TMI Blog2019 (6) TMI 83X X X X Extracts X X X X X X X X Extracts X X X X ..... culation transaction and, therefore, the loss incurred in such transactions is to be treated as normal business loss. Thus direct the AO to allow the claim of the assessee for set off of loss in question incurred by the assessee in Commodity Futures and Options against profit from non-speculation business as claimed. - Decided in favour of assessee. - I.T.A. No. 1287/KOL/2017 - - - Dated:- 29-5-2019 - Shri P.M. Jagtap, Vice-President (KZ) And Shri S.S. Viswanethra Ravi, Judicial Member For the Appellant : Shri Manish Tiwari, FCA For the Respondent : Shri C.J. Singh, JCIT, Sr. D.R. ORDER PER SHRI P.M. JAGTAP, VICE-PRESIDENT (KOLKATA ZONE):- This appeal filed by the assessee is directed against the order of ld. Commissioner of Income Tax (Appeals)-13, Kolkata dated 16.01.2017. 2. Ground No. 1 raised by the assessee in this appeal is general, which does not call for any specific adjudication. 3. Ground No. 2 raised by the assessee involves the issue relating to addition of ₹ 77190/- made by the Assessing Officer and confirmed by the ld. CIT(Appeals) on ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... are Futures, whereas in the assessee s case, loss was suffered from trading in Commodity Futures. He noted that as per the definition given in section 43(5) of the Act, speculative transaction was defined to mean a transaction in which a contract for the purchase and sale of any commodity, including stocks and shares, is periodically or ultimately settled otherwise than by actual delivery or transfer of the commodity or scripts. He also noted that as per the proviso (d) to section 43(5) of the Act, an eligible transaction in derivatives referred to in clause (ac) of section 2 of the Securities Contracts (Regulation) Act, 1956 carried out in a recognized stock exchange shall not be deemed to be a speculative transaction . He held that the combined reading of section 43(5) read with proviso (d) thereto thus made it clear that trading in share derivatives shall be treated as non-speculative transaction, while in commodity derivatives shall be treated as speculative transaction. He accordingly treated the loss of ₹ 39,10,971/- suffered by the assessee in the transactions on account of Commodity Futures and Options as speculative loss and disallowed the claim of the assessee for ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... entered into by a member of a forward market or a stock exchange in the course of any transaction in the nature of jobbing or arbitrage to guard against loss which may arise in the ordinary course of his business as such member or (d) An eligible transaction in respect of trading in derivatives referred to in clause (ac) of section 02 of the securities contracts Act 1956 (42 of 1956) carried out in recognized stock exchange. Shall not be deemed to be a speculative transaction. (i) Eligible transaction means any transaction:- (a) Carried out electronically on screen based system through a stock broker or sub-broker or such other intermediary registered under section 12 of the securities and exchange board of India Act 1992 (15 of 1992) in accordance with the provisions of the securities contracts regulation Act 1956 (42 of 1956) or the securities and exchange board of India Act 1992 or the depositaries Act 1996 (22 of 1996) and the rules, regulations or bye-laws made or directions issued under those Acts or by banks or mutual funds on a recognized stock exchange and: (b) Which is supported by a time stamped contract ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... oks at the definition of speculative transaction, it provides that any 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 actual delivery or transfer of the commodity or scripts. Commodity derivatives contracts are certainly contracts for the purchase or sale of commodities and, therefore, would clearly be covered by this definition if the transaction is squared off without delivery. There is a specific exemption for security derivatives, whereby such derivatives are not to be treated as speculative transaction. However, this exemption only applies to derivatives traded on notified stock exchanges (Bombay Stock exchange, National Stock Exchange, and United Stock Exchange) through stock brokers (i.e. security derivatives) and does not apply to commodity derivatives which are traded on commodity exchanges. Therefore, clearly commodity derivatives transactions squared up without delivery would amount to speculative transactions. Day trading transactions in shares, where no delivery is taken but the transactions are squared up the same day, woul ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ommodity through MCX prior to the said date will amount to speculation business. By Finance Act, 2005, clause (d) was inserted in the proviso to sub-section (5) of section 43 w.e.f. 1st April 2006, which provided that an eligible transaction in respect of trading in derivative referred to in clause (a) of section (2) of Securities Contract (Regulation) Act, 1956, carried out in a recognized Stock Exchange shall not be deemed to be speculative transactions. Thus, from 1st April 2006, trading in derivative carried through the recognized Stock Exchange was treated as non-speculative transactions. For the purpose of clause (d), Rule 6DDA and 6DDB of I.T. Rules, 1962, provided that notification of recognized Stock Exchange has to be done by the Central Govt. (CBDT). In pursuance to this Rule, the CBDT has notified the MCX Stock Exchange Ltd. by S.O. 1327(E) dated 22nd May 2009. 9. Now, the issue is whether such a notification given on 22nd May 2009, through which MCX Stock Exchange has been recognized, can be held to be applicable for the transaction undertaken in the assessment year 2007-08 i.e., after 1st April 2006. From the combined reading of clause (d) of provis ..... X X X X Extracts X X X X X X X X Extracts X X X X
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