2015 (11) TMI 484 - AT - Income Tax

ITAT Delhi: Ruling on Business Loss, Expenses, and TDS Dispute

The Appellate Tribunal ITAT DELHI dismissed the Revenue's appeals regarding the disallowance of business loss on the sale of securities and the reduction ... Loss claimed as business loss - whether the provisions of section 94(7) are applicable in respect of loss claimed by the assessee? - CIT(A) allowed the claim - Held that:- In the instant case, the assessee has purchased units of SBI Mutual Fund on 27.12.2004 and the same were sold on 29.03.2005. The record date of dividend in the case of SBI Mutual fund for the relevant year was 28.03.2005. Based on these dates, the ld. AR submitted a chart of calculation of no. of days of purchase of securities from the record date of dividend, according to which, the purchase of securities is 91 days before the record date of dividend. The Sr DR has also not disputed this calculation. In background of these facts, it is evident that units have been purchased 91 days before the record date of dividend. As the units have been acquired by the assessee beyond a period the three months from the record date, the condition (a) of section 94(7) of the Act is not fulfilled. For disallowance of loss u/s 94(7) of the Act, all the three conditions have to be fulfilled simultaneously. As all the three conditions of section 94(7) are not fulfilled, we hold that loss of sale of securities to the extent of dividend income cannot be disallowed or ignored invoking provisions of section 94(7) of the Act in the case of the assessee. Same view has also been upheld in the case of CIT Vs. Alka Bhosle [2010 (6) TMI 16 - BOMBAY HIGH COURT]. There is no error in the findings of the CIT(A) on this issue. - Decided against revenue. Disallowance of expenses u/s 14A - CIT(A) deleted part disallowance - Held that:- The disallowance upheld by the ld. CIT(A) is justified in view of the nominal expenses incurred by the assessee towards earning of interest from tax free bond and other exempted income. Therefore, no interference is required in the findings of the CIT(A) on this issue. The ground of the Revenue is accordingly dismissed. Difference in tax deducted and interest recorded in the TDS certificate - Held that:- As it is a matter of verification of the TDS certificate and if TDS has been deducted in excess by a particular deductor and the same has been deposited in the Government Account, the assessee cannot be faulted for that. In view of the above, we remit this matter back to the file of ld.AO and direct him to verify the facts of tax deducted and interest recorded in the TDS certificate. The ld. AO may also verify the TDS and corresponding interest income from the records of the Income-tax Department. If he finds that the submission of the assessee is correct, the assessee may be allowed relief accordingly. - Decided in favour of assessee for statistical purposes. Issues Involved:- Disallowance of business loss on the sale of securities- Disallowance of expenses under section 14A of the Income Tax Act, 1961- Disallowance of business expenditure linked to tax-free interest income- Disallowance of interest expenses- Increase in interest income of the assesseeAnalysis:1. Disallowance of Business Loss on the Sale of Securities:- The Revenue challenged the allowance of business loss on the sale of securities by the Commissioner of Income-tax (Appeals). The Revenue invoked section 94(7) of the Income Tax Act, 1961, to disallow the loss. However, the Appellate Tribunal held that all three conditions of section 94(7) must be met simultaneously for the loss to be disallowed. As the conditions were not fulfilled in this case, the Tribunal dismissed the Revenue's ground and upheld the Commissioner's decision.2. Disallowance of Expenses under Section 14A:- The Revenue contested the reduction of disallowance of expenses under section 14A by the Commissioner of Income-tax (Appeals). The Tribunal found that the disallowance upheld by the Commissioner was justified due to the minimal expenses incurred by the assessee in earning interest from tax-free bonds. Consequently, the Tribunal dismissed the Revenue's challenge on this issue.3. Disallowance of Business Expenditure Linked to Tax-Free Interest Income:- The assessee disputed the disallowance of business expenditure linked to tax-free interest income by the Assessing Officer. The Tribunal directed the Assessing Officer to verify the TDS certificate issued by a specific entity and to confirm the facts of tax deducted and interest recorded in the certificate. If the excess TDS deduction is verified, the Tribunal instructed the Assessing Officer to allow relief to the assessee accordingly. Therefore, this ground of the assessee was allowed for statistical purposes.4. Disallowance of Interest Expenses and Increase in Interest Income:- The Assessing Officer disallowed interest expenses and increased the interest income of the assessee. However, the Tribunal did not provide specific details on the resolution of these issues in the provided text.In conclusion, the Appellate Tribunal ITAT DELHI dismissed the Revenue's appeals regarding the disallowance of business loss on the sale of securities and the reduction of expenses under section 14A. The Tribunal partially allowed the assessee's appeal related to the disallowance of business expenditure linked to tax-free interest income. The Tribunal also directed the Assessing Officer to verify the TDS certificate in the matter of interest income, providing relief to the assessee if the excess TDS deduction is confirmed.