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2014 (6) TMI 598 - AT - Income TaxAdmission of additional grounds - Addition of STCG as Business income Trading of derivates - Held that - Assessee had suffered loss on trading of derivatives which has been reflected by Assessee as speculation loss in the return of income - the profits earned on sale of shares which were treated by Assessee as short term capital gains was considered as business by the Assessee - the loss suffered from trading of derivatives was not considered as business loss through as per the provisions of the Act, it is a business loss and therefore eligible for set off against the other income Relying upon National Thermal Power Company Limited Versus Commissioner of Income-Tax 1996 (12) TMI 7 - SUPREME Court the Tribunal has jurisdiction to examine a question of law which arises from the facts as found by the authorities below and having a bearing on the tax liability of the Assessee notwithstanding the fact that the same was not raised before the lower authorities. Additional ground of the Assessee admitted - the additional ground raised for the first time, thus, the matter is liable to be remitted back to the AO for fresh adjudication Decided partly in favour of Assesee.
Issues:
1. Timeliness of notice under Section 143(2) 2. Treatment of Short Term Capital Gain as Business Income 3. Taxation of Capital Gain from shares 4. Set off of loss from trading of derivatives Analysis: Issue 1: Timeliness of notice under Section 143(2) The appeal was filed against the order of CIT(A)-II for the assessment year 2007-08. The Assessee contended that the notice issued under Section 143(2) exceeded the prescribed time limit, rendering the assessment proceedings and resulting order invalid. However, this ground was not pressed and was dismissed accordingly. Issue 2: Treatment of Short Term Capital Gain as Business Income The Assessee challenged the treatment of Short Term Capital Gain as Business Income by the Hon'ble CIT(A). The appeal argued against this characterization, seeking a different classification for tax purposes. This issue was raised and addressed in the appeal process. Issue 3: Taxation of Capital Gain from shares Another contention involved the treatment of shares of a specific company as stock in trade along with other shares, leading to the taxation of Capital Gain from those shares as Business Income. The Assessee disputed this categorization, presenting arguments against the tax treatment applied by the authorities. Issue 4: Set off of loss from trading of derivatives A significant aspect of the appeal was the request for the set off of a loss incurred in trading derivatives against other income. The Assessee sought to have this loss considered as a normal business loss under the amended provisions of Section 43(5)(d) of the Income Tax Act, 1961. The Assessee made a case for the admission of this additional ground, emphasizing that the loss should be eligible for set off as per the relevant provisions. The Tribunal admitted the additional ground raised by the Assessee regarding the treatment of the loss from trading derivatives. The matter was remitted to the Assessing Officer for fresh consideration, along with other interconnected grounds raised in the appeal. The decision was influenced by legal precedents and the need for a thorough examination of the issue. As a result, the appeal of the Assessee was partly allowed, indicating a favorable outcome on certain aspects of the case. This detailed analysis of the judgment highlights the key issues raised in the appeal and the Tribunal's considerations and decisions regarding each matter.
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