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2019 (7) TMI 695 - HC - Income TaxSet off of the loss incurred by trading in F & O against business income - contention on behalf of the assessee that Explanation to Section 73 cannot apply to loss arising from derivative transactions which are categorically excluded from being regarded as speculative business as defined under S.43(5) - HELD THAT:- As decided in ASIAN FINANCIAL SERVICES LTD. VERSUS COMMISSIONER OF INCOME TAX-3 KOLKATA [2016 (3) TMI 685 - CALCUTTA HIGH COURT] once it is deemed to be a normal business loss on the basis of proviso appended to Section 43(5) a question of applying Section 73 of the Act 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 (supra), 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 read with Rule 8D - suo mota disallowance by the assessee - HELD THAT:- The suo mota 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 l4A 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.l3 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 made by the AO u/s 14A. - Revenue appeal dismissed.
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