Home Case Index All Cases Income Tax Income Tax + AT Income Tax - 2019 (11) TMI AT This
Forgot password New User/ Regiser ⇒ Register to get Live Demo
2019 (11) TMI 268 - AT - Income TaxDeduction of mark to market losses (MTM) - assessee being a stockbroker and engaged in the business of trading in derivative segment by entering into future and options contracts, some of the future and options contracts could not be squared up at the end of the financial year and, therefore, the assessee booked the expected loss in such contracts on Mark to market basis - HELD THAT:- There is no dispute that the assessee is engaged in stockbroking business. It is also not in dispute that the assessee also engaged in the business of trading in derivatives segment and entered into the future and options contract, some of which could not be squared up at the end of the financial year and, therefore, the assessee booked the expected loss in such contracts on Mark to market basis. Assessee claimed a loss as calculated on Mark to market basis claiming that he was following this practice continuously year after year and according to the assessee, the same was as per recognised accounting standards. Contention of the assessee has been that since the MTM losses arise out of contractual obligation existing as on the reporting date, the same cannot be regarded as contingent or notional loss in nature. As rightly considered by the CIT(A), the question involved in this matter is whether such MTM losses are allowable as expenditure or how to be disallowed on the ground that these were notional losses. The authorities below, however, placing reliance on the circular dated 23/3/2010, decided the issue against the assessee. According to the Ld. AR this issue is no longer res Integra. MTM losses arising out of contractual obligation existing on the reporting date cannot be regarded as contingent or notional in nature and merely because the liability has to be discharged at a future date, the same cannot be regarded so. With this view of the matter, we find it difficult to sustain the addition and accordingly set aside the impugned order and direct the assessing officer to delete the addition made in this regard. Appeal of the assessee is allowed.
|