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TMI Blog2015 (12) TMI 1904X X X X Extracts X X X X X X X X Extracts X X X X ..... ppeal, the CIT(A), by placing reliance on the decisions of the Delhi Tribunal in the case of Munjal Showa Ltd vs DCIT, 94 TTJ 227, Ahmedabad Tribunal in the case of Essar Steel vs DCIT [2005] 97 ITD 125, Chennai Tribunal in the case of DCIT vs Paterson Securities Pvt. Ltd, 127 ITD 386, and M/s Cotton Blossom(India) Ltd vs ACIT in I.T.A.No. 2032/Mds/2012 dated 21.12.2013, observed that these transactions dealt with in the course of carrying in the regular course of its business activities and not as a separate business activity and therefore, the forward contracts entered into with Bank in foreign exchange is not a speculative transaction and the same falls outside the purview of speculative transaction by proviso (c) to sec. 43(5) of the Act. The CIT(A) also relied on the decision of the Chennai Tribunal in the case of M/s Celebrity Fashions Ltd in I.T.A.Nos.1249 & 1250/Mds/2013 for assessment years 2008-09 and 2009-10 wherein it was held that the loss incurred by the assessee as a result of foreign exchange forward contracts relates to its business only and hence the same has to be treated as business loss. Accordingly, in his opinion, the loss arising from these forward contracts ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... cerned. Therefore, aggregation of the share trading profit and loss from derivative transactions should be done before the Explanation to sec.73 is applied. The above view has been taken by Special Bench of this Tribunal, Mumbai Bench, in the case of CIT v. Concord Commercial Pvt. Ltd. (2005) 95 ITD 117 (Mum)(SB). In this case, the Special Bench held that : Before considering whether the assessees case is hit by the deeming provision of Explanation to Sec. 73 of the Act, the aggregate of the business profit / loss has to be worked out based on the non-speculative profits; either it is from share delivery or from share derivative. 8. From the above, it is concluded that both trading of shares and derivative transactions are not coming under the purview of Section 43(5) of the Act which provides definition of speculative transaction exclusively for purposes of section 28 to 41 of the Act. Again, the fact that both delivery based transaction in shares and derivative transactions are non-speculative as far as section 43(5) is concerned goes to confirm that both will have same treatment as regards application of the Explanation to Section 73 is concerned, which creates a deeming ficti ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 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. In order to resolve the issue before us, the section has to be read in the manner as follows: Explanation : Where any part of the business of a company ( . . . .. .. .. .. .. .. .. . .. .. . ) consist 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. It would, thus, appear that where an assessee, being the company, besides dealing in other things also deals in purchase and sale of shares of other companies, the assessee shall be deemed to be carrying on a speculation business. The assessee, in the present case, principally is a share broker, as already indicated. The assessee is also in the business of buying and selling of shares for self where actual delivery is taken and given and also in buying and selling of shares where actual delivery was not intended to be taken or given. Therefore, the entire transaction ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... he statute. It was also not able to contradict the finding of fact that booking and cancellation of FC of foreign exchange were not in respect of specified export or import. Besides, finding of fact given by the Revenue Authorities remained un-contravened that loss in question, shown by it pertained to those FC transactions, against which no actual delivery of foreign exchange was made. On appreciation of the facts surrounding the transaction ITAT had reached at the conclusion that transactions entered in to by the assessee were speculative in nature and the case of the assessee is not covered by proviso(a) of the section 43(5) of the Act. Disputed transactions were speculative and not hedging transaction, that the assessee could not relate any single bill to any of the contract and it had not provided detail of any purchase order relatable to specific transaction, during the assessment or appellate proceedings. Thus, the transactions undertaken by it have to be taken as transactions relatable to Foreign Exchange. ITAT was of the opinion that the order of the FAA does not suffer from any legal or factual infirmity. Therefore, considering the peculiar facts and circumstances of the ..... X X X X Extracts X X X X X X X X Extracts X X X X
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