INCOME TAX ACT, 1961

Section 143(5) Section 73, Expln.

Loss - Set-off - Assessee seeking setting off of derivative profit with share trading loss - Denial by AO on the ground that derivative transactions is not considered as speculative transaction for the purpose of section 43(5)

Assessee carried on composite business of derivative trading and share trading. It showed share trading loss. AO treated share trading loss as speculation loss by invoking Expln. to section 73. Also, AO held that loss from share trading had to be carried forward to be set off against speculation profit of future years. Assessee pleaded that share trading loss could be set-off against derivative profit. AO rejected this on the ground that derivative transactions is not considered as speculative transaction for the purpose of section 43(5). Held: Share trading loss incurred by assessee was specualtive in nature. However, derivative transactions is not considered as speculative transaction for the purpose of section 43(5) only and not otherwise. The same cannot be extended to provisions of section 73. Accordingly, assessee was entitled for setting off derivative profit with the share trading loss and hence, there was no need for making separate disallowance of share trading loss. Accordingly, treatment of AO in allowing carry forward of share trading loss to subsequent years.

REFERRED : CIT v. DLF Commercial Developers Limited (2013) 218 Taxman 45 (Del) : 2013 TaxPub(DT) 2199 (Del-HC) and CIT v. Parkview Properties(P) Ltd. (2003) 261 ITR 473 (Cal) : 2003 TaxPub(DT) 961 (Cal-HC).

FAVOUR : Partly in assessee's favour.

A.Y. : 2012-13

SUBSCRIBE FOR FULL CONTENT