Income Tax Appellate Tribunal - Ahmedabad
The Dcit, Central Circle-2(1),, ... vs M/S. Aaryavart Commodities Pvt. Ltd.,, ... on 21 February, 2018
IN THE INCOME TAX APPELLATE TRIBUNAL
AHMEDABAD "D" BENCH AHMEDABAD
BEFORE, SHRI S. S. GODARA, JUDICIAL MEMBER
AND SHRI AMARJIT SINGH, ACCOUNTANT MEMBER
ITA No. 1112/Ahd/2016
(Assessment Year: 2008-09)
The Deputy Commissioner of
Income-tax, Central Circle - 2(1), Ahmedabad Appellant
Vs.
M/s. Aaryavart Commodities Pvt. Ltd.,
210, Chitrarath Complex, Opp. Municipal
Market, C. G. Road, Ahmedabad Respondent
PAN: AAMCS7986E
राज व क ओर से/By Revenue : Shri V. K. Singh, Sr. D.R.
आवेदक क ओर से/By Assessee : Shri Aseem Thakkar, A.R.
सन
ु वाई क तार ख/Date of Hearing : 12.02.2018
घोषणा क तार ख/Date of
Pronouncement : 21.02.2018
ORDER
PER S. S. GODARA, JUDICIAL MEMBER
This Revenue's appeal for assessment year 2008-09 arises against the CIT(A)-3, Ahmedabad's order dated 18.02.2016, in case no. CIT(A)-3/Cir- 1(1)/282/15-16, reversing Assessing Officer's findings adding an amount of Rs.5,19,46,966/- pertaining to disallowance of loss incurred due to speculative ITA No. 1112/Ahd/16 [DCIT vs. M/s. Aaryavart Commodities Pvt. Ltd. ] A.Y. 2008-09 -2- transaction not covered u/s.43(5)(d), in proceedings u/s. 143(3) r.w.s. 263 of the Income Tax Act, 1961; in short "the Act".
Heard both the parties qua the above sole issue. Case file perused.
2. We notice at the outset that the CIT(A)'s findings under challenge elaborately discusses all the relevant facts, Assessing Officer's conclusion as well as assessee's submissions during the course of lower appellate proceedings as under:
"6. The Ground No. 2 and 3 relate to the issue of substance i.e. disallowing the loss against the income of the appellant, saying that the losses to the extent of Rs.5,19,46,966/- incurred by the appellant in hedging activities were considered as speculative in nature and disallowed while computing the income under the head "profits and gains of business or profession". The Assessing Officer has discussed the issue in para No. 4 of Assessment Order. The gist of the order is as under:
"The assessee had charged the profit and loss account with 'purchase by contract' of Rs. 5,19,46,966/-. Thus, the loss of Rs. 5.19.46.966/- was on accounting of hedging in commodities in MCX Stock Exchange Ltd. and National Commodity & Derivative Exchange Limited (NCDEX). The losses in hedging transactions carried out in the previous year 2007-08 relevant to A.Y. 2008-09 was "speculative transaction" as per the definition provided in Section 43(5) of the Act in view of the fact that MCX Stock Exchange Ltd. (MCX) was notified as the recognized exchange only on and with effect from 22.05.2009 and NCDEX was not notified as the recognized stock exchange. Therefore, such transactions entered into in the previous year 2007-08 were not covered by proviso (d) of section 43(5) of the Act too.
Thus, the losses to the tune of Rs. 5,19,46,9667- incurred by assessee in hedging activity were speculative in nature and it was disallowable in computing the income under the head "profits and gains of business or profession" of the non-speculative business," which was not disallowed. Income-tax involved on the underassessment of Rs.5,19,46,966/-."
6.1 On the other hand, the appellant has explained the issue in the submission and has relied on various judgments.
6.2 The perusal of the assessment order indicates that the AO has only objection / that the transactions were not carried out in recognized stock exchange or recognition I has been granted on a date which is subsequent to the year under appeal. The fact remains that the recognition to the Exchange has been granted at a subsequent date. The issue has been dealt with by jurisdictional ITAT in the case of Vimal Oil and Food Industries Ltd. reported in (2015) 67 SOT 373, (Ahm) wherein it has been held.
