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2015 (12) TMI 899 - ITAT MUMBAI

2015 (12) TMI 899 - ITAT MUMBAI - TMI - Disallowance of loss on revaluation of stock of equity shares - Held that:- The assessee has relied upon the entries passed in the books of account and also the fact that the shares were purchased out of borrowed funds in order to support its contentions that it intended to purchase the shares as stock in trade. However, as held by Ld CIT(A), these two factors alone cannot be taken as determinative factors and accordingly the intention of the assessee shou .....

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es of the above said company only to hold them as investments. Hence we are of the view that the tax authorities are justified in rejecting the claim of the assessee that it was held as stock in trade. Consequently, the tax authorities are justified in rejecting the claim of revaluation loss arising on account of fall in the price of shares.

Disallowance made u/s 14A - Held that:- we notice that the assessee itself has admitted that the shares of Deepak Fertilizers & Petrochemicals Lt .....

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rmal provisions of the Act. Accordingly, we confirm the disallowance of ₹ 40.94 lakhs made by the AO.

Disallowance of interest expenditure u/s 24 - Since the assessee had not let out the house property, the AO held that the assessee cannot claim the same u/s 24 of the Act also - Held that:- The Ld D.R submitted that the assessee has changed the character of the property from business asset to house property. But the question here is whether the assessee is entitled to claim dedu .....

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th the view taken by Ld CIT(A) on this issue. - ITA No. 2574/Mum/2013 - Dated:- 24-11-2015 - B. R. Baskaran, AM And Amarjit Singh, JM For the Appellant : Shri Kailash Gaikwad For the Respondent : Shri S V Joshi ORDER Per B R Baskaran, AM These cross appeals are directed against the order dated 18-01-2013 passed by Ld CIT(A)-13, Mumbai and they relate to the assessment year 2009-10. 2. The assessee is aggrieved by the decision of Ld CIT(A) in confirming the disallowance of loss on revaluation of .....

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the assessee purchased shares of a company named M/s Deepak fertilizers and Petrochemicals Corporation Ltd during the period from September, 2008 to March, 2009 in various instalments. The assessee claimed the shares as its "Stock in trade" and accordingly valued it as at the year end at cost or market prices whichever is less. Since the market price of the shares has fallen down, the revaluation of the shares resulted in a loss of ₹ 1,19,17,194/- and the assessee claimed the sa .....

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uot;Stock in trade". Accordingly he disallowed the claim of loss arising on account of revaluation of shares. The Ld CIT(A) also confirmed the same. 5. The Ld A.R submitted that the assessee has classified the shares as "Stock in trade" in its books of accounts. Further, the assessee has purchased the shares out of borrowed funds. He further submitted that the memorandum of association of the assessee company permits dealing in shares. Accordingly he submitted that the assessee s .....

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that are carried on by the assessee. The assessee does not carry on the business of dealing in shares. The assessee has only accumulated the shares of Deepak Fertilizers and Petrochemical corporation Ltd, since it is in the business of market development of fertilizers and agro products. Thus, the intention of the assessee was very clear that the assessee has purchased the shares of the above said company in order to enjoy the pride of possession and the same shows that the intention of the asse .....

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pany during the year under consideration. The assessee has started purchasing shares of Deepak Fertilizers and Petrochemical Corporation Ltd only during the year under consideration. It has not purchased shares of that company either in the earlier year or in the succeeding year. It is also a fact that the assessee is engaged in the business of market development of fertilizers and agro products, in which the above said company is engaged. Hence, in our view, there is merit in the contention of .....

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ear, which is against the business principles of trading. If the assessee had intended to consider the shares as stock in trade, it would have indulged in repeated purchase and sale of shares. On the contrary, the assessee has proceeded to purchase shares continuously every month and also held it for a quiet a long time. 8. The assessee has relied upon the entries passed in the books of account and also the fact that the shares were purchased out of borrowed funds in order to support its content .....

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racted from the same only during the course of assessment proceedings. Hence, in our view, the conduct of the assessee and the factors surrounding the issue shows that the assessee had intended to purchase the shares of the above said company only to hold them as investments. Hence we are of the view that the tax authorities are justified in rejecting the claim of the assessee that it was held as stock in trade. Consequently, the tax authorities are justified in rejecting the claim of revaluatio .....

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issue urged by the assessee before us relates to the disallowance made u/s 14A of the Act. The assessee had earned dividend income of ₹ 1,33,720/-, which was claimed as exempt. The above said dividend income was earned out of mutual fund investments. The assessee made a disallowance of ₹ 86,915/- out of interest expenditure relating to mutual fund investments and ₹ 40,94,203/- as the interest relating to investments made in purchase of Shares of M/s Deepak Fertilisers and Chem .....

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w taken by the tax authorities and since the shares of Deepak Fertilizers & Petrochemicals Ltd has been purchased to hold them as investments, we are of the view that the Ld CIT(A) was justified in holding that the provisions of sec. 14A read with Rule 8D shall apply. Before us, the assessee placed reliance on certain case laws to contend that the disallowance u/s 14A should not exceed the dividend income. The Ld A.R further submitted that the assessee had received dividend income only from .....

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investment made in the shares of Deepak Fertilizers. Hence the interest expenditure of ₹ 40.94 lakhs cannot be taken as expenditure relating to the business carried on by the assessee, but it is related to the investment made in the shares. Hence, the interest expenditure is otherwise not allowable under the normal provisions of the Act. Accordingly, we confirm the disallowance of ₹ 40.94 lakhs made by the AO. 13. We shall now take up the appeal filed by the revenue, which relates t .....

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