Loss out of Non-Speculative Transactions can be set off under the Head of Regular Business: ITAT [Read Order]

The Lucknow benchof Income Tax Appellate Tribunal (ITAT) comprising A D Jain, vice president and Shri T S Kapoor, AM has held that loss arose out of non-speculative transactions can be set off under the head of the regular business and quashes the order of CIT(A) confirming the addition u/s 43(5)(e) of the Income Tax Act, 1961.

The appellant has contended that the loss in commodity derivatives trading business was non-speculative and the action of the Assessing Officer in not setting off the same against other business incomewas not sustainable. It was contended that the appellant was carried on two businesses of the medical derivatives and the other dealing in the derivatives of commodities, shares and securities in recognised Stock Exchanges; that the profit and loss account filed had income and loss of both the businesses.The profit of medical derivatives and loss of derivatives was shown separately under the head of “Income from Business and Profession”. The appellant stated that the loss is allowed to be set off against the profits from the medical derivatives business.

The respondent contended that the assessee had set off the loss of speculative business with regular business, this set off was rightly not allowed by the Assessing Officer and relied on the order of CIT(A).Further stated that the CIT(A) has held the assessee as wrong in setting off the loss of speculative business with regular business and confirmed the addition under clause (e) of the first proviso to section 43(5) of the Income Tax Act 1961.

The Tribunal observed that the transaction of the appellant as per clause (e) of the first proviso to section 43(5), cannot at all be deemed to be speculative transactions. It was observed that under section 70 (1) of the Act, where the net result for any Assessment Year in respect of any source falling under any head of income, other than “Capital Gains”, is a loss, the assessee shall be entitled to have the amount of such loss set off against his income from any other source under the same head.

The Coram observed that the loss that arose out of the derivative trading commodity is not a speculative transaction, and can be set off against the profit of the medical derivatives business of the appellant. The appeal filed by the assessee was allowed.Shri Ashok Seth appeared on behalf of the appellant and Shri Harish Gidwani appeared on behalf of the respondent.

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Ramesh Verma vs The ACIT Gonda , 2022 TAXSCAN (ITAT) 573 , Shri Ashok Seth , Shri Harish Gidwani