ITO, Bangalore v. Shri. Suresh Panjwani, Bangalore

ITA 779/BANG/2010 | 2006-2007
Pronouncement Date: 07-01-2011 | Result: Allowed

Appeal Details

RSA Number 77921114 RSA 2010
Bench Bangalore
Appeal Number ITA 779/BANG/2010
Duration Of Justice 6 month(s) 26 day(s)
Appellant ITO, Bangalore
Respondent Shri. Suresh Panjwani, Bangalore
Appeal Type Income Tax Appeal
Pronouncement Date 07-01-2011
Appeal Filed By Department
Order Result Allowed
Bench Allotted B
Tribunal Order Date 07-01-2011
Assessment Year 2006-2007
Appeal Filed On 11-06-2010
Judgment Text
PAGE 5 OF 5 ITA NO.779/BANG/2010 5 AND THE BUSINESS INCOME DERIVED FROM THE DERIVATIVE S. THEREFORE IN THE INTEREST OF JUSTICE THE MATTER IS TO BE REVIEW ED AFRESH BY THE CIT(A) TO DETERMINE THE CORRECT SPECULATIVE BUSINES S INCOME FOR THE CURRENT YEAR. IN THE LIGHT OF THE ABOVE OBSERVATION WE RESTORE THE MATTER TO THE FILE OF THE CIT(A). HE SHALL DETERM INE THE SPECULATIVE BUSINESS INCOME THAT IS DERIVED IN CONCERNED ASST. YEAR AND SET OFF THE SPECULATIVE LOSS THAT WAS DETERMINED IN THE ASS T. YEAR 2004-05. 9. IN THE RESULT THE APPEAL FILED BY THE REVENUE I S ALLOWED FOR STATISTICAL PURPOSES. THE ORDER PRONOUNCED ON FRIDAY THE 7 TH DAY OF JANUARY 2011 AT BANGALORE. SD/- SD/- (A MOHAN ALANKAMONY) (GEORGE GEORGE K) ACCOUNTANT MEMBER JUDICIAL MEMB ER COPY TO :- 1. THE ASSESSEE 2. THE REVENUE 3. THE CIT(A) CONCERNED. 4. THE CIT CONCERNED. 5. THE DR 6. GF BY ORDER MSP/6/1. ASSISTANT REGISTRAR ITAT BANGALORE. PAGE 4 OF 5 ITA NO.779/BANG/2010 4 7. THE LEARNED AR ON THE OTHER HAND REITERATED T HE SUBMISSIONS MADE BEFORE THE AUTHORITIES BELOW AND S UPPORTED THE FINDING OF THE CIT(A). 8. WE HAVE HEARD THE RIVAL SUBMISSIONS AND PERUSED THE MATERIAL ON RECORD. THE ASSESSING OFFICER HAS OBSE RVED THAT THE ASSESSEE HAS DECLARED SPECULATION PROFIT FROM SHARE S AMOUNTING TO RS.17 75 165/-. ACCORDING TO THE ASSESSING OFFICER THE ASSESSEE IS IN TRADING IN DERIVATIVES AND AS PER THE PROVISIONS OF SECTION 43(5) OF THE I T ACT (W.E.F. 1/4/2006) THE SAME IS TO BE T REATED AS BUSINESS INCOME AND HENCE THE SPECULATIVE LOSS DETERMINED AND CARRIED FORWARD FROM PAST YEAR (ASST. YEAR 2004-05) CANNOT B E SET OFF AGAINST THE BUSINESS INCOME BY VIRTUE OF SECTION 73 OF THE ACT. 8.1 THE CIT(A) ON THE CONTRARY HAS OBSERVED THAT INCOME FROM DERIVATIVE IS ONLY TO THE EXTENT OF RS.83 183/- WHEREAS INCOME FROM SPECULATIVE BUSINESS IS RS.16 91 982/-. IT WA S FURTHER OBSERVED BY THE CIT(A) THAT THE ASSESSEE HAS MAINTAINED SEPAR ATE BOOKS OF ACCOUNT FOR SPECULATION AND DERIVATIVES AND THEREFO RE HE FOUND THERE IS NOTHING WRONG IN SETTING OFF OF THE SPECULATIVE LOSS AGAINST THE SPECULATIVE BUSINESS OF RS.16 91 982/-. THIS FINDIN G OF THE CIT(A) IS CONTRADICTING THE FINDING OF THE ASSESSING OFFICER. THE ASSESSING OFFICER HAS STATED THAT THE ENTIRE AMOUNT OF RS.17 75 165/- IS PROFIT DERIVED FROM TRADING IN DERIVATIVES AND HENCE IT I S A BUSINESS INCOME. NO MATERIAL/BOOKS OF ACCOUNT HAVE BEEN PRODUCED BEF ORE US TO BIFURCATE CURRENT YEARS INCOME BETWEEN SPECULATIVE BUSINESS PROFITS PAGE 3 OF 5 ITA NO.779/BANG/2010 3 YEAR 2004-05 OUGHT TO BE SET OFF AGAINST CURRENT YEAR S INCOME ARISING FROM SPECULATIVE BUSINESS. 