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M/s. Envision Investment & Finance Pvt. Ltd. Versus The DCIT, Range 9 (1) , Mumbai

2015 (8) TMI 1158 - ITAT MUMBAI

Set off of loss from trading in shares against profit earned - whether CIT(A) erred in holding that provisions of section 43(5), clause (d) is applicable from 25.01.2006 being the date of notification of Bombay Stock Exchange (BSE) & National Stock exchange(NSE) as recognized stock exchange, ignoring the fact that the provisions of section 43(5), clause (d) is inserted w.e.f. 01.04.2006? - Held that:- In the light of the decision of DLF Commercial Developers Ltd. (2013 (7) TMI 334 - DELHI HIGH C .....

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chinery, depreciation, reserves for shipping business, rehabilitation fund, expenditure on certain eligible objects or schemes, deductions, amounts not deductible, profits chargeable to tax, etc. The assessee is no doubt correct in contending that the only definition of derivatives is to be found in Section 43 (5); yet the Court cannot ignore or overlook that the definition ' to the extent it excludes such transactions from the mischief of the expression "speculative transactions" is confined in .....

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objective of Section 73- apparent from the tenor of its language is to deny speculative businesses the benefit of carry forward of losses. As no distinguishing decision has been brought on record by the Ld. DR in favour of the Revenue, respectfully following the decision of the Hon’ble High Court of Delhi and for the sake of completeness of adjudication, we direct the AO to allow the set off of loss against the gains. - Decided in favour of assessee.

Rebate u/s. 88E - Held that:- A pe .....

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VIJAY PAL RAO AND SHRI N.K. BILLAIYA, JJ. For The Appellant : Shri Randhir Kumar Gupta For The Respondent : Shri Vijay Mehta ORDER PER N.K. BILLAIYA, AM: These are appeal by the Revenue and cross objection by the assessee against the very same order of the Ld. CIT(A)-19, Mumbai dated 14.12. 2009 pertaining to Assessment year 2006-07. The appeal and the cross objection were heard together and are disposed of by this common order for the sake of convenience. ITA No. 2138/M/2010 - Revenue s appeal .....

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se and in law, the Ld. CIT(A) erred in directing the Assessing Officer to allow set off of loss from trading in shares against profit earned upto 25.01.2006 without appreciating the fact that provisions of section, 43(5)(d) was inserted w.e.f. 01.04.2006 and hence set off of loss from shares against the income, is not allowable. 3. On the facts and in the circumstances of the case and in law, the Ld. CIT(A) erred in directing the Assessing Officer to allow credit of Security Transaction Tax(STT) .....

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res ₹ 24,25,505/- Loss on fall in value of shares Rs. (92,46,676) Net figure (-) ₹ 68,21,171/- 4. The assessee was asked to explain as to why this loss should not be treated as speculation loss invoking the provision of Explanation of Sec. 73 of the I.T. Act, 1961. The assessee filed a detailed reply which read as under: Application of provision of explanation to Sec. 73 in respect of fall in value of closing stock by ₹ 92,46,676/-. From the perusal of the Profit & Loss a/c .....

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61. Our Submission We may refer the provision of section 43(5), proviso (d), which is inserted by Finance Act, 2005, which has excluded derivative transaction from the definition of speculation. The relevant part of section 43(5), proviso (d) is reproduced herein below. (d) An eligible transaction in respect of trading in derivative referred to in clause (ac) of section 2 of securities contract (Regulation) Act 1956, (42 of 1956) carried out, in a recognized Stock Exchange, shall not be deemed i .....

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recognizing both the exchanges, for the purpose of s.43(5}, proviso(d) a copy notification is enclosed herewith. In otherwords, the Profit /Loss on derivative transaction up to 24/01/2006 is speculative Profit/loss. We submit that in F&O (Derivative) transaction, up to 25/01/2006, there is Profit of ₹ 49,18,10,934/where is nothing but speculative transaction. We submit that the profit up to 25/01/2006, is speculation income and the loss due to fall in value of share, i.e. speculation, .....

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.2006 vide notification No. 2 of 2006 for the purpose of S. 43(5) proviso(d), according to which the profit/loss on derivative transaction upto 24.1.2006 is to be treated as speculative profit/loss therefore, the proviso(d) to Sec. 43(5) is inserted w.e.f. 1.4.2006 and is applicable from A.Y. 2007-08. Since the assessee s case is for A.Y. 2006-07, therefore, is not covered by this proviso. The AO further declined to entertain the claim of the assessee to set off loss against profit on sale of sh .....

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as speculative loss . 5.1. The AO further denied the rebate claimed u/s. 88E of the Act holding that assessee s income has been assessed under the head Speculative income/loss therefore the assessee is not entitled for rebate u/s. 88E of the Act. 6. Aggrieved by this, the assessee carried the matter before the Ld. CIT(A) and reiterated what has been stated/submitted during the course of the assessment proceedings. After considering the facts and the submissions qua the impugned notification, the .....

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o A.Y. 2006-07 and onwards. Hence it is held that the profit upto 25.1.2006 is in the nature of speculation and is to be set off against loss incurred in trading in shares. The AO will verify and compute the profit earned upto 25.1.2006 and to that extent the appellant shall be allowed set off against loss from trading in shares. The AO will verify and compute the profit earned upto 25.1.2006 and to that extent the appellant shall be allowed set off against loss from trading in shares. 7. In so .....

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nds of appeal taken by the Revenue are contrary to the findings of the AO, which means that the department is trying to improve upon the findings of the AO, which is against the settled decision of law. Referring to the decision of the Tribunal in the case of ACIT Vs Ms. Aishwarya K. Rai, 127 ITD 204, the Ld. Counsel pointed out the observations of the Tribunal, wherein the Tribunal has held as under: It is no doubt true that the Ld. DR can make any arguments in support of the stand taken by the .....

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iew was taken by the Tribunal, Pune Bench in the case of ITO Vs Anant Y. Chavan 126 TTJ 984. Referring to the Special Bench decision of the Tribunal, Mumbai in the case of Mahindra & Mahindra 313 ITR (Trib.) 263 particular page 322 the Ld. Counsel pointed out to the observations of the Special Bench which read as under: In our considered opinion, the Ld. Departmental Representative has no jurisdiction to go beyond the order passed by the Assessing Officer. He cannot raise any point different .....

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his finding of the AO has been set aside by the Ld. CIT(A) by holding that the proviso is w.e.f. 1.4.2006, therefore, in our considered opinion by ground No. 1 taken by the Revenue, the Revenue wants to improve upon the assessment order which is not permissible as discussed elsewhere. 11.2. Having said all that on facts of the case, the Ld. Counsel heavily relied upon the decision of the Hon ble Delhi High Court in the case of DLF Commercial Developers Ltd. 261 CTR (Del) 127 and stated that the .....

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Section D, which deal with computation of business income. The said provisions provide for matters relating to computation of such income, rent taxes, insurance of buildings, repairs of plant and machinery, depreciation, reserves for shipping business, rehabilitation fund, expenditure on certain eligible objects or schemes, deductions, amounts not deductible, profits chargeable to tax, etc. The assessee is no doubt correct in contending that the only definition of derivatives is to be found in .....

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ce 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 provi .....

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h mentioning. The stated objective of Section 73- apparent from the tenor of its language is to deny speculative businesses the benefit of carry forward of losses. Explanation to Section 73 (4) has been enacted to clarify beyond any shadow of doubt that share business of certain types or classes of companies are deemed to be speculative. That in another part of the statute, which deals with computation of business income, derivatives are excluded from the definition of speculative transactions, .....

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