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The ACIT 15(1), Mumbai Vs. M/s. Deepsang Corporation 431, 4th Floor, Sanghrajka House, Dr. D. B. Marg, Opera House, Mumbai 400 004
October, 05th 2015
               MUMBAI "D" BENCH, MUMBAI


                     ITA. No. 2260/Mum/2014
                    (Assessment Year:2008-09)

The ACIT 15(1),
Mumbai                                               Appellant


M/s. Deepsang Corporation
431, 4th Floor, Sanghrajka House,
Dr. D. B. Marg, Opera House,
Mumbai ­ 400 004                                    Respondent


        /By Appellant : Shri Chandra Vijay, D.R.
         /By Respondent :Shri Ashok Patil, A.R.
        /Date of Hearing
                                    : 24.09.2015
       /Date of
    Pronouncement                   : 30.09.2015



    This appeal has been filed by Revenue against the order of
Commissioner of Income-Tax (Appeals)-26, Mumbai, dated
29.01.2014 for A.Y. 2008-09 on following grounds:
I TA N o . 2 2 6 0 / M u m / 1 4 A . Y . 0 8 - 0 9 [ A C I T v s . M / s . D e e p s a n g C o r p o r a t i o n ]   Page 2

           "1.         On the facts and in the circumstances of the case and
                       in law, the CIT(A) has erred in deleting disallowance of
                       mark to market loss of Rs.2,98,49,207/- on the
                       derivate transaction.

           2.          On the facts and in the circumstances of the case and
                       in law, the CIT(A) has erred in not deciding the issue
                       on merits though Hon'ble ITAT has set aside the issue
                       to the CIT(A) to be decided afresh as per law."

2.         Assessment in this case was completed at an assessed
income of Rs.49,50,030/- and appeal was filed on various
grounds on 25.11.2010 and appeal was partly allowed.
Subsequently, assessee went to ITAT and wherein order was
passed on 05.02.2013 by observing as under:
           "5. After considering the rival submissions and perusing
           the relevant material on record, it is observed that the
           Assessing Officer did not allow set off of MTM loss against
           the regular business income on two grounds, viz., firstly,
           the assessee did not have UCC and secondly, the assessee
           failed to provide any evidence that this MTM margin was
           ever settled by actual cash' settlement or carried forward.
           The learned CFT(A) deleted the disallowance simply by
           considering one aspect, being the availability of UCC. There
           is no discussion whatsoever as regards the second aspect
           on which the Assessing Officer did not allow set off of loss.
           The learned AR was fair enough to concede that there is no
           discussion on the ground reproduced above that the
           Revenue is aggrieved against the reversal of the A. O's
           action thought the assessee failed to submit any, evidence
           that these losses were actually settled at the year ending.
           Without going into the merits of the case, we set aside the
           impugned order and restore the matter to the file of the
           learned CFT(A) for deciding the second aspect afresh as per
           law after allowing a reasonable opportunity of being heard
           to the assessee. "
2.1 Subsequent to the aforesaid ITAT order, the matter was
I TA N o . 2 2 6 0 / M u m / 1 4 A . Y . 0 8 - 0 9 [ A C I T v s . M / s . D e e p s a n g C o r p o r a t i o n ]   Page 3

sent for remand vide letter dated 25.04.2013 and the remand
report was received vide letter dated 02.01.2014. The issue
involved in this case was whether Mark to market Loss (MTM)
on derivative transactions Rs.2,98,49,207/- was allowable as
business loss. CIT(A) allowed the appeal vide para 4.2 of the
order as under :-
           "4.2 I have carefully considered the findings of the AO as
           well as the submissions of the Appellant. In this regard, the
           findings of the AO does not appear appropriate because, the
           appellant has regularly carried out the derivative
           transactions of F & O. It is now a settled principle that the
           derivative transactions conducted through a recognized
           stock exchange have been taken out of the purview of the
           speculation transactions under section 43(5) of the I. T Act,
           after the amendment with effect from 01.4.2006. This
           position have recently been clarified by the Hon'ble Bombay
           High Court in the case of Bharat Ruia (HUF), wherein it is
           held that after the amendment, the derivative transactions
           in shares would not come within the ambit of speculative
           transactions u/s.43(5) of the I.T. Act. In the instant case, it
           is an undisputed fact that these transactions have been
           carried out through recognized stock exchange with Unique
           Client Code (UCC) accordingly, the profit/loss on such
           transactions will be treated as normal business profit/loss
           and it cannot be treated as notional loss. On this issue,
           matter was remanded to AO to verify the UCC. Vide report
           dated 04.10.2011, the AO has confirmed that the assessee
           had UCC. Therefore, the finding of the AO in this regard is

