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TMI Blog2022 (7) TMI 736X X X X Extracts X X X X X X X X Extracts X X X X ..... d to the facts and circumstances of the case, Ld. CIT(A) has erred in law and on facts in confirming the action of Ld. A.O. in passing the impugned order without giving adequate opportunity of being heard." 3. Brief facts of the case are that during the year, the assessee had carried forward a loss of Rs.27,73,108/- "loss from Trading in Derivatives" on stock exchanges as Non-speculative in view of provisions of section 43(5) of, the Income Tax Act, 1961 and claiming that explanation to section 73 does not apply to derivatives. On the other hand the Assessing Officer has applied explanation to section 73 and allowed this loss to be carried forward only as speculative loss. 4. Upon assessee's appeal, ld. CIT (A) found that the issue was covered against the assessee by his own order in assessee's own case earlier and decision of Hon'ble Delhi High Court in CIT vs. DLF Commercial Developers Ltd. 218 Taxman 0045. He has held as under :- "The only question relevant to the issue in question is whether "loss in Trading in Derivatives" on stock exchanges can be treated as "Speculative loss" in view of explanation to section 73 of the Act. The issue has been already adjudicated upon by ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ee's counsel. Respectfully, following the decision of Hon'ble Delhi High Court directly covering the case, it is held that no interference is called for in the order passed by the Assessing Officer on this account." 5. Against the above order, the assessee is in appeal before us. We have heard both the parties and perused the record. 6. Ld. counsel of the assessee submitted that the issue is squarely covered in favour of the assessee by ITAT decision in assessee's own case for AY 2012-13 in ITA No.6203/Del/2015 order dated 05.10.2018 as well as Hon'ble Supreme Court decision on the same issue. That the Hon'ble Delhi High Court decision relied upon by the ld. CIT (A) has not been agreed with by the Hon'ble Calcutta High Court in the case of PCIT vs. Snowtex Investment Ltd. 87 taxman.com 356. That the aforesaid decision of Hon'ble Calcutta High Court has already been approved by Hon'ble Supreme Court in the same case referred in (2019) 414 ITR 227. That the Hon'ble Delhi High Court is not the jurisdictional High Court in this case. The jurisdiction of the assessee lies with Hon'ble Punjab and Haryana High Court. Furthermore, he submitted that the Hon'ble Bombay High Cou ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... n. (3) In respect of allowance on account of depreciation or capital expenditure on scientific research, the provisions of subsection (2) of section 72 apply in relation to speculation business as they apply in relation to any business. (4) No loss shall be carried forward under this section for more than [four] assessment years immediately succeeding the assessment year for which loss was first computed. (Explanation. -Where any part of the business of a company (other than a company whose gross total income consists mainly of income which is chargeable under the heads "Interest on securities», "Income from house property", "Capital gains" and «Income from other sources"], or a company (the principal business of which is the business of trading in shares or banking] or the granting of loans and advances) consists in the purchase and sale of shares of other companies, such company shall, for the purposes of this section, be deemed to be carrying on a speculation business to the extent to which the business consists of the purchase and sale of such shares.] 10. Thus, from the plain reading of Explanation, it can be seen that it encompasses purchase and sale of sh ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... . That is why all definitions in statutes generally begin with the qualifying words similar to the words used in the present case namely, unless there is anything repugnant in the subject or context. Therefore in finding out the meaning of the word "insurer" in various sections of the Act, the meaning to be ordinarily given to it is that given in the definition clause. But this is not inflexible and there may be sections in the Act where the meaning may have to be departed from on account of the subject or context in which the word has been used and that will be giving effect to the opening sentence in the definition section. namely, unless there is anything repugnant in the subject or context. In view of this qualification, the court has not only to look at the words but also to look at the context, the collocation and the object of such words relating to such matter and interpret the meaning intended to be conveyed by the use of the words under the circumstances. Similarly, in N.K. Jain and Ors. v C.K. Shah and Ors. AIR 1991 SC 1289, it was held that: 4. The subject matter and the context In which a particular word is used are of great importance and it is axiomatic that the ob ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... held units of UTI are not shares, and therefore, Explanation to Section 73 would not cover the loss, arising on the transfer of UTI. If legal inference can be drawn from the judgment of Hon'ble Supreme Court, then only the shares have to be construed strictly as given in Explanation to Section 73. This is more so, as fiction has been created in Section 73 and it is a settled law that a fiction cannot be enlarged to cover another fiction, therefore, when Future and Derivatives do not find mention and place in Explanation to Section 73 then there is no question of 'treating Futures and Derivatives to be hit by Explanation to Section 73. However, after decision of Hon'ble Delhi High Court in another case of DLF Ltd. dated 11.07.2013, the similar issue has come before the Hon'ble Calcutta High Court in the case of Snowtex Investments Ltd. (supra) wherein question no. 1 raised before the Hon'ble High Court, was whether profits on Futures by Derivatives is speculation profit; and whether Explanation to Section 73 should apply. The Hon 'ble High Court answered this question in favour of this proposition that loss in shares are hit by Explanation to Section 73, wher ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e legislative intended to treat them differently. There is, as such no question of any unintended consequences. Thus, Hon'ble Calcutta High Court did not agree with the ratio of the decision of Hon'ble Delhi High Court in the case of DLF Commercial Developers Ltd. (supra). But, Delhi High Court is the Jurisdictional High Court and in normal circumstances, that has to be followed. But, the decision of Calcutta High Court reached before Hon'ble Supreme Court and Hon'ble Supreme Court in Civil Appeal No.4483 of 2019 in the case of Snowtex Investments Ltd. Vs. Pr.CIT, 414 ITR 227 upheld, the order of Calcutta High Court by finding no error in the decision of Hon'ble High Court holding that Business of Futures and options did not constitutes profits and gains from speculative business." 13. Thus, Hon'ble Kolkata High Court did not agree with the ratio of the decision of Hon'ble Delhi High Court in the case of DLF Commercial Developers Ltd. (supra). Though, Hon'ble Delhi High Court being the Jurisdictional High Court and in normal circumstances, the same has a binding judicial precedence, which needs to be followed. However, this decision of Hon'ble ..... X X X X Extracts X X X X X X X X Extracts X X X X
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