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TMI Blog2009 (10) TMI 633X X X X Extracts X X X X X X X X Extracts X X X X ..... lative loss - CIT(A) hold that the appellant s derivative transaction up to and including 24-1-2006 for the year under appeal should be construed as speculative transaction within the meaning of section 43(5) HELD THAT:- The recognized stock exchange means a recognized stock exchange as notified by the Central Government for this purpose. Therefore, even if the notification is from a particular date, as per clause ( d ) inserted, the same will apply to all the transactions in relation to assessment year 2006-07 and onwards. Clause ( d ) does not mention that unless the recognized stock exchange is notified, the transaction will not be deemed to be a speculative transaction. The power to notify the stock exchange is granted under the ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... Delhi, dated 29-5-2009 in an appeal against assessment framed under section 143(3) of the Income-tax Act ( the Act ). 2. The only issue raised in this appeal is against disallowance of loss on future and option transaction carried at the stock exchange by treating the same as speculation business loss. 3. The assessee is carrying on business as builder, developer and contractor. During the year it has also done trading in shares by way of future and option transactions. This resulted into a loss of Rs. 20,36,328, The Assessing Officer was of the opinion that loss in future and option segment is to be considered as speculation loss in terms of section 43(5) read with Explanation to section 73. The assessee submitted that the trans ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ant that F O/derivative transaction incapable of physical delivery and hence outside the scope of section 43(5) on the basis of the decision of Mumbai Tribunal in RBK Securities Limited (IT Appeal No. 2465/Mum./2006), DCIT v. SSKI Investors Services Private Limited (ITA No. 3182/Mum./2004), P.S. Kapoor v. ACIT 29 SOT 587 , in the first 2 of the decisions, the assessment year involved was prior to assessment year 2006-07. It was during assessment year 2006-07 that amendment to section 43(5) was made by inserting clause ( d ) thereto. In case of P.S. Kapoor ( supra ), it was only held that the provisions of section 43(5)( d ) was clarificatory and hence retrospective. In the appellant s case, the assessment year involved is asses ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... nd will be applicable to assessment year 2006-07 onwards. The learned DR Ms. Ruchika C. Govil on the other hand, relied upon the observations of the learned Commissioner (Appeals). 5. We have considered the rival submissions. Section 43(5) defined speculative transaction means a transaction in which a contract for the purchase or sale of any commodity including stocks and shares is periodical or ultimately settled otherwise than by the actual delivery or the transfer of commodity or scrips. Proviso below section 43(5) carves out exceptions to section 43(5). As per clause ( d ) of the said Proviso "an eligible transaction in respect of trading in derivatives referred in Securities Contracts (Regulation) Act, 1956 carried out in a recog ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... eld that "clause ( d ) of section 43(5) is prospective in nature and will be effective from the date from which the Legislature made it effective, i.e., 1-4-2006 and will be applicable to assessment year 2006-07 onwards". The notification is by way of a subordinated Legislation but cannot override the principal Legislation enacted by the Parliament. It only clarifies but will not override unless statutorily so prescribed. Since there is no dispute to the fact that the transactions in the present case in F O segment are the eligible transactions carried out in a recognized stock exchange, loss in such transactions cannot be deemed to be transaction in speculation business. The same being considered as regular business transaction, loss inc ..... X X X X Extracts X X X X X X X X Extracts X X X X
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