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TMI Blog2012 (6) TMI 82X X X X Extracts X X X X X X X X Extracts X X X X ..... e and options' are not covered by Explanation to section 73 for the reasons that this is specifically excluded by way of clause (d) to section 43(5) w.e.f 01-04-06 by the Finance Act'05. It is clear that Explanation to section 73 refers to the business of purchase and sale of shares and not the business of derivative transactions carried out by recognized stock exchange by the assessee. Therefore, CIT(A) rightly allowed the set off of loss against normal business income - Decided against the Revenue. - IT Appeal No. 1033 (Kol.) of 2011 - - - Dated:- 4-5-2012 - Mahavir Singh And C. D. Rao , JJ. Niraj Kumar for the Appellant. Ravi Tulsiyan for the Respondent. ORDER Mahavir Singh, Judicial Member ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... suing notices u/s. 143(2) and 142(1) were issued. Assessee company's main business is of trading in goods and merchandise and dealing in futures and options of Stock Exchange indices. The Assessing Officer noticed that the assessee has claimed loss on account of futures and options at ₹ 51.71 cr. and claimed set off this loss against profit of business. The assessee also claimed the balance loss of ₹ 32 cr. to be carried forward as business loss. The Assessing Officer while completing assessment u/s. 143(3) of the Act vide order dated 28.12.2010 treated the loss in futures and options as speculation loss and according to him, purchase and sale of shares including hedging and derivatives are inseparable in part. Accordingly, ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... he assessee has incurred losses in Future and Options transactions and this loss was set off with profits from other non-speculative business as claimed by assessee. The assessee has enclosed complete statement of trading in Future and Options including general ledger detailing out of transactions of purchase and sale and also enclosed derivatives statement. These documents are even now attached with assessee's paper book at pages 26-34 and 35-39. It is also an admitted fact that the transactions in Future and Options were undertaken by the assessee through recognized stock exchange i.e. NSE. From the assessee's paper book pages, it is also clear that the contract notes in respect of 'Future and Options' derivative transacti ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... he view that a contract in respect of raw materials, merchandise or trade in derivatives with any recognized stock exchange entered into by a person in the course of his manufacturing or merchandise business or trade in derivatives to guard against loss through future price fluctuations in respect of his contracts for actual delivery of goods manufactured by him or merchandised sold by him or even trading of derivatives shall not be deemed to be speculative transactions. As referred by the learned counsel for the assessee, the relevant provisions of section 43(5) of the Act, where speculative transactions are defined reads as under:- Speculative transaction means a transaction in which a contract for the purchase or sale of any commod ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... onically on screen-based systems through a stock broker or sub-broker or such other intermediary registered under section 12 of the Securities and Exchange Board of India Act, 1992 (15 of 1992) in accordance with the provisions of the Securities Contracts (Regulation) Act, 1956 (42 of 1956) or the Securities and Exchange Board of India Act. 1992 (15 of 1992) or the Depositories Act, 1996 (22 of 1996) and the rules, regulations or bye-laws made or directions issued under those Acts or by banks or mutual funds on a recognised stock exchange; and (B) which is supported by a time stamped contract note issued by such stock broker or sub- broker or such other intermediary to every client indicating in the contract note the unique client id ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... of section 43(5) of the Act. Even revenue is admitting that transactions of assessee in question are pertaining to purchase and sale of derivatives and not the purchase and sale of shares. For this, the discussion carried out by the Assessing Officer at page 3 reads as under:- There may be another misconstruction of the law to the effect that since Proviso to Section 43(5) has excluded derivatives from the definition of speculative transactions, it has also ceased to be speculative for the purpose of Explanation below Section 73. But a closer reading of the Explanation disabuses one of such misconception. Explanation is independent of Section 43(5). It is completely a standalone provision. It says, a company's business in share d ..... X X X X Extracts X X X X X X X X Extracts X X X X
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