The Tax Publishers2020 TaxPub(DT) 3892 (Kol-Trib)

INCOME TAX ACT, 1961

Sections 72

Where assessee was engaged in derivative transaction and total of favourable and unfavourable differences exceeded Rs. 60 lakhs then assessee was required to get his accounts audited under section 44AB. As a consequence due date of filing of ITR of the assessee would be that applicable to assessee engaged in audit and therefore, the assessee was eligible to carry forward the loss incurred in commodity transactions.

Loss - Carry forward - Transactions in commodity derivatives - Assessee got accounts audited—AO was of the view no audit was required

The AO noted in his order that the assessee has claimed loss on commodity trading totaling to Rs. 53,03,486 (Rs. 45,39,898 + Rs. 7,63,588). According to AO this loss was due to the speculation activity of the assessee. The AO noted that the assessee was an individual and not required to get its (assessee's) accounts audited under section 44AB of the Income Tax Act, 1961. Therefore, according to AO due date of filing of return of income was on 31-7-2012 and since the assessee filed his return under section 139(4) of the Act on 26-9-2012, the return was belatedly filed and therefore, the aforesaid speculation loss cannot be allowed to be carried forwarded as claimed in his return. Held: The assessee's activity/loss was covered in currency and futures and options, which have been carried out/claimed as per proviso/clause (d) to section 43(5) of the Act read with Explanation 1 thereto and the said Notification No. 2/2006 [S.O. 89(E), dated 25-1-2006]. In such circumstances, the AO erred in assessing/adding all the losses, which the assessee claimed on commodity and derivatives and share derivatives as speculation loss. According to assessee, the issue of turnover in case of transaction in derivatives for the purpose of section 44AB of the Act has been dealt with by the ICAI in para 5.11(b) of its 'Guidance Note on Tax Audit under section 44AB of the Income Tax Act, 1961-Revised 2005 edition', which has been reproduced by the CIT(A) in his order at page-9, para 16. According to him, the total favourable and unfavourable differences are to be taken as turnover. After going through the details of derivatives chart, which is evident from P & L account, which show the total of favourable and unfavourable differences exceed Rs. 60 lakhs and therefore, the assessee was required to get his accounts audited under section 44AB of the Act. Since the return of income was filed on 26-9-2012 claiming losses incurred during the year (assessment year under consideration) within time limit applicable to assessee, the assessee was eligible to carry forward his losses as business loss.

REFERRED :

FAVOUR : In assessee's favour.

A.Y. : 2012-13


INCOME TAX ACT, 1961

Section 68

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