Commodity Transactions carried out during Regular course of Business cannot be treated as 'Speculative Business': ITAT [Read Order]

The Mumbai Bench of Income Tax Appellate Tribunal has allowed the deduction holding that the commodity transactions carried out during the regular course of business could not be treated as speculative business.

In the instant case, the assessee, Clothing Culture Ltd was a company engaged in the business of manufacturing and trading of textile products. The assessee company had carried out the commodity transactions on the platform of National Stock Exchange Limited (NSEL) for A.Y.2013-14. In July 2013, the assessee company which had 4 open contracts, aggregating to Rs 27.55 Crore, had written off the value of open contracts by taking the value of closing stock as Nil when the NSEL had been found having no money or commodity against the contracts.

Accordingly, the assessing officer disallowed the deduction for the loss of Rs 21,68,322/- claimed by the assessee, holding that the said loss couldn’t be treated as business loss.

Haridas Bhat, on behalf of the assessee contended that the assessee company had carried out trading activities in commodity and all the transactions were routed through profit and loss account and income or loss arising there from to the assessee were duly offered under the head ‘income from businesses’.

He also submitted that all the expenditures incurred thereon in the form of warehousing rents, transaction charges, stamp duty agreement, VAT, service tax etc, which were incurred in trading of commodities were claimed as regular business expenditure to earn the said business income and the same had been accepted by the assessing officer. But the assessing officer had rejected this claim in the next assessment when the loss had been claimed by the assessee.

Jayant Jhaveri had appeared for the department content that the commodity transactions could not be treated as speculative business and further contended that the deduction should not be allowed.

 The Tribunal Bench of Vikas Aswathy (judicial Member) and M Balaganesh (Accountant Member) held that the commodity transactions could not be treated as a speculative business carried on by the assessee as it had been carried out in the regular course of the business. The Bench further held that the business expenditure would be allowable as deduction under Section 37 of the Income Tax Act 1961.

To Read the full text of the Order CLICK HERE

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