TMI Blog2014 (8) TMI 1142X X X X Extracts X X X X X X X X Extracts X X X X ..... infraction of law and hence allowable as business expenditure. It was held that in such a case Explanation to Sec. 37 would not apply. Addition of provision for loss on mark to market on derivative - Held that:- An identical issue came up for hearing in the case of group company of the assessee namely M/s. ECL Finance Ltd. [2013 (1) TMI 783 - ITAT MUMBAI] allowing the assessee appeal. Disallowance u/s. 14A r.w. Rule 8D - assessee has suo motu disallowed ₹ 59.60 lakhs - Held that:- AO has computed the disallowance by applying Rule 8D and while doing so, the AO has considered the value of stock-in-trade shares and securities as investments. Further, the AO has considered the total investment instead of investment on which dividen ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... , I.T.A. No.7235/Mum/2011 - - - Dated:- 13-8-2014 - Shri N.K. Billaiya, Accountant Member And Shri Sanjay Garg, Juicial Member Revenue by: Shri M. Murali Assessee by: Shri A.V. Sonde ORDER N.K. Billaiya, AM: These cross appeals by the Revenue and the assessee are preferred against the order of the Ld. CIT(A)-8, Mumbai dt. 21.6.2011 pertaining to A.Y.2008-09. As both these appeals were heard together, they are disposed of by this common order for the sake of convenience and brevity. ITA No. 5939/M/2011 Revenue s appeal 2. The Revenue has raised following two grounds: 1. On the facts and in the circumstances of the case and in law, the Ld. CIT(A) erred in deleting the addition the penalty levied by ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... irregularities committed by the assessee s clients, such payments were not on account of any infraction of law and hence allowable as business expenditure. It was held that in such a case Explanation to Sec. 37 would not apply. Respectfully following the decision of the Hon ble High Court, ground No. 1 is dismissed. 7. Ground No. 2 relates to the deletion of addition of provision for loss on mark to market on derivatives amounting to ₹ 2,21,49,882/-. 8. An identical issue came up for hearing in the case of group company of the assessee namely M/s. ECL Finance Ltd., in ITA No. 7656/M/2011 wherein the Tribunal has considered the issue at para-5 of its order and at para-8, the Tribunal followed the findings of ITA No. 5324/M/07 and ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... at the dividend amount of ₹ 7.518 crores has been earned on shares held as stock-intrade and ₹ 7 crores on Mutual Fund which were claimed as exempt u/s. 10(34) and 10(35) respectively. It was pointed out that the assessee itself has disallowed 5% of dividend income. The disallowance was computed at ₹ 59.66 lakhs. It was further contended that interest bearing borrowed fund had been utilized for fixed deposits with various banks resulting in taxable interest income. Earning of dividend income was only incidental and ancillary to its share trading business activity. After considering the facts and the submissions, the Ld. CIT(A) observed that the amount of disallowance for the purpose of Sec. 14A has to be determined as per ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... se of CIT Vs HDFC Bank Ltd. in Income Tax Appeal No. 330 of 2012. We also find that the assessee has suo motu disallowed 59.60 lakhs. The AO has computed the disallowance by applying Rule 8D and while doing so, the AO has considered the value of stock-in-trade shares and securities as investments. Further, the AO has considered the total investment instead of investment on which dividend income was earned which makes the assessment order erroneous and further the First Appellate Authority order is also erroneous as he has confirmed the findings of the AO. In our considered view, considering the financials of the assessee in totality the suo motu disallowance made by the assessee should suffice the mandate of provision of Sec. 14A of the Act ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... s, the Hon ble Bombay High Court held as under: Held,_ dismissing the appeal, that the value of the shares transacted by the assessee as a stock broker on behalf of his client was as much a part of the debt as was the brokerage charged by the assessee on the transaction. The brokerage having been credited to the profit and loss account of the assessee, it was evident that a part of the debt was taken into account in computing the income of the assessee. The fact that the liability to pay the brokerage may arise at a point in time anterior to the liability to pay the value of the shares transacted would not make any material difference to the position. Both constitute a part of the debt which arises from the very same transaction involvi ..... X X X X Extracts X X X X X X X X Extracts X X X X
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