope that you will find on fact that these transaction have been carried not on client id, therefore, cannot fall under clause (d) of Section 43(5). Further, it is an admitted fact that your good self has already considered the transaction is in the nature of jobbing, in this regarded we rely upon the decision of Hon ble ITAT Banglore ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e (a), (b) and (c) to the proviso of the said section. The assessee was mainly doing the export business of pepper to overseas buyers of different countries. It was member of IPSTA, a recognized forward market exchange which was controlled and monitored by the forward market commission. The loss was incurred by the assessee as a member of IPSTA due to jobbing to guard against the loss arisen in the ordinary course of its business. Therefore, the case of the assessee squarely fall within the purview of clause (c) of proviso to section 43(5) and was not a speculative loss. 2.6.1(ii) The other case relied by the assessee was CIT v. Sh. Sharwan Kumar Agarwal (2001) 249 ITR 233 The facts of the case are that the assessee a share broker and member of UP stock exchange, Kanpur carried on transactions with other members in the nature of jobbing or arbitrage. The Hon ble High Court held that the onus was on the revenue to establish that the assessee was not entitled to exception covered by clause (c) of the proviso to section 43(5) of the Act. It was further mentioned that the revenue has not sought any question to be referred in regard to proviso, clause (c) to sub section 5 of ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ion transaction u/s. 43(5), whether clause (d) of Sec. 43(5) introduced by Finance Act, 2005 w.e.f. 1.4.2006 is clarificatory in nature and therefore, retrospective in operation ? The Special Bench observed that speculative transaction is a transaction in which contract for purchase and sale of any commodity is settled otherwise than by actual delivery. It is not in dispute that in the case of transaction in derivatives, the transaction is always settled otherwise than by actual delivery. However, it was contended by the Counsel that Sec. 43(5) is applicable only in respect of contract for purchase and sale of commodity. His contention was that the derivative is not a commodity and, therefore, Sec. 43(5) would not be applicable at all. The Departmental Representative has furnished the printout taken from the Website of SEBI explaining the term "derivative", which reads as under :- "The term "Derivative" indicates that it has no independent value, i.e. its value is entirely "derived" from the value of the underlying asset. The underlying asset can be securities, commodities, bullion, currency, live stock or anything else. In other words, Derivative means a forward, futur ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... nsactions within the meaning of Sec. 43(5). If the transaction in derivatives does not fall within the definition of 'speculation transaction' u/s. 43(5), then there was no question of exempting certain type of transaction in derivatives from the scope of speculative transaction u/s. 43(5). If it is held that the transaction in derivatives does not fall in Sec. 43(5), it will make clause (d) and Explanation thereto below Sec. 43(5) introduced by Finance Act, 2005 to be redundant. It cannot be presumed that the Government has introduced a clause, i.e. clause (d) as well as Explanation thereto, which was redundant and infructuous. In view of above, the Special Bench held that the term 'derivatives' in which underlying asset is shares, will fall within the meaning of 'commodity' used in Sec. 43(5) of the Act. The next question is whether clause (d) of Sec. 43(5) introduced by Finance Act, 2005 w.e.f. 1.4.2006 is clarificatory and, therefore, retrospective in nature. It is evident that the transaction in derivatives in exempted from the purview of speculative transaction u/s. 43(5) because of recent systemic and technological changes introduced by stock exchange. The ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e Act as there is no risk involved in brokerage business. Further, the assessee also has not made such claim. In the light of above discussion it is held that the assessee carried on business of jobbing in various commodities on MCX in his individual capacity. The regular business, a necessary ingredient to qualify for exclusion from speculation transaction in terms of clause (c) of proviso to section 43(5) is missing. 2.6.4 A.O. further observed that However, the case of the assessee is covered clause (d) of proviso to section 43(5) of the Act which stipulates as under- [(d)an eligible transaction in respect of trading in derivatives referred to in clause [(ac)] of section 2 of the Securities Contracts (Regulation) Act, 1956 (42 of 1956) carried out in a recognised stock exchange;] shall not be deemed to be a speculative transaction. [Explanation. - For the purposes of this clause, the expressions- (i) eligible transaction means any transaction,- (A) carried out electronically on screen-based systems through a stock broker or sub-broker or such other intermediary registered under section 12 of the Securities and Exchange Board of ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ) which means that the trade in derivatives through MCX exchange will now be regarded as Business transaction and therefore, the loss, if in unfortunate event of incurring loss will be allowed to be adjusted with any other