VIJAY N. ROHIRA, MUMBAI v. ACIT CIR 20(3), MUMBAI

ITA 1905/MUM/2010 | 2006-2007
Pronouncement Date: 28-01-2011 | Result: Partly Allowed

Appeal Details

RSA Number 190519914 RSA 2010
Bench Mumbai
Appeal Number ITA 1905/MUM/2010
Duration Of Justice 10 month(s) 19 day(s)
Appellant VIJAY N. ROHIRA, MUMBAI
Respondent ACIT CIR 20(3), MUMBAI
Appeal Type Income Tax Appeal
Pronouncement Date 28-01-2011
Appeal Filed By Assessee
Order Result Partly Allowed
Bench Allotted F
Tribunal Order Date 28-01-2011
Date Of Final Hearing 05-01-2011
Next Hearing Date 05-01-2011
Assessment Year 2006-2007
Appeal Filed On 10-03-2010
Judgment Text
1 ITA 1905/MUM/10 M/S VIJAY N. ROHIRA IN THE INCOME TAX APPELLATE TRIBUNAL MUMBAI BENCHES F BEFORE SHRI R.V. EASWAR PRESIDENT AND SHRI P.M. JA GTAP A.M. ITA NO. 1905/MUM/2010 ASSESSMENT YEAR 2006-07 VIJAY N. ROHIRA 302/H ABHISHEK APARTMENT VERSOVA VILLAGE ANDHERI (W) MUMBAI 400 053. PAN AABPR 88950 VS. A.C.I.T. 20(3) ROOM NO. 406 4 TH FLOOR PIRAMAL CHAMBERS MUMBAI 400 012. APPELLANT RESPONDENT APPELLANT BY SHRI M. SUBRAMANIAN RESPONDENT BY SMT. ASHIMA GUPTA ORDER PER P.M. JAGTAP A.M. THIS APPEAL BY THE ASSESSEE IS DIRECTED AGAINST THE ORDER OF LD. CIT(A)- 31 MUMBAI DATED 15.1.10 AND THE SOLITARY ISSUE ARISING OUT OF THE SAME RELATES TO THE ASSESSEES CLAIM FOR SET OFF OF CARRIED FORWARD SPE CULATIVE LOSS OF A.Y. 2005-06 AMOUNTING TO ` 4 54 191/- AGAINST THE PROFITS AND GAINS OF THE YE AR UNDER CONSIDERATION I.E. 2006-07 WHICH HAS BEEN DISALLOWED BY THE A.O. AND CONFIRMED BY THE LD. CIT(A). 2. THE ASSESSEE IN THE PRESENT CASE IS AN INDI VIDUAL WHO IS ENGAGED IN THE BUSINESS OF DEALING IN DERIVATIVE AND SPECULATIVE TRANSACTION O F SHARES AND SECURITIES. THE RETURN OF INCOME FOR THE YEAR UNDER CONSIDERATION WAS FILED B Y IT ON 31.10.06 DECLARING TOTAL INCOME OF ` 19 89 460/-. IN THE SAID RETURN PROFIT FROM DERI VATIVE TRANSACTIONS OF SHARES WAS SHOWN BY THE ASSESSEE AT ` 20 56 990/- AND LOSS OF ` 4 54 191/- FROM DERIVATIVE TRANSACTION CARRIED FORWARD FROM A.Y. 2005-06 WAS S ET OFF AGAINST THE SAID PROFIT. ACCORDING TO THE A.O. LOSS OF A.Y. 2005-06 FROM TH E DERIVATIVE TRANSACTION OF SHARES 2 ITA 1905/MUM/10 M/S VIJAY N. ROHIRA WAS DECLARED AND ASSESSED AS SPECULATIVE LOSS WHERE AS PROFIT FROM SIMILAR DERIVATIVE TRANSACTION EARNED BY THE ASSESSEE DURING THE YEAR UNDER CONSIDERATION WAS ASSESSABLE AS REGULAR BUSINESS INCOME IN VIEW OF THE AMENDMENT MA DE IN THE PROVISIONS OF SECTION 43(5) W.E.F. 1.4.2006. SINCE THE SET OFF OF SPECUL ATIVE LOSS OF A.Y. 2005-06 AGAINST THE REGULAR BUSINESS INCOME OF THE ASSESSEE FOR THE YEA R UNDER CONSIDERATION WAS NOT ALLOWABLE THE A.O. DISALLOWED THE ASSESSEES CLAIM FOR SET OFF IN THE ASSESSMENT COMPLETED U/S 143(3) DTD. 24.10.08. 