TMI Blog2015 (4) TMI 1296X X X X Extracts X X X X X X X X Extracts X X X X ..... y the authorities as mentioned above, we hold that the assessee has rightly claimed mark- to-market loss which is liable to be allowed. The learned CIT(A) has rightly allowed the claim of the assessee, his order is hereby upheld. - Decided in favour of assessee. - ITA No.7739/Mum/2012 - - - Dated:- 9-4-2015 - S/Sh. I P Bansal,Judicial Member Rajendra,Accountant Revenue by: Shri Asghar Zain Assessee by: None ORDER Rajendra, Challenging the order dated 17.10.2012 of the CIT(A)-4,Mumbai, Assessing Officer (AO) has raised following Grounds of Appeal. 1. On the facts and circumstances of the case and in law, the 13. CIT (A) has erred in deleting the addition made, on account of disallowance of Mark to Market loss ₹ 4,98,65,834/- in trading of derivates. 2. The appellant prays that the order of CIT (A) on the above ground he set aside and that of the Assessing Officer he restored . 3. The appellant craves leave to amend or alter any ground or add a new ground which may be necessary. Assessee- company engaged in the business of financial services,filed its return of income ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... t in nature rather loss or profit is somewhat ascertainable in view of constant watch on daily market value and even the quantum of profit or loss though not actually ascertainable, can be anticipated in view of the trends of the market. The difference between the predetermined price and market price is settled daily on markto-market basis. In such type of contracts, it is not the stock value which is subject matter of the contract rather the contract itself is the stock in trade which is purchased by paying/depositing the initial margins on percentage basis to the broker taking into consideration maximum anticipated rise or fall in the price of the stock in future. As observed above, the difference of margin in calculated and settled on daily basis in view of the market rates and trends. The Hon'ble Supreme Court in the case of CIT v. Woodward Governor India (P.) Ltd (2009) 179 Taxman 326, while dealing with the question as to whether the additional liability arising on account of fluctuation in the rate of exchange can be allowed to be adjusted pending actual payment of the varied, has observed that expenditure as used in section 37 in Income Tax Act may in the circumstance ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... mark to market margin is disclosed under Loans and Advances. c. Equity Index/Stock Futures are marked to market on a daily basis and the resultant unrealized loss is recognised in the profit and loss account. On final settlement or squaring up of contracts for equity index/stock futures, the realised profit or loss after adjusting the unrealized loss already accounted, if any is recognised in the profit and loss account and shown as Profit/(Loss) on trading in Options/Futures. So trading in stock future has not only been recognized but certain standards have also been recognized for recording loss and profit under such type of transactions. While dealing with a similar issue, the co-ordinate Bench of this Tribunal vide order dated 10.11.2010 in ITA No.5324/Mum/2007 for A.Y. 2004-05 in the case of Edelweiss Capital Ltd. , has observed as under: We have considered the facts and the rival contentions. In the Scheduled annexed to and forming part of the Balance Sheet and Profit Loss Account for the year under appeal (page 13 of the Paper Book), the assessee has made the following Note: H. Equity Futures-Index/Stock (a) Initial M ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... the shape of appreciated value of closing stock is not brought into the account, as no prudent trader would care to show increased profit before its realization. This is the theory underlying the rule that the closing stock is to be valued at cost or market price whichever is the lower, and it is now generally accepted as an established rule of commercial practice and accountancy . This is what the Supreme Court held in the case of Chainrup Sampatram vs. Commissioner of Income Tax, West Bengal (1953) 24 ITR 481 (SC) speaking through Hon'ble Justice Patanjali Sastri, the then Chief Justice of India (page 485-486 of the Report). At page 486 the Supreme Court further observed that loss due to a fall in price below cost is allowed even if such loss has not been actually realized . Quoting from the case of Whimster Co. Vs. Commissioners of Inland Revenue (1926) 12 Tax Cases 813, the Supreme Court observed that the profits that are chargeable to tax are those realized in t year and that an exception is recognized where a trader purchased and still holds goods which are fallen in value in which case though no loss has been realized nor it has occurred, nevertheless at the close of ..... X X X X Extracts X X X X X X X X Extracts X X X X
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