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DATE: April 30, 2019 (Date of pronouncement)
DATE: June 24, 2019 (Date of publication)
AY: 2008-09
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Speculation Loss: Law on when an amendment can be said to be clarificatory/ retrospective explained. The amendment to the Explanation to s. 73 by the Finance (No 2) Act 2014 with effect from 1 April 2015 is not clarificatory or retrospective. Consequently, loss occurred to the assessee as a result of its activity of trading in shares (a loss arising from the business of speculation) is not capable of being set off against the profits which it had earned against the business of futures and options since the latter did not constitute profits and gains of a speculative business

The amendment which was brought by Parliament to the Explanation to Section 73 by the Finance (No 2) Act 2014 was with effect from 1 April 2015. In its legislative wisdom, the Parliament amended Section 43(5) with effect from 1 April 2006 in relation to the business of trading in derivatives, Parliament brought about a specific amendment in the Explanation to Section 73, insofar as trading in shares is concerned, with effect from 1 April 2015. The latter amendment was intended to take effect from the date stipulated by Parliament and we see no reason to hold either that it was clarificatory or that the intent of Parliament was to give it retrospective effect. 31 The consequence is that in A.Y. 2008-2009, the loss which occurred to the assessee as a result of its activity of trading in shares (a loss arising from the business of speculation) was not capable of being set off against the profits which it had earned against the business of futures and options since the latter did not constitute profits and gains of a speculative business

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DATE: October 16, 2018 (Date of pronouncement)
DATE: October 26, 2018 (Date of publication)
AY: 2014-15
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S. 254/ 36(1)(vii): If the AO has failed to discharge his obligation to conduct a proper inquiry, it is the obligation of the ITAT to ensure that effective inquiry is carried out. The AO has not examined the crucial aspect whether the bad debts claimed by the assessee due to the NSEL scam constitutes a "speculative transaction" u/s 43(5) and whether Explanation to s. 73(1) applies

A perusal of the order of the lower authorities gives an infallible impression that such crucial aspect has not been addressed. Without understanding the fate of the goods purchased purportedly in the custody of or on behalf of the assessee, it will not be possible to determine the issue. Where the purchase with delivery is settled by cross contract of sale with delivery at future date against sale proceeds, the entire debt turning bad is rather innocuous

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DATE: October 1, 2018 (Date of pronouncement)
DATE: October 6, 2018 (Date of publication)
AY: 2009-10
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Tax Planning: The fact that the assessee bought and sold shares of groups concerns with a view to book loss and off-set the capital gains from another transaction does not mean that the loss can be treated as bogus if the documentation is in order. The loss cannot be treated as "speculation loss" under the Explanation to s. 73 because the shares were held as investments

The claim of assessee-company is supported by the documents on record. Therefore, Ld. CIT(A) rightly came to the finding that the assessee-company has genuinely entered into purchase and sale of shares and if any, loss have been suffered by the assessee-company, A.O. cannot treat the same as non-genuine due to extraneous considerations or irrelevant reasons in the assessment order

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DATE: December 28, 2016 (Date of pronouncement)
DATE: December 29, 2016 (Date of publication)
AY: 2009-10
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CITATION:
S. 73 Explanation (speculation loss): If the assessee manages his transactions of sale and purchase of shares in cash segment and in future segment as a composite business, the transactions cannot be segregated to arrive at profit or loss in each segment separately. The provisions of the Income-tax Act cannot be interpreted to the disadvantage of the assessee and to segregate the transactions in cash and future segment which will be against the spirit of the taxation law

The peculiarity of the business of the assessee is such that the transactions carried out by the assessee in cash segment and in future segment cannot be segregated. The business of the assessee survives on the ultimate resultant figure arrived at after setting off/adjusting of the profit and loss from each segment. It cannot be said that the transactions in each segment done by the assessee are independent of each other. Before parting we would like to further add that certain exceptions have been carved out under section 43(5) vide which certain transactions in derivative named as ‘eligible transactions,’ done on a recognized stock exchange, subject to fulfillment of certain requirements, are deemed to be non-speculative. The said provisions have been inserted in the Act for the benefit of the assessees keeping in view the fact that in such type transactions on recognized stock exchange, the chance of manipulating and thereby adjusting the business profits towards speculative losses by the assessee is negligible because such transactions are done on recognized stock exchange and there are less chances of manipulation of figures of profits and losses. These provisions have been inserted for the benefit of the assessee so that the assessee may be able to set off and adjust his profit and losses from derivatives in commodities against the normal business losses. These provisions are intended to ease out the assessee from the difficulties faced due to the stringent provisions separating the speculative transactions from the normal transactions

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DATE: May 13, 2016 (Date of pronouncement)
DATE: May 26, 2016 (Date of publication)
AY: 2009-10
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CITATION:
The amendment to Explanation to s. 73 by Finance (No. 2) Act, 2014 w.e.f. 01.04.2015 is clarificatory in nature and operates retrospectively from 01.04.1977, being the date the Explanation to s. 73 was placed on the statute. Therefore, the loss incurred in share trading business by companies whose principal business is trading in shares will not be treated as speculation loss but as normal business loss and the same can be adjusted against income from business or other sources

The insertion of the amendment in the Explanation to section 73 of the Act by the Finance (No. 2) Act, 2014, in our view, is curative and classificatory in nature. If the amendment is applied prospectively from A.Y. 2015-16, a piquant situation would arise that an assessee who has earned profit from purchase and sale of shares in A.Y. 2015-16 would be treated as normal business profit and not speculation business profit in view of the exception carried out by the amendment in Explanation to section 73 of the Act. In these circumstances, speculation business loss incurred by trading in shares in earlier years will not be allowed to be set off against such profit from purchase and sale of shares to such companies in A.Y. 2015-16. For this reason also, the amendment inserted to Explanation to section 73 of the Act by Finance (No. 2) Act, 2014 is to be applied retrospectively from the date of the insertion to Explanation to section 73 of the Act

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DATE: August 7, 2015 (Date of pronouncement)
DATE: August 10, 2015 (Date of publication)
AY: 2006-07
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(i) DR can only support the AO's order and cannot set up an altogether new case before the ITAT, (ii) Loss on sale of shares, even if a speculation loss, can be set-off against the gains on sale of shares

Even if the loss claimed by the assessee relating to share transactions as well as loss resulting on valuation of closing stock is treated as speculation loss, the same is entitled to be set-off against the profit on sale of shares in view of DLF Commercial Developers Ltd. 261 CTR (Del) 127

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DATE: October 21, 2014 (Date of pronouncement)
DATE: October 24, 2014 (Date of publication)
AY: 2009-10
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CITATION:
Rule 8D(ii) & 8D(iii) do not apply to shares held as stock-in-trade. Loss arising out of derivatives from the income arising out of buying and selling of shares

(i) Both trading of shares and derivative transactions are not coming under the purview of Section 43(5) of the Act which provides definition of “speculative transaction” exclusively for purposes of section 28 to 41 of the Act. Again, the fact …

DCIT vs. Baljit Securities Private Limited (ITAT Kolkata) Read More »