3. AGAINST THE ORDER PASSED BY THE A.O. U/S 143(3) AN APPEAL WAS PREFERRED BY THE ASSESSEE BEFORE THE LD. CIT(A) WHO CONFIRMED THE DI SALLOWANCE MADE BY THE A.O. ON ACCOUNT OF ASSESSEES CLAIM FOR SET OFF OF CARRIED FORWARD SPECULATIVE LOSS AGAINST THE REGULAR BUSINESS INCOME OF THE ASSESSEE RELYING ON THE DECISION OF SPECIAL BENCH OF ITAT AT CALCUTTA IN THE CASE OF SHREE CAPITAL SERVICES P VT. LTD. VS. SCIT 318 ITR (AT) 001 WHEREIN IT WAS HELD THAT AMENDMENT MADE IN SECTION 43(5) BY INSERTING CLAUSE (D) IS PROSPECTIVE IN NATURE AND THE SAME WILL BE APPLICAB LE TO A.Y. 2006-07ONWARDS. AGGRIEVED BY THE ORDER OF THE LD. CIT(A) THE ASSES SEE HAS PREFERRED THIS APPEAL BEFORE THE TRIBUNAL. 4 WE HAVE HEARD THE ARGUMENTS OF BOTH THE SIDE S AND ALSO PERUSED THE RELEVANT MATERIAL ON RECORD. THE LEARNED COUNSEL FOR THE ASS ESSEE HAS MAINLY RAISED THREE CONTENTIONS BEFORE US IN SUPPORT OF THE ASSESSEES CLAIM FOR SET OFF OF CARRY FORWARD SPECULATIVE LOSS AGAINST BUSINESS INCOME FOR THE YE AR UNDER CONSIDERATION. FIRSTLY HE HAS CONTENDED THAT THE NATURE OF TRANSACTIONS RESULTING INTO LOSS IN A.Y. 2005-06 IS EXACTLY SIMILAR TO THAT OF THE TRANSACTIONS CARRIED OUT IN THE YEAR UNDER CONSIDERATION GIVING RISE TO BUSINESS INCOME AND THIS BEING SO THE CLAIM OF THE ASSESSEE FOR SET OFF OF SPECULATIVE LOSS OF A.Y. 2005-06 SHOULD BE ALLOWED AGAINST THE PROFI T OF THE YEAR UNDER CONSIDERATION. WE FIND IT DIFFICULT TO ACCEPT THIS CONTENTION OF THE LEARNED COUNSEL FOR THE ASSESSEE IN VIEW OF THE FACT THAT EVEN THOUGH THE NATURE OF TRANSACTION S ENTERED INTO BY THE ASSESSEE IN BOTH THE YEARS IS THE SAME THE TREATMENT GIVEN TO THE S AID TRANSACTIONS UNDER THE ACT HAS 3 ITA 1905/MUM/10 M/S VIJAY N. ROHIRA CHANGED IN AS MUCH AS THE SAID TRANSACTIONS WERE BE ING TREATED AS SPECULATIVE TRANSACTIONS IN A.Y. 2005-06 WHEREAS THE SAME ARE BEING TREATED AS NON-SPECULATIVE BUSINESS TRANSACTIONS IN THE YEAR UNDER CONSIDERATION AS A R ESULT OF AMENDMENT MADE IN SECTION 43(5) BY INSERTING PROVISO (D) W.E.F. 1.4.06. FURTH ER AS HELD BY THE SPECIAL BENCH OF ITAT IN THE CASE OF SHREE CAPITAL SERVICES PVT. LTD . (SUPRA) THE SAID AMENDMENT IS APPLICABLE ONLY PROSPECTIVELY I.E. FROM A.Y. 2006-0 7 ONWARDS. AS PER SECTION 73(2) THE LOSSES IN SPECULATION BUSINESS CARRIED FORWARD FROM EARLIER YEARS CAN BE SET OFF ONLY AGAINST PROFITS AND GAINS OF ANY SPECULATION BUSINE SS CARRIED ON BY THE ASSESSEE AND THE SAID PROVISION REMAINING UNCHANGED THE ASSESSEE I N OUR OPINION IS NOT ENTITLED FOR SET OFF OF LOSS IN RESPECT OF SPECULATION BUSINESS OF A .Y. 2005-06 AGAINST THE REGULAR BUSINESS INCOME FOR THE YEAR UNDER CONSIDERATION. 