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TMI Blog2015 (7) TMI 111X X X X Extracts X X X X X X X X Extracts X X X X ..... ovide any scope in deviating from the method prescribed in the Rule 8D of the Income Tax Rule, 1962, in calculating disallowance u/s.14A of the Income Tax Act, 1961. 3. That, on the facts and in circumstances of the case and in law, the CIT(Appeals) has erred in holding that the loss of the assessee-company from Future & Option (F&O) transactions as non-speculative loss, without having regard to the fact that derivative transactions are not delivery based transactions to be expressly covered by the provisions of Section 43(5) of the Income Tax Act, 1961. 4. That, on the facts and in circumstances of the case and in law, the CIT(Appeals) has erred in holding that the loss of the assessee-company from Future & Option (F&O) transactions as non-speculative loss, ignoring/ without having regard to the fact that the Explanation to Section 73 of the Income Tax Act, 1961 apply to the loss from delivery based transactions in shares and, therefore, this Explanation applies to loss from derivative (F&O) transactions and such loss was in the nature of speculative loss. 5. That, on the facts and in circumstances of the case and in law, the CIT(Appeals) has erred in deleting the addition of R ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ly registered with the Reserve Bank of India. During the course of scrutiny various documents and books of accounts were asked to produce and compliance were made accordingly by the Appellant. From the records, it is found that during the Financial Year 2008-09 relevant with the Asst. Year 2009-10, the appellant entered in Future & Option transactions with the recognized stock exchange in India and it incurred losses of Rs. 3,24,185/- during the financial year under consideration. The relevant documents in regard with the transactions are also produced during the assessment proceedings. The Assessing Officer has delved upon his finding on the Explanation to Section 73 and decided that the transactions are nothing but speculative by virtue to Section 73 of the Income Tax Act, 1961. On the other hand, from the material placed on record, I find that the transactions in shares and securities carried out by the appellant company are in the form of eligible transactions covered under clause (d) of sub-section (5) of section 43 of the Act. On careful consideration of the facts, I find merit in the contentions of the appellant that - (i) The Finance act, 2005 has amended the section 43(5) ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ons carried out by the assessee are not speculative transactions, as per the definition given under section 43(5), therefore, the Explanation to section 73 will not apply. Our aforesaid view is duly supported by the decision of the Hon'ble Delhi High Court in the case of CIT-vs- DLF Commercial Developers Ltd. 35 taxmann.com 280 (Delhi), in which, the Hon'ble High Court held as under: "7. It is apparent, facially, that the term "speculative transaction" has been defined only in Section 43 (5). At the same time, it is qualified, i.e. that the scope of the definition is restricted in its application to working out the mandate of Sections 28 to 41 of the Act. In terms of the Explanation to Section 73 (4) in the case of a company, business of purchase and sale of shares is deemed to ITA 94/2013 Page 8 be speculation business. However, certain companies are excluded from this Explanation which are: (i) a company whose gross total income consists mainly of income which is chargeable under the heads 'Interest on securities', 'Income from house property', 'Capital gains' and 'Income from other sources'. (ii) a company, the principal business of whi ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... net investment relative to other types of contracts that have a similar response to changes in market conditions; and (c) that is settled at a future date. Actually, derivatives are assets, whose values are derived from values of underlying assets. These underlying assets can be commodities, metals, energy resources, and financial assets such as shares, bonds, and foreign currencies. 10. It is no doubt, tempting to hold that since the expression "derivatives" is defined only in Section 43 (5) and since it excludes such transactions from the odium of speculative transactions, and further that since that has not been excluded from Section 73, yet, the Court would be doing violence to Parliamentary intendment. This is because a definition enacted for only a restricted purpose or objective should not be applied to achieve other ends or purposes. Doing so would be contrary to the statute. Thus contextual application of a definition or term is stressed; wherever the context and setting of a provision indicates an intention that an expression defined in some other place in the enactment, cannot be applied, that intent prevails, regardless of whether standard exclusionary terms (such as ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... atives are excluded from the definition of speculative transactions, only underlines that such exclusion is limited for the purpose of those provisions or sections. To borrow the Madras High Court's expression, -derivatives are assets, whose values are derived from values of underlying assets; in the present case, by all accounts the derivatives are based on stocks and shares, which fall squarely within the explanation to Section 73 (4). Therefore, it is idle to contend that derivatives do not fall within that provision, when the underlying asset itself does not qualify for the benefit, as they (derivatives - once removed from it and entirely dependent on stocks and shares, for determination of their value). 12. In the light of the above discussion, it is held that the Tribunal erred in law in holding that the assessee was entitled to carry forward its losses; the question framed is answered in favour of the revenue and against the assessee. The appeal is, therefore, allowed; there shall be no order as to costs." 6.1 The ld. AR before us could not bring to our knowledge any contrary decision which had a view contrary to the aforesaid decision of the Hon'ble Delhi High Cou ..... X X X X Extracts X X X X X X X X Extracts X X X X
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