TaxTMI 
TaxTMI 
2010 (11) TMI 851
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....al engaged in the business of dealing in shares and investment. The assessee received a tax free interest income on RBI Bonds and dividend income. According to the assessee no expenditure whatsoever was incurred in earning the aforesaid income which did not form part of the total income and, therefore, no disallowance of the expenses by invoking the provisions of section 14A should be made. The Assessing Officer however, was of the view that some expenditure would have been incurred in earning the tax free income. He estimated the same at a sum of Rs. 1.00 lac and added the aforesaid sum to the total income of the assessee. 3. On appeal by the assessee the CIT(A) following the decision of the Special Bench of the Tribunal in the case of Da....
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....index and equity stock features and options by the ICAI. The Assessing Officer however, rejected the claim of the assessee for the following reasons: "As the derivative contracts are not accounted for in the books at the inception thereof at the time of purchase, they do not and cannot form a part of stock in trade. It may be stated that derivatives are commodities as stated in Section 43(5) of Income Tax Act, and are actively dealt into, though may not be regarded as stocks. However, in case where mark to market results in a loss, the cost of acquisition being NIL, the valuation of such a contract will be a negative figure. By its very nature the value of stock in trade cannot be negative. It is therefore, very clear that derivative contr....
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...., represents the net amount paid or received on the basis of movement in the prices of Index / Stock Futures till the Balance Sheet date. Amount paid to brokers in addition to Mark-to-Market Margins is disclosed as "Margin Deposits" under Loans and Advances. (c) As on the Balance Sheet date, profit / loss on open positions in Index / Stock Futures are accounted for as follows: * Credit balance in the "Mark-to-Market Margin - Equity Index / Stock Futures Account", being anticipated profit, is ignored and no credit for the same is taken in the Profit and Loss Account. * Debit balance in the "Mark-to-Market Margin - Equity Index / Stock Futures Account", being anticipated loss, is adjusted in the Profit and Loss Account. (d) On final settl....
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....f Chainrup Sampatram vs. Commissioner of Income Tax, West Bengal (1953) 24 ITR 481 (SC), speaking through Hon'ble Justice Patanjali Sastri, the then Chief Justice of India (page 485 - 486 of the Report). At page 486 the Supreme Court further observed that "loss due to a fall in price below cost is allowed even if such loss has not been actually realized". Quoting from the case of Whimster & Co. vs. Commissioners of Inland Revenue (1926) 12 Tax Cases 813, the Supreme Court observed that the profits that are chargeable to tax are those realized in the year and that an exception is recognized where a trader purchased and still holds goods which are fallen in value in which case though no loss has been realized nor it has occurred, nevertheless....