Real estate businessman lost Rs 34.21L in F&O trading: Here’s what ITAT did
The ITAT Delhi ruled in favor of a taxpayer, allowing him to set off losses from futures and options (F&O) trading against his regular business income. The tribunal clarified that the deeming provisions of Section 73 regarding share trading do not apply to exchange-traded derivatives.
Why it matters
This ruling provides significant clarity for traders and tax professionals regarding the classification of derivative losses, potentially impacting how business income is calculated for tax purposes.
A taxpayer from Mathura earned Rs 8.64 crore through his real estate trading business. However, the said taxpayer alsoincurred a loss of around Rs 34 lakh from futures and options (F&O) trading in the stock market. When the taxpayer filed his income tax return (ITR), he reported the F&O loss as a business loss.The Income Tax Assessing Officer (AO) from I.P. Estate, New Delhi, did not allow this believing that since the taxpayer’s primary business was real estate trading rather than F&O trading, the AO treated the derivative loss as speculative in nature.The AO invoked the Explanation to Section 73 and consequently refused to allow the loss to be set off against the taxpayer’s regular business income. The assessment relied on the Delhi High Court ruling in CIT v.
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