Income Tax Appellate Tribunal - Kolkata
Suresh Kumar Jalan, Kolkata vs Assessee
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IN THE INCOME TAX APP ELLATE TRIBUNAL,
KOLKATA 'C' BENCH, KOLKATA
Coram : Shri Mahavir Singh (Judicial Member)
and Shri Abraham P . George (Accountant Memb er)
I.T .A. No.: 445/K ol./ 2012
Assessment year : 2006-2007
Sure sh Kuma r J alan ,.................................... ......... ....................Appe llant
6, L yons Range, Room G-20,
Kolkata-700 001
[PAN : ACPPJ 6074 L]
-Vs.-
Income Tax Office r,.......................................................... ...Respondent
Wa r-36(2), Kolkata ,
18, Rabind ra S arani ,
Kolkata-700 001
Appearances by:
Shri Soumitra Choudhury and Shri S.P. Chowdhury, A.R., fo r the assessee
Shri A.K. Das, Sr. D.R., for the Department
Date of co ncluding the hearing : De cember 09, 2013
Date of pronouncing the orde r : De cember 09, 2013
O R D E R
Per Abraham P. George :
1. This appeal filed by the assessee is against an order dated 1 s t December, 2011 of Commissioner of Income Tax (Appeals)-XX, Kolkata for assessment year 2006-07.
2. Assessee has raised seven grounds in total, out of which Grounds No. 1 & 7 are general, therefore, need no adjudication.
3. Through its Grounds No. 2 to 4, assessee is aggrieved on an addition of Rs.7,12,636/- made by the Assessing Officer, considering loss suffered in share derivative transactions as speculative loss. This was confirmed by the l d. CIT(Appeals).1
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4. Facts apropos are that assessee had filed his return for the impugned assessment year declaring a loss of Rs.34,224/-. While completing the assessment Assessing Officer disallowed a loss of Rs.7,12,636/- claimed by the assessee as a part of normal loss. As per the Assessing Officer, loss on account of derivative transactions could onl y be considered as speculation loss. Assessing Officer for taking this view relied on a CBDT Notification No. 2 dated 25 t h January, 2006.
5. Aggrieved, assessee moved in appeal before ld. CIT(Appeals). As per the assessee, it's case was covered by Explanation (d) to section 43(5) of the Act and was doing Futures & Options (F&O) transactions against holdings of stocks and shares, to guard against loss that coul d arise on account of price fluctuations. As per assessee, CBDT Circular relied on by the Assessing Officer was not binding on him. Loss incurred on account of derivative transactions for assessment year 2006-07 had to be considered as business loss. However, ld. CIT(Appeals) was not impressed. According to him, CBDT Circular was binding on the Assessing Officer. As per l d. CIT(A ppeals), assessee had not filed any evidence to prove that F& O transactions were undertaken to guard against loss in holdings of stock in shares. He, therefore, confirmed the order of Assessing Officer.
6. Now before us, ld. A.R. strongly assailing the order of authorities below submitted that Hon'ble S pecial Bench of this Tribunal in the case of Shree Capital Services Limited -vs.- ACIT [121 ITD 498] has held that Clause (d) of Section 43(5) was prospective and effective w.e.f. 1 s t April, 2006 i.e. assessment year 2006-07 onwards. According to him, the impugned assessment year being assessment year 2006-07, the loss on account of F&O transactions could be treated only as normal loss and not as speculative loss. Reliance was also placed on the decision of Ahmedabad Bench of the Tribunal in the case of ACIT -vs.- Hiren Jaswantrai Shah (2011) 62 DTR 95. According to him, this decision of 2 I .T.A . N o . : 4 4 5/ Kol. / 2 0 1 2 A s s es s m e n t y e a r : 2 0 0 6 - 0 7 Pa ge 1 to 5 Ahmedabad Bench was rendered after considering the decision of S pecial Bench of this Tribunal in the case of Shree Capital Services Ltd. It was held that transactions carried out through recognized Stock Exchanges from 1 s t April, 2005 to 25 t h January, 2006, would be eligible for being treated as non-speculative in nature in view of Clause (d) of proviso to section 43(5) of the Act. Ld. A.R. submitted that all the transactions carried out by the assessee were only through Stock Exchanges.
