CIT Vs. NASA FINELEASE P LTD

JUDGEMENT

(1.) Revenue, by this appeal under Section 260A of the Income Tax Act 1961 (Act, for short), has raised a solitary issue relating to interpretation of clause (d) to Section 43(5) of the Act. For the purpose of record, we note that the appeal pertains to assessment year 2006-07.

(2.) The respondent-assessee is engaged in the business of dealing in securities and investment and was engaged by Kotak Mahindra Securities to manage their funds and earn income in nature of profits/gains or dividends from dealing with securities. The assessee had received management fee as per contract with Kotak Mahindra Securities.

(3.) The respondent-assessee had shown a loss of Rs.1,90,29,988/- in derivative transactions. The Assessing Officer held that the loss was speculative loss under Section 73 of the Act. Secondly, the derivative transactions were during the period July, 2005 to September, 2005 and proviso (d) to sub-section 5 to Section 43 was violated. The proviso (d) to section 43(5) inserted with effect from 1st April, 2006 stipulates that eligible transactions should have been conducted/carried out only in recognized stock exchange, to be notified. The said insertion was made by Finance Act, 2005. Rule 6 DDA and Rule DDB were subsequently enacted to prescribe conditions and procedure for notification of a recognized stock exchange. National Stock Exchange and Bombay Stock Exchange were notified vide notification dated 25th January, 2006. The transactions in question it is accepted and an admitted position were conducted in the National Stock Exchange.