TMI Blog2017 (6) TMI 61X X X X Extracts X X X X X X X X Extracts X X X X ..... D(2)(ii). Investment written off during the year not considered for arriving at disallowance u/r 8D - Held that:- The rule requires the value of investment, the income from which is exempt from tax alone to be considered for the disallowance. The sum of ₹ 8,94,800/- written off during the year is in respect of joint venture in Dubai in Peninsular Middle East DMCC. The Income from this investment is not exempt from tax and hence the same need not be considered for disallowance u/s 14A r.w.r 8D. Therefore, it cannot be said that there is error in the assessment order. Provision for leave encashment - Held that:- The assessee in the statement of total income had mentioned in the footnote that no disallowance was made towards leave encashment, following the decision of the jurisdictional Kerala High Court in the case of Hindustan Latex Ltd.[2012 (6) TMI 713 - KERALA HIGH COURT ] The Assessing Officer has accepted the same while completing the assessment. There is no error in the assessment since the Assessing Officer has followed the judgment of the jurisdictional High Court. Loss on trading in shares not considered as loss from speculation business as required under exp ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ank guarantee commission should not be considered as interest on borrowings. Thus there was no error in the assessment order and hence the order under section 263 was not correct. 5. The Rule 8D(iii) requires the value of investment , the income from which is exempt from tax alone to be considered for the disallowance. The sum of ₹ 8,94,800 written off during the year is in respect of joint venture in Dubai in Peninsular Middle East DMCC. The income from this investment is not exempt from tax and hence the same need not be considered for disallowance under section 14A read with Rule 8 D. Thus there was no error in the assessment order and hence the order under section 263 was not correct. 6. The appellant had mentioned as a foot note in the statement of total income that no disallowance was made towards leave encashment following the decision of the Jurisdictional Kerala High Court in the case of Hindustan Latex Ltd. The assessing officer has accepted the same while completing the assessment. There is no error in the assessment since the assessing officer has followed the decision of the jurisdictional high court. The assessing officer has taken one of the possible view ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 73. 3.1 The assessee filed reply vide letter dated 16.11.2015 and the assessee s authorized representative appeared before the CIT on various hearing dates and submitted that the proposed revision is bad in law because there is no error in the assessment order warranting interference u/s 263 of the Act. The assessee s authorized representative had raised specific points with regard to each of the reasons stated in the notice issued u/s 263 of the Act to contend that there is no error in the assessment order and the Assessing Officer had taken a conscious decision to allow the deductions. 4 The CIT rejected the contentions raised by the assessee and passed order u/s 263 of the Act. The CIT, set aside the assessment order dated 9.3.2015 and directed the Assessing Officer to pass fresh assessment order, after examining the points of error mentioned by the CIT in the impugned assessment order. The relevant finding of the CIT, reads as follows: 7. .. I have considered the contentions of the assessee. On examination of the records it can be seen that the Assessing Officer has not examined all the above points while allowing the claim of the assessee. On examination of ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ; 21,30,564 is not considered as loss from speculation business as required under explanation to section 73. 6.1 Now, let us examine whether the above four reasons stated by the CIT is a good ground to hold that the assessment order passed u/ 143(3) of the Act dated 9.3.2015 is an order erroneous and prejudicial to the interest of the revenue. 6.2 Bank Guarantee commission to be considered as interest for disallowance u/s 14A: Section 2(28A) of the I T Act defines interest which reads as follows: interest means interest in any manner n respect of any moneys borrowed or debt incurred (including a deposit, claim or other similar right or obligation) and includes any service fee or other charge in respect of the moneys borrowed or debt incurred or in respect of any credit facility which has not been utilized. 6.3 A bank guarantee is a promise from a bank that the liabilities of a debtor will be met in the event that the debtor fails to fulfill the contractual obligations. It is not a borrowing or a debt incurred. It is only a facility extended by the bank for which charges are recovered. Hence, the bank guarantee commission cannot be considered as interest on ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e jurisdictional High Court. 6.6 Loss on trading in shares amounting to ₹ 21,30,564 is not considered as loss from speculation business as required under explanation to section 73 The brief fact in relation to the above issue are as follows: The assessee is engaged in the business of trading in shares on self account, derivatives transactions and share broking activity. The Assessing Officer treated the aforesaid loss arising from purchase and sale of share on self account, done on delivery basis, as normal business loss to be set off against other business income i.e brokerage. The IT Act 1961 has been amended by Finance Act 2005 w.e.f 1.4.2005 and by clause Proviso of sub. Sec 5 of section 43 it has been provided that trading in derivative carried out in the recognized stock exchange should not be considered as speculative business. The assessee, in the assessment proceedings, vide its reply dated 9.2.2015 has answered in detail the loss in trading, scrip wise profit and loss etc., (details are furnished from pages 38 to 47 of the paper book filed by the assessee). The AO during the course of assessment proceedings had examined the evidence furnished and had c ..... X X X X Extracts X X X X X X X X Extracts X X X X
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