Case Law Details
Magic Share Traders Ltd Vs ITO (ITAT Ahmedabad)
The issue under consideration is whether a company dealing in ‘derivatives’ could be considered as engaged in speculative business as per Section 73 or not?
In the present case, the assessee seeks set off of losses arising from derivative losses as non-speculative business losses. The Revenue had considered the loss arising from derivative transactions as ‘speculative loss’ and had consequently denied set off of such losses from regular income of non-speculative nature, etc., by applying Explanation to section 73.
ITAT states that the explanation to Section 73 of the Act cannot apply to loss arising from derivative transactions which are categorically excluded from being regarded as speculative business as defined under s.43(5) of the Act read with proviso (d) thereto. Once it is deemed to be a normal business loss on the basis of proviso appended to Section 43(5) of the Act, a question of applying Section 73 of the Act or the Explanation thereto for the purposes of refusing loss to be set off against business income is wholly incorrect. Further, it is also states that derivatives cannot be treated at par with shares for the purposes of Explanation to Section 73 of the Act because the legislature has treated it differently.
Hence, ITAT allowed the appeal filed by the assessee by considering derivative losses as non-speculative business losses.
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