TMI Blog2012 (9) TMI 447X X X X Extracts X X X X X X X X Extracts X X X X ..... ction 43(5), it would be seen that the rules which has been prescribed are only procedural in nature. When a rule or provision does not effect or empower any right or create an obligation but merely relates to procedural mechanism, then it is deemed to be retrospective unless such an inference is likely to lead to an absurdity - Once in the statute, it has been provided that w.e.f. 1st April 2006, an eligible transaction carried out in a recognized Stock Exchange will not be treated as speculation transaction, then simply because procedural mechanism has taken a long time to recognize the Stock Exchange - in favour of assessee. - IT APPEAL NO. 2742 (MUM.) OF 2011 - - - Dated:- 12-9-2012 - P.M. JAGTAP, AMIT SHUKLA, JJ. ORDER Am ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... otice, as to why loss in derivative trading should not be treated as speculation loss, the assessee replied as under:- a. Derivative transactions are treated as business income / loss particularly so when they are part of regular business transaction. b. Dealings in derivatives being a separate kind of transaction don't involve purchase and sale of shares and therefore loss on account of derivative trading cannot be speculation loss. Reliance was placed on the decision of Mumbai Bench of the ITAT in the case of DCIT v. SSKI Investors Services P. Ltd. (113 TTJ 511) and RB Securities Pvt. Ltd. v. ITO . c. Derivative transactions are non speculative and it is not necessary that the exchanges have to be notified." 3. T ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... Further, it was submitted that the amendment brought w.e.f. 1st April 2006, in clause (d) of the proviso to sub-section (5) of section 43, specifically provided that eligible transactions in trading derivative carried out in recognized Stock Exchange shall not be deemed to be speculative transaction even though the trading in MCX has been notified as recognized exchange for the purpose of section 43(5) from 22nd May 2009. Since the same being clarificatory in nature, therefore, the same has to be construed retrospectively from the assessment year 2006-07. Lastly, it was submitted that the derivative is a financial instrument and, therefore, it is not a speculation transactions in a strict sense in terms of section 43(5). In support of this ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... is incorrect. Otherwise there was no requirement for bringing a specific clause (d) in proviso to section 43(5). 7. On the other hand, the learned Counsel for the assessee submitted that clause (d) of proviso to section 43(5), which is applicable from 1st April 2006, is prospective in nature and will be applicable to the assessment year 2006-07 onwards as held by Kolkata Special Bench of the Tribunal in Shree Capital Services Ltd. v. ACIT , reported in 121 ITD 498 (SB) (Cal.). The notification dated 22nd May 2009, is by way of subordinated legislation which cannot override the principal legislation enacted by the Parliament. It only clarifies the mandate of statute and will not override the statutory provisions. Since there is no di ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e.f. 1st April 2006, which provided that an "eligible transaction in respect of trading in derivative referred to in clause (a) of section (2) of Securities Contract (Regulation) Act, 1956, carried out in a recognized Stock Exchange" shall not be deemed to be speculative transactions. Thus, from 1st April 2006, trading in derivative carried through the recognized Stock Exchange was treated as non-speculative transactions. For the purpose of clause (d), Rule 6DDA and 6DDB of I.T. Rules, 1962, provided that notification of recognized Stock Exchange has to be done by the Central Govt. (CBDT). In pursuance to this Rule, the CBDT has notified the MCX Stock Exchange Ltd. by S.O. 1327(E) dated 22nd May 2009. 9. Now, the issue is whether such a ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ansactions carried out through MCX Stock Exchange after 1st April 2006, would be eligible for being treated as non-speculation within the meaning of clause (d) of proviso to section 43(5). Various case laws, as have been relied upon by the learned Counsel also, support this view that recognition by the Central Govt. of the Stock Exchange from a later date will not debar the transaction as non-speculation, especially after 1st April 2006. Therefore, in our opinion, the assessee's derivative trading through MCX Stock Exchange in the assessment year 2007-08 is non-speculation transaction and, therefore, the loss incurred in such transactions is to be treated as normal business loss and, accordingly, the findings of the Commissioner (Appeals), ..... X X X X Extracts X X X X X X X X Extracts X X X X
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