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2020 (2) TMI 1016 - AT - Income TaxDisallowance of marked to market loss on derivatives - nature of speculation loss - HELD THAT:- Pertinently in the statement of facts filed with the memorandum of appeal in form No. 35 before learned Commissioner (Appeals), the assessee has specifically stated that it has carried out its transactions in derivatives in future and option segments of National Stock Exchange. From the impugned order if learned Commissioner (Appeals) it is patent obvious that he has completely overlooked the aforesaid factual position while observing that the assessee has entered into over the counter derivative transaction and not in any recognized stock exchanges, while treating it as speculative loss u/s. 43(5) of the Act. Keeping in view, the factual position arising out if the material on record, the contention of the assessee that the derivative transaction in respect of which it has claimed mark to market loss comes within the exception as per Clause (d) of the proviso to Sec. 43(5) of the Act appears to have substantial strength, hence, needs to be accepted. Now, it is fairly well settled by the ratio laid down in the case of CIT Vs. Woodward Governor India Pvt Ltd [2009 (4) TMI 4 - SUPREME COURT] that mark to market loss as on the balance sheet date is allowable u/s 37(1) of the Act. Further, it has been brought to our notice by learned Authorized Representative that in subsequent assessment years the Assessing Officer has consistently allowed assessee’s claim of mark to market loss. In view of the aforesaid, we hold that mark to market loss is not in the nature of speculation loss, hence, has to be allowed. Disallowance u/s 14A - disallowance of interest expenditure under Rule 8(D)(2)(ii) - HELD THAT:- Financial statement available on record clearly indicate that the assessee had sufficient interest free funds available with it. That being the case, it has to be presumed that the interest free funds were utilized in investment in shares. Thus, no part of the interest expenditure can be attributed for earning of exempt income. Therefore, the only disallowance which can be made u/s 14A of the Act is the administrative expenditure as per Rule 8D(2)(iii). Here also, while computing the disallowance the Assessing Officer has to consider only those investments which have yielded exempt income during the year, as held by the Income Tax Appellate Tribunal, Delhi (Special Bench) in the case of ACIT Vs Vireet Investments (P) Ltd. [2017 (6) TMI 1124 - ITAT DELHI]. It is relevant to observe, the assessee has furnished a working of disallowance under Rule 8D(2)(iii) quantifying the disallowance. Admittedly, the aforesaid working has been furnished by the assessee for the first time before us and was not available either before the Assessing Officer or learned Commissioner (Appeals). We direct the Assessing Officer to verify the aforesaid working furnished by the assessee and thereafter compute the disallowance under Rule 8D(2)(iii) - Decided in favour of assessee partly.
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