Kamal Kant Vs ITO (ITAT Delhi)
The ITAT Delhi addressed an appeal filed by the assessee, Mr. Kamal Kant, against an order from the National Faceless Appeal Centre (NFAC) for the Assessment Year (A.Y.) 2009-10. The core issue of the dispute arose from an order passed under Section 154 of the Income-tax Act, 1961, where the Central Processing Centre (CPC) disallowed the assessee’s claim to set off a business loss against income under the head Capital Gain. The assessee, an individual engaged in trading shares, securities, and Futures & Options (F&O) contracts, filed a return declaring an income of , claiming a business loss of and reporting a capital gain income of from transactions related to land and building. Upon processing the return under Section 143(1), the CPC raised a demand by not allowing the set-off, a position later upheld by the NFAC. The assessee argued that this disallowance was erroneous, maintaining that the loss from F&O was duly reported in the ITR-4 form and was eligible for set-off as per law.
The assessee’s representative argued that the disallowance violated Section 71(2) of the Act, which allows for the set-off of losses incurred under any head of income, except for “Capital gains,” against income under any other head, including Capital Gains. Reliance was placed on the decision of the Co-ordinate Bench in the case of Deepak Sogani v. Deputy Commissioner of Income-Tax, which specifically held that losses from F&O derivative trading—classified as non-speculative business losses under Section 43(5)(d)—are eligible to be set off against Capital Gains, with the only prohibition under Section 71(2A) being against setting off such losses against salary income. Respectfully following this judicial precedent, the ITAT agreed that the assessee was entitled to set off the non-speculative business loss against the income from Capital Gains, as the claim was made in the original income tax return. Consequently, the ITAT set aside the orders of the lower authorities and remanded the matter back to the Assessing Officer (AO) to verify the details submitted by the assessee and correctly allow the claimed set-off. The appeal was formally allowed for statistical purposes.
