AMIT M. SHAH, MUMBAI v. ADDL CIT 15(1), MUMBAI

1 IN THE INCOME TAX APPELLATE TRIBUNAL G BENCH MUMBAI BEFORE SHRI RAJENDRA SINGH(AM) AND SHRI V.D.RAO (JM) ITA NO.1138/M/2010 ASSESSMENT YEAR 2005-06 AMIT M. SHAH THE ADDL.CIT 15(1) MATRU MANDIR 1 ST FLOOR BHAGWAN BHUVAN TARDEO MUMBAI. 99/103 TAMBA KANTA MUMBAI 400 003. PAN : ABIPS 0914 N APPELLANT RESPONDENT ASSESSEE BY : NONE REVENUE BY : MS MALATHI SHRIDHARAN O R D E R PER RAJENDRA SINGH (AM) THIS APPEAL BY THE ASSESSEE IS DIRECTED AGAINST TH E ORDER DATED 11.12.2009 OF CIT(A) FOR THE ASSESSMENT YEAR 2005-0 6. THE ONLY DISPUTE IS REGARDING TREATMENT OF LOSS OF RS.28 04 629/- INCUR RED BY THE ASSESSEE IN FUTURE AND OPTIONS (DERIVATIVES) TRANSACTIONS. 2. THE ASSESSEE WAS ENGAGED IN BUSINESS OF FINANCIN G AND DEALING IN SHARES AND DERIVATIVES. DURING THE RELEVANT YEAR THE ASSES SEE HAD INCURRED LOSS OF RS.28 04 629/- IN TRANSACTIONS IN DERIVATIVES. THE AO NOTED THAT THE TRANSACTIONS IN DERIVATIVES DO NOT INVOLVE DELIVERY AND THEREFORE IN VIEW OF DEFINITION OF SPECULATIVE TRANSACTION UNDER SECTION 43(5) THE TRANSACTIONS IN DERIVATIVES HAD TO BE TREATED AS SPECULATIVE. IT WA S ALSO NOTED BY HIM THAT THE 2 PROVISO (D) TO SECTION 43(5) AS PER WHICH THE TRANS ACTIONS IN DERIVATIVES WERE DEEMED TO BE NON SPECULATIVE WAS APPLICABLE ONLY FR OM 1.4.2006. HE THEREFORE TREATED THE LOSS AS SPECULATION LOSS WHICH IN APPEA L WAS CONFIRMED BY CIT(A) AGGRIEVED BY WHICH THE ASSESSEE IS IN APPEAL BEFORE THE TRIBUNAL. 3. BEFORE US NO ONE APPEARED ON BEHALF OF THE ASSES SEE. AN ADJOURNMENT APPLICATION WAS RECEIVED ON THE GROUND THAT THE AUT HORIZED REPRESENTATIVE WAS OUT OF TOWN. THE ADJOURNMENT REQUEST WAS NOT FOUND REASONABLE AND THE SAME WAS REJECTED. WE THEREFORE PROCEED TO DECIDE THE AP PEAL ON THE BASIS OF MATERIAL AVAILABLE ON RECORD AND AFTER HEARING THE LEARNED DR WHO SUPPORTED THE ORDERS OF AUTHORITIES BELOW. 4. WE HAVE PERUSED THE RECORDS AND CONSIDERED THE M ATTER CAREFULLY. SPECULATIVE TRANSACTIONS HAVE BEEN DEFINED IN SECTI ON 43 (5) TO MEAN A TRANSACTION IN WHICH A CONTRACT FOR PURCHASES OR SA LES OF ANY COMMODITY INCLUDING STOCK OF SHARES IS PERIODICALLY OR ULTIMA TELY SETTLED OTHERWISE THAN BY ACTUAL DELIVERY OR TRANSFER OF THE COMMODITY OR SCR IP. SINCE THE TRANSACTIONS IN DERIVATIVES DO NOT INVOLVE ANY DELIVERY THE TRANSA CTIONS HAVE TO BE TREATED AS SPECULATIVE. THE SAME VIEW WAS TAKEN BY THE SPECIAL BENCH OF THE TRIBUNAL IN CASE OF SHREE CAPITAL SERVICES LTD. (124 ITD 740) I N WHICH THE SPECIAL BENCH NOTED THAT DERIVATIVES DERIVED THEIR VALUE FROM THE UNDERLYING ASSETS THAT IS STOCK AND SECURITIES AND THEREFORE SIMILAR TREATMEN T HAS TO BE GIVEN IN CASE OF DERIVATIVES ALSO. SINCE THE TRANSACTION DID NOT INV OLVE DELIVERY THE SPECIAL BENCH HELD THAT THE TRANSACTION HAS TO BE TREATED A S SPECULATIVE. THE PROVISO (D) TO SECTION 43(5) WHICH DEEMS TRANSACTION IN DER IVATIVE AS NOT SPECULATIVE IS APPLICABLE ONLY FROM 1.4.2006 AND THEREFORE NOT REL EVANT TO THE ASSESSMENT 3 YEAR UNDER CONSIDERATION. WE THEREFORE RESPECTFULLY FOLLOWING THE DECISION OF THE SPECIAL BENCH (SUPRA) CONFIRM THE ORDER OF CIT( A). 5. IN THE RESULT THE APPEAL OF THE ASSESSEE IS DISM ISSED. 6. THE DECISION WAS PRONOUNCED IN THE OPEN COURT ON 28.02.2011. SD/- SD/- ( V.D. RAO ) (RAJENDRA SINGH) JUDICIAL MEMBER ACCOUNTANT MEMBER DATE : 28.02.2011 AT :MUMBAI COPY TO : 1. THE APPELLANT 2. THE RESPONDENT 3. THE CIT(A) MUMBAI CONCERNED 4. THE CIT MUMBAI CITY CONCERNED 5. THE DR G BENCH ITAT MUMBAI // TRUE COPY// BY ORDER ASSISTANT REGISTRAR ITAT MUMBAI BENCHES MUMBAI ALK