INCOME TAX ACT, 1961

Section 263

Revision under section 263 - Erroneous and prejudicial order - Treatment of loss on currency derivative transactions done through broker being member of notified stock exchange -

Pr.CIT noticed that the assessee had claimed loss on account of commodities (Currency Loss) of Rs. 41,25,364. On perusal of contract notes of Godavari Exim Pvt. Ltd., i.e., broker it was noted by Pr. CIT that said loss of Rs. 41,25,364 had been incurred on account of currency derivative. Further, Pr. CIT noticed that transactions in question involved settlement otherwise than by actual delivery or transfer of any commodity. Accordingly, Pr.CIT took the view that loss on account of commodities, currency derivatives was speculation loss and, therefore, held assessment order as erroneous and prejudicial to the interest of revenue. Held: Assessee proved that MC Stock Exchange Ltd. was notified for the purpose of section 43(5) vide Notification No. 46/2009, dated 22-5-2009 issued by CBDT and currency derivative transaction was done by assessee through broker, i.e., M/s. Godavari Exim Pvt. Ltd.; who was member of MC Stock Exchange Ltd. Therefore, assessee's transaction fell under clause (d) of sub-section (5) of section 43 and, therefore, currency derivative loss was not speculation loss and, therefore, order of Pr. CIT under section 263 was set aside.

REFERRED :

FAVOUR : In assessee's favour.

A.Y. : 2014-15

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