IN THE INCOME TAX APPELLATE TRIBUNAL
MUMBAI "D" BENCH, MUMBAI
BEFORE SHRI SHAILENDRA KUMAR YADAV, JUDICIAL
MEMBER,
AND SHRI ASHWANI TANEJA, ACCOUNTANT MEMBER.
ITA. No. 2260/Mum/2014
(Assessment Year:2008-09)
The ACIT 15(1),
Mumbai Appellant
Vs.
M/s. Deepsang Corporation
431, 4th Floor, Sanghrajka House,
Dr. D. B. Marg, Opera House,
Mumbai 400 004 Respondent
PAN: AAEFD6966A
/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
ORDER
PER SHAILENDRA KUMAR YADAV, J.M:
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:
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"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
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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
reversed."
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
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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
assessee.
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:
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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.
31880101336721)
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
Annexure-A)
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
case."
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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
S.K.SINHA
/ 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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