2016 (10) TMI 500 - HC - Income Tax

Activity of jobbing entered into - whether is not a speculative transaction within the meaning of Section 43(5)(c) of the Act? - Held that - In view of the clear provision as found in Section 43(5) proviso (c) of the Act, the jobbing activity done to guard against business loss could not be considered as a speculative transaction. Thus loss on account of ₹ 60.37 lakhs claimed by the Respondent Assessee was allowed to be set off against business profits. We find that there is no dispute between the parties that the transactions entered into by the Respondent Assessee are in fact jobbing transactions. The provisions of Section 43(5) proviso (c) of the Act are very clear in excluding jobbing activity done to guard against loss from the ambit of speculative loss. It is a self-evident position on reading of Section 43(5) proviso (c) of the Act. Therefore jobbing transactions in the present facts would not be covered by the definition of speculative transaction in view of Section 43(5) proviso (c) of the Act. No substantial question of law

Summary

Issues:
Interpretation of Section 43(5)(c) of the Income Tax Act, 1961 regarding jobbing activity as a speculative transaction for Assessment Year 2008-09.

Analysis:
The appeal challenges the order of the Income Tax Appellate Tribunal (Tribunal) dated 7 August 2013, which relates to Assessment Year 2008-09. The main issue raised by the Revenue is whether the Tribunal was correct in holding that the jobbing activity entered into by the Respondent Assessee is not a speculative transaction under Section 43(5)(c) of the Act.

The Respondent Assessee claimed a jobbing loss of ?60.37 lakhs in its Return of Income for A.Y. 2008-09. The Assessing Officer considered this loss as speculative, disallowing it to be set off but allowing it to be carried forward as a speculation loss. The Assessee appealed to the Commissioner of Income-tax (Appeals) (CIT(A)), who allowed the appeal, stating that jobbing transactions do not fall under the definition of speculative transactions as per Section 43(5) proviso (c) of the Act.

The Revenue then appealed to the Tribunal, which upheld the CIT(A)'s order, stating that the jobbing activity was carried out in the ordinary course of business to prevent business loss. The Tribunal emphasized that Section 43(5) proviso (c) of the Act excludes jobbing activity done to guard against loss from the realm of speculative loss. The Tribunal's decision was based on the clear provisions of the Act regarding jobbing transactions and speculative transactions.

The High Court concurred with the Tribunal's decision, noting that the provisions of Section 43(5) proviso (c) of the Act unambiguously exclude jobbing activity aimed at preventing business loss from being classified as speculative transactions. Therefore, the jobbing transactions in this case were not considered speculative under the law. The Court found no substantial question of law in the matter and dismissed the appeal, upholding the decision in favor of the Respondent Assessee.

In conclusion, the High Court upheld the Tribunal's decision, emphasizing that jobbing transactions aimed at safeguarding against business loss do not fall under the definition of speculative transactions as per Section 43(5)(c) of the Income Tax Act, 1961. The judgment clarifies the distinction between speculative and non-speculative transactions, providing a clear interpretation of the relevant legal provisions in the context of the case at hand.