1.  CIT Vs. Nishi Mehra & Others, I.T.A. No. 120-125 of 2000, Date of Pronouncement: 19.02.2015, High Court of Delhi

Whether addition can be made by the AO merely based upon the District Valuation Officer’s report in the absence of any material pointing to under valuation.

Held: No

Brief Fact:
As per the fact of the given case, assessee had already disclosed alleged properties in its income tax return and wealth tax return, which were duly accepted by the authorities. A search operation was conducted on the assessee group and the Ld. AO doesn’t found any incriminating material in respect of the alleged properties which show that there is under valuation of properties. However, the AO referred to the District Valuation Officer u/s 142A of the Act for valuation of the properties. On the basis of the report by DVO, Ld. AO concluded that a comparison between declared value and the value determined by the DVO disclosed serious discrepancy. Therefore, the AO added the difference and brought them to tax.

Held:
It is settled law that in the absence of any incriminating evidence that anything has been paid over and above than the stated amount, the primary burden of proof is on the Revenue to show that there has been an understatement or concealment of income. It is only when such burden has been discharged, would it be permissible to rely upon the valuation given by the DVO. Further, the opinion of the DVO, per se, is not information and cannot be relied upon in the absence of other corroborative evidence. The appeals have to be and are accordingly dismissed.

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2.   IVF Advisor Pvt. Ltd. Vs. ACIT, I.T.A. No. 4798/Mum/2012, Date of Decision: 13.02.2015, ITAT - Mumbai

Whether loss from foreign currency futures will be regarded as speculation loss under clause (d) of proviso to section 43(5) of Income Tax Act, 1956?

Held: No

Brief fact:
The assessee is an investment management consultant company. It had claimed loss from foreign currency futures. The company entered into a derivative contract and settle the same by actual delivery. The Ld. AO disallowed the loss claimed by the assessee on account that the loss is speculation loss.

Held:

It would be pertinent to consider the decision of Hon’ble Madras High Court in the case of Rajshree Sugar & Chemicals Ltd. vs. Axis Bank Ltd., AIR 2011 (Mad) 144, wherein the term derivative has been defined to include foreign currency as an underlying security of the derivative.

Also a perusal of the contract note shows that the assessee has either entered into call option or put option and on the settlement day the transaction has been settled by delivery, either the assessee has paid US dollar on the settlement day or has taken delivery of US dollar. The derivatives include foreign currency and call option/ put option, are transactions of derivative markets and cannot be termed as speculative in nature.

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