2018 (5) TMI 1803 - AT - Income Tax

Disallowance of loss made by the assessee on account currency derivatives - Held that - As submitted on behalf of the assessee before the Assessing Officer as well as before us expenditure was incurred by the assessee relating to the said transactions on account of brokerage service tax and other charges levied by the broker aggregating to 5, 15, 653/- and accordingly the total loss as claimed by the assessee was to the tune of 5, 17, 141/-. As pointed out by the learned counsel for the assessee this additional expenditure incurred by the assessee on account of brokerage service tax and other charges was duly supported by the documentary evidence in the form of relevant bills issued by the broker and there was no reason whatsoever given by the A.O. for not accepting this explanation of the assessee - the genuineness of the transactions made by the assessee on MCX Stock Exchange Ltd. through broker Marigold Vanijya Pvt. Ltd. was duly established and the action of the authorities below in disallowing the claim of the assessee for the resultant loss in dealing in currency derivatives is not tenable. Delete the said disallowance and allow the appeal of the assessee.

Summary

Issues: Disallowance of assessee's claim for loss in dealing in currency derivatives.

Detailed Analysis:

Issue 1: Disallowance of Loss Claim
The appeal was against the disallowance of the assessee's claim for a loss of ?5,17,141 incurred in dealing in currency derivatives. The Assessing Officer (A.O.) disallowed the claim, alleging collusion between the assessee and the broker to create a bogus loss. The A.O. based his decision on the statement of the broker's Director admitting to providing false losses. The A.O. completed the assessment under section 143(3) disallowing the claimed loss. The Commissioner of Income Tax (Appeals) upheld the disallowance. The Tribunal analyzed the evidence, including the broker's statement and transactions verified from MCX Stock Exchange Ltd. The Tribunal found that the transactions were genuine, supported by documentary evidence of brokerage charges, service tax, and other fees totaling ?5,15,653, leading to the claimed loss of ?5,17,141. The Tribunal concluded that the disallowance was not justified, deleting the disallowance and allowing the appeal.

Conclusion:
The Tribunal overturned the disallowance of the assessee's claim for loss in dealing in currency derivatives, finding the transactions genuine and adequately supported by documentary evidence. The Tribunal emphasized the importance of verifying evidence and ensuring a fair assessment process in such cases.