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2020 (6) TMI 535 - AT - Income TaxLoss incurred by the assessee on F & O (Future and Options) derivative transactions - “speculative loss” or not - disallowing the set off of the said loss against other business income - whether the ld. CIT(A) was justified in observing that the F & O transactions carried out by the assessee were not genuine? - HELD THAT:- Assessee had earned profit from F & O transactions in A.Y.2010-11 which was duly taxed by the ld. AO as regular business income. During the year, there is no change in the facts or there is no emergence of any fresh development in the case of the assessee company, enabling the ld AO to take a divergent view. Hence, revenue is not justified in taking a divergent view for the year under consideration alone. Following the principle of consistency as decided in the case of Radhasaomi Satsan [1991 (11) TMI 2 - SUPREME COURT] the loss incurred by the assessee on derivative transactions deserves to be allowed as regular business loss during the year under consideration and consequently eligible to be set off against other income as per law. Disallowance of apportioning of expenditure on loss from derivatives, we find that the ld. AO had apportioned the employee cost and administration expenses in proportion of the loss of derivatives to the total receipts and arrived at the figure as part of speculation loss. Loss incurred on derivative transactions is not speculative loss and rather need to be treated as regular business loss, we direct the ld. AO to delete the disallowance towards apportionment of expenditure. Accordingly, the ground No. I raised by the assessee is allowed. Disallowance of expenditure u/s.14A - HELD THAT:- From the perusal of the various documentary evidences placed on record, we hold that the interest payment was paid by the assessee company as per the directions of the Maharashtra State Consumer Disputes Reddressal Commission for delayed delivery of flat to one of the buyers and the said payment of interest has got absolutely nothing to do with the investment activity carried out by the assessee. Hence, there cannot be any proportionate disallowance of interest in terms of second limb of Rule 8D(2) of the rules.Disallowance of interest in the sum in Rule 8D(2)(ii) is hereby directed to be deleted. With regard to disallowance of administrative expenses under third limb of Rule 8D(2) of the Rules, the ld. AR was not able to make any substantial argument in support of his claim. We find that assessee had indeed earned exempt income in the form of dividend and had not made any disallowance of expenses incurred for the purpose of earning such income in the return of income. The entire expenditure has been debited for composite business carried out by the assessee. The basic purpose for introduction of provisions of Section 14A in the statute is to address this grievance of the revenue. For want of any plausible evidence, we hereby confirm the disallowance made in the sum under third limb of Rule 8D(2) of the Rules by the lower authorities. Accordingly, the ground No.II raised by the assessee is partly allowed.
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