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IL and FS Employees Welfare Trust Versus Addl. Commr. Of Income Tax 19 (3) , Mumbai and Vica-Versa

2016 (9) TMI 1149 - ITAT MUMBAI

Diminution of value of shares - to be treated as business loss or not - Held that:- Regular method of valuation to be followed - No doubt it is to be seen whether diminution of investment in the shares is liable to allowable or not. This matter of controversy has already been adjudicated by the Hon’ble Supreme Court in case of United Commercial Bank [1999 (9) TMI 4 - SUPREME Court] wherein this controversy has been decided in favour of the assessee against the revenue. - Decided in favor of asse .....

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y been adjudicated by the CIT(A), therefore, we nowhere found any ground to interfere with this order, therefore we uphold this issue in favour of the assessee and against the revenue. Accordingly, this issue is decided in favour of the assessee and against the revenue. - I.T.A. No.5235/M/2014, I.T.A. No.5223/M/2014 - Dated:- 3-3-2016 - SHRI G.S.PANNU, AM AND SHRI AMARJIT SINGH, JM For The Assessee by: Shri Dilip V. Lakhani For The Department by: Shri Bhanwar Singh Ratnoo The assessee as well as .....

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conclusion reached by the Learned Commr. Of Income Tax (Appeals) that disallowance be restricted to ₹ 1,35,25,433/- is erroneous. The appellant prays that no addition be made u/s.14A and the addition confirmed by the Learned Commr. Of Income Tax (Appeals) may be deleted. 2. On the facts and circumstances of the case the Learned Commr. Of Income Tax (A) has erred in confirming the disallowance made by the Learned Assessing Officer regarding diminution in the value of the shares amounting to .....

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ppellant submit that levy of interest u/s.234B of ₹ 14,12,268/- and ₹ 64,299/- under Sec 234C is not justified and be deleted. 3. The revenue has also raised the following grounds:- 1. On the facts and in the circumstances of the case and in law, the Learned CIT(A) erred in directing the AO to compute the Long Term Capital Loss on account of sale/transfer of shares of IL & FS during the year by determining cost of acquisition u/s.45(2A) of the I.T.Act, 1961 read with Circular No. .....

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. The case was selected for scrutiny assessment and notice u/s.143(2) of the Act dated 24.08.2010 was issued and served upon the assessee. Thereafter notice u/s.142(1) of the Act was also issued and served upon the assessee. The assessee is a trust settled by Infrastructure Leasing & Financial Services Ltd. in the year 1990 for the welfare of its employees and the employees of its associate and affiliated companies. The beneficiaries of the Trust are all employees of the company and the empl .....

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8377; 1,35,25,433/- and also confirmed the disallowance made by the Assessing Officer to the tune of ₹ 52,31,313/- on account of diminution in the value of the shares and also confirmed the interest u/s.234B of the Act to the tune of ₹ 14,12,268/- and ₹ 64,299/- u/s.234C of the Act, therefore the present appeal has been filed before us. Whereas the revenue has challenged the direction given by the CIT(A) to the Assessing Officer to compute the Long Term Capital Loss on account .....

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.14A of the Act. In the relevant assessment year the assessee received the dividend income of ₹ 7,33,91,985. However, at the time of filing of return, the assessee disallowed the interest expenses to the tune of ₹ 25,10,473/- u/s.14A of the Act. The contention of the assessee is that the expenditure which has not been incurred to earn the exempt income is not liable to be considered while application of the provision u/s.14A read with Rule 8D of the Act. The contention of the assesse .....

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y Ltd. Vs. DCIT, 234 CTR 1 (Bom) is also applicable in this case. But while following the above said law no doubt the expenditure which has not been incurred to earn the exempt income is not liable to be considered while assessing the expenditure u/s. 14A r.w. Rule 8D of the Act. It is necessary to mentioned the detail the expenditure incurred by the assessee. Image No. 1 6. Assessee voluntarily disallowed the employee welfare expenses in sum of ₹ 10,709,710/- and interest expenses to the .....

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s expenditure to earn the exempt income. Therefore, in view of the said circumstances the finding of the CIT(A) on this issue is hereby ordered to be set aside and Assessing Officer is directed to assess the income of the assessee in view of the observations made above. Accordingly this issue is decided in favour of the assessee against the revenue. ISSUE NO.2:- 7. Under this issue the assessee challenged the confirmation of disallowance made by the Assessing Officer regarding the diminution of .....

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assessee has treated shares of listed companies as stock in trade and the regular profit and loss on the sale of the shares if any has been offered to tax as business income and as the market value as on 31.03.2009 for such shares is less than its cost sub diminution in the value of the shares is to be treated as business loss. The Assessing Officer relied upon the case Indian Overseas Bank 51 taxaman 283 (Madras). The finding of the Assessing Officer was confirmed by the CIT(A). However, the as .....

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ere being maintained. Therefore, in the said circumstances the finding of the CIT(A) on this issue was on wrong path. Moreover, the law relied by the assessee was not seen and discussed. The details of the investment and diminution of value of shares has been furnished which lies at page 15 of the paper book. No doubt it is to be seen whether diminution of investment in the shares is liable to allowable or not. This matter of controversy has already been adjudicated by the Hon ble Supreme Court .....

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tment and there was no justifiable reason for not accepting the same. Preparation of the balance-sheet in accordance with the statutory provision would not disentitle the assessee in submitting the income-tax return on the real taxable income in accordance with the method of accounting adopted by the assessee consistently and regularly. That cannot be discarded by the departmental authorities on the ground that the assessee was maintaining the balance-sheet in the statutory form on the basis of .....

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ase. 8. In view of the said observation, we allowed the diminution in the value of the share amounting to ₹ 52,31,313/-, therefore, we set aside the order passed by the CIT(A) on this issue. Accordingly, this issue is decided in favour of the assessee against the revenue. ISSUE NO.3:- 9. According to issue no.3, the assessee has challenged the interest u/s.234B to the tune of ₹ 14,12,268/- and ₹ 64,299/- u/s.234C. Since the issue no.2 has also been decided in favour of the asse .....

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998. However, the revenue is of the view that the average cost method adopted by the Assessing Officer is liable to be implemented whereas the Assessing Officer disallowed the Long Term Capital Loss to the tune of ₹ 7,50,92,618/-. Before going further it is necessary to advert the finding of the learned CIT(A) in this regard. 4. I have duly considered the submission of the appellant and in the said respect it is relevant to refer to section 45(2A) of Act, which is as follows: (2A) Where an .....

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section 10 of the Depositories Act, 1996, and for the purpose of - (i) section 48; and (ii) (ii) proviso to clause (42A) of section 2, the cost of acquisition and the period of holding of any securities shall be determined on the basis of the first-in-first-out method. Inserted by the Depositories, Act, 1996, w.e.f from 20.09.1995, which provides as follows: ………. The appellant s is contention that it has domiciled IL & FS shares in two different demat accounts. In F.Y. 2 .....

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under the Act, which prescribed the method to determine the cost of acquisition and the period of holding of any security, i.e. on the basis of first-in and first-out method. The AO has not disputed that the shares have been held by the depository and transferred in the demat form and FIFO method is not applicable in such cases. He has also not doubted the computation of capital gain on FIFO basis. He has merely applied the above two referred decisions without discussing as to how se.45(2A) is n .....

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