business income or from other heads. If you trade through, NCDEX, you will not have this facility. The notification 46/2005 dated 22-5-2009 is given below In exercise of the powers conferred by clause (ii) in the Explanation to clause (d) of the proviso to sub-section (5) of section 43 of the Income-tax Act, 1961 (43 of 1961), read with rule 6DDB of the Income-tax Rules, 1962, the Central Government hereby notifies MCX Stock Exchange Ltd. as a recognized stock exchange for the purpose of the said clause with effect from the date of publication of this notification in the Official Gazette. MCX Stock Exchange Ltd. shall separately maintain data regarding all transactions registered in the system in which client codes have been allowed to be changed for periodical inspection by the Director-General of Income-tax (Investigation) having jurisdiction over such exchange and provide copies of the relevant information as and when required. The ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... x Pvt. Ltd and also through M/s Moti Commodities Futures Pvt. Ltd. and incurred loss of Rs.3,41,435/-. for F.Y 2007-08 relevant to A.Y 2008-09. This loss has been rightly admitted as speculative loss and has been carried forward. Apart from that from 29.8.2007 onward, the appellant being the member of MCX, himself entered into speculation transaction of commodities on MCX and it has incurred a whopping loss of Rs. 1,34,62,163/- in A.Y 2008-09 Rs. 68,25,182/- in A.Y 2009-10.This loss has been treated to be non-speculative by the appellant claiming that same is covered under the exception provided in clause (c ) of section 43(5), whereas the A.O. has held this to be loss on account of speculative transaction by holding that same is neither covered in exception provided in clause (c) or not covered in clause (d) of section 43(5). Issue before me to be decided is whether the transaction carried out by the appellant as member of the Commodity Exchange MCX are speculative transaction or not, as per the definition provided in section 43(5) of I.T. Act. For the sake of clarity relevant portion of section 43(5) is reproduced below:- Sec. 43(5) Speculative transaction means a ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... o guard against any loss at the time of actual purchase of the metal or commodity in future, sometimes due to volatility in the market. this transaction is settled by jobbing which would be in the nature of speculative transaction, but this particular transaction done in the particular circumstances for guarding against the loss which may arise in the ordinary course of his business of purchase of metal or commodity, has been excluded from the purview of section 43(5) that too by a deeming provision. This was done so that the actual user or regular buyer of the metal or commodity are not put to disadvantage even in such specific circumstances, which may sometimes arise, where they are forced to do the transaction of jobbing only to guard against the loss which otherwise would have arisen due to purchase being entered into at a higher price and thereby such transactions entered into sometimes, though being speculative in nature, but are deemed to be non-speculative. Now obviously the transaction in the ordinary course of business of such member should be to actually purchase the metal or commodity or to actually sell the metal or commodity and obviously to take or give deliver ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... uch speculative transaction entered by the member is part of regular business carried out as member. If that is so, then also the second category of the transactions i.e the transactions in which loss was expected, which have to be guarded against, are not identified by A.R and are at all missing. 4.5. It is seen from the facts already discussed and also further mentioned below, that all the transactions running into thousands and thousands in number carried out by the appellant have been settled without delivery except one or two transaction of one/two unit of gold of one gram. Thus there is no transaction in the ordinary course of business of purchase and sale of commodities by the appellant as member of MCX. 4.6. The A.R. has referred that the A.O. has accepted that the assessee carried on the transaction of jobbing, as per para 8.2 pages 15 of the A.O s order whereas transaction done in the regular course of business has not been identified by the A.R. A.R. answered this query by mentioning that the loss under consideration is regular business loss. If the loss under consideration is considered as regular business loss, then also as mentioned elsewhere in this order ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ng asked by the undersigned, that these speculative transactions are for Gold, Crude oil, Silver, Copper and Zinc etc. The appellant has never taken delivery of any of the commodities/metal, nor has ever given delivery of any of the commodity/metal during the two years under consideration except one or two unit of gold once/twice. 