TMI Blog2015 (6) TMI 284X X X X Extracts X X X X X X X X Extracts X X X X ..... essee on derivatives and the profit earned if trading of the commodity as speculative in nature, For the aforesaid view, we are also fortified by the decision of the ITAT Mumbai 'B' Bench in the case of R.B.K. Securities (P) Ltd. Vs ITO (2008 (7) TMI 949 - ITAT MUMBAI). - Decided against revenue. - ITA No. 2181/Del/2012, CO No. 241/Del/2012 - - - Dated:- 27-5-2015 - N K Saini, AM And George George K, JM,JJ. For the Appellants : Ms Rano Jain, Shri V Mohan, CA For the Respondent : Smt Parwinder Kaur, Sr. DR ORDER Per: N K Saini This appeal by the department and the Cross Objection by the assessee are directed against the order dated 22.02.2012 of the ld. CIT(A)-XIII, New Delhi. 2. First we will deal with the Departmental appeal in ITA No. 2181/Del/2012. The only effective ground raised in this appeal reads as under: 1. On the facts in the circumstances of the case Ld. CIT(A) has erred in holding, and consequently deleting the disallowance of loss made at ₹ 18,90,350/-, that transactions related to sale purchase of shares and derivatives/commodity trading were not speculative transactions and consequently allowing set-off of losses incurred from ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... f ₹ 71,83,701/- and the balance loss of ₹ 18,90,350/- was treated as speculative loss which was allowed to be carried forward and set off against speculative profit. 4. Being aggrieved the assessee carried the matter to the ld. CIT(A) and the submissions made as incorporated in para 10.2 of the impugned order were as under: 10.2 Submission of the appellant Your honor during the year under consideration the appellant was engaged in the business of dealing in shares and securities. The details of profits earned and the losses incurred are as follows: Profit from dealing in shares (delivery based) 4,59,450 Profit from dealing in shares (non delivery based) 1,56,378 Profit from Trading in Commodity Futures 74,72,122 Loss from Trading in Shares Futures 95,06,474 The ld. AO while computing the income for the year under consideration by making his own calculations disallowed the loss of ₹ 95,06,474/- incurred by the appellant on account of trading in share futures to be set off against the bus ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... means any transaction,- (A) carried out electronically on screen-based systems through a stock broker or sub-broker or such other intermediary registered under section 12 of the Securities and Exchange Board of India Act, 1992 (15 of 1992) in accordance with the provisions of the Securities Contracts (Regulation) Act, 1956 (42 of 1956) or the Securities and Exchange Board of India Act, 1992 (15 of 1992) or the Depositories Act, 1996 (22 of 1996) and the rules, regulations or bye-laws made or directions issued under those Acts or by banks or mutual funds on a recognized stock exchange; and (B) which is supported by a time stamped contract note issued by such stock broker or sub-broker or such other intermediary to every client indicating in the contract note the unique client identity number allotted under any Act referred to in sub-clause (A) and permanent account number allotted under this Act; (ii) recognized stock exchange means a recognized stock exchange as referred to in clause (f) of section 2 of the Securities Contracts (Regulation) Act, 1956 (42 of 1956) and which fulfils such conditions as may be prescribed and notified 23 by the Central Government for this pur ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... tion of the AO was contrary to the provision of section 43(5) clause (c) and (d) of the Act. According to him the loss on derivative trading was to be set off against the profit earned by the assessee from commodity futures and also commission earned from sale of flats and sale purchase of shares. The ld. CIT(A) held that the AO was not justified in treating the transactions of derivative trading and commodity future as speculative, he directed the AO to allow the set off of loss incurred from derivative trading against the profit earned from commodity future, sale purchase of shares and commission earned on sale purchase of land. The reliance was placed on the following case laws: - Smt. Seema Jain Vs ACIT 6 ITR (TRIB) 488 (Del.) - G.K. Anand Bros. Buildwell (P.) Ltd. Vs ITO, Ward- 12(2), New Delhi (2009) 34 SOT 439 (Del.) - R.B.K. Securities (P.) Ltd. Vs ITO 118 TTJ (Mum) 465 6. Now the department is in appeal. The ld. DR strongly supported the assessment order dated 10.12.2009 and reiterated the observations made by the AO. 7. In his rival submissions the ld. Counsel for the assessee reiterated the submissions made before the authorities below and strongly s ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... d the profit relating to delivery based share trading, trading in commodities and earning commission on booking of flats. Profit earned from those activities by the assessee cannot be considered as speculative in nature. Now question arises as to whether the loss suffered by the assessee on derivative was to be treated as a speculative loss or to be set off against the regular business profit. To resolve this issue, it is relevant to discuss the provisions contained in explanation to clause (d) of Sub-section (5) to Section 43 of the Act which provides that eligible transaction in respect of trading in derivatives would not be deemed to be speculative transaction. The said provision read as under: 43(5) Speculative transaction means a transaction in which a contract for the purchase or sale of any commodity, including stocks and share, is periodically or ultimately settled otherwise than by the actual delivery or transfer of the commodity or scrips: (a) .. (b) (c) .. (d) an eligible transaction in respect of trading in derivatives referred to in clause (ac) of section 2 of the Securities Contracts (Regulation) Act, 1956 (42 of 1956) carried out in a recognized s ..... X X X X Extracts X X X X X X X X Extracts X X X X
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