Home Case Index All Cases Income Tax Income Tax + AT Income Tax - 2022 (6) TMI AT This
Forgot password New User/ Regiser ⇒ Register to get Live Demo
2022 (6) TMI 533 - AT - Income TaxSpeculative loss or not - Set off and carry forward of loss arising from derivative transactions in currency segment - Eligible transaction in respect of derivatives transaction - HELD THAT:- Section 43(5) of the Income Tax Act defines 'speculative transaction'. As per the Scheme of the Act, a transaction of speculative nature carries a differential treatment qua the non speculative transaction in the matter of set off and carry forward of losses arising therefrom. The proviso to Section 43(5) provides for certain exceptions in varied situation and where the transactions executed fall within any of such exceptions, profit/loss arising from such transactions will not be regarded as derived from speculative business and consequently, will not be deemed to be speculative transaction for the purposes of the Act. We are presently concerned with clause (d) of such exceptions annexed to Section 43(5) of the Act. In view of the clause (d) to Section 43(5), a transaction will not be regarded as 'speculative transaction' where an eligible transaction in respect of trading in derivatives referred to in clause (ac) of Section 2 of Securities Contracts (Regulation) Act, 1956 was carried out in a recognized stock exchange. Explanation-1 to Section 43(5), in turn, defines 'eligible transaction' for the purposes of clause (d) to mean a transaction carried out electronically on screen based systems through a stock broker registered under SEBI Act 1992. In essence, an 'eligible transaction' [as defined in Explanation-I to Section 43(5)] in respect of derivatives transaction [as defined in clause (ac) to Section 2 of Securities Contract (Regulation) Act, 1956] carried out on a recognized Stock Exchange shall not be deemed as Speculative Transaction having regard to exception provided in clause (d) to proviso to Section 43(5) of the Act. We are of the considered view that the assessee in the instant case has complied with all the conditions of clause (d) and Explanation-1 to Section 43(5) of the Act cumulatively so as to treat such currency derivative transaction as eligible transaction for the purposes of exclusion from the ambit of speculative transaction defined under Section 43(5) - This being the position, the loss arising from derivative transaction has been incorrectly disallowed by the AO for being set off and carried forward against non speculative business income in accordance with law and wrongly confirmed by the CIT(A). The action of the CIT(A) is accordingly set aside and the Assessing Officer is directed to restore the claim of the assessee to be non speculative in nature. Appeal of assessee allowed.
|