4.9. Another important aspect noticed is that appellant has entered into short sell on most of the days. So much so that out of 15 sample days for which details were called for, on as many as 13 days, the appellant has first entered into sale transaction, obviously without having the possession of commodity with himself. It only proves that the action of the appellant in all these cases were only to enter into speculative transaction which were to be squared off during the same day itself or lateron without any intention of delivery. Thus it is evident that the primary transactions itself are of speculative nature and are thus covered u/s 43(5) and thereby exception (c) does not apply. On further probing done by the undersigned, it was noticed that on a single sample day i.e on 16.10.07, the appellant has entered into 66 transactions of sale o ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... eculative transactions within the meaning of section 43(5) and the appellant has failed to established by giving details of jobbing transaction as well as details of transaction done in the ordinary course of his business where loss was expected and then linkage of jobbing transaction which was done to guard against such loss (as has been envisaged in clause (c)) and on the contrary the facts as mentioned above clearly proves that these transactions cannot at all to be covered within the exception provided under sub clause (c) of section 43(5) as claimed by the appellant. 6. Facts of the cited case of Komal Export vs. ACIT 19 SOT 602 (2008) decided by Hon ble ITAT Delhi are distinguishable. In that case, the said concern was engaged in export business of pepper which incurred some hedging expenses while procuring the said commodity from an organization IPSTA namely Indian Pepper Spice Trade Association claiming that hedging was purely done to cover future loss. The assessee engaged in export business of pepper to overseas buyer had to purchase the pepper and it was to guard against the loss arising in procuring/purchasing the commodity i.e is in the ordinary course of his bus ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... otification dated 22.05.2009 for the purpose of clause (d) of section 43(5). 8. In view of the facts and circumstances and the legal position on the issue under consideration, claim of loss on account of speculative transaction in commodities amounting to Rs. 1,34,62,163/- in A.Y 2008- 09 is held to be covered u/s 43(5) and set off of the same so disallowed by the A.O. from the business income is upheld. 7. During the appellate proceedings here before the Tribunal, ld. Counsel of the assessee filed copy of written submission, copy of which was given to ld. D/R also. The assessee explained his case on the basis of written submissions filed. The written submissions filed here before the Tribunal are more or less same as filed before ld. CIT (A). The difference in the written submission is that in the written submission filed here before the Tribunal, ld. A/R has controverted the findings of ld. CIT (A) also by explaining the reasons in detail. 8. The ld. D/R on the other hand, firstly placed reliance on the orders of AO and ld. CIT (A). Attention of the Bench was drawn on pages 2 3 of the order of the AO for assessment year 2009-10 and page 3 for assessment year 2008-09. ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ferent types of membership available and it is an admitted fact that the appellant under consideration is a member in MCX having Trading-Cum-Clearing Membership, and such member can do business on his own account and it is not necessary to do the business on account of client only. Under the facts, it is clear that he is not only authorised to do the work on behalf of client but also on own account as well. 2. The appellant is an individual earns brokerage as well as also having income or loss on account of jobbing of the commodities traded in said exchange as member. It is important to note here that the membership of MCX is in his individual name. 3. The appellant under consideration was given membership of MCX w.e.f. 28.03.2007 and the effective date for permitting to do operation was 29.08.2007. The transaction entered into by the appellant before 29.08.2007 and even after with M/s Tradeswift Comdex Private Limited not as a member have been shown and considered as Speculation Business Loss which amounted to Rs. 3,41,435/- for the A.Y.2008-09 and set off of same loss has not been claimed. Submission of the appellant:- 1. MCX is a public limited company, g ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 1. To clarify the nature of transaction and legal provision for considering a transaction as speculative, we reproduced the legal provision in this regard provided in section 43(5) as follows : " speculative transaction" means a transaction in which a contract for the purchase or sale of any commodity, including stocks and shares, is periodically or ultimately settled otherwise than by the actual delivery or transfer of the commodity or scrips; Provided that for the purposes of this proviso-- (a) a contract in respect of raw materials or merchandise entered into by a person in the course of his manufacturing or merchanting business to guard against loss through future price fluctuations in respect of his contracts for actual delivery of goods manufactured by him or merchandise sold by him; or (b) a contract in respect of stocks and shares entered into by a dealer or investor therein to guard against loss in his holdings of stocks and shares through price fluctuations; or (c) a contract entered into by a member of a forward market or a stock exchange in the course of any transaction in the nature of jobbing or arbitrage to guard against loss which may a ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ed by the appellant on the MCX on his own account shows that he has made first purchase/sale transaction of a commodity for a particular quantity