TMI Blog2020 (3) TMI 447X X X X Extracts X X X X X X X X Extracts X X X X ..... nvestments that yield exempt income should be considered for computing average value of investments The second contention of the assessee that disallowance under section 14A of the Act should be restricted to the extent of exempt income earned is supported by the judgmen of PCIT vs. State Bank of Patiala [ 2018 (11) TMI 1565 - SC ORDER] . Thus, in the light of aforesaid decisions we deem it fit and proper to restore this issue to the file of Assessing Officer for the limited purpose of recomputation of disallowance under Rule 8D(2)(iii) in line with the principles laid down in the case of PCIT vs. State Bank of Patiala and ACIT vs. Vireet Investment Pvt. Ltd. [ 2017 (6) TMI 1124 - ITAT DELHI] Disallowance of mark to market loss - provision for mark to market loss is an unascertained liability, it is a provision for loss, which may or may not occur at the time of settlement of the contract at future date and hence, disallowed the same in entirety - HELD THAT:- Co-ordinate Bench of the Tribunal in assessee s own case for assessment year 2011- 12 [ 2017 (5) TMI 1719 - ITAT MUMBAI] has considered this issue and has held that mark to market loss claimed by the assessee is allowa ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... and not 14A and assessee had made non-current investment of ₹ 100.48 crore. The Ld.CIT(A) further erred in not considering the decision of the Hon'ble Supreme Court in the case of M/s.Maxopp Investments Pvt. Ltd. 2. Whether on the facts of the instant case and in law, the CIT(A) erred in deleting the disallowance of ₹ 20,52,47,434/- in respect of mark to market loss on index options without appreciating that such loss is notional and contingent in nature which had not crystallized at the end of the year. 3. Whether on the facts of the instant case and in law, the CIT(A) erred in deleting the disallowance of ₹ 18,97,915/- on account of discount on buy back of debentures. As part of the terms of the debenture contract, the amount returned by the assessee to the investor is less than the original amount received from the investor. Difference amount not repaid back by the assessee is in the nature of business income of the assessee as it is a benefit. 4. The appellant craves leave to add, amend, vary, omit or substitute any of the aforesaid grounds of appeal at any time before or at the time of hearing of appeal. 5. The appeal prays that the o ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ted the issue of disallowance under section 14A r.w.r. 8D(2). The Tribunal in both the aforesaid cases has held that the disallowance be restricted to exempt income earned and only dividend yielding investments be considered for computing avg. value of investments. 5. The ground No.2 raised in the appeal by the Revenue is with regard to disallowance of mark to market loss. The ld. Authorized Representative for the assessee submitted that the issue has been decided by the Tribunal in assessee s group concern M/s.Mahindra Investment Ltd. in ITA No.1502/Mum/2012 assessment year 2008-09 decided on 03/05/2013 and in assessee s own case in ITA No.6993/Mum/2013 for assessment year 2011-12 decided on 05/05/2017. While dismissing the ground raised by the Revenue, the Tribunal held that mark to market loss claimed by the assessee is allowable. 6. The ground No.3 of the appeal by Revenue is relating to disallowance on discount on buy back of debentures. The ld. Authorized Representative for the assessee placed reliance on the decision of Hon'ble Karnataka High Court in the case of CIT vs. Industrial Credit Development Syndicate Ltd. reported as 285 ITR 310(Kar) to contend that no ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... issed, accordingly. 9. The two fold contentions of the assessee before us is, that the disallowance may be restricted to exempt income earned and only investments yielding exempt income should be considered for making disallowance under section 14A of the Act. The Special Bench of the Tribunal in the case of M/s. Vireet Investment Pvt. Ltd.(supra) has held that while computing disallowance under section 14A r.w. Rule 8D(2)(iii) only those investments that yield exempt income should be considered for computing average value of investments The second contention of the assessee that disallowance under section 14A of the Act should be restricted to the extent ofexempt income earned is supported by the judgment of Hon ble Punjab Haryana High Court in the case of PCIT vs. State Bank of Patiala (supra). The SLP filed against the said judgment was dismissed by the Hon ble Apex Court. Thus, in the light of aforesaid decisions we deem it fit and proper to restore this issue to the file of Assessing Officer for the limited purpose of recomputation of disallowance under Rule 8D(2)(iii) in line with the principles laid down in the case of PCIT vs. State Bank of Patiala and ACIT vs. Vire ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... surplus as capital innature observed: 14. In the instant case, admittedly the assessee had issued debentures which are redeemable after a period of ten years at a face value thereof. Though debenture-holders sold the debentures before the stipulated period at a discounted price to the nominee of the assessee, the consideration paid to those debenture-holders was paid by the assessee as reflected in the books of account by a loan advanced to the nominee. Thereafter, on the due dates, the assessee has redeemed those debentures. For the purpose of accounting, the entire liability was shown as a liability at the price paid by the nominee of the assessee. In the balance sheet, the entire amount due under debentures was shown as a liability. After redemption, the difference in the amount was transferred to the P L a/c and it was shown as surplus. It is obviously on the ground that after redemption so much liability is saved by the assessee and actually the same has to be shown as surplus though there is no real income or profit derived. Notwithstanding the nomenclature adopted in the balance sheet to depict that amount and the place where it is shown, in reality the assessee did no ..... X X X X Extracts X X X X X X X X Extracts X X X X
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