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2003 (8) TMI 158 - AT - Income Tax

Issues Involved:
1. Validity of proceedings and orders by CIT(A) and the Assessing Officer.
2. Rejection of claim of set off of share badla business loss against other income.
3. Withdrawal of interest under section 234A and section 244A of the Act.

Detailed Analysis:

1. Validity of Proceedings and Orders:
In all three cases, the ground relating to the alleged invalid proceedings and orders passed by the CIT(A) and the Assessing Officer was not pressed by the learned counsel during the hearing. Consequently, this ground was rejected in all appeals.

2. Rejection of Claim of Set Off of Share Badla Business Loss:
The primary issue across the appeals was the rejection of the claim to set off losses incurred in share badla (hedging) transactions against other income. The assessees argued that they were investors in shares and not dealers or speculators, and the transactions were hedging transactions intended to guard against price fluctuations. The CIT(A) held that these transactions were speculative, as they involved a series of speculative transactions amounting to speculation business, and thus the losses could not be set off against other income.

The Tribunal examined the nature of the transactions, noting that they were periodically and ultimately settled otherwise than by actual delivery. This brought the transactions within the ambit of 'speculative transaction' as defined in section 43(5) of the Act. The Tribunal referred to the Full Bench of the Hon'ble Gujarat High Court in the case of Pankaj Oil Mills v. CIT, which distinguished between speculative and hedging transactions. The Tribunal found no material evidence that the transactions were intended to hedge against price fluctuations of existing shares.

The Tribunal also considered the judgment of the Hon'ble Calcutta High Court in the case of CIT v. Ganga Prasad Birla (HUF), which held that even a single speculative transaction could constitute speculative business. In the present cases, the transactions were repeated over several settlement periods, indicating a speculative nature. Consequently, the Tribunal upheld the CIT(A)'s decision that the losses were speculative and could not be set off against other income.

3. Withdrawal of Interest under Section 234A and Section 244A:
In the cases of Shri Kanubhai A. Patel and Shri Kantibhai A. Patel, the ground related to the withdrawal of interest allowed under section 244A was raised. The CIT(A) had held that no appeal lies against the withdrawal of interest. However, the Tribunal referred to a previous order in the case of Shrichem Intermediates, where a similar issue was remanded back to the CIT(A) for a fresh decision. Following this precedent, the Tribunal set aside the CIT(A)'s order regarding the non-maintainability of the appeal against the withdrawal of interest and directed the CIT(A) to decide the issue afresh in accordance with the law.

Conclusion:
The appeals were disposed of as follows:
- ITA No. 579 and 1723/Ahd./98 were partly allowed for statistical purposes.
- ITA No. 1727/Ahd./99 was dismissed.

 

 

 

 

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