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TMI Blog2015 (11) TMI 1538X X X X Extracts X X X X X X X X Extracts X X X X ..... and circumstances of the case, ld. CIT(A)-VI, Kolkata has erred in law in holding that Rule 8D will not be applicable for the assessment year 2007-08 and the addition u/s. 14A should be restricted to Rs. 5,99,545/-." 3. Briefly stated facts are that the assessee claimed exempt income of dividend of Rs. 37,34,300/- and long term capital gain of Rs. 5,62,20,229/- but attributed only expenses relatable to this exempt income at Rs. 3,14,353/-. The AO during the course of assessment proceedings noted that in view of the decision of Special bench of Mumbai Tribunal in the case of ITO Vs. Daga Capital Management Pvt. Ltd. [2009]312 ITR (A.T.) 0001 (SB Mum), wherein the applicability of Rule 8D of the Rules is held to be retrospective and applying the same, he made disallowance of interest expenses relatable to exempt income at Rs. 16,60,862/- and also disallowed other expenses relatable to exempt income at Rs. 9,15,267/- thereby total disallowance was at Rs. 28,90,482/-. Against this, assessee has already offered the disallowance of direct expenses at Rs. 3,14,353/- u/s. 14A of the Act. Aggrieved, assessee preferred appeal before CIT(A), who following the decision of Hon'ble Bombay High ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... receipts for the donations mentioned above. He has not decided the issue. However, we feel that this issue can be verified by the AO and accordingly, this issue of revenue's appeal is set aside and allowed for statistical purposes. 7. The next issue in this appeal of revenue is against the order of CIT(A) deleting the addition made by AO in respect to expenses relatable to exempted income by invoking the provisions of section 14A of the Act read with Rule 8D of the I. T. Rules, 1962, (hereinafter referred to as the "Rules"). For this, revenue has raised following ground no.3: "3. That on the facts and circumstances of the case, Ld. CIT(A)-VI, Kolkata has erred in law in holding that Rule 8D will not be applicable for the assessment year 2007-08 and the addition u/s. 14A should be restricted to Rs. 5,99,545/- in computing book profit u/s. 115JB." 8. At the outset, Ld. Counsel for the assessee stated that the issue has already been dealt with and it is the same issue which is decided while adjudicating the first issue. Hence, this issue of revenue's appeal, exactly on identical principles, is dismissed. 9. The next issue is as regards to the order of CIT(A) allowing rebate u/s. ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e is in the business of purchase and sale of shares including share trading, share broking, portfolio management services and derivative trading. According to AO, the assessee has incurred loss of Rs. 95,02,451/- in this scheme of business and this loss is a speculation loss within the meaning of Explanation to Sec. 73 of the Act. According to AO, this issue is covered by the decision of Hon'ble jurisdictional High Court in the case of CIT Vs. Parkview Properties Pvt. Ltd. (2003) 261 ITR 473. He also relied on CBDT Circular No. 204 dated 24.07.1976 and stated that the second clause of Explanation to Sec. 73 of the Act does not apply to this case and to qualify for the first exception the income from business is to be computed with the income from other sources and he noted that the business income is at Rs. 1,88,23,827/- for setting off of share trading loss which is more than the other sources income at Rs. 1,31,18,686/-. Therefore, he disallowed the claim of the assessee of business loss of Rs. 95,02,451/- by treating the same as deemed speculation loss u/s. 73 of the Act. Aggrieved, assessee preferred appeal before CIT(A), who also confirmed the action of AO. Aggrieved, now asse ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... transaction for purchase and sale of shares where actually delivery is taken. Merely because a transaction does not fall within the definition of 'speculative transaction u/s. 43(5) would be no ground for non-application of the explanation to sec. 73. The operation of Explanation to Sec. 73 is independent of application or non-application of transaction being a speculative transaction or not under section 43(5). In view of the above, we direct the AO to treat the profit from a future and option difference; Capital market trade difference etc. as profits from speculative business within the meaning of the Explanation to Sec. 73." 14. We find that in exactly identical facts the Coordinate Bench in the case of DCIT Vs. Baljit Securities Private Limited in ITA No. 1183/Kol/2012 dated 21.10.2014 has considered this issue by following Special Bench of Mumbai in the case of CIT Vs. Concord Commercial Pvt. Ltd. (2005) 95 ITD 117 (Mum SB), wherein it is held as under: "5. We have heard rival submissions and gone through facts and circumstances of the case. The assessee is engaged in the business of share trading which involves stock and share broking activities, purchase and sale of deli ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ive transaction', only applied for purposes of Sec. 28 of the Act i.e., it does not apply to the other sections of the Act. On the contrary, Explanation to Sec. 73 of the Act creates a deeming fiction by which among the assessee, who is a company, as indicated in the said Explanation dealing with the transaction of share and suffer loss, such transaction should be treated to be speculative transaction within the meaning of Sec. 73 of the Act notwithstanding the fact that according to the definition of speculative transaction mentioned in Sec. 43(5) of the Act, the transaction is not of that nature as there has been actual delivery of the scrips of share. As per the definition of section 43(5) of the Act, trading of shares which is done by taking delivery does not come under the purview of the said section. Similarly as per clause (d) of Section 43(5), derivative transaction in shares is also not speculation transaction as defined in the said section. Therefore, both profit / loss from all the share delivery transactions and derivative transactions are having the same meaning, so far as Sec. 43(5) of the Act is concerned. Again, in view of the fact that both delivery based transacti ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... except against profits and gains, if any, of another speculation business.' The resultant effect was that any loss arising out of speculative transaction could only have been set off against profits arising out of speculative transaction. In the present case, the assessee, as already indicated, has been dealing in shares where delivery was in fact taken and also in shares where delivery was not ultimately taken. In other words, the assessee has been dealing in actual selling and buying of shares as also dealing in shares only for the purpose of settling the transaction otherwise than by actual delivery. The question arise whether the losses arising out of the dealings and transaction in which the assessee did not ultimately take delivery of the shares or give delivery of the shares could be set off against the income arising out of the dealings and transactions in actual buying and selling of shares. An answer to this question is to be found in the explanation appended to Section 73 which reads as follows: 'Explanation: where any part of the business of a company other than a company whose gross total income consists mainly of income which is chargeable under the heads "interest ..... X X X X Extracts X X X X X X X X Extracts X X X X
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