Case Law Details

Case Name : Harsha Capital Services Ltd. Vs. ITO (ITAT Delhi)
Appeal Number : ITA No. 1132/Del/2012
Date of Judgement/Order : 08/08/2012
Related Assessment Year : 2006-07
Courts : All ITAT (4213) ITAT Delhi (925)

In this case during the course of assessment proceedings, it was noticed by the Assessing Officer that the assessee company had incurred loss of Rs.  1,15,880/- in respect of derivative transaction during the period under consideration. Assessing Officer further noticed that the transactions in question have been made on National Stock Exchange and Bombay Stock Exchange which were not recognized for the purpose of Rule 6DDA and the notification to recognize these stock exchanges was issued only on 25.1.2006.  Therefore, Assessing Officer held that the loss arising out of purchase and sale of shares, delivery of which were not physical made, were liable to be considered in light of the provisions of Explanation to Section 73 of the I.T. Act, 1961. Accordingly, the loss of Rs. 1,15,880/- was disallowed by the Assessing Officer treating the same as speculative loss.

Ld. Commissioner of Income Tax (A) has confirmed that the Assessing Officer’s action on this account as relevant details pertaining to the source of income and also necessary certificate issued by the competent authority granting the assessee the status of NBFC was not produced before him. However, before me the assessee’s counsel has filed the certificate of registration from the RBI to enable the assessee company to carry on the business of non-banking financial institution. In view the observation of the Ld. Commissioner of Income Tax (A) that proper details were not available in this case and the necessary certificate of registration as NBFC was not produced, I deem it fit to remit back the matter to the file of the Assessing Officer to consider the issue afresh, after obtaining the necessary details and going through the certificate of registration as NBFC produced before me.

INCOME TAX APPELLATE TRIBUNAL, DELHI

ITA No. 1132/Del/2012 – A.Y.: 2006-07

Harsha Capital Services Ltd. Vs.  ITO

O R D E R

This appeal by the Assessee is directed against the order of the Ld. Commissioner of Income Tax (Appeals)-VIII, New Delhi dated 23.12.2011 pertaining to assessment year 2006-07.

2. The ground raised in the appeal is that on the facts of the case and in law the Ld. Commissioner of Income Tax (A) erred in confirming that the Derivative Loss of Rs. 1,15,880/- on dealing in future and option derivatives of shares in Recognized Stock Exchange Prior to 25.1.2006 is Speculation loss.

3. In this case during the course of assessment proceedings, it was noticed by the Assessing Officer that the assessee company had incurred loss of Rs.  1,15,880/- in respect of derivative transaction during the period under consideration. Assessing Officer further noticed that the transactions in question have been made on National Stock Exchange and Bombay Stock Exchange which were not recognized for the purpose of Rule 6DDA and the notification to recognize these stock exchanges was issued only on 25.1.2006.  Therefore, Assessing Officer held that the loss arising out of purchase and sale of shares, delivery of which were not physical made, were liable to be considered in light of the provisions of Explanation to Section 73 of the I.T. Act, 1961. Accordingly, the loss of Rs. 1,15,880/- was disallowed by the Assessing Officer treating the same as speculative loss.

4. Upon assessee’s appeal Ld. Commissioner of Income Tax (A) noted that he found that though the assessee company claims that for the asstt. year under consideration, the gross total income consists mainly of income which is generated from banking activities or the granting of loans and advances, the necessary details as to the volume of loans and advances granted during the financial year have not been furnished. Ld. Commissioner of Income Tax (A) further observed that it is not known whether the interest of Rs.  368530/- has been offered to tax as ‘income from other sources’ or as the ‘income from business or profession’. Therefore, Ld. Commissioner of Income Tax (A) held that in the absence of the relevant details, he was unable to agree with the assessee company that its main business was that of banking or the granting of loans and advances. Ld. Commissioner of Income Tax (A) further observed that assessee company has also not furnished the necessary certificates issued by the competent authority granting it the status of NBFC i.e. Non-Banking Finance Company. Hence, Ld. Commissioner of Income Tax (A) held that he did not find any infirmity in the action of the Assessing Officer and the rejection of claim of loss of Rs. 1,15,880/- was sustained.

5. Against the above order the assessee is in appeal before me.

6. I have heard the rival contentions in light of the material produced. I find that Ld. Commissioner of Income Tax (A) has confirmed that the Assessing Officer’s action on this account as relevant details pertaining to the source of income and also necessary certificate issued by the competent authority granting the assessee the status of NBFC was not produced before him. However, before me the assessee’s counsel has filed the certificate of registration from the RBI to enable the assessee company to carry on the business of non-banking financial institution. In view the observation of the Ld. Commissioner of Income Tax (A) that proper details were not available in this case and the necessary certificate of registration as NBFC was not produced, I deem it fit to remit back the matter to the file of the Assessing Officer to consider the issue afresh, after obtaining the necessary details and going through the certificate of registration as NBFC produced before me.

7. In the result, the appeal filed by the assessee stands allowed for statistical purposes.

Order pronounced in the open court on 08/8/2012.

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