TMI Blog2020 (6) TMI 535X X X X Extracts X X X X X X X X Extracts X X X X ..... ncome as per law. Disallowance of apportioning of expenditure on loss from derivatives, we find that the ld. AO had apportioned the employee cost and administration expenses in proportion of the loss of derivatives to the total receipts and arrived at the figure as part of speculation loss. Loss incurred on derivative transactions is not speculative loss and rather need to be treated as regular business loss, we direct the ld. AO to delete the disallowance towards apportionment of expenditure. Accordingly, the ground No. I raised by the assessee is allowed. Disallowance of expenditure u/s.14A - HELD THAT:- From the perusal of the various documentary evidences placed on record, we hold that the interest payment was paid by the assessee company as per the directions of the Maharashtra State Consumer Disputes Reddressal Commission for delayed delivery of flat to one of the buyers and the said payment of interest has got absolutely nothing to do with the investment activity carried out by the assessee. Hence, there cannot be any proportionate disallowance of interest in terms of second limb of Rule 8D(2) of the rules.Disallowance of interest in the sum in Rule 8D(2)(ii) is h ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... he business of developing real estate, leasing of different properties and trading in derivatives. During the year under consideration, the assessee company suffered loss of ₹ 63,47,155/- on derivative transactions which was set off by the assessee against other business income earned by it. The said derivative transaction loss was treated by the ld. AO as speculative loss by applying the provisions of Explanation to Section 73 of the Act. The ld. AO accordingly, disallowed the said loss of ₹ 63,47,155/- by treating the same as speculative loss to be set off only against speculative income and not against regular business income earned by the assessee. The ld. AO further disallowed ₹ 16,55,463/- by apportioning the expenditure attributable to the derivative transactions as speculative in nature. This action was upheld by the ld. CIT(A) in first appeal. 2.2. Aggrieved, the assessee is in appeal before us on the following grounds:- I. Disallowance of loss in F O transactions: 1) The Commissioner (Appeals) erred in holding that the loss of ₹ 63,47,155/- incurred on F O Derivative transactions was speculative loss and consequentially erred in dis ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e of the assessee company. This clinching fact and evidence, which remains undisputed by the revenue before us, goes to prove that the assessee s gross total income mainly consists of income from house property, capital gains and other sources and accordingly, the case of the assessee squarely falls in the first exception provided in Explanation to Section 73 of the Act. For the sake of convenience, the relevant provisions of Section 73 of the Act are reproduced below: Losses in speculation business. 73. (1) Any loss, computed in respect of a speculation business carried on by the assessee, shall not be set off except against profits and gains, if any, of another speculation business. (2) Where for any assessment year any loss computed in respect of a speculation business has not been wholly set off under sub-section (1), so much of the loss as is not so set off or the whole loss where the assessee had no income from any other speculation business, shall, subject to the other provisions of this Chapter, be carried forward to the following assessment year, and- (i) it shall be set off against the profits and gains, if any, of any speculation business carried ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... wherein it had been categorically affirmed that the said Director Mr. Ghansham Hemdev had appeared in person before the ld. AO on various occasions and had filed the following documents on 15/01/2013, 24/01/2014, 29/01/2014 and 05/02/2014:- a) All contract files for F O derivative transactions b) Copies of Demat accounts of all the brokers namely India Infoline Ltd., Enam Securities Ltd., and Kotak Securities Ltd., c) Global statements / confirmations of all the brokers 2.7. The aforesaid affidavit dated 27/01/2016 also contain the affirmation of the Director Mr. Ghansham Hemdev that he had even appeared before the ld. CIT(A) alongwith his Advocate and had explained the entire manner of incurrence of the loss on derivative transactions carried out by him and had also filed the following documents before the ld. CIT(A) on 22/07/2015:- a) Global statement of F O derivative transactions carried out by the assessee company with M/s. Kotak Securities Ltd., b) Profit and loss account and relevant schedules thereto for the year end 31/03/2010 to show that assessee company had earned profit from derivative transactions of ₹ 20,25,089/- in A.Y.2010-11 and paid ta ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... d. CIT(A) to come to a conclusion that the transactions in F O carried out by the assessee as not genuine. We hold that this conclusion of the ld. CIT(A) is contrary to the facts and evidences on record. 