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TMI Blog2015 (10) TMI 2314X X X X Extracts X X X X X X X X Extracts X X X X ..... 00,000/- as per section 54 of the Act. Therefore, he is eligible only for the amount he has invested as per sub-section (2) of section 54 of the Act. The ld. CIT(Appeals), without considering sub-section (2) of section 54 of the Income Tax Act, proceeded on a different footing that whether the transfer was taken place or not, which is not relevant. Therefore, direct the Assessing Officer to allow the claim of deduction under sub-section (2) of section 54 of the Act to the extent of ₹ 15,00,000/-. - Decided partly in favour of revenue. Disallowance of losses under Future and Options - setting off of brought forward loss - Held that:- The transactions in Future & Options are not to be considered as speculation losses w.e.f. 01.04.2006 consequent to the Finance Act, 2006. In so far as set off of brought forward losses from one head against the income from another head, as per section 71(2) of the Act [with effect from assessment year 2005-06], where in respect of any assessment year, the net result of computation under the head ‘profits and gains of business or profession’ is a loss and the assessee has income assessable under the head ‘salaries’, the assessee shall not be en ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... er, observed that the assessee could not get the property registered in his name within the period of two years from the date of sale of the original asset and hence the assessee was not eligible for deduction under section 54 of the Act. Accordingly, the Assessing Officer disallowed the claim of the assessee under section 54 of the Act. 4. On appeal before the ld. CIT(Appeals), it was submitted that out of sale proceeds of original property sold, the assessee has purchased a new residential property situated at Plot 62, House No. 435, Shiv Vilas area of Indore City for a consideration of ₹ 99,00,000/- vide sale agreement dated 31.03.2007. He further submitted that immediately after sale agreement, the seller of the property handed over the property to the assessee. Thereafter, the property is under continuous possession and enjoyment of the assessee and submitted that at the time of agreement, an amount of ₹ 15,00,000/- was paid on 30.07.2007 and again an amount of ₹ 50,00,000/- was also paid on 25.02.2011. The ld. CIT(Appeals), after considering the submissions of the assessee, allowed the deduction claimed under section 54 of the Act and the relevant portion ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... tipulated time of two years (for purchase) or three years (in case of construction) from the date of sale of the original asset. Purchase is with reference to an existing house. When an existing house is transferred in favour of the assessee by its owner, the same amounts purchase. The word transfer is defined in the IT Act and sec. 2(47) of the Act, which is as under: Sec.2 (47) transfer , in relation to a capital asset, includes,- (i) the sale, exchange or relinquishment of the asset; or (ii) the extinguishment of any rights therein; or (iii) the compulsory acquisition thereof under any law; or (iv) in a case where the asset is converted by the owner thereof into, or is treated by him as, stock-in-trade of a business carried on by him, such conversion or treatment; or (iva) the maturity or redemption of a zero coupon bond; or] (v) any transaction involving the allowing of the possession of any immovable property to be taken or retained in part performance of a contract of the nature referred to in section 53A of the Transfer of Property Act, 1882 (4 of 1882) ; or (vi) ......................... Explanation - For the purposes of Sub-clauses (v) and (vi), ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... her on payment of substantial amount in terms of purchase agreement within four days of sale of his old house, assessee acquired substantial domain over new residential flat within specified period, it could be said that assessee complied with requirements of section 54 - Held, yes Whether merely because builder failed to hand over possession of flat within - specified period, assessee could be denied benefit of benevolent provision of section 54 - Held, no iii) Balraj v. CIT (254 ITR 22)(Del): Section 54 of the Income-tax Act, 1961 - Capital gains ; Profits on sale of property used for residential house - Assessment year 1975-76 - Whether section 54 speaks of purchase only and for availing benefit under this section, -it is not necessary that assessee should become owner of property Held, yes Whether, where assessee paid a sum at time of entering into an agreement for purchase of a property within a year from sale of another property, he would be entitled to benefit provided under section 54 even though there was no registration within said period - Held, yes . iv) CIT v. Shahajada Begam (173 ITR 397)(AP): Section 54(1) of the Income-tax Act, 1961 - Capital g ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... he agreement. Therefore, it is amount to part performance of the said agreement and, the assessee has deemed to have purchased the residential house as on 30.07.2007. In this context, it is necessary to examine section 54 of the Act and relevant portion of the statue is extracted as under: 54. Profit on sale of property used for residence. Subject to the provisions of sub-section (2), where, in the case of an assessee being an individual or a Hindu undivided family, the capital gain arises from the transfer of a long-term capital asset , being buildings or lands appurtenant thereto, and being a residential house, the income of which is chargeable under the head Income from house property (hereafter in this section referred to as the original asset), and the assessee has within a period of one year before or two years after the date on which the transfer took place purchased, or has within a period of three years after that date constructed, a residential house, then, instead of the capital gain being charged to income-tax as income of the previous year in which the transfer took place, it shall be dealt with in accordance with the following provisions of this section, that is ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... Stock and Broking Pvt. Ltd. (ii) Calculation sheet of capital loss. On verification of the same, the following discrepancies are noted: (i) In the contract note, the assessee name was mentioned as Prakash A Bohra (ii) There is no PAN, address mentioned in contract note. (iii) In future and option contract note, as per procedure the date mentioned is the last Thursday of every month. In the contract note