Are commodities covered by the Securities Contracts (Regulation) Act, 1956?

IN THE INCOME TAX APPELLATE TRIBUNAL
 “C” BENCH, CHENNAI

BEFORE SHRI DUVVURU RL REDDY, JUDICIAL MEMBER AND
SHRI S. JAYARAMAN, ACCOUNTANT MEMBER

I.T.A. No: 1705/Chny/2018
Assessment Year : 2013-14

M/s. Renaatus Projects (P) Ltd.,
156, Mullamparappu,
N.G. Palayam,
Erode – 638 115.
[PAN: AADCR 1851J]
Appellant)

Vs. 

The Deputy Commissioner of
Income Tax,
Central Circle -2,
Coimbatore.
Respondent)

Appellant by : Shri. S. Sridhar, Advocate
Respondent by : Shri. Suresh Periasamy, JCIT

Date of Hearing : 14.06.2021
Date of Pronouncement : 21.06.2021

 O R D E R

PER S. JAYARAMAN, ACCOUNTANT MEMBER:

The assessee filed this appeal against the order of the Commissioner of Income Tax (Appeals)- 18, Chennai in ITA No. 290/16-17 dated 06.03.2018 for the assessment year 2013-14. 

2. M/s. Renaatus Projects P. Ltd., the assessee, incurred loss of Rs. 29,82,328/- from various derivative transactions carried out in commodities on the MCX (one of the commodity stock exchange) and claimed it as an expenditure for the assessment year 2013-14. While making the assessment u/s. 143(3), the AO disallowed the assessee’s claim observing that commodities are not covered by the Securities Contracts (Regulation) Act, 1956. Therefore, they are not covered by the provisions of section 43(5)(d) of the Income Tax Act. Aggrieved, the assessee filed an appeal before the CIT(A). The Ld. CIT(A) dismissed the appeal. Aggrieved against that order, the assessee filed this appeal.

3. The case was heard through video conferencing. The Ld. AR inviting our attention to the order of the Ld. CIT(A), wherein the additional grounds/submissions filed by the assessee are extracted , submitted that the assessee’s transactions by way of commodity derivatives through recognised stock exchange was not to be taxed as speculative income up to the assessment year 2013-14 in view of the section 43(5)(d) of the Income Tax Act. Since, the subject matter of appeal is related to AY 2013-14, clause (e) of section 43(5) is not applicable. However, the Ld. CIT (A) without adjudicating this specific aspect, invoking S43(5)(e) dismissed the appeal and hence the AR pleaded that this issue may be remitted back to the Ld. CIT(A) for an adjudication as to whether the assessee’s transaction is covered u/s. 43(5)(d) or not as was pleaded in its additional grounds before the Ld. CIT(A). Per contra, the Ld. DR supported the orders of the lower authorities.

4. We heard the rival submissions. We find that the assessee has in the additional grounds specifically pleaded before the Ld. CIT(A) that the impugned transactions undertaken during the period relevant to the assessment year 2013-14 is falling within the scope of section 43(5)(d) and hence it cannot be taxed as a speculative income. We find that the Ld. CIT (A) has not adjudicated this matter. Therefore, we remit this issue back to the Ld. CIT (A) for giving due opportunity to the assessee and decide the specific grounds taken by the assessee in accordance with law.

5. In the result, the assessee’s appeal is treated as allowed for statistical purposes.

Order pronounced on 21st June, 2021 at Chennai.

Sd/-                                                         Sd/-

(DUVVURU RL REDDY)                       (S. JAYARAMAN)
Judicial Member                                  Accountant Member

Chennai,
Dated: 21st June , 2021
JPV

Copy to:
1.Appellant 
2./Respondent 
3.CIT(A)
4.CIT 
5.DR 
6.GF