9911796707
TMI Blog2024 (12) TMI 567X X X X Extracts X X X X X X X X Extracts X X X X ..... rtaining to the assessment year 2007-08 under the Income Tax Act [hereinafter referred to as the "I.T. Act"]. 2. The brief facts necessary for the disposal of the I.T. Appeal are as follows: The respondent/assessee is a company engaged in property development and is currently under liquidation. During the previous year relevant to the assessment year 2007-08, the assessee had returned business income in connection with its property business but had also netted off a loss of Rs.803.03 lakhs, which was the carried forward loss from previous years in relation to its business of trading in derivatives. The Assessing Officer treated the loss of Rs.803.03 lakhs as speculative loss and, going by the provisions of Section 73 of the I.T. Act, fou ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ssioner of Income Tax v. DLF Commercial Developers Ltd. - [(2013) 261 CTR (Del) 127], wherein it was held that determination of stock derivatives value is dependent on shares and hence, the provisions of Section 73 of the I.T. Act would be applicable to the derivative business, and accordingly, the loss on account of derivative transactions would not be allowed to be carried forward and set off against non-speculative business income. The Tribunal thereafter remitted the issue to the file of the Assessing Officer to bifurcate the speculative loss and normal business loss. The Tribunal also disallowed 2% of the exempt income as expenditure incurred for the purposes of earning exempt income. This was in relation to an amount of Rs. 8,40,000/ ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... At the outset, it is submitted by Sri. Jose Joseph, the learned Standing Counsel for the Income Tax Department that the Revenue does not press question No. (2) above since it has since become well-settled that the amendment effected to the I.T. Rules with effect from 2008 would not apply for the prior assessment years. We, therefore, answer the said question against the Revenue and in favour of the assessee. 7. In relation to question Nos. (1) and (3), Sri. Jose Joseph would rely on the judgment of the Delhi High Court in DLF (supra) to contend that the definition of "speculative transaction" in Section 43 of the I.T. Act has to be seen as limited for the purposes of determining the income from profits and gains of business or profession a ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... fined a 'speculative transaction' to mean a transaction in which a contract for the purchase or the sale of any commodity including stocks and shares is settled otherwise than by the actual delivery or transfer of the commodity or scrips. The impact of the amendment by the Finance Act, 2005 was that an eligible transaction on a recognised stock exchange in respect of trading in derivatives was deemed not to be a speculative transaction. With effect from April 1, 2006, trading in derivatives was by a deeming fiction not regarded as a speculative transaction when it was carried out on a recognized stock exchange. 15. The circular of the Central Board of Direct Taxes dated February 27, 2006 indicated that this amendment was occasioned by th ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ve transaction. The notification prescribing the rules and the conditions to be fulfilled by a stock exchange to be recognized by the Central Government for the purposes of section 43 (5) [i.e., Rules 6DDA and 6DDB of the Income-tax Rules, 1962] has been published in the Official Gazette on 1st July, 2005 vide S. O. No. 932(E). Applicability : From the assessment year 2006-07 onwards." 16. Section 73 deals with losses from speculation business. Under sub-section (1) of section 73, a loss computed in relation to speculation business carried on by an assessee can only be set off against the profits and gains of another speculation business. The Explanation to section 73 contains a deeming fiction where certain businesses shall, for the ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... g in shares was brought in only with effect from April 1, 2015." 10. It will thus be seen that once the provisions of Section 43 (5), as amended, came to treat a trade in derivatives as not a speculative transaction when it was carried out on a recognised stock exchange, then the effect of that amendment was to treat the transaction in derivatives as merely a business transaction. A loss in the derivative business would consequently be a business loss for the purposes of Section 72, and a set off of such business loss would have to be permitted against profits and gains of business as computed in terms of the I.T. Act. In other words, this was not a case where Section 73 was attracted at all since Section 73 deals specifically with losses ..... X X X X Extracts X X X X X X X X Extracts X X X X
|
