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TMI Blog2018 (11) TMI 551X X X X Extracts X X X X X X X X Extracts X X X X ..... f the Income Tax Act, 1961 (the Act) concerning assessment year 2012-13. 2. In the captioned appeal, the assessee has filed following concise/modified grounds of appeal for adjudication purposes: "1. Ld. CIT(A) erred in law and on facts in confirming action of AO to treat business loss of Rs. 5,19,80,774/- as speculation loss by applying explanation to section 73 of the Act. Ld. CIT(A) ought to have considered submission of the appellant and ought to have treated business loss instead of treating same as speculation loss. It be so held now. 2. Ld. CIT(A) erred in confirming action of AO in disallowing Rs. 5,09,728/- u/s 14A of the Act ignoring fact that appellant suo-moto disallowed Rs. 1,35,183/- without recording satisfaction on his ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... , the AO relied upon the decision of the Hon'ble Delhi High Court in the case of CIT vs. DLF Commercial Developers Pvt. Ltd. 35 taxmann.com 280 (Del). 4. Aggrieved, the assessee preferred the appeal before the CIT(A). 5. The CIT(A) re-visited the various submissions made on behalf of the assessee but, however, found no merit therein. The CIT(A) observed that the provisions of Section 43(5) of the Act which provides definition of 'speculative transaction' applies only for the purposes of Section 28 of the Act and does not extend to other sections of the Act. On the contrary, the Explanation to Section 73 of the Act creates a deeming fiction by which the assessee, which is a company, as indicated in the said Explanation dealing with the tra ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... arising from derivative transactions are concerned, the trading in derivatives cannot be deemed to be speculative transaction at the first instance. Continuing further, the learned senior counsel for the assessee raised three broad legal contentions to prop up its case. 7.1 Firstly, Explanation to Section 73 of the Act cannot apply to loss in F&O activity which are expressly excluded from being regarded as 'speculative business' under s.43(5)(d) of the Act. For this proposition, the learned senior counsel relied upon the decision in the case of Asian Financial Services Ltd. 293 CTR 240 (Cal.) and Upkar Retail (P.) Ltd. 94 taxmann.com 450 (Ahd.). 7.2 Secondly, Explanation to Section 73 of the Act does not also apply because income under t ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... d upon the order of the lower authorities. 9. We have carefully considered the rival submissions and perused the respective orders of the AO and CIT(A). The substantive question that arises for adjudication is whether loss incurred in eligible transactions i.e. derivative transactions within the meaning of Proviso (d) to Section 43(5) of the Act not involving any purchase or sale of shares per se can be regarded as speculative loss for the purposes of set off in view of Explanation to Section 73 or not. The controversy involved in the present case is thus essentially legal in nature. 9.1 In the present appeal, the assessee seeks set off of losses arising from derivative losses as non-speculative business loss. In contrast, the Revenue has ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... allowed on this ground alone. 9.3 In view of the resounding conclusion drawn in favour of the assessee on the aforesaid legal position, we do not consider it necessary to advert to other alternative contentions raised on behalf of the assessee. 10. In the result, Ground No.1 of the assessee's appeal is allowed. 11. Ground Nos. 2 & 3 concern disallowance under s.14A of the Act. The AO has disallowed an estimated expenses pegged at Rs. 5,09,728/- as attributable to exempt income by invoking Section 14A of the Act. The aforesaid action of the AO was confirmed by the CIT(A) in first appeal. 12. When the matter was called for hearing, the learned senior counsel for the assessee pointed out that the total exempt income by way of dividend was ..... X X X X Extracts X X X X X X X X Extracts X X X X
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