2021 (9) TMI 890 - AT - Income Tax

Income earned from trading in Shares, Future and Options and derivatives - apportioning of expenditure towards alleged speculation/business - AO firstly re-calculated the loss by apportioning the expenditure incurred during the year, computing loss and further, treated the alleged loss from trading of Shares, Future and Options and derivatives as speculative in nature, not liable to be set off from the other business income - HELD THAT - As regards the apportionment of expenditure incurred during the year, the Ld. AO erred to taking note of the fact that the income from commission brokerage is computed on the basis of turnover carried out on recognised exchange of which the assessee is a member - Assessee has shown better income from sale and purchase of shares and lower loss in derivative business and, therefore, in our considered view, the Ld. CIT(A) has rightly appreciated this aspect, thereby deleting the addition made by the Ld. AO wrongly apportioning of expenditure towards alleged speculation/business, which gave rise to higher speculation loss. Thus, ground no. 1 raised by the revenue stands dismissed. Characterization of loss - Treating the loss/income incurred by the assessee for trading in shares, Future and Options and derivatives as business loss as against the finding of the Ld. AO treating the same as speculation loss - HELD THAT - We find this issue has come up before this tribunal in assessee s own case for the A.Y 2012-13 2021 (2) TMI 1204 - ITAT KOLKATA wherein the Tribunal after placing reliance on the judgment of the Hon ble Jurisdictional High Court in assessee s own case for the A.Y 2005-06 by order dated 12-03-2014, has held that the income from derivatives, Future and Options and Share trading carried out on recognised Stock Exchange is not in the nature of speculation and it is a business income. Addition u/s 2(24)(x) r.w.s. 36(1)(va) in respect of employees contribution towards PF/ ESI - delay on payment of employees contribution to PF as prescribed by the respective Act - HELD THAT - As alleged sum was duly deposited with the respective authority before the due date of filing of return of income for the A.Y 2011-12 prescribed u/s. 139(1) of the Act. We find that the case of the assessee is covered by the judgment of the Hon ble Jurisdictional High Court of Calcutta in the case of Vijayshree Ltd 2011 (4) TMI 63 - ITAT KOLKATA as decided in favour of assessee.

Summary

Issues Involved:

1. Apportionment of expenditure and calculation of speculation loss.
2. Treatment of loss from trading in shares, futures, and options as business loss or speculation loss.
3. Disallowance of employees' contribution towards PF/ESI due to delayed payment.

Issue-Wise Detailed Analysis:

1. Apportionment of Expenditure and Calculation of Speculation Loss:

The Learned Assessing Officer (Ld. AO) recalculated the loss by apportioning the expenditure incurred during the year, computing a higher speculation loss of ?5,63,23,387/- as against the loss declared by the assessee at ?2,62,66,074/-. The Ld. AO's recalculation was based on the observation that the expenditure incurred by the assessee was not apportioned correctly. However, the Commissioner of Income-tax (Appeals) [CIT(A)] found that the Ld. AO erred in not considering the turnover on which brokerage commission/income was earned. The CIT(A) accepted the assessee's claim of loss from income from derivatives trading of ?2,62,66,074/-, leading to the deletion of the addition made by the Ld. AO. The Tribunal upheld the CIT(A)'s decision, noting that the Ld. AO did not properly account for the turnover giving rise to the brokerage income.

2. Treatment of Loss from Trading in Shares, Futures, and Options as Business Loss or Speculation Loss:

The Ld. AO treated the loss from trading in shares, futures, and options as speculative in nature, not liable to be set off against other business income. The CIT(A) disagreed, treating the loss as business loss. The Tribunal referred to its own decision in the assessee’s case for the A.Y. 2012-13, where it was held that income from derivatives, futures, and options trading on a recognized stock exchange is not speculative but business income. The Tribunal cited the Hon’ble Jurisdictional High Court's decision in the assessee's case for A.Y. 2005-06, which supported this view. Consequently, the Tribunal found no infirmity in the CIT(A)'s decision and dismissed the revenue's appeal on this ground.

3. Disallowance of Employees' Contribution Towards PF/ESI Due to Delayed Payment:

The Ld. AO disallowed ?2,55,972/- for delayed payment of employees' contribution towards PF/ESI. The CIT(A) deleted this disallowance, noting that the amount was deposited before the due date of filing the return for A.Y. 2011-12. The Tribunal upheld the CIT(A)'s decision, referencing the Hon’ble Jurisdictional High Court of Calcutta's judgment in the case of Vijayshree Ltd., which held that such contributions are deductible if deposited before the due date of filing the return. The Tribunal also cited its own decision in a similar case, reiterating that the delayed payment of employees' contributions to PF/ESI is allowable if made before the return filing due date.

Conclusion:

The Tribunal dismissed the revenue's appeal, upholding the CIT(A)'s decisions on all grounds. The apportionment of expenditure was found to be incorrect by the Ld. AO, the loss from trading in shares, futures, and options was rightly treated as business loss, and the disallowance of employees' contributions to PF/ESI due to delayed payment was correctly deleted. The order was pronounced in the open court on 15.09.2021.