submitted by assessee it was mentioned as December 2006, which is not the procedure generally followed. (iv) The loss due to future and option transaction should be considered as trading loss and not capital loss. Due to this reason, the authorized representative was requested to submit the copy of form 10DB. The authorized representative submitted the same, but the discrepancies mentioned above were noticed in form 10DB also. In this regard, this office letter u/s 133(6) dt 11.12.2009 was sent to National Stock Exchange, Mumbai to furnish the following details. (a) Verify the authenticity of the contract note and form 10DB submitted. (b) Provide details regarding the total volume of transaction done during the period 01.04.2006 to 31.03.2007 by Prakas ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... , the name was mentioned in the contract note as Prakash A. Bohra instead of Prakash Chand Bohra and also submitted that all the transactions are genuine and the losses claimed by the assessee should be allowed as regular losses. The ld. CIT(Appeals), after considering the submissions of the assessee, accepted the claim of the assessee and relevant portion of the order is extracted as under: I have considered the above submissions of the assessee. The assessee has dealt with the 'Future Options' transactions through M/s. Anugrah Stock Broking Pvt. Ltd., a licensed broker with NSE. The licensed broker has issued contract notes to the assessee giving the details of Future Options' purchased and sold by the assessee. Though the contract notes of the said 'Future Options', contained the name as Prakash A Bohra , the broker later on, vide their letter dated 05.12.2009, addressed to the Assessing Officer, clarified that the name was mistakenly mentioned as 'Prakash A. Bohra' as against the correct name of Prakash Chand Bohra due to computer database error. Therefore, the mistake in the name contained in the contract notes is only a typograph ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... heads. Even if the losses in Future Options are to be treated as trading losses, the same amounts to business losses, and not speculation losses, as contained under the provisions of sec.43(5)(d) of the Act w.e.f. 01.04.2006. The relevant provisions are Definitions of certain terms relevant to income from profits and gains of business or profession. Sec.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 or scrips: Provided that for the purposes of this clause- (a ) .............................. ; or (b) .............................. ; or (c) .............................. ; or (d) an eligible transaction in respect of trading in derivatives referred to in clause (ac) of section 2 of the Securities Contracts (Regulation) Act, 1956 (42 of 1956) carried out in a recognised stock exchange; shall not be deemed to be a speculative transaction; (emphasis supplied) Prior to 01.04.2006, the transactions in 'Future Options' are consider ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ame is also allowable for set off, not only against the income under the head 'business income', but also under any head during the year (including the head capital gains . Thus, in either case, the losses from Future Options of ₹ 88,22,204/- are eligible for set off against the capital gains income derived from the sale of the house property, under the head 'income from capital gains'. Therefore, the assessee's claim of set off losses of ₹ 88,22,204/- from 'Future Options', against the long term capital gains income derived from sale of house property is as per law and allowable. Accordingly, the Assessing Officer is directed to allow the assessee's claim of the losses of ₹ 88,22,204/- from 'Future Options' to be set off against the capital gains income from the sale of house property. It is also clarified that the assessee is eligible for the said set off, irrespective of the head of income under which the losses of Future Options' transactions are to be determined, i.e. whether under the head 'business' or under the head 'capital gains'. Thus, the assessee succeeds in his appeals in this ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... tract notes cannot be a reason for rejection of the claim of the assessee. In our opinion, the assessee has discharged the onus cast upon him and it is the duty of the Assessing Officer to prove that the assessee s transactions are not genuine. The Assessing Officer has only wrote a letter to the National Stock Exchange asking to provide details regarding the total volume of transaction done during the period 01.04.2006 to 31.03.2007 by Prakash Chand Bohra and what was the outcome of the transaction (profit and loss) and volume of the said transaction. The NSE gave reply by stating that with regard to the authenticity of the contract note and form 10DB submitted cannot be certified by the Exchange. With regard to the details of transactions no trades were found to be executed for the combination of member and client codes for the Future and Options segment during the period from April 01, 2006 to March 31, 2007 and thus not furnished . On the basis of the above reply given by the NSE, the Assessing Officer has disbelieved the transactions of the assessee. We find that this is not sufficient reason to come to a conclusion that the assessee has not made any transaction of Future O ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... come derived from sale of house property. The ld. CIT(Appeals) has further observed that the assessee is eligible for set off irrespective of head of income under which the losses of Future Options transactions are to be determined, i.e. whether under the head business or under the head capital gains . 16. From the above observations of the ld. CIT(Appeals) with regard to allowability of claim of the assessee, the ld. CIT(Appeals) gave a categorical finding that the transactions in Future Options are not to be considered as speculation losses w.e.f. 01.04.2006 consequent to the Finance Act, 2006. In so far as set off of brought forward losses from one head against the income from another head, as per section 71(2) of the Act [with effect from assessment year 2005-06], where in respect of any assessment year, the net result of computation under the head profits and gains of business or profession is a loss and the assessee has income assessable under the head salaries , the assessee shall not be entitled to have such loss to set off against such income. However, it shall be allowable from set off from income from any other head. The ld. CIT(Appeals), by considering the a ..... X X X X Extracts X X X X X X X X Extracts X X X X
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