2023 (1) TMI 368 - AT - Income Tax

Disallowing the NCDEX Trading Loss - treating the same as Speculation Loss - Whether the lower authorities grossly erred in not considering the submission made by the assessee that the proviso (e) to clause 5 of section 43 of the Income Tax Act is applicable from 01-04-2013? - whether Delay in notifying the NCDEX as exchange, cannot nullify the legislative mandate of the enactment. Delay was attributable to the Central Board of Direct Taxes who had failed to issue necessary notification within time - HELD THAT - As decided in M/S P.D. SEKHSARIA TRADING COMPANY PVT. LTD. 2019 (3) TMI 2011 - ITAT AMRITSAR the Second proviso which has been inserted by the Finance Act 2018 is curative and therefore is to be treated as came into force from the date from which clause (5) itself was inserted In the statute i.e. with effect from 01.04.2014. Our above view finds support from the decision of the Hon'ble Supreme Court in the case of Allied Motors Pvt. Ltd. 1997 (3) TMI 9 - SUPREME COURT wherein it was held that a proviso which is designed to eliminate unintended consequence which may cause undue hardship to the assessee and unjust in a specific situation is to be read as retrospective with effect from which the main section was inserted. To the same effect is the decision of Ansal Land Mark Township Pvt. Ltd. 2015 (9) TMI 79 - DELHI HIGH COURT wherein decision of Rajeev Kumar Agarwal 2014 (6) TMI 79 - ITAT AGRA was confirmed wherein it was held that a curative amendment to avoid unintended consequences is to be treated as retrospective in nature even though it may not state so specifically by the statue. It was held that Second proviso to Section 40(a)(la) of the Act must be given retrospective effect of the point of time when the related legal provision was introduced. It is not in dispute that the assessee's transactions in agricultural commodity derivative were otherwise eligible transaction within the meaning of Section 43(5)(e) of the Act, we set aside the orders of the lower authorities on this issue and direct the AO to treat the loss in said transaction as non- speculative business loss and accordingly allow set off of the same from other business income as per law. Thus, this ground of appeal of the assessee is allowed. Disallowing of car expenses, shop expenses, Staff tea expenses and telephone and mobile expenses claimed by the assessee - HELD THAT - As During the course of hearing, the ld.AR of the assessee has not filed any written submission controverting the findings of the ld. CIT(A). Hence, Ground No. 2 of the assessee is dismissed.

Issues Involved:
1. Disallowance of NCDEX Trading Loss by treating it as Speculation Loss.
2. Disallowance of certain expenses claimed by the assessee.
3. Charging of interest under sections 234A and 234B.

Detailed Analysis:

Issue 1: Disallowance of NCDEX Trading Loss by Treating it as Speculation Loss
The primary contention was whether the NCDEX trading loss of Rs. 39,88,783/- should be treated as a speculative loss. The lower authorities disallowed this loss by treating it as speculative, citing that NCDEX was recognized as a stock exchange only from 27.11.2013, and transactions prior to this date did not fulfill the conditions of Section 43(5)(e) of the Income Tax Act.

The assessee argued that the proviso (e) to clause 5 of section 43, applicable from 01-04-2013, should be given retrospective effect. The delay in notifying NCDEX as an exchange was attributed to the Central Board of Direct Taxes (CBDT), and thus, the legislative mandate should not be nullified due to procedural delays.

The ITAT considered similar cases, including the decision in P.D. Sekharia Trading Company Pvt. Ltd. vs DCIT, where it was held that the notification should be given retrospective effect. It was noted that the proviso to Section 43(5) was procedural and necessary adjunct to the section enforced from 01-04-2014. The ITAT Amritsar Bench's decision was cited, which treated losses from agricultural commodity derivatives as non-speculative even if Commodity Transaction Tax (CTT) was not paid, as CTT was not chargeable for such derivatives.

Based on these precedents, the ITAT concluded that the assessee's transactions should be treated as non-speculative, and the loss of Rs. 39,88,783/- was allowed to be set off against business income.

Issue 2: Disallowance of Certain Expenses
The assessee claimed expenses amounting to Rs. 1,89,567/-, out of which Rs. 38,000/- was disallowed by the lower authorities. These expenses included car expenses, shop expenses, staff tea expenses, and telephone and mobile expenses.

During the hearing, the assessee did not provide any written submission to counter the findings of the CIT(A). Consequently, the ITAT dismissed this ground, upholding the disallowance of Rs. 38,000/-.

Issue 3: Charging of Interest Under Sections 234A and 234B
The assessee contested the charging of interest under sections 234A and 234B. Since this issue is consequential in nature, the ITAT did not provide a detailed analysis and treated it accordingly.

Conclusion:
The appeal was partly allowed. The ITAT allowed the set-off of the NCDEX trading loss against business income, treating it as non-speculative. However, the disallowance of Rs. 38,000/- in expenses was upheld, and the issue of interest under sections 234A and 234B was treated as consequential.

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