Smt. Seema Jain, New Delhi v. ACIT, New Delhi

ITA 1279/DEL/2010 | 2006-2007
Pronouncement Date: 28-05-2010 | Result: Allowed

Appeal Details

RSA Number 127920114 RSA 2010
Assessee PAN ACZPJ9367Q
Bench Delhi
Appeal Number ITA 1279/DEL/2010
Duration Of Justice 2 month(s) 6 day(s)
Appellant Smt. Seema Jain, New Delhi
Respondent ACIT, New Delhi
Appeal Type Income Tax Appeal
Pronouncement Date 28-05-2010
Appeal Filed By Assessee
Order Result Allowed
Bench Allotted G
Tribunal Order Date 28-05-2010
Assessment Year 2006-2007
Appeal Filed On 22-03-2010
Judgment Text
IN THE INCOME TAX APPELLATE TRIBUNAL DELHI BENCH G : NEW DELHI BEFORE SHRI R.P.TOLANI AND SHRI K.D.RANJAN ITA NO.1279/DEL/2010 ASSESSMENT YEAR : 2006-07 SMT. SEEMA JAIN 61/19 RAMJAS ROAD KAROL BAGH NEW DELHI. VS. ASST. COMMISSIONER OF INCOME TAX CIRCLE -33(1) DELHI. PAN ACZPJ9367Q (APPELLANT) (RESPONDENT) APPELLANT BY : S/SHRI RAKESH JOSHI & SANJAY JAIN C.A. RESPONDENT BY : MS. NAMITA PANDEY SR. D. R. ORDER PER K.D.RANJAN AM: THIS APPEAL BY THE ASSESSEE FOR ASSESSMENT YEAR 200 6-07 ARISES OUT OF ORDER OF LD. CIT(A)-XXVI NEW DELHI. THE RELEVANT G ROUNDS OF APPEAL ARE REPRODUCED AS UNDER: 1. ON THE FACTS AND CIRCUMSTANCES OF THE CASE AS W ELL AS IN LAW THE LD. CIT(A) HAS ERRED IN CONFIRMING THE ACTION OF LD. AS SESSING OFFICER IN TREATING TRANSACTION IN DERIVATIVES SEGMENT AS S PECULATIVE TRANSACTIONS AND ACCORDINGLY NOT ALLOWING SET-OFF O F LOSS FROM SUCH TRANSACTION AGAINST OTHER INCOME WITHOUT CONSIDERIN G THE FACTS AND CIRCUMSTANCES OF THE CASE. 2. ON THE FACTS AND CIRCUMSTANCES OF THE CASE AS WE LL AS IN LAW THE LD. CIT(A) HAS ERRED IN CONFIRMING THE ACTION OF LD. AS SESSING OFFICER FOR ALLOCATING EXPENSES OF RS.2 60 276/- ALLEGING T O BE INCURRED FOR THE PURPOSE OF SPECULATIVE TRANSACTION WITHOUT CONS IDERING THE FACTS AND CIRCUMSTANCES OF THE CASE. 2. THE ONLY ISSUE FOR CONSIDERATION RELATES TO NOT ALLOWING THE LOSS INCURRED ON DERIVATIVE TRANSACTIONS AGAINST THE TRA DING SHARES. THE FACTS OF 2 THE CASE STATED IN BRIEF ARE THAT THE ASSESSEE DU RING THE YEAR UNDER CONSIDERATION WAS ENGAGED IN THE BUSINESS OF TRADI NG IN SHARES AND SECURITIES. THE ASSESSEE INCURRED LOSS OF RS.55 65 480/- ON ACCOUNT OF LOSS FROM TRADING IN FUTURES SEGMENT AND EARNED PROFIT O F RS.12 76 783/- ON ACCOUNT OF PROFIT FROM SALE AND PURCHASE OF SHARES ON DELIVERY BASIS. THE ASSESSEE SET OFF THE PROFIT FROM SALE AND PURCHASE OF SHARES AGAINST THE LOSS INCURRED UNDER FUTURES SEGMENT. HOWEVER THE ASSESS ING OFFICER NOTED THAT NATIONAL STOCK EXCHANGE AND BOMBAY STOCK EXCHANGE W ERE NOTIFIED BY C.B.D.T. ON 25/1/2006 ACCORDING TO WHICH THE TRANS ACTIONS IN DERIVATIVES (FUTURES AND OPTIONS) CARRIED OUT IN BSE AND NSE AF TER 25/1/2006 COULD NOT BE TREATED AS SPECULATION TRANSACTIONS. THE ASSESSI NG OFFICER ASKED THE ASSESSEE