ITA 2069/MUM/2026

Parties Involved

Facts Summary

The assessee, Edelweiss Multi Strategy Investment, is a Category III Alternative Investment Fund registered with SEBI and was engaged in transactions involving commodities and derivatives. The assessee filed its return of income for the year under consideration on 30/09/2013 declaring total income of Rs.65,70,864/- under the head 'Profits and gains of business or profession'. The case was selected for scrutiny and assessment was completed u/s. 143(3) of the Act on 30/03/2016. During the assessment proceedings, the Assessing Officer noticed that the assessee debited Rs.2,29,15,417/- towards diminution/mark-to-market loss in respect of physical silver remaining unsold as at the year end. The assessee's case was that the physical silver constituted part of its commodity trading activity and, in accordance with the method followed by it, the same was valued at cost or market value, whichever was lower. The Assessing Officer observed that the physical silver was reflected in the financial statements under the nomenclature 'current investment' and not as stock-in-trade. The Assessing Officer proceeded on the basis that, in the absence of actual settlement as at the balance-sheet date, the impugned diminution represented a notional loss and, placing reliance on CBDT Instruction No. 03/2010 dated 23/03/2010, disallowed the claim. Aggrieved, by the order of the Assessing Officer, the assessee preferred an appeal before the Commissioner of Income-tax (Appeals). The Commissioner of Inco…

Legal Issues

• 1. Whether the Commissioner of Income-tax (Appeals) erred in deleting the disallowance of Rs.2,29,15,417/- being mark-to-market loss on unsold silver?
• 2. Whether the Commissioner of Income-tax (Appeals) erred in allowing the claim of mark-to-market loss on an unrealised/unsold position as an 'ascertained loss'?
• 3. Whether the Commissioner of Income-tax (Appeals) erred in holding that the nomenclature in the balance sheet is not determinative and in applying CBDT Circular No. 4/2007 mechanically?
• 4. Whether the Commissioner of Income-tax (Appeals) erred in directing deletion of the consequent adjustment made by the Assessing Officer to book profit under section 115JB?

Judgment Outcome

Decided in favour of Partly Assessee / Partly Revenue.

Precedents Relied Upon

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