TMI Blog2023 (2) TMI 1078X X X X Extracts X X X X X X X X Extracts X X X X ..... urred out of corpus fund cannot be claimed as deduction inasmuch as corpus itself is exempted from tax - assessee s contention is that transactions were delivery based and redemption was undertaken to protect the interest of the assessee-Trust and not for trading on commercial line - HELD THAT:- Undisputed facts of the case are, assessee had made investments in mutual funds permitted under Section 11(5) of the Act. The unit of mutual funds in which investments was made was sold in the previous year relevant to A.Y. Due to sale, assessee suffered loss this amount has been claimed as deduction. ITAT has recorded in para 21 of its Order that the facts of this case are similar to the one in Hindustan Welfare Trust Vs. Director of Income T ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... MAR AND HON BLE MR. JUSTICE T.G. SHIVASHANKARE GOWDA For the Appellant (By Shri. S. Parthasarathi, Advocate) For the Respondent (By Shri. K.V. Aravind, Standing Counsel) JUDGMENT, P.S. DINESH KUMAR J., This appeal by the assessee, directed against the order dated June 04, 2018 in ITA No. 750/Bang/2017 has been admitted to consider following questions of law: i. Whether the Appellate Tribunal is justified in disallowing the claim of the appellant on the loss of Investment when the redemption of the Investment was made solely for the purpose of protecting the funds of the trust? ii. Whether the Appellate Tribunal is justified in not appreciating the facts that even if the investments were made out of ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... al)] vide order dated December 29, 2016 has allowed the loss by holding that speculative transactions have a specific meaning under Section 43(5) of the Act and that even if the investments are made out of corpus fund, when interest is earned thereon or capital gains accrues on their transfer, the same are to be treated as income under the Act. The ITAT [Income Tax Appellate Tribunal.] has reversed the order passed by CIT (A). Hence, this Appeal. 6. Shri. S. Parthasarathi, for the Assessee submitted that: assessee had invested in units of mutual fund which is an approved investment under Section 11(5) of the Act, read with Rule 17C of the IT Rules, 1962 and the said investments do not have the character of speculative transact ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ies bond on commercial lines and not for the purpose of protecting the interest of corpus of the trust. Therefore, there is no nexus between the activities of the trust and incurring loss on account of investing in perpetual bond; though, corpus fund is exempted from tax, these are to be considered for the limit of maximum amount i.e, upto 10 lakhs which is not chargeable to income tax. 8. We have carefully considered rival contentions and perused the records. 9. In substance, the assessee s contention is that transactions were delivery based and redemption was undertaken to protect the interest of the assessee-Trust and not for trading on commercial lines. 10. Undisputed facts of the case are, assessee had made investmen ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... hat income has to be determined on the principles of commercial accountancy. There is, thus, a distinction between real profits ascertained on principles of commercial accountancy. In the case of Poona Electric Supply Co. Ltd. v. CIT Bombay City (1965) 3 SCR 818 this Court has held that income tax is on the real income. In the case of a business, the profits must be arrived at on ordinary commercial principles. The scheme of the IT Act requires the determination of real income on the basis of ordinary commercial principles of accountancy. To determine the real income , permissible expenses are required to be set off. In this behalf, we may also usefully refer to the judgment in CIT, Gujarat v. S.C. Kothari (1972) 4 SCC 402 where ..... X X X X Extracts X X X X X X X X Extracts X X X X
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