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2020 (3) TMI 591 - AT - Income TaxLTCG on sale of BSE equity shares - taking the depreciated value of BSE card as on 31.03.2005 as cost of acquisition of BSE shares - HELD THAT:- Perusing the material on record and the decision in the case of Techno Shares & Stocks Ltd. [2019 (11) TMI 359 - ITAT MUMBAI] we observe that the identical issue has been decided by the co-ordinate bench 3rd Member wherein it has been held that the cost of acquisition of the shares of BSE shares shall be the original cost of acquisition to the members of card in terms of section 55(2)(ab) of the Act even though the assessee has claimed depreciation on the cost of membership card in the earlier year. Disallowance of loss on mark to market basis in respect of trading in derivatives - HELD THAT:- In this case the assessee has treated the derivatives as stocks during the year as the assessee is a share broker in BSE. The assessee has computed mark to market loss as on 31.03.2008 with reference to the prevailing rate of foreign exchange in respect of those contracts which were not settled at the end of the year and thus recognized the said loss according to the accounting standard- 30 issued by ICAI. The AO has disallowed the said loss as contingent and being unascertained as the settlement of the derivative contracts have not taken place. However, it is undisputed that assessee is dealing in derivatives which has to be valued on prevailing foreign exchange rate at the year end in view of the mercantile system being followed by the assessee. In our opinion the said loss is allowable as the issue is squarely covered by the decision of CIT vs. Woodward Governor India (P.) Ltd. [2009 (4) TMI 4 - SUPREME COURT] and also in the case of Edelweiss Capital [2012 (10) TMI 223 - ITAT, MUMBAI] and Motilal Oswal Securities Ltd. vs. DCIT [2016 (3) TMI 962 - ITAT MUMBAI] . Addition under rule 14A read with rule 8D - suo moto disallowance - non recording of satisfaction - HELD THAT:- In this case the AO has simply applied the provisions of section 14A read with rule 8D and computed the disallowance without recording any satisfaction as to how the suo-moto disallowance made by the assessee is incorrect. Under these circumstances, we are of the view that a mechanical application of section 14A read with rule 8D is not correct and against the provisions of the Act. The case of the assessee is squarely covered by the decision of the Hon’ble Supreme Court in the case of Godrej & Boyce Manufacturing Co. Ltd. Vs. DCIT [2017 (5) TMI 403 - SUPREME COURT] wherein held that AO must record his satisfaction as to how the assessee’s calculation is incorrect having regard to the books maintained by the assessee. The Hon’ble Apex Court has held that in absence of any satisfaction by the AO, the provisions of section 14A read with rule 8D can not be invoked. - Decided in favour of assessee.
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