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2020 (8) TMI 191 - ITAT MUMBAILoss incurred by the assessee in purchase and sale of shares - Whether a business loss or speculation loss? - HELD THAT:- CIT(A) has recorded categorical finding that the assessee has earned profit from share trading activity. We further noted that although, the assessee claims to have earned profit from share trading activity, but such profit has been computed without considering direct and indirect expenses relatable to share trading activity, although the major portion of income or loss of the assessee is from share trading activity. The facts and consequent findings recorded by the Ld. AO, and the Ld.CIT(A) are contrary to each other and requires fresh verification from the Ld. AO, in light of the fact that the assessee has not considered expenditure incurred in relation to share trading activity. We are of the considered view that the assessee is hit by the provisions of Explanation to section 73 in the case of Snowtex Investments Ltd.[2019 (5) TMI 1165 - SUPREME COURT] and accordingly, in case, the assessee incurred losses from share trading activity, the same needs to be considered as deemed speculative loss and cannot be allowed to be set off against profit derived from trading in derivatives. In case, the assessee has earned profit from share trading activity, then Explanation to section 73 has no application and accordingly, the said loss needs to be treated as normal business loss and allowed to be set off against any other income. Issue needs to be re-examine by the Ld. AO, in light of various facts brought out by both the parties and to recompute profit after considering relevant expenditure relatable said trading activity and then to decide applicability of Explanation to section 73. Accordingly, we set aside the issue to the file of the Ld. AO and direct him to reconsider the issue afresh in accordance with law. Disallowances of expenditure incurred in relation to exempt income u/s 14A - HELD THAT:- There is no merit in the arguments of the assessee that no interest expenditure could be disallowed. Insofar as, disallowances of expenditure under Rule 8D(2)(iii) of I.T.Rules, 1962, it is a settled position that only, those investments, which has earned exempt income for the year under consideration needs to be considered for the purpose of average value of investments to determine disallowances of expenditure @ 0.5% of average value of investments. Therefore, we direct the AO to consider only those investments which yeild exempt income for the year for disallowance of expenditure. To sum up, the issue needs to go back to the file of the Ld. AO to determine disallowances of expenditure, in relation to exempt income u/s 14A, in light of our discussions given hereinabove and accordingly, we set aside the issues to the file of the Ld. AO and direct him to recompute the disallowances in accordance with in terms of our observations given hereinabove.
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