2.2 This order of CIT(A) has been restored back by ITAT with
directions as detailed in para 3.1 of CIT(A). The submissions of
I TA N o . 2 2 6 0 / M u m / 1 4 A . Y . 0 8 - 0 9 [ A C I T v s . M / s . D e e p s a n g C o r p o r a t i o n ]   Page 4

assessee in this regard were forwarded and the remand report
reads as under:
           "In the appeal proceedings this case the assessment was
           completed u/s.143(3) of the I.T Act determining the total
           income at Rs.49,50,030/- instead of returned loss declared
           at Rs.2,63,84, 766/-. While completing the assessment the
           AO treated the Mark to Margin loss incurred on F & O
           business as speculation loss instead of business loss
           treated by the assessee and also denied the set off against
           other business income during the year. The appeal filed by
           the assessee against the above order was allowed by the Ld.
           CIT(A) by directing the AO to treat the Mark to Margin loss
           as business loss and allow the set off as claimed by the

                 Against the above order the Department filed appeal
           before the Hon'ble ITAT. The ITAT has set aside the order of
           the CIT(A) and restored back the issue to the file of the
           CIT(A) to verify whether the assessee has made the
           settlement of Mark to Margin loss with the brokers by actual
           cash payment during the year with supporting documentary
           evidence. In view of the above, the assessee submitted the
           details in respect of actual settlement of loss before the
           CIT(A), which has been forwarded to the AO for verification
           and submission of remand report.

                 Therefore, vide letter dated 19.07.2013, the assesee
           was asked to furnish the details alongwith documentary
           evidences in respect of payments made to brokers for
           settlement of the above loss during the year. In response to
           the above notice, the assessee vide letter dated 07.08.2013
           & 14.08.2013 has furnished the copy of ledger accounts,
           bank statements, broker statements etc. regarding the
           actual settlement of the loss made by cheque payments and
           adjustments of share trading receipts.

                After verification of the details it is found that the
           assessee has settled the loss of Rs.2,98,49,207/- to the
           brokers during the year as under:
I TA N o . 2 2 6 0 / M u m / 1 4 A . Y . 0 8 - 0 9 [ A C I T v s . M / s . D e e p s a n g C o r p o r a t i o n ]    Page 5

           Total mark to Margin Loss                                                                             Rs.2,98,49,207/-

           Less: Payment made to:-
           M/s. Pragya Securities Pvt. Ltd.
           (Deepsang Corpn.
           UBI A/c. No.318801010336721)                                           Rs.1,57,64,539/-

           M/s. Techno Shares & Stocks Pvt.                                          Rs.20,10,252/-
           Ltd. (Deepsang Corpn. ­ ICICI Bank
           A/c. No.034805002164 & Union
           Bank of India A/c. No.

           Paid on behalf by Shri Gunvantrai                                          Rs.5,00,000/-
           Sanghrajka (Partner) Saraswat
           Bank A/c. No.OPPUB/5020

           Paid on behalf by Mrs. Sangeeta                                        Rs.17,00,000/-
           Amit Shah (Partner) ICICI Bank
           A/c. No.34805002132

           (Paid on behalf by M/s. Dadajee                                        Rs.18,00,000/- Rs.2,17,74,791/-
           Dhakjee Pvt. Ltd. (sister concern)
           HDFC Bank
           A/c. No.0602490000702)
           (copy of ledger account and Bank
           Account Statement enclosed as

           Balance                                                                                                   Rs.80,74,416/-

           Net of Purchase and Sales                                                                                 Rs.81,16,780/-
           (Amount adjusted by brokers from
           Balance available in the running A/c.
           Of regular purchase and sale of shares)
           (Copy of Sales & Purchase Statement
           Enclosed as Annexure-B)

           Excess paid to broker                                                                                      Rs.42,364/-

                In view of the above, the claim of the assessee that the
           Mark to Margin loss has been actually settled during the
           year is found to be in order and the appeal may kindly be
           decided by considering the above facts and merits of the
I TA N o . 2 2 6 0 / M u m / 1 4 A . Y . 0 8 - 0 9 [ A C I T v s . M / s . D e e p s a n g C o r p o r a t i o n ]   Page 6

Assessing                  Officer             had           verified              the         fact          of      payment     of
speculation loss and found the same to be in order as per
findings recorded in remand report. In view of remand report,
CIT(A) held that loss incurred by assessee during year has
been settled by various payments in subsequent years and
same was found in order.                                             This reasoned finding of CIT(A),
wherein CIT(A) has deleted the disallowance of mark to market
loss of Rs.2,98,49,207/- on derivate transaction, needs no
interference from our side. We uphold the same.

3.         As a result, appeal filed by Revenue is dismissed.

     Pronounced in the open Court on this the 30th day of
September, 2015.

       Sd/-                                                                          Sd/-
 (ASHWANI TANEJA)                                                         (SHAILENDRA KUMAR YADAV)
ACCOUNTANT MEMBER                                                             JUDICIAL MEMBER
Mumbai: Dated 30/09/2015
                                                          True Copy
                       / Copy of Order Forwarded to:-
1.   / Revenue
2.  / Assessee
3.      / Concerned CIT
4.   -  / CIT (A)
5.    ,     ,  /
   DR, ITAT, Mumbai
6.   / Guard file.
                                                                                                                      By order/   ,

                                                                                                                     / ,
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