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TMI Blog2015 (1) TMI 567X X X X Extracts X X X X X X X X Extracts X X X X ..... appellant in respect of ACC shares and the loss of Rs. 14.82 lacs incurred therein fell outside the purview of the said proviso (b) because the market price of ACC shares continued to rise and there was no adverse price fluctuation?" Mr. Khaitan, learned senior advocate appeared on behalf of the appellant assessee and referred us straight away to section 43(5) read with proviso (b) thereto of the Income Tax Act, 1961. It will be useful to set out below the said provision:- "43.(5) "speculative transaction" means a transaction in which a contract for the purchase or sale of any commodity, including stocks and shares, is periodically or ultimately settled otherwise than by the actual delivery or transfer of the commodity ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... oresaid transactions would reveal price fluctuation in the period when his client made the sale and purchase of the shares without actual delivery or transfer of them. This his client had done to guard against loss of its holding those shares. He pointed out that in the fluctuation of the prices of the said shares between 27th July, 1990 and 29th August, 1990 the market price of the shares continued to rise except between 8th and 9th August 1990 when the price of the said shares fell from Rs. 1,060/- per share to Rs. 1,044.50 per share. According to learned counsel the relevant provision read with the proviso excepted hedging transactions without providing for the requirement of the result of such transactions. He submitted in hedging trans ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... r Sections 43 and 73 thereof. He submitted if his client was to accept the said transactions to be speculative transactions then the loss incurred thereby could only be set off against profit from speculation business. However section 43(5) read with proviso (b) thereto excepted hedging transactions out of speculative transactions defined in Section 43(5). His client having entered into hedging transactions, it was entitled to set up the hedging loss as business loss. He went on to submit the decision in Mohanlal Ranchhoddas could be relied on. The Gujarat High Court in that decision referred to an earlier Full Bench decision of that court in Pankaj Oil Mills -vs- CIT: 115 ITR 824 wherein the Full Bench had referred extensively to the tech ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... aforesaid substantial question of law should be answered in the negative and in favour of the appellant assessee. Mr M.P Agrawal, learned advocate appeared on behalf of the respondent Revenue and submitted according to the Concise Oxford Dictionary, Sixth Edition in page 498 meaning of 'hedge' was to make or trim hedges; secure oneself against loss on (bet, speculation) by compensating transactions on the other side. Chambers Twentieth Century Dictionary ninth reprint of the Indian Edition 1983 in page 603 gave the meaning of 'hedge' as to obstruct; to surround; to guard; to protect oneself from loss on, by compensatory transactions. e.g. bets on other side. He submitted the answer was in the formulated question itself. T ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... verse fluctuation in price, would also prevent him from making windfall profit owing to favourable fluctuation in price as well. The author attributes that as the price which the hedger pays for the insurance against loss. The explanation of hedge trading given by the said author, we find, truly explained the meaning of hedging as given in the dictionaries relied on by the Revenue in the context of the said Act. The proviso (b) of section 43 (5) of the said Act does not require an inquiry into the result of the transactions but that it should have been entered into for guarding against loss in the holding of stocks and shares. The undisputed facts in this case, in our view, contain ingredients of hedging. The result of those transactions, h ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... declared @ Rs. 1.80 per unit and received by the assessee. Subsequent thereto the said shares were sold by the assessee but @ Rs. 16.10 per share being the agreed price less the dividend value per unit. The assessee therefore claimed deduction in respect of the dividend under the then section 80M of the Income Tax Act, 1961 and showed loss of Rs. 68,900/- in respect of the share transactions. Mr. Khaitan relied on the decisions in the case of CIT Vs. Walfort Share and Stock Brokers P.Ltd.: 326 ITR 1 (SC) and Commissioner of Wealth Tax, West Bengal-VI Vs. Babulal Jatia: 137 ITR 540 (Cal). Mr. Khaitan by relying on Walfort's case submitted losses over and above the dividend received would still be allowed from which it follows that Parli ..... X X X X Extracts X X X X X X X X Extracts X X X X
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