5. THE SECOND CONTENTION RAISED BY THE LEARNED COUNSEL FOR THE ASSESSEE IS THAT THE AMENDMENT MADE IN SECTION 43(5) BY INSERTING PROVIS O (D) THEREIN IS A BENEFICIAL AMENDMENT WHICH CANNOT BE THRUST UPON THE ASSESSEE AND THE ASSESSEE IS AT LIBERTY TO CLAIM THE PROFIT ARISING FROM DERIVATIVE TRANSACTIO N AS SPECULATIVE PROFIT IN THE YEAR UNDER CONSIDERATION EVEN AFTER THE SAID AMENDMENT. IN SUP PORT OF THIS CONTENTION HE HAS RELIED ON THE DECISION OF HONBLE SUPREME COURT IN THE CAS E OF MAHENDRA MILLS LTD. 243 ITR 56. AFTER CAREFULLY PERUSING THE JUDGMENT PASSED BY THE HONBLE SUPREME COURT IN THE SAID CASE WE FIND THAT THE ISSUE INVOLVED THEREIN WAS ENTIRELY DIFFERENT FROM THE ISSUE INVOLVED IN THE PRESENT CASE. THE ISSUE INVOLVED IN THE SAID CASE WAS RELATING TO THE DEPRECIATION ALLOWANCE U/S 32 AND ALTHOUGH NO CLAIM FOR DEPRECIATION ALLOWANCE WAS MADE BY THE ASSESSEE IN THAT CASE THE A.O. ALLOWED THE SAME WHILE COMPLETING THE ASSESSMENT. THE HONBLE SUPREME COURT NOTED IN THIS CONTEXT THAT THE DEDUCTION ON ACCOUNT OF DEPRECIATION ALLOWANCE U/S 32 WAS SUBJEC T TO SECTION 34 WHICH PROVIDES THAT DEDUCTION U/S 32 SHALL BE ALLOWED ONLY IF THE PRESC RIBED PARTICULARS HAVE BEEN FURNISHED BY THE ASSESSEE. IT WAS OBSERVED BY THE HONBLE SUP REME COURT THAT THE PROVISION FOR CLAIM OF DEPRECIATION IS FOR THE BENEFIT OF THE ASS ESSEE AND IF HE DOES NOT WISH TO AVAIL OF THAT BENEFIT FOR SOME REASON THE SAME CANNOT BE FO RCED UPON HIM. IT WAS HELD THAT IT IS 4 ITA 1905/MUM/10 M/S VIJAY N. ROHIRA FOR THE ASSESSEE TO SEE IF THE CLAIM OF DEPRECIATIO N IS TO HIS ADVANTAGE. THE HONBLE APEX COURT REJECTED THE CONTENTION RAISED ON BEHALF OF T HE REVENUE THAT THE INCOME OF THE ASSESSEE UNDER THE HEAD PROFITS AND GAINS OF BUSIN ESS OR PROFESSION AS PER SECTION 29 IS TO BE COMPUTED IN ACCORDANCE WITH THE PROVISIONS CO NTAINED IN SECTION 30 TO 43-A AND SINCE SECTION 32 PROVIDES FOR DEPRECIATION IT HAS TO BE ALLOWED IN COMPUTING THE INCOME OF THE ASSESSEE KEEPING IN VIEW THE BAR CONTAINED IN SECTION 34. IT WAS HELD BY THE HONBLE SUPREME COURT THAT IF SECTION 34 IS NOT SAT ISFIED AND THE REQUIRED PARTICULARS ARE NOT FURNISHED BY THE ASSESSEE HIS CLAIM FOR DEPRECI ATION U/S 32 CANNOT BE ALLOWED. IT IS THUS CLEAR THAT THE ACTION OF THE REVENUE AUTHORITI ES TO THRUST UPON THE ASSESSEE DEPRECIATION ALLOWANCE WHICH WAS NOT EVEN CLAIMED B Y HIM WAS NOT UPHELD BY THE HONBLE SUPREME COURT KEEPING IN VIEW THE BAR CONTA INED IN SECTION 34 HOLDING THAT DEPRECIATION ALLOWABLE U/S 32 WAS SUBJECT TO SATISF ACTION OF SECTION 34 WHICH PROVIDES THAT DEDUCTION U/S 32 SHALL BE ALLOWED ONLY IF PRES CRIBED PARTICULARS HAVE BEEN FURNISHED BY THE ASSESSEE. IN THE PRESENT CASE WE ARE CONCER NED WITH PROVISO (D) TO SECTION 43(5) WHICH CARVES OUT OR EXCLUDES CERTAIN TRANSACTIONS F ROM THE DEFINITION OF EXPRESSION SPECULATIVE TRANSACTION GIVEN IN SECTION 43(5). AS PER THE SAID PROVISO AS ELIGIBLE TRANSACTION IN RESPECT OF TRADING IN DERIVATIVES RE FERRED TO IN CLAUSE (AC) OF SECTION 2 OF SECURITIES CONTRACTS (REGULATION) ACT 1956 CARRIED OUT IN A RECOGNIZED STOCK EXCHANGE SHALL NOT DEEMED TO BE A SPECULATIVE TRANSACTION AN D CONSEQUENTLY