ITA No. 1112/Ahd/16 [DCIT vs. M/s. Aaryavart Commodities Pvt. Ltd. ]A.Y. 2008-09 -3- "In view of the discussion, assessee's derivative trading through MCX Stock Exchange in assessment year 2008-09 was non speculated transaction; therefore, loss incurred in such transactions was to be treated as normal business loss. It is found that by Finance Act, 2005 clause (d) was inserted in proviso to sub-section (5) of section 43 with effect from 1-4-2006 which provided that an eligible transaction in respect of trading in derivative referred to in clause (a) of sub-section (2) of Securities Contract (Regulation) Act, 1956 carried out in a recognized stock exchange shall not be deemed to be speculative transactions. Thus, from 1-4-2006 trading in derivative carried through the recognized stock exchange was treated as non-speculative transactions. For the purpose of clause (d), rules 6DDA and 6DDB of IT Rules, 1962, provided that notification of recognized stock exchange has to be done by the Central Government (CBDT). In pursuance of this Rule, the CBDT has notified the MCX Stock Exchange Ltd. by S.O. 1327(E) dated 22-5-2009. The issue in such a notification given on 22-5- 2009, by which MCX Stock Exchange has been recognized, could be held to be applicable for the undertaken in the assessment year 2008-09 i.e. after 1st April, 2006. Once in it has been provided that with effect from 1-4-2006, an eligible transaction out in a recognized Stock Exchange will not be treated as speculative transaction, then simply because procedural mechanism has taken a long time to recognize the Stock Exchange, it will not lead to an inference that the same would be applicable from the date when the Stock Exchange has been recognized by the Central Govt. The notification issued under rule 6DDB, does not empower any right or create obligation but only recognizes what is already provided in statute. Thus, the transactions carried out through MCX Stock Exchange after 1-4-2006, would be eligible for being treated as non-speculative derivates within the meaning of clause (d) of proviso to section 43(5). [Para 5] 6.3 In view of ratio laid down by the Hon'ble 1TAT, Ahmedabad (supra) and other case laws such as CIT vs. Nasa Finlease Pvt. Ltd. (2013) 358 ITR 305 (Delhi) and Arnav Akshay Mehta (2012) 53 SOT 581 (Mum.), it is decided that the loss in the transactions to be treated as business loss and not as speculative loss. The ground No. 2 & 3 of the appeal allowed."
3. Learned Departmental Representative vehemently contends that the Assessing Officer had rightly made the impugned addition of Rs.5,19,46,966/- in view of the fact that the assessee's case in seeking to adjust its losses in hedging transactions was rightly held to be not allowable being arising out of speculative transactions as defined u/s.43(5) of the Act. He highlights the fact that the stock exchange in question stood notified as a recognized exchange only w.e.f. 25.02.2009 whereas we are dealing with assessment year 2008-09. We find the above co-ordinate bench's decision in case of Vimal Oil and Food Industries Ltd. (supra) has already held that such a recognition of stock exchange with prospective ITA No. 1112/Ahd/16 [DCIT vs. M/s. Aaryavart Commodities Pvt. Ltd. ] A.Y. 2008-09 -4- effects would also cover the impugned assessment year for the purpose of exigibility of Section 43(5)(d) of the Act. Learned Departmental Representative fails to pinpoint any distinction on facts or law. We therefore affirm CIT(A)'s findings under challenge.
4. This Revenue's appeal is dismissed.
[Pronounced in the open Court on this the 21st day of February, 2018.] Sd/- Sd/-
(AMARJIT SINGH) (S. S. GODARA)
ACCOUNTANT MEMBER JUDICIAL MEMBER
Ahmedabad: Dated 21/02/2018
True Copy
S.K.SINHA
आदे श क त ल
प अ े
षत / Copy of Order Forwarded to:-
1. राज व / Revenue
2. आवेदक / Assessee
3. संबं धत आयकर आय!
ु त / Concerned CIT
4. आयकर आयु!त- अपील / CIT (A)
5. )वभागीय ,-त-न ध, आयकर अपील य अ धकरण, अहमदाबाद /
DR, ITAT, Ahmedabad
6. गाड3 फाइल / Guard file.
By order/आदे श से,
उप/सहायक पंजीकार
आयकर अपील य अ धकरण, अहमदाबाद ।