TMI Blog2016 (3) TMI 864X X X X Extracts X X X X X X X X Extracts X X X X ..... can be made in respect of funds involved in shares and securities held as stock-in-trade. We direct accordingly. - ITA No.3255/Mum/2012, ITA No.3425/Mum/2012 - - - Dated:- 10-2-2016 - SHRI R.C.SHARMA, AM and SHRI RAM LAL NEGI, JM For The Assessee : Shri Jitendra Sanghavi and Shri Amit P. Khatiwala For The Revenue : Shri Peeyush Sonkar ORDER PER R.C.SHARMA (A.M.) : These are the cross appeals filed by the assessee and revenue against the order of CIT(A), Mumbai, for the assessment year 2008-09. 2. The assessee in its appeal (i.e. ITA No.3255/Mum/2012) has taken the following grounds :- 1. That the learned CIT (A) has erred in law and on facts in confirming the profit on sale of future option transactions ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 0/- against loss incurred on purchases and sale of shares treating the same as business income, and also made disallowance of ₹ 4.54 crores u/s.14A of the Act. 4. By the impugned order, the CIT(A) deleted the disallowance made u/s.14A. However, he has confirmed the action of AO for invoking provisions of Explanation to Section 73, by not allowing setting off loss on sale of shares against income from sale of option. Against this order of CIT(A), both assessee and revenue are in appeal before us. 5. We have considered rival contentions and deliberated on judicial pronouncements referred by lower authorities in their respective orders as well as cited by ld. AR and DR before us. 6. It was argued by ld. AR that issue with regard ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... explanation to section 73. The ITAT Kolkata Bench has taken the same view in the case of ITO vs. Rajanigandha Properties Ltd. in ITA no. 1011/Kol/2011 and also in Arion Commercial Pvt. Ltd. Kolkata in ITA no. 1010/Kol/2011 and held that the transaction done by delivery as well as the transaction of derivative of shares, profit/loss is not hit by Section 43(5) and therefore the aggregation of share trading loss and profit from derivative transactions should be done before the application of the Explanation to Section 73. 7. In view of the above judicial pronouncements the assessee is entitled to set off of the share trading loss with the profit earned from derivative transactions. In the instant case before us, we found that assessee is ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... sessee was engaged in trading of shares, the shares held as stock-in-trade cannot be taken into account while computing disallowance of expenditure incurred for earning exempt income. As per ld. AR since the assessee was fully engaged in purchase and sale of shares, the shares were held as stock-in-trade, therefore, no disallowance should have been made u/s.14A in terms of decision of Hon ble Kolkata High Court in the case of Baljit Securities (P) Ltd., 368 ITR 470. 10. On the other hand, ld. DR relied on the order of lower authorities. 11. We have considered rival contentions and found that the assessee had not offered the disallowance u/s.14A as per rule 8D, therefore, the AO had recomputed the disallowance as per Rule 8D. However, ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... was holding shares as stock-in-trade as well as investments. While working out disallowance u/s.14A the AO had worked out disallowance under rule 8D taking into account entire shares held by assessee treating the same as investments. In the interest of justice, we restore this issue back to the file of AO for recomputing the disallowance to be made under Rule 8D by excluding the shares held as stock-in-trade while working out the average investment. Thus, no disallowance can be made in respect of funds involved in shares and securities held as stock-in-trade. We direct accordingly. 12. In the result, both appeals of the assessee and revenue are allowed in part, in terms indicated hereinabove. Order pronounced in the open court on thi ..... X X X X Extracts X X X X X X X X Extracts X X X X
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