2017 (2) TMI 1483 - AT - Income Tax

Tribunal Adjusts Appeal: Speculative Losses and Computer Depreciation Allowed, Interest Deductions to be Reassessed.

Growmore Research & Assets Mgt. Ltd. Versus DCIT Central Circle 31, Mumbai.

Growmore Research & Assets Mgt. Ltd. Versus DCIT Central Circle 31, Mumbai. - TMI Issues Involved:1. Taxation of income in the hands of the appellant.2. Disallowance of loss from stock market activity.3. Disallowance of payment towards maintenance of accounts.4. Disallowance of depreciation on computers.5. Deduction on account of interest payable to brokerage firms.6. Levy of interest under Sections 234A, 234B, and 234C.Detailed Analysis:1. Taxation of Income:During the hearing, Ground No.1 was not pressed by the appellant, and therefore, it was dismissed.2. Disallowance of Loss from Stock Market Activity:The appellant was aggrieved by the disallowance of Rs. 1,95,57,742/- on account of loss from stock market activity claimed as a set-off against profit from money market activity. The Assessing Officer (AO) denied the set-off on the grounds that money market activities were considered non-speculative while share market activities were speculative. The Tribunal referenced a previous decision in the case of M/s. Growmore Leasing & Investments Ltd., where it was held that transactions in money market securities without delivery were speculative and legal. Consequently, speculative losses could be set off against speculative profits. The Tribunal found that the appellant’s money market transactions involved no delivery, only settlement of differences, making them speculative. Therefore, the disallowance was directed to be deleted, and Ground No.2 was allowed.3. Disallowance of Payment Towards Maintenance of Accounts:The appellant contested the disallowance of Rs. 2,50,000/- paid towards maintenance of accounts, claimed to be made to the ABCD Group. The lower authorities disallowed this payment as the appellant could not substantiate the rendering of services by the payee. The Tribunal upheld the disallowance due to the lack of evidence proving the payment and the rendering of services. Thus, Ground No.3 was rejected.4. Disallowance of Depreciation on Computers:The appellant challenged the disallowance of Rs. 2,25,000/- on account of depreciation on computers purchased during the year. The lower authorities had disallowed the depreciation on the grounds that the appellant could not prove the use of the computers. However, in a previous round, the CIT(A) had allowed the depreciation based on evidence of purchase and delivery. The Tribunal agreed with the initial order of the CIT(A) that there was no reason to deny the claim for depreciation, thus deleting the disallowance. Ground No.4 was allowed.5. Deduction on Account of Interest Payable to Brokerage Firms:The appellant claimed entitlement to deduction on account of interest payable to brokerage firms. The Tribunal noted that this issue had been decided in favor of the appellant in previous years (A.Ys. 2006-07 and 2007-08). The Tribunal directed the CIT(A) to re-adjudicate the matter following the previous directions, giving the appellant an opportunity to be heard. Ground No.5 was allowed for statistical purposes.6. Levy of Interest Under Sections 234A, 234B, and 234C:The appellant argued that while the levy of interest is mandatory, the computation should be accurate, accounting for TDS credits. The Tribunal acknowledged this and directed the AO to recompute the interest liability after reducing the amount of tax deductible at source, following the precedent set in the case of M/s. Harsh Estates Pvt. Ltd. Thus, Grounds No.6 and 7 were allowed for statistical purposes.Conclusion:The appeal filed by the Assessee was partly allowed, with specific directions given for re-adjudication and proper computation of interest. The order was pronounced in the open court at the conclusion of the hearing.