4.1 THE RELEVANT FINDING OF THE CIT(A) READS AS FO LLOWS:- I FIND THE ABOVE FINDING OF THE AO DOES NOT CONFORM TO THE FACTS OF THE CASE. ADMITTEDLY THE APPELLANT HAS MAINTAINED SEPARATE BOOKS FOR SPECULATION AND DERIVATIVES WHICH IS NOT DISPUTED BY THE AO. BESIDES THE LOSS OF AY 2003-04 HAS BEEN CARRIED FORWARD THROUGH THE ASST. YEARS 2004-05 AND 2005-06 AND THE DEPARTMENT HAS ALLOWED SUCH BROUGHT FORWARD EVEN IN ASSESSMENT U/S 143(3) IN AY 2004-05. I FIND ONCE IN PAST YEARS THE LOSS IS DETERMINED AND ALLOWED TO BE CARRIED FORWARD; IT WOULD BE INJUSTICE NOT TO ALLOW SUCH SET OFF AGAINST THE INCOME OF THE CURRENT YEAR UNDER THE SAME HEAD. I THEREFORE DELETE SUCH DISALLOWANCE AND ALLOW THE APPEAL. 5. THE REVENUE BEING AGGRIEVED IS IN APPEAL BEFO RE US. 6. THE LEARNED DR CONTENDED THAT INCOME FROM TRADI NG IN DERIVATIVES IS DEEMED TO BE BUSINESS INCOME BY VIRTU E OF CLAUSE (D) IN THE PROVISO TO SECTION 43(5) AND AS SUCH SPECULATI ON LOSS CANNOT BE SET OFF AGAINST SUCH DEEMED BUSINESS INCOME. IT W AS SUBMITTED THAT THE DIRECTION OF THE CIT(A) TO ALLOW SET OFF OF RS .7 93 235/- BEING SPECULATION LOSS AGAINST INCOME ASSESSED AS BUSINES S INCOME BY THE ASSESSING OFFICER IS IN CONTRAVENTION OF THE PROVIS IONS OF SECTION 73 OF THE I T ACT. PAGE 2 OF 5 ITA NO.779/BANG/2010 2 3. BRIEFLY STATED THE FACTS ARE AS FOLLOWS:- THE ASSESSEE IS AN INDIVIDUAL. HE IS DEALING IN SHARES AND EQUITY. THE RETURN OF INCOME WAS FILED ON 31.10.200 6 FOR THE CONCERNED ASST. YEAR DECLARING AN INCOME OF RS.9 29 930/-. THE ASSESSMENT U/S 143(3) WAS COMPLETED ON 12.12.2008 FIXING A TOTAL INCOME AT RS.17 23 165/-. IN THE ASSESSMENT COMPLE TED THE SET OFF OF SPECULATIVE LOSS AMOUNTING TO RS.7 93 235/- WAS DENIED BY THE ASSESSING OFFICER BY OBSERVING THUS:- IN THE RETURN OF INCOME FILED THE ASSESSEE HAS DECLARED SPECULATION PROFIT FROM SHARES OF RS.17 75 165/- AGAINST THIS INCOME THE ASSESSEE HAS CLAIMED SET OFF BROUGHT FORWARD SPECULATION LOSS OF ASSESSMENT YEAR 2004-05 AS PER DETAILS FILED THE ASSESSEE IS DEALING IN EQUITY AND SHARES. THE ASSESSEE IS MAINLY DOING TRADING IN DERIVATIVES. AS PER SEC.43 OF INCOME TAX ACT 1961 DEALING IN DERIVATIVES IS NOT SPECULATIVE TRANSACTION FROM ASST. YEAR 2006-07. HENCE INCOME FROM TRADING IN DERIVATIVES HAS TO BE TREATED AS BUSINESS INCOME. HENCE THE SPECULATION LOSS OF EARLIER YEARS CANNOT BE SET OFF AGAINST BUSINESS INCOME. HENCE SPECULATIVE LOSS OF RS.7 93 235/- CLAIMED AS SET OFF IS DISALLOWED AND BROUGHT TO TAX. 4. ON APPEAL BEFORE THE FIRST APPELLATE AUTHORITY THE CONTENTIONS RAISED BY THE ASSESSEE WAS ACCEPTED AND HE DECIDED THE ISSUE IN FAVOUR OF THE ASSESSEE BY HOLDING THAT THE ASSESSEE HAD MAINTAINED SEPARATE BOOKS OF ACCOUNT FOR INCOME DER IVED FROM SPECULATION AND DERIVATIVES AND SPECULATIVE LOSS DE TERMINED FOR ASST. PAGE 1 OF 5 ITA NO.779/BANG/2010 1 THE INCOME TAX APPELLATE TRIBUNAL BANGALORE BENCH B BEFORE SHRI GEORGE GEORGE K J.M. AND SHRI A MOHAN ALANKAMONY A.M. ITA NO.779/BANG/2010 (ASST. YEAR 2006-07) THE INCOME TAX OFFICER WARD-1(2) BANGALORE. - APPELLANT VS SHRI SURESH PANJWANI NO.38 COLES CORNER F.NO.1 FRAZER TOWN BANGALORE-560 005. - RESPONDENT APPELLANT BY : SMT. MEERA SRIVASTAV JCIT RESPONDENT BY : SHRI BALRAM R RAO ADVOCATE O R D E R PER GEORGE GEORGE K : THIS APPEAL PREFERRED BY THE REVENUE IS DIRECTED A GAINST THE ORDER OF THE CIT(A)-I BANGALORE DATED 10.2.201 0. THE RELEVANT ASST. YEAR IS 2006-07. 2. THE SOLITARY ISSUE THAT IS RAISED IN THIS APPEAL IS WHETHER THE CIT(A) IS JUSTIFIED IN DIRECTING THE ASSESSING OFFICER TO ALLOW THE SET OFF OF A SUM OF RS.7 93 235/- BEING SPECULATION LOSS (DETERMINED IN AY 2004-05) AGAINST THE INCOME OF THE CURRENT YEA R.