IN THE HIGH COURT OF JUDICATURE AT BOMBAY

BENCH AT AURANGABAD

INCOME TAX APPEAL NO. 79 OF 2018

Souvenir Developers (I) Pvt. Ltd.

Shop No. 1, Animesh Apartment,

Plot No. 3, Janki Nagar,

Wadibhokar Road, Deopur,

Dhule-424 002.

…. Appellant.

Versus

The Union of India

Through Assistant Commissioner

of Income Tax, Circle-3(1), Dhule.

.… Respondent.

Mr. S. P. Shah, Advocate for appellant.

Dr. Kalpalata Bharaswadkar-Patil, Advocate for respondent.

...

CORAM : R. D. DHANUKA &

S. G. MEHARE, JJ.

Date on which reserved for judgment : 20^th April, 2022.

Date on which judgment pronounced : 06^th May, 2022.

JUDGMENT : [PER R. D. DHANUKA, J.] :-

1.

The appeal by the assessee under section 260-A of the

Income Tax Act, 1961 raises the following substantial questions of

law :-

(i)

Whether on the facts and circumstances of the case and in

law, the Tribunal was justified in confirming any addition on

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transaction in derivatives on recognized stock exchange as

defined under Section 43 (5) (d) of the Income Tax Act, 1961

with reference to explanation given to Section 73 of the Income

Tax Act, 1961 which is applicable to speculative transactions.

(ii) Whether loss suffered by the appellant on the transactions

in respect of trading in derivatives referred to in clause (ac) of

Section 2 of the Securities Contracts (Regulation) Act, 1956

carried out in a recognized stock exchange by the appellant

could have been set off against the income of the appellant

arisen out of infrastructure business carried on by the appellant

under Section 70 of the Income Tax Act, 1961.

2.

By consent of parties appeal is heard finally. Some of the

relevant facts for the purpose of deciding this appeal are as under :-

The relevant assessment year is 2009-10 and financial year

is 2008-09. The appellant is a domestic company and derives income

from business.

The appellant is dealing in collection of Toll fees in the

name and style “M/s. Souvenir Developer (India), Pvt. Ltd., Dhule”.

The appellant is also carrying business of shares and derivatives. The

return of income declaring total income of Rs.85,43,220/- was

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submitted electronically by assessee on 30^th September 2009. The

same was processed on 28^th March 2011 under section 143 (1) of the

Income Tax Act, 1961 by accepting the return of income. Subsequently

the case of the appellant was picked up for scrutiny. The statutory

notice under section 143(2) of the Income Tax Act, 1961 was issued

on 28^th September 2010. The appellant was granted an opportunity of

being heard by the assessing officer. The appellant produced the

information called as per questionnaire before the assessing officer.

The assessing officer passed order on 29^th December 2011 assessing

the income of the appellant as Rs.90,79,092/-.

3.

In the said assessment order, the assessing officer made

addition of the income to the extent of Rs.5,35,872/- under three

different heads. The assessing officer refused to consider the loss

suffered by the assessee on transaction in derivatives while computing

net taxable income. The application for rectification under section 154

made by the appellant was rejected by order dated 14^th May 2012. On

4^th June 2012 the appellant preferred an appeal before the

Commissioner of Income Tax (Appeals) against the assessment order.

The appellant did not challenge the additions made by the Assessing

Officer.

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4.

On 27^th February 2014, the Commissioner of Income Tax

(Appeals) passed order refusing to consider the loss suffered by the

appellant on transaction in derivatives while computing the net

income of the appellant. The Commissioner of Income Tax (Appeal)

was of the view that the appellant would not be entitled to set-off loss

suffered from transactions in securities because of the provisions of

section 73. The Commissioner held that as provided under section 73,

the loss suffered by the assessee would be a loss from speculative

business and as such the appellant would not be entitled to claim set-

of