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2015 (11) TMI 1538 - ITAT KOLKATA

2015 (11) TMI 1538 - ITAT KOLKATA - TMI - Addition u/s. 14A - CIT(A) restricted the addition - Held that:- We find that the relevant assessment year involved is 2007-08 and as held by Hon’ble Bombay High court in the case of Godrej & Boycee Mfg. Co. Ltd., [2010 (8) TMI 77 - BOMBAY HIGH COURT ] that Rule 8D of the Rules as inserted by the I. T (Fifth Amendment) Rules, 2008 w.e.f. 24.3.2008 is prospective and not retrospective. We find that the exempted income of dividend is to the extent of ͅ .....

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that the AO has disallowed the claim of donation on the basis that no evidence was produced by 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 b .....

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e 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 an assessee, being the company, besides dealing in other things also deals in purchase and sale of shares of other companies, the assessee shall be deemed to be carrying on a speculation b .....

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arising out of derivatives from the income arising out of buying and selling of shares. 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. - Decided in favour of assessee - I.T.A No.582/Kol/2011, I.T.A No.607/Kol/2011 - Dated:- 5-11-2015 - Shri Mahavir Singh, JM & Shri Waseem .....

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The first 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.1: 1. 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 asse .....

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t. 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. Ag .....

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circumstances of the case. We find that the relevant assessment year involved is 2007-08 and as held by Hon ble Bombay High court in the case of Godrej & Boycee Mfg. Co. Ltd., supra that Rule 8D of the Rules as inserted by the I. T (Fifth Amendment) Rules, 2008 w.e.f. 24.3.2008 is prospective and not retrospective. We find that the exempted income of dividend is to the extent of ₹ 37,34,300/- and long term capital gain of ₹ 5,62,20,229/- in AY 2007-08. Rule 8D of the Rules is no .....

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as raised following ground no.2: 2. That on the facts and circumstances of the case, Ld. CIT(A)-VI, Kolkata has erred in law in directing the AO to allow donation of ₹ 18,002/-. 6. We have heard rival submissions and gone through facts and circumstances of the case. We find that the AO has disallowed the claim of donation of ₹ 18,000/- on the basis that no evidence was produced by the assessee during the assessment proceedings but CIT(A) directed the AO to allow the claim of the asse .....

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s 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 refer .....

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udicating 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. 88E of the Act on the computed book profit u/s. 115JB of the Act. For this, revenue has raised following ground no.4: 4. That on the facts and circumstances of the case, Ld. CIT(A)-VI, Kolkata has erred in law in holding that rebate u/s. 88E will be allowable to the assessee when its tax payable is computed as .....

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. 11. The only issue in this appeal of assessee is against the order of CIT(A) in upholding the order of AO in applying Explanation to sec. 73 of the Act disallowing loss in business of purchase and sale of shares to be assessed as deemed speculation loss. For this, assessee has raised following ground nos. 3 to 5: 3) For that on the facts and in the circumstances of the case, the CIT(A) erred in law and on fact in upholding the finding of the Assessing Officer that the Explanation to Sec. 73 of .....

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ransactions of purchase & sale of shares and therefore income derived by the appellant from stock broking, derivative trading and portfolio management fees should have been assessed as income derived from purchase & sale of shares. 5) For that on the facts and in the circumstances of the case, the AO be directed to assess the loss in purchase & sale of shares amounting to ₹ 95,02,451/- as business loss and be directed to be set off against other business income. 12. Briefly sta .....

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ctional 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 so .....

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essee for AY 2007-08 as assessable as per the accounts of the assessee and which is relevant for the issue and hence, the same is reproduced from the submissions of the assessee as under: HEADWISE SUMMARY OF INCOME INCLUDED IN THE ASSESSABLE INCOME A. Profits & Gains of Business (i) Brokerage ₹ 1,51,65,389 (ii) Share Speculation Profit ₹ 98,649 (iii) Income from Depository Operations ₹ 13,97,970 (iv) Proprietary Trading in Derivatives ₹ 1,31,81,302 (v) Interest ₹ .....

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Counsel for the assessee, first of all, before us claimed that assessee s Gross total primarily comprises of Income from Capital Gains and therefore the case falls under the first limb of exception in Explanation to Sec. 73 of the Act. Secondly, he argued that the above income of steams were intimately connected with transactions involving purchase and sale of shares and all the income and receipts were earned by assessee in the course of single integrated business involving transactions in capi .....

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on 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 in .....

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014 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 delivery based shares and purchase & sale of non-delivery based shares i.e., derivative trading. The a .....

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ofit from F & O operations. The assessee carried the matter to CIT(A) who allowed the claim of the assessee by holding that share trading loss is to be allowed to be set off with the profits earned in derivative transactions. Further, the CIT(A) also held that receipt from the surrender of Keyman Insurance Policy has to be assessed as business income and to be allowed for set off with loss from business under the same head. The assessee conducted its business of purchase and sale of shares u .....

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emium out of profit derived from business of purchase of shares. The AO in 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 a .....

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es 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 defini .....

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very based transactions and derivative transaction are non-speculative as far as Sec. 43(5) is concerned, it follows that both will have the same treatment as far as application of Explanation to Sec. 73 is concerned. Therefore aggregation of the share trading loss and profit from derivative transactions should be done before the Explanation to Section 73 of the Act, is applied. The above view has been taken up by Special Bench of this Tribunal, Mumbai Bench, in the case of CIT v. Concord Commer .....

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transactions are not coming under the purview of Section 43(5) of the Act which provides definition of speculative transaction exclusively for purposes of section 28 to 41 of the Act. Again, the fact that both delivery based transaction in shares and derivative transactions are non-speculative as far as section 43(5) is concerned goes to confirm that both will have same treatment as regards application of the Explanation to Section 73 is concerned, which creates a deeming fiction. Now, before ap .....

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y 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 eff .....

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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 c .....

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solve the issue before us, the section has to be read in the manner as follows: Explanation : Where any part of the business of a company (… … … … … … … … … … … … … … …. … … … … … …. … … … … … … … … …. … … .. .. … .. … … … .. … .. … & .....

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ng in other things also deals in purchase and sale of shares of other companies, the assessee shall be deemed to be carrying on a speculation business. The assessee, in the present case, principally is a share broker, as already indicated. The assessee is also in the business of buying and selling of shares for self where actual delivery is taken and given and also in buying and selling of shares where actual delivery was not intended to be taken or given. Therefore, the entire transaction carri .....

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