Case Law Details
Total Securities Ltd Vs ACIT (ITAT Chennai)
ITAT Chennai held that provisions of section 73 doesn’t apply in view of specific exclusions of the arbitrage/jobbing transactions from the purview of speculative transaction u/s 43(5) of the Income Tax Act.
Facts- The present appeal is filed by the appellant contending that CIT(A) has erred in confirming the addition made by the assessing officer by treating the loss of income as speculation loss.
AO held that the assessee set-off share trading loss on equity based transactions against income from derivative trading. The income from derivative trading, in terms of Clause (d) of Sec. 43(5) was non-speculative in nature. Since the assessee was engaged in the business of share trading, the explanation to Section 73 would apply which provide that any income or loss arising from such transactions is deemed to be speculative in nature. Therefore, the losses thus arising could be set-off only from speculative income only whereas the assessee has set-off share trading losses against non-speculative income from derivative trading which is impermissible.
Conclusion- We find that the trading business of the assessee constitutes only profit / loss in arbitrage / jobbing which are normal business transactions for the assessee. In the case of the assessee, the entire transaction of purchase and sale of securities constitutes arbitrage & jobbing transactions as a whole and hence, these transactions are outside the purview of the speculative transaction. The explanation to Sec.73 would not apply to the case of the assessee in view of specific exclusions of the arbitrage/jobbing transactions from the purview of speculative transaction u/s 43(5) of the Income Tax Act.
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