7. Per contra, Ld. D.R. strongly supported the order of ld. CIT(A ppeals).
8. We have heard the rival submissions and perused the material on record. We find that revenue has not disputed the claim of assessee that the transactions in F&O were carried out through recognized Stock Exchanges. Assessing Officer had treated the loss arising on account of trading in F&O as speculative loss though assessee had relied on Clause
(d) of proviso to section 43(5) of the Act. As pointed out by ld. A .R. Hon'ble Special Bench of this Tribunal in the case of Shree Capital Services Ltd. has clearly held that Clause (d) of section 43(5) is not clarificatory in nature. The said Clause was held effective from assessment year 2006-07 onwards. Therefore, loss suffered by the assessee during impugned assessment year on account of trading in F&O transactions could not be treated as speculative lo ss. Clause (d) of section 43(5) of the Act does not require that the trading in derivatives shoul d be undertaken only for hedging any prob able future loss that could happen on shares held as stock. Decision of both Special Bench of this Tribunal in the case of Shree Capital Services Ltd. (supra) as well as that of coordinate Bench in the case of Hiren Jaswantrai Shah (supra) had considered the effect of the CBDT Circular No. 2 before holding that proviso (d) to section 43(5) had to be applied onl y from assessment year 2006-07. Therefore, from assessment year 2006-07 loss arising out of F& O transactions done recognized through Stock Exchanges cannot be 3 I .T.A . N o . : 4 4 5/ Kol. / 2 0 1 2 A s s es s m e n t y e a r : 2 0 0 6 - 0 7 Pa ge 1 to 5 considered as speculative transactions. Grounds No. 2 to 4 of the appeal are allowed for statistical purposes.
9. Vide its Ground No. 5 grievance of the assessee is that l d. CIT(A ppeals) did not direct the Assessing Officer to allow rebate of Security Transaction Tax of Rs.1,35,023/- legitimatel y available to it under section 88E of the Act.
10. We find from the grounds taken by the assessee before ld. CIT(A ppeals) that no such issue was ever raised by him before the CIT(A ppeals). Computation of income, as given by the Assessing Officer in the assessment order, clearly show that there was no such claim made by the assessee in the return of income at all. Therefore, in view of the decision of H on'ble Apex Court in the case of Goetz India Ltd. -vs.- CIT (2006) 284 ITR 323 (SC) this being a fresh claim could not have been made except through a revised return. We are therefore not inclined to consider this ground raised by assessee. Ground No. 5 stands dismissed.
12. Vide Ground No. 6, grievance of the assessee is that ld. CIT(A ppeals) confirmed an addition of Rs.37,907/- made under section 14A of the Act. Assessee had earned Rs.1,09,494/- which was claimed exempt under section 10(34) of the Act. Since assessee had not made any suo mo tu disallowance for expenses incurred on such exempt income, Assessing Officer invoked section 14A of the Act and made a disallowance of Rs.37,907/-. Ld. CIT(Appeals) confirmed this disallowance.
13. We are of the opinion that by virtue of decision of the Hon'ble Mumbai High Court in the case of Godrej & Boyce Manufacturing Co. Ltd. - vs.- DCIT (2010) 328 ITR 81 (Bom.) disallowance under section 14A can be made even prior to assessment year 2008-09, though Rule 8D of Income Tax Rules could not be applied. This Tribunal has been consistentl y holding that in such cases prior to assessment year 2008-09 4 I .T.A . N o . : 4 4 5/ Kol. / 2 0 1 2 A s s es s m e n t y e a r : 2 0 0 6 - 0 7 Pa ge 1 to 5 disallowance of 1% of the exempt income woul d be appropriate. Therefore, we direct that the disallowance be restricted to 1% of the exempt income claimed by the assessee. Ordered accordingly. Ground No. 6 of assessee is partly allowed.
14. In the result, the appeal filed by the assessee is partly allowed.
Order pronounced in the open court on 9 t h day of December, 2013.
Sd/- Sd/-
Mahavir Singh Abraham P. George
(Judicial Member) (Accountant Member)
Kolkata, the 9 t h day of December, 2013
Copies to : (1) The appellant
(2) The respondent
(3) CIT
(4) CIT(A)
(5) The Departmental Representative
(6) Guard File
By o rder etc
Assistant Registrar
Income Tax Appellate Tribunal
Kolkata benches, Ko lkata
Laha/Sr. P.S.
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