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2018 (2) TMI 253 - AT - Income TaxTransaction in 'currency derivatives' - treated as ‘marked to market’ transactions - whether liable to be held as 'speculative' within meaning of section 43(5) - CIT-A considered the transactions entered into by the assessee, to be speculative transactions and loss incurred by the assessee not been allowed to be set off against other business income of the assessee - Held that:- As rightly contended, not only were the losses incurred by the assessee entitled to be held as non-speculative, but also the whole of the loss sustained by him was entitled to be allowed to be set off with other income and no part of such loss could be disallowed by holding it to be a 'notional loss'. The facts of the case for assessment year 2014 -15 are in pari materia with those of assessment year 2013-14, except for the fact that there was, undisputedly, no outstanding position as on 31.03.2014 and hence, the observations with regard to assessment year 2013-14 would, mutatis mutandis, apply to assessment year 2014-15 also. DR has sought to place reliance on the Foreign Exchange Management (Foreign Exchange Derivatives Contracts Regulations), 2000 and the Foreign Exchange Control Manual, Chapter -3 Securities Service Contracts (Regulation) Act, 1956. However, neither the aforesaid Regulations, nor the Manual were the subject matter of consideration before the Authorities below. The transactions in currency derivatives as entered into by the assessee, were not speculative transactions. There were no derivative contracts outstanding on 31.03.2014, which could be termed as a notional loss. Accordingly, the loss sustained by the assessee in trading of currency derivatives, amounting to ₹ 17,09,121/- for A.Y. 2013-14 and ₹ 11,84,370/- for A.Y. 2014- 15 are allowed to be set off against the other business income of the assessee. So far as regards A.Y. 2013-14, the assessee has contended that alternatively there were only transactions concerning 1200 currency derivatives sold by the assessee for ₹ 6,55,55,211/-. Thus, on account of being ‘marked-to-market’, resulted into a loss of ₹ 51,789/- against a total loss of ₹ 17,09,120.61. In this regard, the assessee has placed on record, at APB 238 to 245, stock results in the books of account of the assessee, in respect of the currency derivatives. These documents are stated to have been filed before the AO as well. Accordingly, as per the assessee it is only this loss of ₹ 51,789/-, which could have been disallowed. However, since the transactions have, as above, been held to be not speculative transactions, this alternative argument of the assessee is not required to be gone into
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