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2012 (9) TMI 134 - AT - Income TaxDiminishing in the value of assets - AO added it in arriving at the book profit as provided under section 115JB - Held that:- Considering assessee’s submission that this amount was not a provision of diminishing in value of the assets but a loss suffered by assessee in the valuation of stock in trade which, however, was claimed separately in the Profit & Loss A/c unable to agree with the Revenue on making adjustment of loss suffered in the valuation of closing stock. There is no dispute with reference to the fact that assessee is in the business of share trading and as part of business activity, it has offered income from shares and securities and claimed diminution in value of stock in trade. There is also no dispute with the fact that this loss was allowed in regular computation and not a provision - As rightly held by the Hon'ble Supreme Court in the case of Dr T A Qureshi (2006 (12) TMI 91 - SUPREME COURT) business loss was allowable on ordinary commercial principles in computing profits. Since claim is direct loss in valuation of stock in trade and as this cannot be considered as a ‘provision’ as provided under Explanation-1, the action of AO and the CIT (A) cannot be upheld - in favour of assessee. Disallowance made u/s 14A r.w.r. 8-D - Held that:- As seen from the balance sheet of assessee as on 31.03.2008 there are no fixed assets and assessee has shown investment of ₹ 1,51,12,500/- at the end of the year as against Rs..5,53,62,500/- at the beginning of the year. Assessee’s stock in trade were shown at ₹ 40,69,22,495/- as against nil in the last year. This indicates that most of the business activities started only during the year and the investment had come down. As against these amounts, AO in the assessment order has taken the closing investment yielding exempt income at Rs..50,20,34,995/- including the stock in trade which is not income yielding exempt income, earning business profits. There is no opening amount which was taken at NIL where as assessee had investments at the end of last year which got reduced in this year. Thus the basis for calculation by AO itself is wrong - Further out of the total amount of interest claimed which were shown interest at ₹ 2,91,38,496/-, there seems to be no examination of interest claims and to whom it is paid, thus it is required restore the matter back to the file of AO to examine the nature of interest expenditure, the amount of dividend earned and the nature on which it is earned - in favour of assessee for statistical purposes.
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