9911796707
TMI Blog2016 (12) TMI 407X X X X Extracts X X X X X X X X Extracts X X X X ..... e the Learned Income Tax Appellate Tribunal, "B" Bench Kolkata erred in law in holding that the meaning of speculative transaction as contained in Section 43(5) of the Income Tax Act, 1961 is only for the purpose of Section 28 to 41 of the Income Tax Act, 1961 and it does not apply to the other sections of the Act? c) Whether on the facts and in the circumstances of the case the Learned Income Tax Appellate Tribunal, "B" Bench Kolkata erred in law in holding that the aggregation of the share trading loss and profit from derivative transactions should be done before the Explanation to Section 73 of the Income Tax Act, 1961 is applied? d) Whether the impugned order is bad, arbitrary, illegal perverse and the same is nothing but a total non-application of mind of the Income Tax Appellate Tribunal, Kolkata and the same is liable to be set aside and/or quashed?" The assessee earned a sum of Rs. 2,26,12,178/- from trading in derivatives (future and options). About Rs. 11 lakhs were also earned on account of share difference, interest on loan, interest on FDR and consultancy charges. The assessee incurred losses in share trading to the extent of Rs. 1,71,52,934/-. The question was wh ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... led by the A.R. it is noticed that the assessee company is a NBFC and had derivative trading income of Rs. 2,26,12,179/- in F & O Section and trading loss from share trading to the extent of Rs. 1,71,52,934/-. The assessee had contended that share trading and F & O are both inter dependent and identical business activities and he further contended that F & O has been entered into with a view to hedge the shares held by the company. The A.R. has relied upon the judgment of 128 TTJ Mumbai in case of Metropolitan Traders Pvt. Ltd. Vs. ITO while the A.O. referred to Sec.43(5) proviso (d) and treated the F & O income as business profits. This section came into existence w.e.f.01-04-2006. Therefore, this ITAT judgment is not applicable due to specific amendment u/s.43(5) of the I.T. Act, 1961 w.e.f. 01-04-2006 and F & O transaction is treated as business income which is different from trading of shares. Hence, ground no.4 is dismissed." The CIT (A), however, allowed the ground no.3 on the basis of the following reasoning:- "8. Regarding ground no.3 relates to disallowance of Rs. 1,71,52,934/- u/s.73 of the I.T. Act, 1961. The assessee had contended that the company was a NBFC under RBI ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... arity be called proper business. Under Section 70 of the Act, the assessee is entitled to have the loss set off against his income from any other source under the same head unless otherwise provided. Therefore answer to the question is that the assessee is entitled to have the loss arising out of deemed business set off against the income arising out of business proper unless otherwise provided. The question however remains whether the explanation to Sub-Section (4) of Section 73 relied upon by Mr. Lodh provides otherwise. A plain reading of the explanation quoted above cannot be said to have provided otherwise. In that case the irresistible conclusion is that the assessee is entitled to set off such loss arising out of deemed business against the income arising out of business proper. 12. The learned Tribunal has supported the contention of the revenue relying upon the judgement of the Delhi High Court quoted above. The views expressed by the Hon'ble Delhi High Court are contained in a part of the sentence, which is as follows:- "by all accounts the derivatives are based on stocks and shares, which fall squarely within the Explanation to Section 73(4)." 13. We are inclined to ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e judgment of the High Court of Judicature at Fort William as "careful and able", it was stated that it did not "come to close quarters with the judgment which it reviews, and indeed never discusses or even alludes to the reasoning of the Subordinate Judge". It is also elementary that the Appellate Court interferes not because the judgment is not right but because the judgment is wrong. If any authority is required, reference may be made to the judgment in the case of The Dollar Company, Madras -Vs- Collector of Madras reported in AIR 1975 SC 1670 wherein the following views were taken:- "At the outset, we must warn ourselves of the broad guideline that in an appeal from an award granting compensation this Court will not interfere unless there is something to show not merely that on the balance of evidence it is possible to reach a different conclusion but that the judgment cannot be supported by reason of a wrong application of principle or because some important point affecting valuation has been overlooked or misapplied. Moreover, there is a prudent condition to which the appellate power, generally speaking, is subject. A court of appeal interferes not when the judgment under ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... is also in conformity with the views of the Wanchoo Committee, which is as follows:- "19.2 The object of this provision is to curb the device sometimes resorted to by business houses controlling groups of companies to manipulate and reduce the taxable income of companies under their control." Mr. Khaitan submitted that before amendment of sub-section 5 of Section 43 by which dealings in derivatives including future and options were taken out of the category of speculative transactions, any profit or loss arising out of such operations could be set off against profit or loss arising out of dealings in shares. That no doubt was the case so long as the status of dealing in derivatives including future and options was not brought out of the category of speculation. The reasoning is that previously dealings in shares and dealings in derivatives were both speculative transactions but by virtue of amendment made in the year 2006, dealings in derivatives ceased to be speculative transaction but an identical provision was not made with regard to the dealings in shares or with regard to persons having principal business in shares. The law makers realised that identical provisions shou ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... That was a well considered step. We are, as such unable to hold that the amendment made with effect from 1st April, 2015 shall have a retrospective effect on the plea that it is curative in nature. That can only be done by legislature and not by us. Mr. Khaitan relied upon a judgement in the case of Commissioner of Income-Tax, reported in [2009] 319 ITR 306 [SC], wherein Their Lordships held that:- "when a proviso in a section is inserted to remedy unintended consequences and to make the section workable, the proviso which supplies an obvious omission therein is required to be read retrospectively in operation, particularly to give effect to the section as a whole". We are unable to see how does this judgement have any application? Both dealings in shares and dealings in derivatives were at one point of time within the umbrella of speculative transaction. In the year 2006, dealings in derivatives ceased to a speculative transaction. But dealings in shares by a company, whose principal business was dealing in shares, were deliberately retained within the ambit of speculative transaction and has ultimately been lifted only in the year 2015. It cannot be said that this was a step ..... X X X X Extracts X X X X X X X X Extracts X X X X
|