SUCH TRANSACTION IS TO BE TREATED AS REGULAR BUSINESS TRANSACTION OF NON-S PECULATIVE NATURE THEREBY MAKING THE PROFIT/LOSS ARISING OUT OF SUCH TRANSACTION CHARGEA BLE TO TAX IN THE HANDS OF THE ASSESSEE AS REGULAR BUSINESS INCOME. IT IS THUS NOT A CASE WHE RE ASSESSEE HAS TO MAKE ANY CLAIM UNDER THE SAID PROVISO AND THE SAID PROVISO BEING O PERATIVE TO EXCLUDE A CERTAIN CLASS OF TRANSACTIONS FROM THE DEFINITION OF SPECULATIVE TR ANSACTION GIVEN IN SECTION 43(5) WITHOUT THERE BEING ANY CONDITION STIPULATED THEREI N WHICH HAS TO BE SATISFIED BY THE ASSESSEE WE ARE OF THE CONSIDERED VIEW THAT THERE IS NO LIBERTY OR OPTION GIVEN TO THE ASSESSEE TO MAKE IT APPLICABLE IN HIS CASE EVEN IF THE SAME IN SOME CASE LIKE THE ONE IN HAND IS BENEFICIAL TO THE ASSESSEE. THE RELIANCE OF THE LEARNED COUNSEL FOR THE ASSESSEE ON THE DECISION OF HONBLE SUPREME COURT IN THE CASE O F MAHENDRA MILLS LTD. (SUPRA) TO 5 ITA 1905/MUM/10 M/S VIJAY N. ROHIRA CLAIM SUCH OPTION OR BENEFIT THUS IS CLEARLY MISPLA CED AND THE CONTENTION RAISED BY HIM TO THAT EFFECT CANNOT BE ACCEPTED. 6. WE HOWEVER ARE INCLINED TO ACCEPT THE THIRD C ONTENTION RAISED BY THE LEARNED COUNSEL FOR THE ASSESSEE THAT THE NATIONAL STOCK EX CHANGE AND BOMBAY STOCK EXCHANGE HAVING BEEN RECOGNIZED W.E.F. 25.1.06 THE TRANSACT IONS IN RESPECT OF TRADING IN DERIVATES CARRIED OUT BY THE ASSESSEE IN THE SAID STOCK EXCHA NGES PRIOR TO 25.1.06 ARE TO BE TREATED AS SPECULATIVE TRANSACTIONS WITHIN THE MEANING OF SECT ION 43(5) AND THE LOSS ARISING FROM SUCH TRANSACTIONS IS TO BE TREATED AS SPECULATIVE P ROFIT SO AS TO ALLOW THE SET OFF OF BROUGHT FORWARD SPECULATIVE LOSS OF A.Y. 2005-06 AGAINST TH E SAME. ACCORDINGLY WE MODIFY THE IMPUGNED ORDER OF THE LD. CIT(A) ON THIS ISSUE AND DIRECT THE A.O. TO ALLOW THE CLAIM OF THE ASSESSEE FOR SET OFF OF CARRIED FORWARD SPECULA TIVE LOSS OF RS. 4 54 191/- ONLY AGAINST PROFIT FROM THE DERIVATIVE TRANSACTIONS CARRIED ON BY THE ASSESSEE UP TO 24.1.2006 WHICH IS TO BE TREATED AS SPECULATIVE PROFIT OF THE ASSESSEE . 7. IN THE RESULT APPEAL OF THE ASSESSEE IS PARTLY ALLOWED. ORDER PRONOUNCED ON 28 TH JANUARY 2011. SD/- SD/- (R.V. EASWAR) (P.M. JAGTAP) PRESIDENT A CCOUNTANT MEMBER MUMBAI DATED 28 TH JANUARY 2011. 6 ITA 1905/MUM/10 M/S VIJAY N. ROHIRA RK COPY TO 1. THE APPELLANT 2. THE RESPONDENT 3. THE CIT(A) 31 MUMBAI 4. THE CIT- 20 MUMBAI 5. THE DR BENCH F 6. MASTER FILE // TUE COPY// BY ORDER DY/ASSTT. REGISTRAR ITAT MUMBAI 7 ITA 1905/MUM/10 M/S VIJAY N. ROHIRA DATE INITIALS 1 DRAFT DICTATED ON 6.1.11 SR. PS 2 DRAFT PLACED BEFORE THE AUTHOR 7.1.11 SR. PS 3 DRAFT PLACED BEFORE THE SECOND MEMBER 4 APPROVED DRAFT COMES TO THE SR. PS SR. PS 5 KEPT FOR PRONOUNCEMENT ON SR. PS 6 FILE SENT TO THE BENCH CLERK SR. PS 7 DATE ON WHICH FILE GOES TO THE HEAD CLERK 8 DATE ON WHICH FILE GOES TO THE AR 9 DATE OF DISPATCH OF ORDER