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2012 (11) TMI 761 - AT - Income TaxCommodity trading loss - Speculation loss or not - allowable as set-off against other heads of income - held that - As per 43(5)(d) an eligible transaction in respect of trading in derivatives referred to in clause (ac) of Section 2 of the Securities Contracts (Regulation) Act, 1956 (42 of 1956) carried out in a recognized stock exchange shall not be deemed to be a speculative transaction and there is no requirement to refer the matter to Hon ble President, ITAT for constitution of a Special bench as issue is decided in favour of the assessee by respectfully following the Tribunal decision rendered in the case of Tejas K. Shah vs ITO 2010 (9) TMI 905 - ITAT AHMEDABAD - In the result, appeal of the revenue is dismissed and ground of assessee has become infructuous as set off of loss is already allowed and, therefore, there is no case of any increase in tax liability.
Issues:
1. Allowance of set-off of speculative loss against business income. 2. Interpretation of notification regarding recognized stock exchanges for derivative transactions. 3. Adjudication of rebate claim under section 88E on STT paid. Issue 1: Allowance of set-off of speculative loss against business income: The case involved an appeal by the revenue against the order of Ld. CIT(A) allowing set-off of speculative loss on commodities trading against business income. The revenue contended that the commodity trading loss should be treated as speculative loss and added to the total income of the assessee. The Ld. CIT(A) considered the assessee's argument that derivative transactions on recognized stock exchanges should not be deemed speculative. The tribunal analyzed the relevant provisions and notifications regarding recognized stock exchanges. It was found that derivative transactions on recognized stock exchanges were not speculative. The tribunal upheld the order of Ld. CIT(A) in favor of the assessee, dismissing the revenue's appeal. Issue 2: Interpretation of notification regarding recognized stock exchanges for derivative transactions: The tribunal examined the notification dated 25.01.2006 recognizing National Stock Exchange (NSE) and Bombay Stock Exchange (BSE) as recognized stock exchanges for derivative transactions. Subsequent notifications recognized MCX Stock Exchange and United Stock Exchange of India Ltd. The tribunal considered conflicting tribunal decisions regarding the treatment of transactions before the notification date as speculative. The tribunal held that derivative transactions on recognized stock exchanges were not speculative. It emphasized the importance of the date of publication in the official gazette for the recognition of stock exchanges. The tribunal followed a previous decision and rejected the revenue's appeal. Issue 3: Adjudication of rebate claim under section 88E on STT paid: The assessee filed a cross-objection regarding the rebate claim under section 88E on STT paid. The tribunal noted that the Ld. CIT(A) had already allowed the set-off of income from F&O transactions against business loss from commodity trading. As a result, the ground related to the rebate claim became infructuous. The tribunal rejected the cross-objection, affirming the order of Ld. CIT(A) and dismissing both the revenue's appeal and the assessee's cross-objection. In conclusion, the tribunal upheld the order of Ld. CIT(A) allowing the set-off of speculative loss against business income, based on the interpretation of notifications regarding recognized stock exchanges for derivative transactions. The tribunal dismissed the revenue's appeal and the assessee's cross-objection, settling the issues raised in the case.
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