TMI Blog2014 (1) TMI 943X X X X Extracts X X X X X X X X Extracts X X X X ..... ed by the assessee to make the payment as on 31.3.2008 on account of loss in F&O segment - the assessee also filed details of loss incurred in derivatives before the AO – the order of the CIT(A) upheld simply because the broker had not carried any adjustment entered during the year under consideration and the said adjustment entry was passed on the next day of close of the year i.e. 1.4.2008 could not be a ground to hold that it was a notional loss – the CIT(A) has rightly held that the said F&O transactions were actually settled by the assessee and the loss incurred was actual - the AO is directed to treat the loss as business loss which is liable to be set off against the business income of the assessee – Decided against Revenue. - I.T.A. No.1802/Mum/2012 - - - Dated:- 17-7-2013 - Shri B. R. Mittal, JM And Shri Rajendra, AM,JJ. For the Appellant : Ms. C. Tripura Sundari For the Respondent : Shri Vipul Joshi and Vipul Pandya ORDER Per B. R. Mittal JM:- The department has filed this appeal for the assessment year 2008-09 against the order of ld. CIT(A) dated 12.1.2012. 2. Only issue involved in this appeal as to whether the ld. CIT(A) has erred in deleting th ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... stock exchange through recognized broker Transparent Shares Securities Private Limited. ii) In the trading of derivatives, the appellant had incurred loss of Rs. 49,66,586/-. In course of assessment complete details was filed along with copy of certificate in form 10 DB was filed before the Assessing Officer. In course of assessment, the AO had also made independent inquiry with the office of National Stock exchange also. The appellant understands that in course of inquiry with the National Stock Exchange also the transactions entered by our client were confirmed. iii) In course of assessment, the AO had asked to explain the details of payment made to broker. The AO asked to explain that why the said notional loss pertaining to F 0 segment should not be allowed to be set off against normal business loss (the AO has mentioned loss but should be read as income) in absence of cheque payment. The appellant had vide letter dated 6/12/2010 explained that the appellant had in fact credit balance(i.e. the appellant had to in fact recover money) in the account with the same broker in his account in which share trading was done. It was also pointed out that actual payment was also ma ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 0. The copy of this instructions is enclosed and on pages 33 34 of the paper book. With due respect to the AO, there is no relevance of this instructions to the facts of the case of the appellant. The instructions of the CBDT are in respect of foreign exchange derivative transactions. It is in respect of marked to market loss by book entry and not in respect of actual loss incurred. Marked to market loss is a contingent loss. Here in case of the appellant the loss incurred is actual loss for which the appellant has also made full payment. vi) In view of the above the action of AO is not allowing loss incurred on F O transaction to be set off against other income for the year is bad in law. It is therefore prayed that the AO be directed to allow set off of loss incurred on F O transactions to be set off against other income and the balance unabsorbed loss should be allowed to be carried forward". 5. The ld. CIT(A) after considering the above submissions has directed the AO to treat the same as business loss liable to be set off against business income vide paragraphs 4.2 and 4.2.1 of the impugned order which reads as under : "4.2 I have carefully considered the findings ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... the loss have arisen on account of actual settlement /conclusion of contract of derivative trading can only be allowed but if the said transactions are not settled at the end of the year then it is a notional loss and the same cannot be allowed. The ld. DR submitted that the assessee could not furnish any evidence about marked to market loss which had been settled at the end of the year. The ld. DR submitted that two of the transactions "future April" and "Suzlon May" had not been closed at the end of the year. Hence the AO rightly treated the loss on F O transactions as notional loss in the year under consideration. 7. On the other hand, ld.AR submitted that there was actual settlement of the F O transactions at the end of the year. It was submitted that the assessee was carrying on trading in derivatives as well as also trading in shares through the same broker viz. Transparent Shares Securities Private Limited. He submitted that the said broker maintains two different accounts in respect of normal share transactions and F O transactions. He submitted that in the share trading there was a debit balance of Rs.62,54,708/- with the brokers ledger in share transactions account wh ..... X X X X Extracts X X X X X X X X Extracts X X X X
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