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TMI Blog2010 (9) TMI 1143X X X X Extracts X X X X X X X X Extracts X X X X ..... ainst other income earned by the assessee. The assessee vide order sheet noting dated 03.12.2008 was asked to explain as to why it should not be disallowed. The assessee was asked to submit the bifurcation of the derivative transaction i.e. before and after 26.01.2006. The assessee was also asked to specify the expenses incurred on it. The assessee vide letter dt.10.12.2008 submitted the note on the issue of derivatives. For sake of clarity, the same is reproduced from Assessment Order under - The assessee company has incurred the loss in derivates trading business of ` 4192858/-. The date wise breakup of the loss was already submitted to your honour with particular break up of 26th January, 2006 which is Assessment Order follows: Period ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... Mumbai ITAT decision in the case of CIT vs. SSKI Investor Services Pvt. Ltd. 113 TTJ 511. 3. Without prejudice it is also submitted that Assessment Order per Rules of the Stock Exchange a derivative contract is compulsorily required to be squared off and actual delivery of asset is neither contemplated nor possible. Thus, it is outside the purview of definition of speculative transaction u/s.43(5) of the I.T. Act. 4. Without prejudice, it is also submitted that the amendment in the definition of speculative transaction vide Finance Act, 2005 must be regarded Assessment Order a classification amendment clarifying the legislative intent that derivatives transaction is not a speculative transaction within the meaning of section 43(5) of I ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ate, exchange rate etc. For eg., in future, there is the contract to buy commodity or security on a future date and in Option there is the right to buy or sell a specific underlying asset at a specific price on or before a given date in future. The definition of the work 'securities' {Sec.2(h)(ia)}. It means derivative is a contract to buy the commodity or scrips in future or option to buy or sale before the given date. Hence, definition of speculation given in Sec.43(5) is clearly applicable to derivative transaction as it is not covered by the exception mentioned in the proviso (a) to (c) to section 43(5). It is covered by the proviso (d) to section 43(5) which was inserted w.e.f. 01.04.2006. According to the proviso (d) to section 43(5) ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... appeal, the CIT(A) found that the loss was incurred on account of derivative trading in assessee's own account. The CIT(A) held that derivative segments are all future trades but strictly speaking by definition of speculative transaction. As derivative trading does not involve any purchase and sale of shares, the loss on account of derivative cannot be treated as speculation loss. We find that dealings in derivative being a separate kind of transaction without force of law, it is not possible to hold that the transaction was speculative in nature. Therefore, the CIT(A) is justified in allowing the appeal filed by the assessee." "1.4 I has been held that in case of Bank of Baroda (256 ITR 385)(MUM) that authorities below Tribunal should a ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... tions to be prescribed by the Central Govt. and it was only w.e.f. 25th January, 2006 that the Notification to that effect was issued." 4. "On the facts and circumstances of the case and in law, the impugned order of the learned CIT(A) is contrary to law and consequently merits to be set aside and that of the Assessing Officer be restored." 5. "The appellant craves leave to amend or alter any ground or add a new ground which may be necessary." 7. We have heard both the parties. 8. In the case of G.K. Anand Bros. Buildwell (P.) Ltd vs. I.T.O. [2009] 34 SOT 439 (DELHI) it has been held as follows for the Assessment Year 2006-07 with respect to speculative transactions the question whether the loss arising in future and option transacti ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... this purpose. Therefore, even if the notification is from 25.01.2006 as per clause (d) inserted, the same will apply to all the transaction in relation to the 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 statue and, hence, once the recognized stock exchange is notified, the same will apply in respect of all eligible transactions carried out in relation to the financial year relevant to the Assessment Year 2006-07 and onwards. The notification dated 25.01.06 is by way of a subordinated legislation but cannot over ride the principal legislatio ..... X X X X Extracts X X X X X X X X Extracts X X X X
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