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2016 (4) TMI 912 - AT - Income TaxTreatment to speculation loss as income from non-speculation business - Held that:- We find that the assessee had treated the entire activity of purchase and sale of shares which comprised of both delivery based and non-delivery based trading as one composite business before the application of deeming provision contained in Explanation to Sec.73 of the Act and accordingly, claimed set off of the loss incurred in delivery based trading with profit derived from derivative trading. We hold that the transactions done by delivery as well as the transactions of derivatives are not hit by Sec.43(5) of the Act and hence the aggregation of the share trading loss and profit from derivative transactions should be done before application of the Explanation to Sec.73 of the Act. As per the definition of section 43(5) of the Act, trading of shares which is done by taking delivery does not come under the purview of the said section. Similarly, as per clause (d) of section 43(5), derivative transaction in shares is also not speculation transaction as defined in the said section. Therefore, both profit/loss from all share delivery transactions and derivative transactions have the same meaning as far as Section 43(5) of the Act is concerned. It thus follows that both will have the same treatment as far as application of the said section is concerned. Thus we hold that the claim of the assessee for set off of loss from share dealing should be allowed from the profits from F & O in share transactions, the character of the income being the same and also hold that before application of the Explanation to section 73, aggregation of the business profit or loss is to be worked out irrespective of the fact whether it is from share delivery transaction or derivative transactions. Income from share trading, brokerage, derivative and interest income on margin money should be considered as income derived from purchase and sale of shares and are therefore to be treated as to profit derived from speculative business as per the provision contained under Explanation to Sec. 73. - Decided against revenue Disallowance u/s 14A r.w.r 8D - Held that:- AO has invoked the provision of Sec. 14A of the Act read with Rule 8D of the IT Rules without recording the satisfaction that the assessee’s books of account are not showing the correct expenditure incurred in relation to dividend income. We find that it is only if the Assessing Officer is not satisfied with the correctness of the assessee's claim under section 14A that he can assume jurisdiction to arrive at the quantum of disallowance of expenditure in accordance with the method prescribed in rule 8D. It is not open to the Assessing Officer, when he is seized with the aspect of being satisfied with the correctness of the claim of the assessee, to use the method prescribed in rule 8D or any part thereof as a benchmark. It is only if, having regard to the accounts of the assessee, he is not satisfied with the correctness of the assessee's claim, that he will have jurisdiction of taking recourse to the method prescribed under rule 8D - Decided against revenue
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