to be settled either by delivery or by cross transaction on a particular future date for a fixed price determined at the time of transaction. Thereafter, on every day, the difference between prevalent price on particular date with fixed price of entered transaction for future date have been either paid or received according to the difference and debited/credited to gross jobbing account. It is clear from the nature of transaction that first a transaction of future date has been made and thereafter, on every day loss/profit has booked according to the prevalent price. From the nature of transaction, it is emerged that - (e) on the date of profit/loss, there was an outstanding transaction of future date, (f) the contract of profit/loss have been made to guard against loss which may arise on settlement of already entered transaction for future date. (g) The transactions have been entered in regular course of business because appellant is a member of forward market wherein entering into transaction of future date ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... loss. 3. Ld. CIT (A) has given his finding in Para 4 of his Order. On perusal it is found that (i) Loss arose out of transactions, entered not as member either for the period pertaining prior to getting membership or entered through other members have claimed as speculative loss. Therefore, only loss arose out of transaction entered as Member have been claimed as non speculative. (Para 4) (ii) The transactions have been settled periodically or ultimately otherwise than by actual delivery of commodity although it is entered as Member of MCX in his own account same is speculative. (Para 4.1) 3.1 Ld. CIT (A) has analyzed the Proviso (c) of Section 43(5) in Para 4.2 of his Order and according to said analysis, the facts of the case have been examined. Therefore, it is important to discuss the basis on which the entire order is founded; hence same is reproduced as follows: 4.2 The legislative intention behind inclusion of this exception (c) was that many times the actual user of the metal or other commodity in the ordinary course of his business of purchasing the metal or commodity had to sometime enter into a contract of forward market. To guard a ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... , hence such finding, is also incorrect. Further as per said interpretation transaction must be done by actual user whereas said proviso required it should be entered by member. (ii) Broadly the analysis of CIT (A) says that if actual user of any commodity entered into jobbing transaction under forceful circumstances than only transaction shall qualified for proviso (c). Here we would like to draw the attention towards Proviso (a) of sub-section 43(5) and for ready reference, we reproduced the same hereinbelow: (a) a contract in respect of raw materials or merchandise entered into by a person in the course of his manufacturing or merchanting business to guard against loss through future price fluctuations in respect of his contracts for actual delivery of goods manufactured by him or merchandise sold by him; or Perusal of the same shows a merchant dealing in a particular merchandise if to guard against loss against future price fluctuation in respect of already entered contract for actual delivery, entered into any contract settled otherwise than actual delivery, shall qualify to fall under proviso (a). In nut shell the transaction according to CIT (A) w ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... (c) In the light of above discussion it is held that the appellant carried on business of jobbing in various commodities on MCX in his individual capacity. The regular business, a necessary ingredient to qualify for exclusion from speculation transaction in terms of proviso (c) of proviso to section 43(5) is missing. (Refer Para 9.2 on Page no. 19 of the AO s order). Perusal shows that after appraising the fact, it was concluded that transactions under consideration are of jobbing nature but same have not incurred during the regular course of business. In this regard, we have already submitted that said inference of regular course of business has been drawn without reading the entire sentence as whole as the word as such member is also there and it is undoubted fact that transaction have been entered as member and it is regular course of his business as member to entered such transactions, further it is important to note that only upon sale or purchase, there cannot be any loss or profit, only upon subsequent purchase or sale, loss or profit can be arrived. Therefore, saying that the details of transactions in the nature of jobbing is provided and details of transac ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ber of stock exchange but is also available to a member of forward market. In order to come within the ambit of c. 43(5) proviso (c) 43(5) the transaction should specifically be (a) entered into by a member of forward market or stock exchange and (b) in the nature of jobbing and arbitrage, and (c) to guard against loss which may arise in the ordinary course of his business as such member. Thus cl. (c) excepts hedges in the nature of jobbing and arbitrage entered into by a member of a forward market or stock exchange to guard against loss which may arise in the ordinary course of his business as such member. A jobber sells and buys on his own account and takes advantage of every turn of price. The difference between jobbing and arbitrage lies in this that