TMI Blog2015 (11) TMI 1538X X X X Extracts X X X X X X X X Extracts X X X X ..... the assessee during the assessment proceedings but CIT(A) directed the AO to allow the claim of the assessee after verification of copies of receipts and declaration issued by approved charities and as produced by assessee before him.We find that the CIT(A) has directed the AO to examine the 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. Rebate u/s. 88E of the Act on the computed book profit u/s. 115JB - Held that:- This issue is not arising out of the order of CIT(A), hence, this issue cannot be adjudicated and this ground cannot be raised by revenue. On query from the Bench, Ld. Sr. DR fairly conceded that no such ground was raised before CIT(A) by the assessee and hence, he concedes that this issue cannot be raised before Tribunal for the first time. Accordingly, this ground of appeal of revenue is dismissed being infructuous. Disallowance of loss in business of purchase and sale of shares to be assessed as deemed speculation loss - applicability of Explanation to sec. 73 - Held that:- Where ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... dend of ₹ 37,34,300/- and long term capital gain of ₹ 5,62,20,229/- but attributed only expenses relatable to this exempt income at ₹ 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 ₹ 16,60,862/- and also disallowed other expenses relatable to exempt income at ₹ 9,15,267/- thereby total disallowance was at ₹ 28,90,482/-. Against this, assessee has already offered the disallowance of direct expenses at ₹ 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 Court in the case of Godrej Boycee Mfg. Co. Ltd. Vs. DCIT (2010) 328 ITR 81 (Bom), wherein it is held that Rule 8D of the Rules is prospective and not retrospective and restricted the disallowance at 1% of exempt income and accordingly, computed the disallowance ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... the AO to examine the 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 ₹ 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 ord ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... udited accounts of the assessee that the assessee 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 ₹ 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 ₹ 1,88,23,827/- for setting off of share trading loss which is more than the other sources income at ₹ 1,31,18,686/-. Therefore, he disallowed the claim of the assessee of business loss of ₹ 95,02,451/- by treating the same as deemed speculation loss u/s. 73 of the Act. Aggrieved, assessee preferred appeal before ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ving transactions in capital market. According to Ld. Counsel, the underlined transactions from which income/revenues were generated involved purchase and sale of shares. According to him, income of loss could not have been earned or suffered unless transactions involving purchase and sale of shares were carried out by the assessee. Ld. Counsel for the assessee relied on Coordinate Bench of this Tribunal in the case of Bhartia Stock Broking Pvt. Ltd. Vs. ITO, ITA No. 2058/Kol/2006 dated 25.05.2007, wherein the Explanation to Sec. 73, which creates a legal fiction, and the issue u/s. 43(5) of the Act was discussed as under: Even otherwise if a transaction is not treated as speculative transactions it could be par with a 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 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... n assessment completed for all prior assessment years allowed the claim of the assessee in the 5 ITA No.1183/K/2012 Baljit Sec. Pvt. Ltd. AY 2009-10 respective assessment years. The assessee treated the entire activity of purchase and sale of shares which comprised of both delivery based and nondelivery based trading, as one, before application of the deeming provision contained in explanation to section 73 of the Act and accordingly, claimed set off of the loss incurred in delivery based trading with the profit derived from derivative trading and further, with the receipt of surrender of the keyman policy treated as a business receipt. We have examined the provisions of section 43(5) of the Act, which contains the definition of speculative 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 notwit ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... tion or derivative transaction. Now, this view has been confirmed by the Hon ble jurisdictional High Court in assessee s own case in GA No.3481 of 2013 and ITAT No. 215 of 2013 dated 12th March, 2014, has held as under:- Clause (d) of Section 43(5) became effective with effect from 1st April, 2006. Therefore, prior to 1st April, 2006 any transaction in which a contract for the purchase or sale of any commodity including stocks and shares was periodically or ultimately settled otherwise than by the actual delivery or transfer of the commodity or scrip was a speculative transaction. Sub-section 1 of Section 73 provides as follows: (1) Any loss, computed in respect of a speculation business carried on by the assessee, shall not be set off 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 assesse ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... etting off the loss arising out of derivatives from the income arising out of buying and selling of shares. This is what the learned Tribunal has done. In view of the above facts and circumstances and the proposition of law as discussed above, we are of the view that assessee has a loss which is arising out of business and accordingly, the same is a business loss and not speculation loss as held by lower authorities. Accordingly, we allow this issue of assessee s appeal. 15. Ground nos. 1 and 2 raised by assessee is against the order of CIT(A) in upholding the validity of the assessment order dated 31.12.2009 without appreciating the submissions of the assessee that the order was passed beyond the period of limitation. For this, assessee has raised following two grounds: 1. For that on the facts and in the circumstances of the case, the CIT (A) erred in upholding the validity of the assessment order dated 31st December 2009; without appreciating the submissions of the appellant that the order was passed beyond the period of limitation. 2) For that on the facts and in the circumstances of the case, the CIT(A) appreciating the fact; that there was considerable delay in ser ..... X X X X Extracts X X X X X X X X Extracts X X X X
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