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2016 (10) TMI 491 - ITAT MUMBAI

2016 (10) TMI 491 - ITAT MUMBAI - TM - Disallowance u/s 14A - Held that:- Assessee voluntarily disallowed the employee welfare expenses in sum of ₹ 10,709,710/- and interest expenses to the tune of ₹ 2,510,473/-. Now the expenses remains to the tune of ₹ 325,000/- on account of legal and professional expenses and an amount of ₹ 65,629/- on account of miscellaneous expenses. Disallowance is not required to be made more than the expenditure. The expenditure remains ₹ .....

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in favour of the assessee against the revenue. - Disallowance of diminution of value of shares - Held that:- 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 wherein held that preparation of the balance-sheet in accordance with the statutory provision would not disentitle the assessee in submitting the .....

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sheet in the prescribed form and it had not option to change it. For the purpose of income-tax as stated earlier, that is to be taxed is the real income which is to be deducted on the basis of the accounting system regularly maintained by the assessee and that was done by the assessee in the present case - Long Term Capital Loss on account of IL & FS during the year by determining cost of acquisition u/s.45(2A) of the Act read with Circular No.768 dated 24.06.1998 - Held that:- No distinguis .....

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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:- 26-8-2016 - SHRI G.S.PANNU, AM AND SHRI AMARJIT SINGH, JM For The Assessee : Shri Dilip V. Lakhani For The Department : Shri Bhanwar Singh Ratnoo ORDER PER AMARJIT SINGH, JM: The assessee as well as revenue has filed an appeal against the order dated 26.05.2014 passed by the Commissioner of Income Tax .....

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7; 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 ₹ 52,31,313/-. The appellant prays that they are entitled to deduction of ₹ 52,31,313/- and .....

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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.768 dated 24.06.1998 of the CBDT instead of average cost method adopted by the AO whereby he disallowed l .....

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ued 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 employees of the associate and affiliated companies without any specific ratio of sharing of income or trust .....

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77; 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 of sale/transfer of share of ILFS during year by determining cost of acquisition u/s.45(2A) of the Act re .....

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3,91,985. 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 assessee is also that the assessee incurred only the interest expenditure which has not been claimed and deducte .....

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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. 6. Assessee voluntarily disallowed the employee welfare expenses in sum of ₹ 10,709,710/- and interest expenses to the tune of ₹ 2,510,473/-. Now the expenses remains to the tune of ₹ 325,000/- on account of legal and profes .....

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is 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 value of shares amounting to ₹ 52,31,313/-. The contention of the appellant is that the investment in which the .....

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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 assessee has also placed reliance on the law settled by the Hon ble Supreme Court in case of United Commercial Bank rep .....

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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 in case of United Commercial Bank reported in 240 ITR 355 wherein this controversy has been decided in favour of the .....

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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 the cost of the investments. In such cases, there is no question of following two different methods for valuing its s .....

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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 assessee and against the revenue, therefore the consequential result is liable to be followed. Accordingly, we set aside .....

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e 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 any person has had at any time during previous year any beneficial interest in any securities, then, any profits or gai .....

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2A) 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. 2008- 09, 11,54,613 shares were lying as opening stock in the demat account with DP ID 11177127 and 56,09,953 IL & .....

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rity, 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 not applicable in the above case and how the two decisions without discussing as to how sec.45(2A) is not applicable i .....

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