TMI Blog2018 (4) TMI 802X X X X Extracts X X X X X X X X Extracts X X X X ..... Explanation to Section 73 will not be applicable to such transactions and hence, the loss incurred by the assessee in derivative transactions through recognised stock exchange has to be set off against other business income as per provisions of the Act. The transaction carried out by the assessee is a non speculative transaction and thus Section 43(5) is not attracted to the facts of the instant case and likewise the assessee was trading in derivatives and not in shares, so the loss suffered by the assessee in trading in derivatives is excluded from the ambit of Explanation to Section 73 - We concur with the decision taken by the Appellate Tribunal as well as the Commissioner of Income Tax (Appeals) in rejecting the view taken by the Assessing Officer to add ₹ 60,66,466/- as loss, on open market trading to the income of the assessee. - Decided against revenue - T.C.A. No. 853 of 2017 - - - Dated:- 20-2-2018 - S. Manikumar And V. Bhavani Subbaroyan, JJ. For the Appellant : Mr.TR.Senthilkumar for Mr.J.Narayanaswamy For the Respondent : Mr.MP.Senthilkumar JUDGMENT ( Judgement of this Court was made by S. Manikumar, J. ) Tax Case Appeal is filed agains ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ses, for consideration is with regard to addition of ₹ 60,66,466/-. According to the learned departmental representative, the assessee claimed the sum of ₹ 60,66,466/- as loss in open market trading. According to the Ld. D.R., the assessee traded in Multi Commodity Exchange. The assessee claimed that the transaction is only a business transaction. Referring to Section 43(5) of the Income-tax Act, 1961 (in short 'the Act'), the Ld. D.R. submitted that the assessee could not produce necessary material, before the Assessing Officer, to prove that the transaction was carried out through Multi Commodity Stock Exchange. No proper stamped voucher or contract note was produced before the Assessing Officer. Even assuming for a moment that the transaction was carried out through Multi Commodity Stock Exchange, the business was carried out by the assessee only for three months, therefore, it has to be considered as speculative business, hence, the same cannot be set off against the other income of the assessee. 3. The Ld. Departmental Representative further submitted that the assessee s main business is retail gold jewellery. Therefore, Explanation to Section 73(4) w ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... w, Tribunal was right in holding that transactions in commodity derivatives done through Multi Commodity Stock Exchange cannot be treated as speculative transaction as per Section 43(5) ? 3. Whether on the facts and circumstances of the case and in law, Tribunal was right in perversely holding that transaction in derivatives done by assessee cannot be treated as speculative transaction under Section 43(5) when assessee did not comply with any of the conditions stipulated under Section 43(5)(d) by producing any evidence to satisfy the conditions ? 8. Supporting of the above substantial questions of law, the grounds raised in the instant appeal are that: (i) The Tribunal has erred in not appreciating the fact that the assessee had traded the commodity through Multi-Commodity Stock Exchange an un recognised exchange which is a different entity from the MCX Stock Exchange which is a recognised exchange. (ii) The Tribunal ought to have appreciated the Multi-Commodity Stock Exchange is not a recognised stock exchange and had mistook the said exchange as MCX Stock Exchange which is a recognised exchange. (iii) Tribunal has erred in holding that the transaction in d ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... rried out by the assessee cannot be considered as 'eligible transaction' and the same has to be treated as 'speculative transaction' and (ii) irrespective of the fact whether the transactions are covered by the definition of 'eligible transaction' and the assessee will not be eligible for set off and carry forward of the loss of ₹ 60,66,466/- in view of Explanation to Section 73 of the Income Tax Act. 12. For better understanding of the relevant provisions relied on by the Assessing Officer, viz., Section 43(5)(d) and Explanation to Section 73 are extracted hereunder: Definitions of certain terms relevant to income from profits and gains of business or profession. 43. In sections 28 to 41 and in this section, unless the context otherwise requires (1) actual cost means ............ (2) paid means ........... (3) plant includes .......... (4) (i) scientific research means ...... (5) speculative transaction means a transaction in which a contract for the purchase or sale of any commodity, including stocks and shares, is periodically or ultimately settled otherwise than by the actual delivery or transfer of ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... a recognised stock exchange as referred to in clause (f) of section 2 of the Securities Contracts (Regulation) Act, 1956 (42 of 1956) and which fulfils such conditions as may be prescribed and notified by the Central Government for this purpose; x x x x x Section 73: Losses in speculative business: (1) Any loss, computed n respect of a speculation business carried on by the assessee, shall not be set off except against profits and gains, if any, of another speculation business. (2) Where for any assessment year any loss computed in respect of a speculation business has not been wholly set off under sub-section (1), so much of the loss as is not so set off or the whole loss where the assessee had no income from any other speculation business, shall, subject to the other provisions of this Chapter, be carried forward to the following assessment year, and (i) it shall be set off against the profits and gains, if any, of any speculation business carried on by him assessable for that assessment year; and (ii) if the loss cannot be wholly so set off, the amount of loss not so set off shall be carried forward to the following assessment year and so on. ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ssment proceedings. However, an adverse assessment order has been preferred. 15. After considering the rival submissions, in the appeal filed by the assessee, the Commissioner of Income Tax (Appeals), vide order dated 16.12.2015, held as follows: 5.1.6. For the transactions in F O segments to qualify for being non-speculative transactions as per the definitions in Section 43(5) the transactions have to be eligible transactions and the transactions have to be carried out through recognised MCX stock exchange. The appellant has entered into transactions which are supported by contract notes having a unique client identity number. Such transactions were carried out through a stock broker on a screen based system. These transactions are eligible transactions. The transactions were carried out in a recognised stock exchange. The AO has held that the appellant failed to prove that the transactions were carried out through MCX Stock Exchange Ltd. which got notified by Notification No.46/2009 dated 22.05.2009. In terms of Explanation to Section 73(4) in the case of a company, business of purchase and sale of shares is deemed to be speculative business. A derivative is a financial ..... X X X X Extracts X X X X X X X X Extracts X X X X
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