Case Law Details
Kulvinder Nath Marwah Vs ACIT (ITAT Delhi)
The recent appeal of Kulvinder Nath Marwah against the Assistant Commissioner of Income Tax (ACIT) before the Income Tax Appellate Tribunal (ITAT) Delhi revolves around the disallowance of derivative loss. The appeal challenges the order dated 20/11/2018 of the Learned Commissioner of Income Tax (Appeals) [Ld. CIT(A)], which upheld the disallowance made by the Assistant Commissioner of Income Tax, Circle-29(1), New Delhi (Ld. AO) for the Assessment Year 2014-15.
The central issue under consideration is the disallowance of derivative loss claimed by the assessee. The Ld. AO disallowed the derivative loss on the grounds that the transactions were speculative in nature as they were not executed through registered intermediaries under section 12 of the SEBI Act. Additionally, the Ld. AO treated the peak balance of derivative investments with certain parties as unexplained investments under section 69 of the Income Tax Act, resulting in further additions to the assessment.
However, upon appeal, the ITAT Delhi carefully examined the submissions and evidence presented by the assessee. The assessee clarified that the derivative transactions were executed through sub-brokers registered with recognized stock exchanges and subjected to Securities Transaction Tax (STT). Furthermore, the assessee demonstrated that the losses incurred were funded through regular banking channels, with detailed records of transactions and payments provided.
The ITAT Delhi accepted the contentions of the assessee, ruling that the disallowance of derivative loss made by the Ld. AO was already addressed and accepted in the initial assessment. Therefore, there was no need for additional disallowances on the grounds of alleged margin payments. Consequently, the ITAT Delhi allowed the appeal of the assessee, thereby overturning the addition made by the Ld. AO.
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