Should losses of trading of securities be treated as speculation loss?

Last updated: 28 August 2021

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The Income Tax Appellate Tribunal ruled that normal business losses from trading securities, specifically those arising from error trades, should not be treated as speculation losses. The Assessing Officer had initially disallowed these losses, classifying them as speculative. However, the Tribunal allowed the assessee's appeal, overturning the previous decision and clarifying that such losses are considered normal business losses.

Court :
ITAT Ahmedabad

Brief :
This assessee’s appeal for A.Y. 2014-15, arises from order of the CIT(A)-10, Ahmedabad dated 28-08-2017, in proceedings under section 143(3) of the Income Tax Act, 1961; in short “the Act”.

Citation :
ITA No. 2358/Ahd/2017

IN THE INCOME TAX APPELLATE TRIBUNAL
AHMEDABAD “C” BENCH
(Conducted Through Virtual Court)
Before: Shri Mahavir Prasad, Judicial Member
And Shri Amarjit Singh, Accountant Member
Edelweiss Broking Ltd.
(on behalf of
amalgamating company
Edelweiss Financial
Advisors Ltd.),
Ahmedabad
PAN: AABCE9421H
(Appellant)
Vs
The ACIT,
Circle1(3),
Ahmedabad
(Respondent)
Revenue by: Shri L.P. Jain, Sr. D.R.
Assessee by: Shri Biren Shah, A.R.
Date of hearing : 09-08-2021
Date of pronouncement : 23-08-2021
ORDER

1. The solitary ground of appeal of the assessee is directed against the order of ld. CIT(A)-10 Ahmedabad in sustaining the addition made by the Assessing Officer by treating the normal business loss of Rs. 1,92,268/- as speculation loss.

2. The case was subject to scrutiny assessment and notice u/s. 143(2) was issued on 28th August, 2015. During the course of assessment, the Assessing Officer observed that assessee has claimed expenses on account of loss of trading of securities. The Assessing Officer asked the assessee to show cause why losses of trading of securities should not be disallowed and treated as speculation loss. The assessee explained that loss of Rs. 1,92,268/- pertained to loss of account of error trade.

3. Aggrieved assessee filed appeal before the ld. CIT(A). The ld. CIT(A) has dismissed the appeal of the assessee following the observation of his predecessor pertaining to the same issue in assessment year 2013-14.

4. In the result, the appeal of the assessee is allowed.
Order pronounced in the open court on 23-08-2021.

Please find attached the enclosed file for the full judgement.

FAQ :

The main issue was whether normal business losses incurred from trading securities should be treated as speculation losses for tax purposes.

The Assessing Officer decided to disallow the claimed business losses and treat them as speculation losses.

The assessee explained that the losses of Rs. 1,92,268/- were due to error trades.

The Income Tax Appellate Tribunal allowed the appeal of the assessee, ruling that the losses were not speculation losses.

No, the tribunal's decision suggests that normal business losses from trading securities, especially those due to errors, are not automatically classified as speculation losses.

Attached File : 1442821_4281_15.pdf

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Poojitha Raam Vinay

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I simplify complex income tax, TDS, banking, and investment updates into practical insights for taxpayers, salaried professionals, pensioners, and senior citizens. I regularly write on ITR filing, tax compliance, savings schemes, and the latest financial rule changes in India.

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