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Speculation loss - Dealing in derivatives
April, 15th 2008

DCIT vs SSKI Investors Services (P) Ltd.
Citation 113 TTJ 511
Speculation loss - Dealing in derivatives
The loss occurring in the course of dealing in derivatives could not be treated as speculation loss.

ITAT, Mumbai

DCIT vs SSKI Investors Services (P) Ltd.

ITA No. 3182/Mum/2004; Asst. yr. 2001-02

O.K. Narayanan, A.M and Sushma Chowla, J.M

25 September 2007

P.C. Maurya for the Appellant
Hiro Rai for the Respondent


O.K. Narayanan, A.M

This appeal is filed by the Revenue. The relevant assessment year is 2001-02. The appeal is directed against the order of CIT(A)-IV at Mumbai dt. 25th Feb., 2004 and arises out of the assessment completed under s. 143(3) of the IT Act, 1961

2. The only ground raised in this appeal is that the CIT(A) erred in directing that the loss of Rs. 8,24,568 on account of derivative trading cannot be treated as speculation loss and failed to appreciate that though the transactions were made on demonstrative transaction is nonetheless speculative.

3. In the first appeal, the CIT(A) found that the loss was incurred on account of derivative trading in assessee's own account. The CIT(A) held that derivative segments are all future trades but strictly speaking by definition of speculative transaction, there has to be purchase or sale of any commodity including stock and shares. As derivative trading does not involve any purchase and sale of shares, the loss on account of derivative cannot be treated as speculation loss. We find that dealings in derivative being a separate kind of transaction, without force of law, it is not possible to hold that the transaction was speculative in nature. Therefore, the CIT(A) is justified in allowing the appeal filed by the assessee.

4. In the result, the appeal filed by the Revenue is dismissed.

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