2019 (1) TMI 1595 - AT - Income Tax

Disallowance on account of F O Loss - CIT (A) treating the loss incurred by the assessee in its derivatives transactions as non-speculative - HELD THAT - There is the factual difference between the submission filed by the assessee and the observation of the AO. But in the given facts and circumstances, we are of the view that the AO erred in understanding the details filed by the assessee. It is because on the same set of documents, the CIT(A) called for the remand report from the AO, but he failed to do so despite several reminders issue to him. Thus considering the facts in totality, we are of the view that the impugned loss does not represent the speculative transaction in pursuance to the provisions of clause (d) of subsection 5 of section 43 of the Act. Accordingly, we do not find any infirmity in the order of the Ld. CIT(A). Hence the ground of appeal of the Revenue is dismissed.

Summary

Issues:
Revenue's appeal against CIT(A)'s order deleting F & O loss addition.

Analysis:
The Revenue contested the deletion of a loss addition by CIT(A) regarding the assessee's derivatives transactions. The Revenue argued that the loss was speculative, while the assessee claimed it was non-speculative under section 43(5)(d) of the Income Tax Act, 1961. The AO treated the loss as speculative due to lack of evidence. The assessee, a Private Limited Company, engaged in derivatives trading through a recognized Stock Exchange, fulfilling conditions under section 43(5)(d).

The CIT(A) found that the assessee provided supporting evidence, including time-stamped contracts and invoices from the Stock Exchange, meeting the Act's conditions. Despite reminders, the AO did not provide a remand report as requested by the CIT(A). The CIT(A) concluded that the loss was non-speculative, reversing the AO's decision.

The Tribunal analyzed section 43(5)(d) requirements for derivatives transactions not to be speculative. As the assessee fulfilled all conditions, the loss was deemed non-speculative. The Tribunal noted discrepancies between the assessee's submissions and the AO's observations, ultimately siding with the CIT(A)'s decision. The Tribunal dismissed the Revenue's appeal, upholding the CIT(A)'s order.