TO FILE DETAILS OF TRADING IN FUTURES SEGM ENT AND THE RESULTANT PROFIT/LOSS FROM 01/4/2005 TO 25/1/2006 AND FROM 25 /1/2006 TO 31/3/2006. FROM THE DETAILS SUBMITTED IT WAS NOTED THAT THE A SSESSEE INCURRED LOSS OF RS.37 49 743/- ON SHARE TRADING IN FUTURE SEGMENT U PTO 25/1/2006. THE ASSESSING OFFICER TREATED THE AMOUNT OF RS.37 49 74 3/- AS SPECULATION BUSINESS LOSS. THE SPECULATION LOSS COULD NOT BE AL LOWED TO BE SET OFF AGAINST THE SHARE TRADING IN CASH SEGMENT BEING NON-SPECULA TION BUSINESS. THE ASSESSING OFFICER THEREFORE DID NOT ALLOW THE SET OFF OF SPECULATION LOSS AGAINST THE BUSINESS INCOME. 3. BEFORE THE LD. CIT(A) IT WAS SUBMITTED THAT AFT ER THE AMENDMENT OF INCOME TAX ACT BY FINANCE ACT 2005 THE TRANSACTION S OF FUTURES SEGMENT W.E.F. 01/4/2006 WOULD NOT BE TREATED AS SPECULATIO N TRANSACTIONS. THEREFORE FOR ASSESSMENT YEAR 2006-07 THE LOSS INCURRED UNDE R DERIVATES SEGMENT WAS BUSINESS LOSS WHICH WAS TO BE SET OFF AGAINST THE P ROFIT EARNED AGAINST CASH SEGMENT. THIS CONTENTION OF THE ASSESSEE WAS TURNED DOWN BY THE LD. CIT(A) ON THE GROUND THAT BOMBAY STOCK EXCHANGE AND NATION AL STOCK EXCHANGE 3 WERE NOTIFIED W.E.F. 25/1/2006 AND THEREFORE THE ELIGIBLE TRANSACTIONS FOR THE PURPOSE OF SEC. 43(5)(D) SHALL INCLUDE ONLY THOSE T RANSACTIONS WHICH TOOK PLACE ON BSE AND NSE AFTER THEIR NOTIFICATION I.E. 25/1/2006. LD. CIT(A) EXAMINED THE CONTENTION OF THE ASSESSEE IN THE LIGH T OF EXPLANATORY MEMORANDUM AND HELD THAT TRANSACTIONS IN NATURE OF DERIVATIVES TRANSACTIONS WILL BE TREATED AS NON-SPECULATION TRANSACTIONS AFT ER NOTIFICATION. SINCE THE NOTIFICATION WAS DONE ON 25/1/2006 THEREFORE THE ONLY TRANSACTIONS AFTER THIS DATE WILL BE THE NATURE OF BUSINESS INCOME. LD. CIT (A) ACCORDINGLY UPHELD THE ORDER PASSED BY THE ASSESSING OFFICER. 4. BEFORE US LD. A.R. OF THE ASSESSEE SUBMITTED TH AT CLAUSE (D) OF SUB- SEC. (5) OF SEC. 43 WAS INSERTED BY THE FINANCE ACT 2005 W.E.F. 01/4/2006 APPLICABLE FOR ASSESSMENT YEAR 2006-07 UNDER WHICH THE TRANSACTIONS IN RESPECT OF TRADING IN DERIVATIVES CARRIED OUT IN RE COGNIZED STOCKS SHALL NOT BE DEEMED TO BE A SPECULATION TRANSACTION. SINCE THE P ROVISIONS OF SEC. 43(5)(D) WERE INSERTED W.E.F. 01/4/2006 ALL THE TRANSACTION S IN DERIVATES WILL BE BUSINESS TRANSACTIONS. HE PLACED RELIANCE ON THE DE CISION OF I.T.A.T. IN THE CASE OF G.K.ANAND BROS. BUILDWELL (P) LTD. V. ITO 3 4 SOT 439 WHEREIN ON IDENTICAL FACTS IT HAD BEEN HELD THAT PROVISIONS O F CLAUSE (D) OF SEC. 43(5) WERE APPLICABLE FOR ASSESSMENT YEAR 2006-07 AND TH EREFORE THE PROFIT OR LOSS FROM DERIVATE TRADINGS WILL NOT BE SPECULATIVE PROFIT OR LOSS. THEREFORE THE SAME WILL BE ELIGIBLE TO BE SET OFF AGAINST THE BUSINESS INCOME CARRIED OUT BY THE ASSESSEE BY PURCHASE AND SALE OF SHARES ON D ELIVERY BASIS. 