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TMI Blog2012 (10) TMI 483X X X X Extracts X X X X X X X X Extracts X X X X ..... the income under various heads as the basis for allocating the indirect expenses. 3(i) On the facts and in the circumstances of the case, the Ld. CIT(A) erred in law and on facts in directing to AO to allow the set off of speculation loss of Rs.1,27,35,432/-. (ii) The CIT(A) has erred in not appreciating that stock futures and options being derivatives of shares, have to be treated at par with shares for the purpose of explanation to section 73 of the Act. 4. The appellant craves leave for reserving the right to amend, modify, alter, add or forego any ground(s) of appeal at any time before or during the hearing of this appeal. 2. Adverting first to ground no.1 in the appeal, facts, in brief, as per relevant orders are that return declaring income of Rs. 2,13,75,904/- filed on 27-09-2008 by the assessee, owning house property and having investment in shares, after being processed on 29.09.2008 u/s 143(1) of the Income Tax Act, 1961[hereinafter referred to as the 'Act'],was selected for scrutiny with the service of a notice u/s 143(2) of the Act, issued on 17-08-2009. During the course of assessment proceedings, the Assessing Officer[AO in short] noticed that the assessee had ad ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... erefore, no basis is left with the Assessing Officer for making the enhancement in the ALP adopted by the assessee. We accordingly are of the view that the orders of the authorities below cannot sustain under law. We accordingly set aside the orders of the authorities below and the additions are deleted and the appeal for the assessee is allowed." Respectfully following the decision of the coordinate Bench of this Tribunal in the assessee's own case for the assessment year 1998-99, the addition as confirmed by the CIT(A) stands deleted. Consequently, ground No-4 of the assessee's appeals for the assessment years 2003-04 and 2004- 05 stand allowed." 2.2 As a co-ordinate bench has already taken a view on these grounds and such view has not been reversed by the Hon'ble Jurisdictional High Court, we think it fit to follow the earlier order of the Tribunal for disposing of this appeal. Consequently, both the grounds are dismissed. 5.1 In the light of view taken by the co-ordinate Benches in the preceding years on the identical issue, especially when the Revenue have not placed before us any material, controverting the aforesaid findings of the ld. CIT(A) so as to enable us to take a ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... disallowed as such. Under the facts and circumstances as discussed above, I find that the impugned disallowance of Rs. 15,48,775/- made by the AO is not justified. The same, is, therefore, deleted." 8. The Revenue is now in appeal before us against the aforesaid findings of the ld. CIT(A). The ld. DR supported the order of the AO while the ld. AR on behalf of the assessee relied upon the findings of the ld. CIT(A). 9. We have the heard both the parties and gone through the facts of the case. Indisputably, the assessee consistently followed the system of allocating direct expenses to the respective heads viz. house property and business income while indirect expenses were allocated in the ratio of 40:60 between house property and business income. Since the portion of expenses relating to house property income had already been disallowed by the assessee suo moto, keeping in view the past history and method followed by the assessee, the ld. CIT(A) was of the opinion that the AO was not justified in making further disallowance of expenses since certain expenses were required for maintenance of the corporate structure of the assessee. In view of consistent practice followed by the as ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... n business" as per the deeming provision of Explanation to section 73 refers only "purchase and sale of shares, but in purchase and sale of stock futures and options (derivatives) which are different from shares of any company and hence, by this count also, the appellant does not qualify for denial of set off u/s 73(1) of the Act. The appellant has relied upon a large number of case laws in this regard. 8.3 On careful consideration of the matter, I find that the case of the appellant would not be covered by the mischief of Explanation to section 73, on both counts, firstly, since major part of the income of the appellant consists of income from house property and income from other sources (as is evident from the computation of total income in the assessment order itself), and secondly since the appellant has engaged in trading of futures and options which is different from trading in shares. It is to be appreciated that stock futures and options are distinct and separate from shares of a company. The shares of a company give the shareholder ownership of the assets and liabilities of the company and right to participate in profits of the company by way of dividends. As again ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... he Apex Court has been followed by the Hon'ble Madras High Court in the case of CIT Vs. Lakshmi Mills Co. Ltd. (2007) 158 Taxman 420, wherein it was held as under: "With respect to the second question of law, viz., whether in the facts and circumstances of the case, the Tribunal was right in holding that loss on account of sale of the unit within one month of its purchase is not a speculative loss, it is fairly conceded by the learned counsel for the revenue that the issue raised in this question is covered against the revenue by the decision of this Court in Apollo Tyres Ltd. vs. CIT [2002] 255 ITR 273 (SC), wherein it is held as under..... Following the aforesaid decision of the Apex Court, we do not find any infirmity in the order of the Tribunal and as such, we uphold the same." The said view has also been followed by the Hon'ble ITAT, Delhi in the case of Multiplex Trading & Industrial Co. Ltd. Vs. ITO (2009) in ITA No. 863(Del) of 2006, wherein it was held that: "Units of Mutual Funds cannot be equated with share of the company. Hence, loss on purchase and sale of units of mutual fund cannot be treated as loss from Speculation business." 8.3.2 In view of the above clear f ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... see claimed that the said loss of Rs.1,27,35,432/- was shown as "speculation loss" in its books of accounts, the loss being related to purchase and sale of stock futures and options on NSE, which were in the nature of derivatives traded on recognized Stock Exchange and were excluded from the definition of "speculative transaction" in terms of section 43(5)(d) of the Act. There is nothing to suggest as to whether or not the ld. CIT(A) analysed the nature of transactions or derivatives as to whether these were forwards, futures, options or swap and whether index derivatives nor analysed as to whether the transactions fell within the ambit of provisions of sec. 43(5) of the Act or were eligible transactions within the meaning of clause (d) of the proviso to the said section. The ld. CIT(A) concluded that case of the assessee would not be covered by the mischief of Explanation to section 73, on both counts, firstly, since major part of the income of the assessee consisted of income from house property and income from other sources and secondly since the assessee was engaged in trading of futures and options which is different from trading in shares. But the AO nowhere analysed the natu ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... upported 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 identity number allotted under any Act referred to in sub-clause (A) and permanent account number allotted under this Act; (ii) "recognised stock exchange" means a recognised stock exchange as referred to in clause (f) of section 2 of the Securities Contracts (Regulation) Act, 1956 (42 of 1956), and which fulfils such conditions as may be prescribed and notified by the Central Government for this purpose; 13.1 In the decision relied upon by the ld. AR in Shree Capital Services Ltd. (supra) which related to AY 2004-05, the Special Bench concluded that that the term 'derivatives' in which underlying asset is shares, would fall within the meaning of 'commodity' used in s. 43(5) of the Act and that cl. (d) of s. 43(5) introduced by Finance Act, 2005 w.e.f. 1st April, 2006 was prospective in nature and would be effective from the date from which the legislature made it effective, i.e. AY2006-07 onwards. The case of the assessee before us relates to AY 2008- 09 and therefore, applicability of aforesaid cl. (d) of ..... X X X X Extracts X X X X X X X X Extracts X X X X
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