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2019 (10) TMI 834 - AT - Income TaxTreating the share trading loss as speculation loss by invoking Explanation to section 73 - allocation of expenses as attributable to deemed speculation activity as against the total expenses claimed in the sum - HELD THAT:- The derivative transactions shall not be treated as speculative transaction only for the purpose of section 43(5) of the Act and not otherwise. The same cannot be extended to provisions of Section 73 of the Act. Share trading loss incurred by the assessee in is speculative in nature and to this extent, we uphold the action of the ld AO. DR placed reliance on the decision of Hon’ble Calcutta High Court in the case of CIT vs Parkview Properties P Ltd [2003 (1) TMI 69 - CALCUTTA HIGH COURT] wherein as been held that the speculation loss could be set off against speculative profits for the purpose of section 73 of the Act, which is what is done by the assessee also in the instant case by setting off the derivative profit with share trading loss. Hence the decision of Hon’ble Calcutta High Court supra actually supports the view of the assessee and our decision rendered hereinabove. In view of the aforesaid observations with regard to the restrictive applicability of provisions of section 43(5)(d) of the Act as detailed supra and respectfully following the judicial precedent relied supra, we hold that the assessee is entitled for setting off the derivative profit with the share trading loss. Hence there is no need for making separate disallowance of share trading loss of ₹ 6,98,422/-. Accordingly, we reverse the treatment of the ld AO in allowing the carry forward of share trading loss to subsequent years. Similarly we find from the aforesaid table that the assessee had incurred loss on account of jobbing and arbitrage transactions in the sum of ₹ 10,77,588/-. This falls under section 43(5)(c) of the Act wherein the said transaction was not considered as speculative transaction. However, the same would apply only for section 43(5) and cannot be extended to section 73 of the Act as held hereinabove. Accordingly, we hold that the said loss on account of jobbing also would have to be set off against derivative profit. Expenses incurred by the assessee which were apportioned towards speculation activity on turnover ratio - assessee had carried on composite business of derivative trading and share trading. AO had not considered the turnover figures for derivative business and had considered only the turnover of share trading business, which had resulted in absurdity by apportioning 99.64% of total expenses only towards speculation activities. We direct the AO to recompute the apportionment of expenditure by considering the income of derivative transactions, jobbing transactions and share trading transactions alone by considering them in absolute figures i.e ignoring the negative signs (losses). AO is directed to make disallowance as per the aforesaid directions.
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