TMI Blog2019 (4) TMI 1781X X X X Extracts X X X X X X X X Extracts X X X X ..... ve loss - HELD THAT:- In the present case the amended provisions of sec 73(4) of the Act are applicable. Since the provisions of sec 3(4) of the Act mandates that speculative loss shall not be carry forward for more than four assessment years immediately succeeding the assessment year for which the loss was first computed, so the speculative loss computed in AY 2005-06 could be carried forward upto AY 2009-10 and not beyond the same. The present assessment year is AY 2010-11 and hence the speculative loss of AY 2005-06 cannot be carried forward to the present assessment year. In view of the above discussion the disallowance of claim of the appellant of carry forward of speculative loss is confirmed - Decided in favour of revenue - I.T.A. No. 5786/Mum/2017, I.T.A. No. 5787/Mum/2017, I.T.A. No. 5788/Mum/2017, I.T.A. No. 5814/Mum/2017, I.T.A. No. 5815/Mum/2017 And I.T.A. No. 5816/Mum/2017 - - - Dated:- 1-4-2019 - Shri Shamim Yahya (AM) And Shri Amarjit Singh (JM) For The Assessee : None For The Department : Shri B.B. Rajendra Prasad ORDER Per Bench : These are cross appeals by t ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... f the case and in law, the CIT(A) has erred in directing the AO to compute the disallowance u/s.l4A r.w.r.SD of the Income Tax Act, in respect of shares/investment in mutual funds, which have yielded dividends. 3. On the facts and in the circumstances of the case and in law, the CIT(A) has erred in rejecting the appellant's proposition that the disallowance U/S.14A r.w.r.SD is not triggered in respect of strategic investment. 4. The appellant reserves its right to add to, alter, amend, or modify any of the grounds taken in this appeal. 4. Since facts are identical we are referring to facts and figures from A.Y. 2009-10. Issues in Revenue appeal :- 5. Brief facts during the appellate proceedings, on this issue, the Assessing Officer observed that the assessee had earned dividend income which is claimed as exempt from tax in computation of income, however, the assessee had not made any disallowance u/s. 14A rw Rule 8D for earning exempt income. After considering the submissions of the assessee the Assessing Officer has made disallowance u/s. 14A rw Rule 8D at ₹ 3,13,17,324/- which con ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... d; Hon'ble Delhi High Court in the case of Holicim India P Ltd; Hon'ble ITAT Bangalore in the case of Alliance Infrastructure Projects P Ltd; Hon'ble Chennai ITAT in M. Bhaskaran. g. The disallowance u/s 14A rw Rule 8D cannot exceed exempt income. In support of said contention the assessee has placed reliance on the decision of the Hon'ble Delhi High Court in the case of Joint Investment P Ltd and that of Hon'ble ITAT, Delhi in the case of Regent Automobiles P. Ltd. h. The investments on which no exempt income has been earned during the year should be excluded from average value of investments while computing disallowance u/s 14A rw Rule 8D. In support of its claim the assessee has placed reliance on the decision of the Hon'ble Delhi High Court In the case of ACB India Ltd; Hon'ble ITAT, Mumbai in the case of Dystar India P Ltd. In view of the above the assessee has submitted that if at all the disallowance u/s 14A rw Rule 8D is required to made then the same has to be made on investments made in mutual funds and the 0.5% disallowance on same works out to be ₹ 13,25,774/-. 7. Considering the abov ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e issue of disallowance under section 14A for strategic investment and others, we have upheld the order of learned CIT(A) in Revenues appeal as above. Hence, assessee s ground on these issues of disallowance under section 14A is dismissed. 14. As regards the issue of set off of carry forward of speculative loss is concerned, we note that this issue is arising in A.Y. 2010-11 and 2011-12. 15. Brief facts on this issue are as under :- During the course of assessment proceedings, on this issue, the Ld. AO has held as under:- During the year the assessee has earned income from speculative business of ₹ 3,35,42,277/-. The assessee has claimed that the net profit derived from the said speculative business of ₹ 3,35,42,277/- should be set off against carried forward speculative business loss of AY 2005-06 since they are speculative in nature by virtue of explanation to section 73 of the IT Act. The relevant extract of the submission made by the assessee is reproduced here under: The claim for set off of carried forward share trading losses of ₹ 3,38,72,6251- against sha ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... held as stock-in-trade by the assessee. The assessee has been following the method of valuation of closing stock of shares at cost or market, whichever is lower. The Bombay High court in the case of Prasad Agents P Ltd reported in 226 CTR 13 has held that even shares in stock at the close of the accounting year resulting in Profit and loss and such profit or loss u/s 28(1) is speculation profit or loss by virtue of proviso to section 73 of the Income Tax Act. b. The issue is identical to AY 2007-08 and the appellant has placed reliance on the written submission submitted during the appellate proceedings for AY 2007-08. c. The speculative loss of AY 2005-06 is available for set off in AY 2010- 11 and the limitation of 4 years does not apply in this case, since the loss pertains to AY 2005-06, which could be carried forward for 8 years, whereas the amendment for 4 year was brought by the Finance Act, 2005, w.e.f. 01.04.2006. In support of its contention the appellant has placed reliance on the Special Bench, Mumbai ITAT in the case of Kotak Mahindra Capital Co. Ltd vs. ACIT reported in 18 ITR 213, wherein while deciding the issue of c/f ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... cial Bench in the case of Kotak Mahindra Capital Co. Ltd (supra). The contentions of the appellant have been considered carefully. The provisions of sec 73(4) of the Act stipulates as under. ( 4) No loss shall be carried forward under this section for more than [four] assessment years immediately succeeding the assessment year for which the loss was first computed. 6.4.2 From the above referred provisions of sec 73(4) of the Act it is unambiguous that the speculation loss can be carried forward only for four assessment years immediately succeeding the assessment year for which the loss was first computed. The usages of word shall make if mandatory and does not leave any doubt. The appellant's contention that it has acquired vested right and hence in respect of speculative loss determined in AY 2005-06 will not be governed by the amended provisions of sec 73(4) of the Act is devoid of merits as the concept of absolute vested right is alien to statutory provisions. The Legislature has got power to impair, imperi ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... head Capital gains assessable for that assessment year in respect of any other capital asset not being a short-term capital asset; ( c) if the loss cannot be wholly so set off, the amount of loss not so set off shall be carried forward to the following assessment year and so on; The Hon'ble ITAT Special Bench considered the words is , carried forward and cannot be appearing in the above referred provisions and held that the same are used in present tense and hence refers to the long term capital loss of the current year. In view of the same it was further held that the provisions of sec 74(1) as substituted w.e.f 01.04.2003 are applicable to the long term capital loss of AY 2003-04 onwards and not to the long term capital loss relating to the period prior to AY 2003-04. The phraseology used in the provisions under consideration, i.e. sec 73(4) of the Act is entirely different and hence the law laid down by the Hon'ble ITAT Special Bench in above referred case is not applicable in t ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... unabsorbed loss of ₹ 15,50,189 of the assessment year 1950-51 cannot be carried forward for more than eight years, and consequently cannot be set off against the business income of the assessment year 1960-61. 7. It is pointed out that the AAC mentioned- in his order for the assessment year 1959-60 that the unabsorbed loss of ₹ 15,50,189 should be carried forward. That direction has meaning only if the law in force in the, assessment year 1960-61 permits the unabsorbed loss to be carried forward into the assessment of that year. The direction by the AAC assumes that the law permits the unabsorbed loss to be carried forward into future years, but as we have seen that is not the law and, therefore, the assessee can derive no advantage from that direction. In view of the above discussed law laid down by the Hon'ble Supreme Court, I am of the considered opinion that in the present case the amended provisions of sec 73(4) of the Act are applicable. Since the provisions of sec 3(4) of the Act mandates that speculative loss shall not be carry forward for more than four assessment years immediately succeeding the assessment ye ..... X X X X Extracts X X X X X X X X Extracts X X X X
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