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2015 (10) TMI 1616 - ITAT MUMBAI

2015 (10) TMI 1616 - ITAT MUMBAI - TMI - Addition on account of mark to market loss claimed on account of trading in derivative transactions - CIT(A) deleted the addition - Held that:- Mark to market losses on account of trading in derivative transactions are allowable deductions. See KOTAK MAHINDRA INVESTMENT LTD. case [2013 (7) TMI 355 - ITAT MUMBAI ] Hence this issue is accordingly decided in favour of the assessee - ITA No. 1764/Mum/2013 - Dated:- 15-6-2015 - R C Sharma, AM And Sanjay Garg, .....

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CIT(A) was justified in deleting the addition of ₹ 8,55,86,854/- made on account of mark to market loss claimed on account of trading in derivative transactions, without appreciating the fact that the loss claimed on the basis of value of derivative as on 31st March is merely a notional loss and the actual loss or the profit in respect of such derivative transaction would get crystallized only at the time of settlement of such transaction." 3. At the outset, the Ld. A.R. has submitted .....

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covered in favour of the assessee by the judgment of the co-ordinate bench of this Tribunal dated 03.05.13 passed in ITA No.1502/M/12 (assessment year 2008-09) in the case of "Kotak Mahindra Investment Ltd. " wherein the co-ordinate bench of this Tribunal while relying upon the law laid down by the Hon'ble Supreme Court in the case of CIT vs. Woodward Governor India (P.) Ltd. (2009) 179 Taxman 326, has observed that the stock future is one of the types of forward contract, which is .....

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mined price is compared with the actual market rate of the booked stock and the difference, if any, is paid by the parties without actually purchasing or selling the stocks in question. The daily market rate of the said stock in question is taken and the difference between the market rate and the predetermined rate is daily calculated and the difference margin, if any, is received/paid to the broker and finally on the stipulated date the contracts are squared off resulting into actual loss or pr .....

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he difference between the predetermined price and market price is settled daily on mark-to-market basis. In such type of contracts, it is not the stock value which is subject matter of the contract rather the contract itself is the stock in trade which is purchased by paying/depositing the initial margins on percentage basis to the broker taking into consideration maximum anticipated rise or fall in the price of the stock in future. The difference of margin is calculated and settled on daily bas .....

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a "loss" even though said amount has not been given from the pocket of the assessee. It has been further observed that the ordinary principle of commercial accounting requires that in the Profit & Loss account the value of stock in trade at the beginning and at the end of the year should be entered at cost or market price, whichever is lower. While anticipated loss is taken into account, anticipated profit in the shape of appreciated value of the closing stock is not brought into .....

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