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2018 (11) TMI 551 - AT - Income TaxTreatment of business loss as speculation loss - while the assessee incurred losses in derivative segment (F&O business), it has earned profits in cash segment i.e. on account of ordinary action of purchase and sale of shares simplicitor. - Held that:- Identical issue arose before the Hon’ble Calcutta High Court in the case of Asian Financial Services (2016 (3) TMI 685 - CALCUTTA HIGH COURT) as held that once it is deemed to be a normal business loss on the basis of proviso appended to Section 43(5) of the Act, a question of applying Section 73 or the Explanation thereto for the purposes of refusing loss to be set off against business income is wholly incorrect. The Hon’ble Calcutta High Court after taking note of the decision of Hon’ble Delhi High Court in DLF Commercial (2013 (7) TMI 334 - DELHI HIGH COURT) took a distinct stand that derivatives cannot be treated at par with shares for the purposes of Explanation to Section 73 because the legislature has treated it differently. Thus, in view of the aforesaid position enunciated by the Hon’ble High Court in Asian Financial Services (2016 (3) TMI 685 - CALCUTTA HIGH COURT), we find good deal of force in the case of assessee. The claim of the assessee thus requires to be allowed on this ground alone. Disallowance u/s 14A - AO has disallowed an estimated expenses pegged at ₹ 5,09,728/- as attributable to exempt income by invoking Section 14A - Held that:- We observe that against the total expense of ₹ 9.63 Lakhs, the turnover of the assessee in taxable stream stands at ₹ 406.59 Crores whereas the tax free income stands a meager amount of ₹ 6.13 Lakhs. The suo moto disallowance by the assessee is prima facie sufficient to cover the possible expense attributable to tax exempt income. Needless to say, the operation of Rule 8D is not automatic. It is hedged by Rules. Likewise, Section 14A of the Act inheres in it the concept of reasonableness. It is unconceivable to say that assessee has incurred ₹ 6.44 Lakhs out of total expense of ₹ 9.63 Lakhs to earn a paltry dividend income of ₹ 6.13 Lakhs while the remaining expenditure attributes for generation of substantial revenue of taxable nature noted above. The action of the Revenue is therefore prima-facie inexplicable. Consequently, we set aside and cancel the addition of ₹ 5,09,728/- made by the AO under s.14A of the Act.
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