2.10. We also find that the provisions of Section 43(5) define the expression speculation transaction . There is no dispute that the derivative transaction carried out by the assessee were carried out in recognised stock exchange through a registered stock broker registered with SEBI. As per Section 43(5) of the Act Speculative transaction is defined to mean a transaction in which the contract for the purchase or sale of any commodity, including the stocks and shares is periodically or ultimately settled otherwise than by the actual delivery or transfer of the commodity or scrip. Clause (d) of proviso to Section 43(5) provides that for the purpose of Section 43(5) of the Act, eligible transaction in respect of any trading in derivatives referred to in Section 2(ac) of the Securities Contracts (Regulation) Act, 1956 carried out in recognised stock exchange shall not be deemed to be a speculative transaction. It is not in dispute that the derivative transaction carried out ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ad claimed interest expenses of ₹ 5,31,274/- as deduction but on the other hand also had lot of liquid assets in the form of mutual funds to the tune of ₹ 4,19,87,830/-. The ld. AO observed that no prudent person will hold liquid assets of ₹ 4.20 Crores and pay interest of ₹ 5,31,274/- on the borrowings. The ld. AO presumed that borrowed funds were utilised for making investment in mutual funds and shares. The ld. AO proceeded to make disallowance u/s.14A of the Act by applying second and third limb of Rule 8D(2) of the rules and arrived at the disallowance of ₹ 4,28,713/- in the assessment. This disallowance was upheld by the ld. CIT(A). 3.2. We find that the ld. AR had submitted that in the instant case, there were no borrowings made by the assessee in order to make payment of interest thereon. The total interest of ₹ 5,31,274/- was paid for delayed delivery of flat to buyer. He submitted that the assessee company in the course of business of developing real estate had constructed a building at Navi Mumbai and sold certain flats and shops, out of which one premises was sold to Mr. Sushil Mahesh alias Maheshwari, Proprietor of M/s. S.R.S. ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ssion of additional evidence. We find that the ld. DR before us merely relied on the order of the ld. AO with regard to this disallowance u/s.14A of the Act. In these circumstances, we deem it fit not to remand this matter to the file of the lower authorities as all the evidences were already placed on record before the ld. CIT(A) and accordingly, proceed to adjudicate the same on merits at our level. From the perusal of the various documentary evidences placed on record, we hold that the interest payment of ₹ 5,31,274/- was paid by the assessee company as per the directions of the Maharashtra State Consumer Disputes Reddressal Commission for delayed delivery of flat to one of the buyers and the said payment of interest has got absolutely nothing to do with the investment activity carried out by the assessee. Hence, there cannot be any proportionate disallowance of interest in terms of second limb of Rule 8D(2) of the rules. Accordingly, the disallowance of interest in the sum of ₹ 2,42,158/- in Rule 8D(2)(ii) is hereby directed to be deleted. 3.3. With regard to disallowance of administrative expenses under third limb of Rule 8D(2) of the Rules, the ld. AR was not a ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... n the ground of exceptional and extraordinary circumstances of the case, the Bench shall fix a future day for pronouncement of the order, and such date shall not ordinarily (emphasis supplied by us now) be a day beyond a further period of 30 days and due notice of the day so fixed shall be given on the notice board. 8. Quite clearly, ordinarily the order on an appeal should be pronounced by the bench within no more than 90 days from the date of concluding the hearing. It is, however, important to note that the expression ordinarily has been used in the said rule itself. This rule was inserted as a result of directions of Hon ble jurisdictional High Court in the case of Shivsagar Veg Restaurant Vs ACIT [(2009) 317 ITR 433 (Bom)] wherein Their Lordships had, inter alia, directed that We, therefore, direct the President of the Appellate Tribunal to frame and lay down the guidelines in the similar lines as are laid down by the Apex Court in the case of Anil Rai (supra) and to issue appropriate administrative directions to all the benches of the Tribunal in that behalf. We hope and trust that suitable guidelines shall be framed and issued by the President of the Appellate Trib ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... me-bound by this Court, the period for which the order dated 26th March 2020 continues to operate shall be added and time shall stand extended accordingly , and also observed that arrangement continued by an order dated 26th March 2020 till 30th April 2020 shall continue further till 15th June 2020 . It has been an unprecedented situation not only in India but all over the world. Government of India has, vide notification dated 19th February 2020, taken the stand that, the coronavirus should be considered a case of natural calamity and FMC (i.e. force majeure clause) maybe invoked, wherever considered appropriate, following the due procedure . The term force majeure has been defined in Black s Law Dictionary, as an event or effect that can be neither anticipated nor controlled When such is the position, and it is officially so notified by the Government of India and the Covid-19 epidemic has been notified as a disaster under the National Disaster Management Act, 2005, and also in the light of the discussions above, the period during which lockdown was in force can be anything but an ordinary period. 10.In the light of the above discussions, we are of the considered vi ..... X X X X Extracts X X X X X X X X Extracts X X X X
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