5. ON THE OTHER HAND LD. SR. D.R. SUBMITTED THAT B OMBAY STOCK EXCHANGE AND NATIONAL STOCK EXCHANGE WERE RECOGNIZE D BY C.B.D.T. W.E.F. 25/1/2006 AND THEREFORE THE TRANSACTIONS CARRIED ON THESE EXCHANGES W.E.F. 25/1/2006 WILL NOT BE DEEMED TO BE IN THE NATURE OF SPECULATIVE TRANSACTIONS. 4 PRIOR TO THIS DATE THEY WILL BE IN THE NATURE OF S PECULATIVE TRANSACTIONS WHICH CANNOT BE SAID TO BE SET OFF AGAINST OTHER BU SINESS INCOME. SHE PLACED RELIANCE ON THE BOARDS NOTIFICATION NO.2 DATED 25/ 1/2006. 6. WE HAVE HEARD BOTH THE PARTIES AND GONE THROUGH THE MATERIAL AVAILABLE ON RECORD. CLAUSE (D) OF SEC. 43(5) WAS I NSERTED BY THE FINANCE ACT 2002 W.E.F. 01/4/2006 THEREFORE THE TRANSACT IONS CARRIED ON IN DERIVATIVES IN A RECOGNIZED STOCK EXCHANGE SHALL BE DEEMED TO BE SPECULATIVE TRANSACTIONS W.E.F. 01/4/2006. IN THE INSTANT CASE NATIONAL STOCK EXCHANGE AND BOMBAY STOCK EXCHANGE WERE RECOGNIZED AS STOCK EXCHANGES VIDE C.B.D.T. NOTIFICATION NO.2 DATED 25/1/2006. PRIOR T O THIS DATE THE TRANSACTIONS CARRIED OUT IN THESE EXCHANGES AS PER PROVISIONS OF SEC. 43(5)(D) CANNOT BE TREATED TO BE AS NON-SPECULATIVE TRANSACT IONS. HOWEVER THE CO- ORDINATE BENCH IN THE CASE OF G.K.ANAND BROS. BUILD WELL (P) LTD. (SUPRA) ON IDENTICAL FACTS HAS HELD THAT THE NOTIFICATION I S BY WAY OF SUBORDINATE LEGISLATION AND CANNOT OVERRIDE THE LEGISLATION ENA CTED BY THE PARLIAMENT. THE PARLIAMENT HAS ENACTED THE LAW W.E.F. 01/4/2006 THEREFORE ALL THE TRANSACTIONS CARRIED ON FROM 01/4/2005 TO 31/3/2006 WILL BE IN NATURE OF BUSINESS INCOME. THOUGH THE STOCK EXCHANGES AS CONT AINED BY THE REVENUE WERE RECOGNIZED W.E.F. 25/1/2006 AND TRANSACTIONS C ARRIED OUT ONLY ON THE RECOGNIZED EXCHANGES WILL BE ELIGIBLE FOR THE BENEF IT OF SEC. 43(5)(D) BUT SINCE THE CO-ORDINATE BENCH HAD DECIDED THAT THE LA W IS APPLICABLE FROM ASSESSMENT YEAR 2006-07 ONWARDS RESPECTFULLY FOLLO WING THE AFORESAID DECISION IT IS HELD THAT THE TRANSACTIONS IN DERIV ATIVES CARRIED OUT IN PREVIOUS YEAR RELEVANT TO ASSESSMENT YEAR 2006-07 WILL BE E LIGIBLE FOR THE BENEFIT OF SEC. 43(5)(D) OF THE ACT. ACCORDINGLY LOSS INCURRE D ON DERIVATIVE TRANSACTIONS WILL BE LIABLE TO BE SET OFF AGAINST T HE PROFIT EARNED IN PURCHASE 5 AND SALE OF SHARES ON DELIVERY BASIS. ACCORDINGLY WE DECIDE THE ISSUE IN FAVOUR OF THE ASSESSEE. 7. SINCE WE HAVE HELD THAT THE TRANSACTIONS IN DERI VATIVES WILL BE TREATED AS BUSINESS INCOME NO EXPENDITURE CAN BE ALLOCATED TOWARDS SPECULATIVE BUSINESS. ACCORDINGLY GROUND NO.2 RAISED BY THE AS SESSEE HAS TO BE ALLOWED. WE ORDER ACCORDINGLY. 8. IN THE RESULT APPEAL FILED BY THE ASSESSEE IS A LLOWED. ORDER PRONOUNCED IN THE OPEN COURT ON 28 TH MAY 2010. SD/- SD/- (R.P.TOLANI ) (K.D.RANJAN ) JUDICIAL MEMBER ACCOUNTANT MEMBER DATED : 28.05.2010. PSP COPY FORWARDED TO: - 1. APPELLANT 2. RESPONDENT 3. CIT 4. CIT(A) 5. DR ITAT DEPUTY REGISTRAR