TMI Blog2017 (7) TMI 35X X X X Extracts X X X X X X X X Extracts X X X X ..... currency transactions was without any legal basis. ii. That claim of currency loss relating to derivative transactions carried out at recognized stock exchange is in the nature of business loss as per sec. 2 (ac) of the securities contracts (Regulation) Act, 1956. ii. That the CIT(A) has not properly appreciated the object and scope of sec. 2(ac) of the Securities Contracts (Regulation) Act, 1956 and as such confirmation of adjustment in the intimation u/s. 143(1) is not justified under the law. 3. That even otherwise, adjustment in the intimation u/s. 143(1) is not justified as same is not the nature of any arithmetical error or an incorrect claim and as such adjustment in the intimation is illegal, arbitrary and without jurisdiction. That intimation u/s. 143(1) and order of the CIT(A) are not sustainable on facts and under the law in respect of claim of business loss relating to currency derivative trading. 2. The only grievance of the assessee in this appeal relates to the adjustment of derivatives loss amounting to ₹ 15,50,100/-. Facts of the case in brief are that the assessee filed his return of income declaring an income of ₹ 23,52 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... . E. Sarojini (2007) 295 ITR 270 (Mad). In this case the hon 'ble Court held that the disallowance of claim made in the IT return cannot be made under the prima facie adjustment u/s 143(l)(a) of the Act.. A debatable issue can never be a subject matter for consideration while passing an order u/s 143(1) of the Act. [Facts: In this case the assessee claimed exemption u/s 54 of the Act for making investment in the construction of additional floor of existing building. The Id. AO disallowed the claim on the ground that the assessee had a residential house at the time of sale of the vacant site and that the sale proceeds were utilized for extension of the existing building]. 9. That the Id. AO ignored the fact that while processing return u/s 143(1) of the Act it is not open to disregard income as declared in the return except adjustment for arithmetical error or incorrect apparent claim. The Id. AO wrongly ignored the fact that even if there is any defect or deficiency in the claim of the assessee, a deficiency notice should have been sent to him u/s 139(9) of the Act. Without complying with the mandate given in the section the IT order ids 143(1) is illegal and invalid. Tha ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... of ₹ 15, 50,103/- in derivative transactions are normal business loss as per S. 43(5) proviso (d) of the Act. As per the proviso to the section derivative transactions done through recognized stock exchange electronically on screen based system through a Stock Broker are recognized as normal business transaction,s. The loss suffered ini derivative transactions is eligible for set off against other heads of his income assessable for the assessment under any other head u/s 71 of the Income Tax Act. 3.1 It is further submitted that transactions done through stock exchanges are recognized stock exchanges as referred in s. 2(f) of the Securities Contracts (Regulation) Act, 1956 (42 of 1956) to and were carried out through stock broker, a member of both the exchanges. The assessee is enclosing here with the photo copy of the letter of CPR Capital Service Ltd., Stock Broker, in support of the contention. In its letter the broker has confirmed that both exchanges are recognized stock exchange as per SEBI guidelines. 4. In view of the above it is requested to accept the contention of the assessee and oblige. 5. The learned CIT(A) after considering the submissions o ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... vered by following the decisions of ITAT Mumbai I :- (i) IVF Advisors Private Limited vs. The Asstt. Commissioner of Income Tax. 10(1) Mumbai in I.T.A. No. 4798/Mum/2012 for the A.Y. 2009-10, order dated 13.02.2015 (ii) Inventurus Knowledge Services (P.) Ltd. vs. Income Tax Officer, Mumbai, 5(2)(1) (2016) 65 taxmann.com 94 (Mum). 7. In his rival submissions, the learned DR strongly supported the impugned order passed by the CIT(A). 8. I have considered the submissions of both the parties and carefully gone through the material available on the record. It is noticed that an identical issue having similar facts has been decided by the ITAT I Bench Mumbai in the aforesaid referred case of IVF Advisors Private Limited vs. The Asstt. Commissioner of Income Tax, Range 10 (1), Mumbai in ITA No. 4798/Mum/2012 for the AY 2009-10 wherein vide order dated 13.2.2015, it has been held that derivatives transaction cannot be termed as speculative in nature. The relevant findings have been given in para 7.1 to 7.5 of the aforesaid order which read as under: 7.1 Thus, it can be seen that the derivatives also includes securities. The definition of eligible trans ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... else. In other words, Derivative means a forward, future option or any other hybrid contract of pre determined fixed duration, linked for the purpose of contract fulfillment to the value of a specified real or financial asset or to an index of securities. With Securities Laws (Second Amendment) Act, 1999, Derivatives has been included in the definition of Securities. The term Derivative has been defined in Securities Contracts (Regulations) Act, as: A Derivative includes: - a. a security derived from a debt instrument, share, loan, whether secured or unsecured, risk instrument or contract for differences or any other form of security; b. a contract which derives its value from the prices, or index of prices, of underlying securities; It is further provided by SEBI that in Aug-2008 SEBI permitted exchange traded currency derivative. Considering the relevant provisions of the relevant Acts, discussed herein above in the light of Hon ble Madras High Court and the answers given to frequently asked questions by the SEBI and the incorporation of exchange traded currency derivative from August, 2008, there remain no iota of doubt that the transaction of ..... X X X X Extracts X X X X X X X X Extracts X X X X
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