whereas jobbing takes place between one member and an another on same stock exchange, arbitrage is done between different exchange price levels at different exchanges. Again, whereas jobbing is applied in shares and stocks, arbitrage is applied to transaction in shares and stock as well as bills of exchange. In the instant case, the assessee company mainly doing the export business of pepper to overseas buyers of different countrie ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... r ITA No. 1050/Del/2008 Assessment Year : 2003-04 - 7. Even if the said futures and options are considered to be commodities, shares and securities then proviso (b) and (c) to section 43(5) of the Income Tax Act, specifically exclude transaction of hedging, jobbing, etc. entered into by a dealer in shares and particularly member of a Stock Exchange. In this regard, the assessee has placed reliance on the decision of Hon ble Allahabad High Court in the case of CIT vs. Shri Sharwal Kumar Agarwal 249 ITR 233. Departments SLP in this case has been dismissed by Hon ble Supreme Court which is reported at 292 ITR 3. In such circumstances and facts of the case, we direct the A.O. to allow the claim of the assessee. Therefore, order of Ld. CIT(A) is reversed on the issue. Thus, ground no. 2 of the assessee is allowed. 5. Further the case, Shree Capital Services Ltd. Vs. ACIT [ITA no. 1294 (Kol) of 2008, of Kolkata ITAT], relied upon by the Ld. AO is clearly distinguishable on the facts that; In that case the question was whether the appellant is covered in proviso (d) of the said section or not, whereas in the instant case the question is regarding the applicability of ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ld not understand the clause (c) in right perspective. The AO says the assessee could not prove the transaction as there is no delivery. However, at various points of time the AO accepts the assessee s transaction as jobbing in nature but they are not done during the regular course of business. Clause (c) specifically provides that if any member of a stock exchange entered into transaction either of loss or profit that will be treated as business transaction. All these transactions are transacted through MCX which is an organized stock exchange. If a member wants to enter into transaction of a future date then the transaction has to be done through stock exchange and if the same member wants to settle those transactions by selling or purchasing then again transaction has to be transacted through stock exchange which has been done in this case. A sample copy dated 5.3.2008 is placed on record. By this sample copy it is seen that the assessee member gave an order for trading to buy gold of future date i.e. 5th April, 2008. For the sake of clarification, this transaction was ordered on 5.3.2008. Thereafter assessee thought proper to settle this transaction, again after few hours the a ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... section 43(5) deals with derivative transaction, therefore, the assessee s case does not fall under clause (d) of section 43(5) of the Act. 11.1 The Ld. CIT (A) somewhere in his order has observed that the actual user of any commodity enter into jobbing transaction under forceful circumstances, then only those transactions shall be qualified for clause (c). We are not understandable that how forcefully transactions can be identified as transactions of jobbing. Undisputedly, the transactions by assessee are of jobbing transactions for the safeguard of future loss and, therefore, it clearly falls under clause (c) of section 43(5). Various case laws relied upon by Ld. A/R before the Assessing Officer as well as before Ld. CIT (A) and now here before the Tribunal support the case of the assessee. The ratio of these cases have been discussed in the written submissions filed on behalf of the assessee which are reproduced somewhere above in this order, therefore, we are not repeating ratio of those case laws once again. The contention of Ld. D/R that decision of Hon'ble Allahabad High Court is not in detail. Whether the order of Hon'ble Allahabad High Court is detailed or not but it dea ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... fore, acquisition of jewellery in the past is not substantiated and thus same was added as unexplained investment totaling to Rs. 6,88,922/-. 15. Brief submissions were filed before ld. Commissioner of Income Tax(A). However, Ld. Commissioner of Income-tax (A) was in agreement with the finding of Assessing Officer. Accordingly he confirmed the order of Assessing Officer. 16. Same submissions have been filed by Ld. Counsel of the assessee before the Tribunal. 17. On the other hand, Ld. D/R placed reliance on the order of Ld. CIT (A). 18. After considering the submissions and perusing the material on record, we find that total jewellery worth Rs. 66,73,428/- were found during the course of search. Except in respect of 134.500 gms gold and 29,368 kg of silver amounting to Rs. 1,42,678/- and Rs. 5,46,244/- respectively, the assessee could not give any explanation satisfactorily to the Assessing Officer. To this extent the gold jewellery and silver items were acquired by the assessee in past which was stated to be received from close relative either at the time of marriage or on various religious occasions. In our considered view, this is customary in Hindu family to have recei ..... X X X X Extracts X X X X X X X X Extracts X X X X
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