Tribunal partially allows appeal, orders deletion of mark-to-market loss disallowance, revisits tax deduction under section 14A.

The Tribunal partly allowed the appeal, directing the AO to delete the mark to market loss disallowance, exempting the non-deduction of tax at source due to past practices, and requiring a reassessment of the disallowance under section 14A.

---

---

Issues involved:
1. Disallowance of mark to market loss.
2. Non-deduction of tax at source on payment to Bombay Stock Exchange.
3. Disallowance under section 14A of the Income Tax Act.

Analysis of the Judgment:

Issue 1: Disallowance of mark to market loss
The assessee challenged three additions, including a mark to market loss of Rs. 18,29,87,255. The AO observed the loss but denied the deduction, stating inconsistency in the assessee's accounting. The CIT(A) confirmed the disallowance treating it as speculation loss and contingent liability. However, the Tribunal disagreed, citing precedents and the Accounting Standard AS-11. The Tribunal found the AO's observations misplaced, as the assessee had accounted for gains as well. Relying on judicial decisions, the Tribunal directed the AO to delete the addition.

Issue 2: Non-deduction of tax at source
The AO disallowed the payment made to Bombay Stock Exchange under section 40(a)(ia) for non-deduction of tax. The Tribunal noted that the issue was covered in favor of the assessee, citing a High Court decision exempting the assessee due to past practices. Considering the timeline of events, the Tribunal allowed the appeal, as the return was filed before the relevant decision.

Issue 3: Disallowance under section 14A
Regarding the disallowance under section 14A, the Tribunal found discrepancies in the AO's computation. The Tribunal directed a fresh consideration by the AO, emphasizing that investments generating taxable income should not be included in the average investment calculation. The issue was restored to the AO for proper assessment.

In conclusion, the Tribunal partly allowed the appeal, directing the AO to delete the mark to market loss disallowance, exempting the non-deduction of tax at source due to past practices, and requiring a reassessment of the disallowance under section 14A. The judgment was pronounced on 18th February 2015.

---