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TMI Blog2012 (8) TMI 483X X X X Extracts X X X X X X X X Extracts X X X X ..... his common order. 2. The assessee is a CEO in Newgen Imaging Systems Pvt.Ltd. Apart income from salary, the assessee had earned income from dividend and capital gains from transaction in shares. The assessee had also transacted in futures & options. However, he suffered loss from such transactions. The assessee filed return of his income relevant to the assessment year 2006-07 on 31.07.2006 showing total income of Rs.1,40,12,172/-. The return of the assessee was processed under section 143(1) on 8.12.2006. Subsequently, the case of the assessee was selected for scrutiny and notice under section 143(2) was issued to the assessee on 2.7.2007. During the year, the assessee claimed loss of Rs.36,38,488/- from transactions in futures & options ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... India for 91 days during the A.Y 2006-07 and 83 days during AY 2007-08). His intention is to invest in shares and not to do regular business in shares. Just to cover earlier year losses and as advised by the brokers he had entered into derivative transactions and taking into account the principle of consistency [Janak S.Rangamala Vs. ACIT 2007 11 SOT 627 (Mum)] specifying that - determination on the basis of books of accounts and intention - to be the decisive factors - taking into account that unless there is a material change, principle of consistency should be applied and also taking into account the intention of the applicant at the time of purchase, frequency of transactions, regularity/continuity of the transactions, volume of transa ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ment transaction and not as business or speculative transactions. 5. The D.R. appearing on behalf of the Revenue submitted that futures & options are not delivery based transactions and therefore they fall under the category of speculative transactions. In order to support his contentions, he relied on the judgement of the Hon'ble Calcutta High Court in the case of Abdul Gani Haji Abib Vs. CIT., reported as 72 ITR 6. 6. On the other hand, Authorised Representative of the assessee submitted that futures & options are part of derivatives and are not speculative transactions. He strongly supported the order of the CIT(A). In order to support his contentions, the Authorized Representative relied on the judgement of the Hon'ble Bombay High Cou ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... peculative transaction" means a transaction in which a contract for the purchase of sale of any commodity, including stocks and shares, is periodically or ultimately settled otherwise than by the actual delivery or transfer of the commodity or scrips: Provided that for the purpose of this clause - ] a) xxxxxx b)xxxxx c)xxxxx d) an eligible transaction in respect of trading in derivatives referred to in clause (ac) of section 2 of Securities Contracts (Regulation) Act, 1956 carried out in a recognized stock exchange shall not be deemed to be a speculative transaction. The CBDT circular no.3/2006 dated 27.02.2006 specifically provides that amendment in section 43(5) by the Finance Act, 2005 shall be applicable from assessm ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... uch a situation, we find guidance from the observations made by Hon'ble Supreme Court, in the case CIT vs Hindustan Bulk Carriers Ltd (259 ITR 449), as follows: A construction which reduces the statute to a futility has to be avoided. A statute or any enacting provision therein must be so construed as to make it effective and operative on the principle expressed in maxim ut res magis valeat quam pereat i.e., a liberal construction should be put upon written instruments, so as to uphold them, if possible, and carry into effect the intention of the parties. [See Broom's Legal Maxims (10th Edition), page 361, Craies on Statutes (7th Edition) page 95 and Maxwell on Statutes (11th Edition) page 221.] A statute is designed to be workable and t ..... X X X X Extracts X X X X X X X X Extracts X X X X
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