2019 (8) TMI 1469 - AT - Income Tax

Revision u/s 263 - losses earned on trading activity of the Futures and Options (F O) - scope of amendment to section 43(5)(d) - Assessee submitted that year under consideration by the Tribunal is the assessment year 2004-05 and the losses from such futures and options were considered as normal business losses in view of the prospective amendment to section 43(5)(d) of the Finance Act, 2005 w.e.f. 01.04.2006 - HELD THAT - Considering the above settled legal proposition of law on this issue in PS. KAPUR. VERSUS ASSISTANT COMMISSIONER OF INCOME-TAX. 2008 (7) TMI 463 - ITAT JAIPUR-A and the retrospective amendment of clause (d) of section 43(5) of the Act, we are of the opinion that the CIT(A) erred in treating the same as speculative losses and, therefore, the decision of the CIT(A) requires to be set-aside. The said retrospective amendments allow the impugned losses as the business losses only. Accordingly, the relevant grounds raised by the assessee are allowed.

Summary

Issues Involved:
1. Appeal against Revision Order u/s 263 of the Act.
2. Appeal against Fresh Assessment Order u/s 263 r.w.s. 143(3) of the Act.

Issue 1: Appeal against Revision Order u/s 263 of the Act
The appellant filed an appeal against the revisional order passed by the Principal Commissioner of Income Tax (CIT) under section 263 of the Income Tax Act. The appeal was belatedly filed with a delay of 1039 days. The appellant later withdrew the appeal, and after hearing both sides, the appeal was dismissed as withdrawn. The Tribunal did not delve into the issue of condonation and proceeded with the dismissal based on the withdrawal of the appeal.

Issue 2: Appeal against Fresh Assessment Order u/s 263 r.w.s. 143(3) of the Act
The appellant challenged the fresh assessment order made by the Assessing Officer following the revisional order of the Principal CIT. The grounds raised by the appellant included contentions related to the set-off of losses incurred in Futures and Options (F&O) trading activity against regular business income. The appellant argued that these losses were not speculative but constituted regular business losses eligible for set-off against business income. The appellant cited precedents, including a judgment of the Jaipur ITAT, to support their claim.

The Tribunal examined the legal position and the retrospective amendment to section 43(5)(d) of the Finance Act, 2005, which clarified that losses claimed in derivative transactions are allowable as business losses. The Tribunal agreed with the appellant's arguments, citing the settled legal proposition and the retrospective nature of the amendment. Consequently, the Tribunal held that the losses from F&O trading activity should be treated as business losses and not speculative losses. Therefore, the decision of the CIT(A) was set aside, and the appellant's grounds related to the treatment of losses were allowed. The appeal against the fresh assessment order was partly allowed based on these findings.

In conclusion, the Tribunal dismissed the appeal against the Revision Order u/s 263 of the Act and partly allowed the appeal against the Fresh Assessment Order u/s 263 r.w.s. 143(3) of the Act concerning the treatment of losses from F&O trading activity.