The Income Tax Appellate Tribunal (ITAT), Kolkata Bench deletd the addition made on account of loss from derivative trading adjusted with business Income.
The assessee Kippy Engineering Private Limited filed return of income on 29.09.2013 for the assessment year. Subsequently, the assessee’s case was selected for scrutiny under CASS.
During the assessment proceedings, the AO noticed that the assessee had debited a sum of Rs. 61,33,487/- on account of loss from derivative trading and found to be adjusted with the business income of the assessee .
It was contented that the assessee-company paid cash amounting to Rs. 5,73,183/- to M/s Cardio Technovention for the purpose of taking reversal of entry as commission received through proper banking channel. The reassessment was concluded at the returned income.
The AO notices that the loss was on account of currency trading and it was on account of speculative business transaction. Therefore, the AO viewed that the speculative business loss could be set off against the speculative profit and no other head of income.
Further alleged that assessee-company paid cash amounting to Rs. 5,73,183/- to M/s Cardio Technovention for the purpose of taking reversal of entry as commission received through proper banking channel for Rs. 6,39,000/- and this issue was not thoroughly examined while completing the assessment. Thereafter AO disallowed the claim.
Aggrieved by the order, the assessee filed an appeal before the Commissioner of Income Tax Appeal (CIT(A)), who dismissed the appeal of assessee. Thus the assessee filed a second appeal before the tribunal.
During the hearing, Ritesh Goel , the counsel for assessee submitted that assessee entered into derivative transactions in foreign currency through SEBI registered broker who is a member of United Stock Exchange of India Limited (USEL).
Therefore, these derivative transactions are carried out through USEL which is a recognized stock exchange and these transactions are backed by time stamped contract notes carrying unique client identity numbers along with PAN .
Further stated that it is outside the ambit of the definition of speculative transaction defined under Section 43(5) of the Income Tax Act.
Subhrajyoti Bhattacharjee, the Counsel for Revenue argued that supported the order of lower authorities.
After reviewing the facts and submissions, the two-member bench of the tribunal comprising Pradip Kumar Kedia (Accountant Member) and Challa Nagendra (Judicial Member) relied upon the Supreme Court case of Snow Ten Investment Ltd. vs PCIT observed that “ the insertion of clause (d) to the provision of section 43(5) of the Income Tax Act, the transaction in respect of trading in derivative as prescribed in clause (d) inserted in provision of section 43(5) would not be a speculative transaction”
Therefore, the views taken by the lower authorities are not in accordance with law. Thus the bench allowed the appeal of the assessee.
Subscribe Taxscan Premium to view the JudgmentSupport our journalism by subscribing to Taxscan premium. Follow us on Telegram for quick updates
