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2018 (2) TMI 1709 - AT - Income TaxDisallowing assessee’s claim of set off of derivative loss against derivative profit treating the same as speculative loss - AO applied the provisions of sections 43(5)(d) of the Act and bifurcated the earnings for the recognized stock exchanges and non-recognized stock exchanges - Held that:- We are of the view that the derivative trading in commodity is to be considered as one business and the net income from the same should be assessed as business income of speculation business, since section 43(5) does not exclude commodity trading during the year. The assessee is member of MCX and he has to carry out transaction on another exchange because on MCX there was no volume in commodity like Coper, Crude Oil, Silver etc. and also there was difference in lot size of the commodity in Lead, Gold etc. Further in MCX exchange, some time, the trading limit exhausted and hence he has to approach other brokers of other exchange to continue the activity. The assessee on ICEX exchange earned profit in Lead and Gold commodity and incurred loss in Iron Ore. Thus, the observations of the AO that the transactions carried out in the last two months of the year has no relevance to the business activity of derivative trading is of no substance. The commodity transactions are not covered by section 43(5)(d) of the Act. From the above definition it is clear that commodity derivative trading is not covered by Securities Control (Regulation) Act, 1956 and therefore the provision applied by the AO is against the facts of the case. The assessee is exclusively carrying on business of derivative trading on various exchanges and the transaction entered into derivative on various exchanges is his business activity whether considered as speculative or non speculative transaction as per section 43(5), the derivative transactions are not speculative transaction, in view of the fact that the derivative transaction is not supported or backed by deliverable commodity. The assessee is not claiming any special deduction under section 43(5)(d) for treating the profit as business profit. The nature of activity is carried throughout the year by the assessee is one and only one to trade in derivatives on various exchanges and earned profit or income which includes loss. In such facts, we are of the opinion that the assessee is eligible for set off of this loss against the profit. We reverse the orders of the lower authorities and allow the claim of the assessee. - Decided in favour of Assessee.
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