TaxTMI 
TaxTMI 
2016 (10) TMI 983
X X X X Extracts X X X X
X X X X Extracts X X X X
....t for condoning the delay. Hence, we condone the delay and admit the appeal for hearing. First we take up Revenue's appeal in ITA No.1614/Kol/11 3. The first issue raised by the Revenue is that Ld. CIT(A) erred in deleting the addition made by Assessing Officer for Rs. 33,60,261/- as speculation loss. 4. Brief facts are that assessee is a Private Limited Company and engaged in the business activities of share/stock broker. The assessee holds the corporate Membership of National Stock Exchange. Assessee for the year under consideration has filed its returned income on 15.10.2008 declaring total business income of Rs. 1,49,40,350/-. Thereafter case was selected for scrutiny and notice u/s 143(2) r.w.s. 142(1) was issued to the assessee. The assessee during the year has claimed day trading loss of Rs. 33,60,261/- on the sale & purchase of the shares. The AO observed that the transaction for the sale & purchase of shares was settled otherwise than by actual delivery of shares. Therefore it is a speculative transaction as per the provisions of section 43(5) of the Act. However the assessee claimed it as non-speculative business transaction on the ground that aforesaid loss is arisin....
X X X X Extracts X X X X
X X X X Extracts X X X X
....to two transactions broker intends to earn only arbitrage difference between two Segment (Cash vs F & O) and or two Exchanges (BSE, NSE etc). this difference may be an outcome of delivery or without delivery on the same day or over a period of time." Being aggrieved by this order of Ld. CIT(A) Revenue is in appeal before us. 6. Before us both the parties relied on the orders of Authorities Below as favourable to them. Ld. AR filed Index which is running pages from 1 to 88 and drew our attention at pages 29 to 66 where the transactions in F & O was taken to guard the loss of the share business held by the assessee. 7. We have heard rival contentions and perused the materials available on record. From the foregoing discussion we find that the AO has treated the transaction of sale & purchase of shares in F&O market which was undertaken to safe guard the loss in his holdings of stocks and shares against price fluctuations as speculation. However we find that the existing transaction is falling within the exceptions provided in clause (c) to section 43(5) of the Act. As per the provisions of the section 43(5) of the Act the transaction is falling within the definition of speculation....
X X X X Extracts X X X X
X X X X Extracts X X X X
....he Income-tax Act, 1961 - Losses - In speculation business (Delivery and non-delivery transactions) - Whether trading of shares which is done by taking delivery does not come under purview of section 43(5); similarly, as per sub-clause (d) of section 43(5), derivative transaction in shares is also not speculation transaction as defined in section 43(5); and therefore, both profit/loss from all share delivery transactions and derivative transactions have same meaning as far as section 43(5) is concerned - Held, yes - Whether loss from share dealing should be allowed to be set off from profits from F & O in share transactions - Held, yes - Whether thus, before application of Explanation to section 73, aggregation of business profit or loss from these transactions is to be worked out irrespective of fact whether it is from share delivery transaction or derivative transactions - Held, yes [Paras 2.7.8 & 2.7.11][In favour of assessee]" The ld. AR before us submitted that all the transactions in F&O were undertaken to safeguard the losses which may arise to the shares/ securities held by the assessee due to price fluctuations. The ld. AR in support of his claim has submitted the details....
X X X X Extracts X X X X
X X X X Extracts X X X X
.....w.s 8D of the IT Rules. 15. The assessee during the year has earned dividend income of Rs. 5,68,583/- but did not disallow any expenses in relation to aforesaid exempted income. Accordingly, AO disallowed the administrative expense of Rs. 1,12,385/- under Rule 8D(iii). 16. Aggrieved, assessee preferred an appeal before Ld. CIT(A) whereas assessee submitted that AO disallowed the expense without recording his "satisfaction" which is mandatory requirement of the Sec. 14A of the Act. The assessee also submitted that the shares were held in the Demat form and dividend directly credited through ECS to the bank account of assessee. The shares were held by the assessee as stock in trade therefore the rule 8D does not apply. As such no expenditure was incurred in connection with the earning of dividend income. However the Ld. CIT(A) has confirmed the order of the AO by disallowing the expense of Rs. 1,12,385/- under Rule 8D(iii). Being aggrieved by this order of Ld. CIT(A), the assessee filed CO before us. 17. The ld. AR reiterated the submission made to the ld. CIT(A) before us. On the other hand the ld. DR vehemently supported the order of the lower authorities. 18. We have heard t....
X X X X Extracts X X X X
X X X X Extracts X X X X
....lation to the exempt dividend income earned by the assessee from shares held as stock-in-trade thus was upheld by the Tribunal in its Third Member decision rendered din the case of DH Securities Pvt. Limited and respectfully following the same, we reject the contention of the ld. counsel for the assessee that the disallowance in the case of the assessee can be restricted only to direct expenses incurred in relation to the earning of exempt dividend income by applying Rule 8D(2)(i)." We are accordingly putting our reliance in the above case and conclude that the provisions of section 14A read with rule 8D of the Act are squarely applicable even for the shares/securities held as stock in trade. In the instant case the shares were held as stock in trade but no disallowance of any expenditure was made. We also find that no submission or any calculation was made before the AO at the time of assessment showing that no expenditure was incurred in connection with the dividend income. In the absence of any information the AO has no option except to resort to the provisions of rule 8D of Income Tax Rules 1962. Accordingly the plea of the assessee with regard to the satisfaction is not tenab....
X X X X Extracts X X X X
X X X X Extracts X X X X
....ncurred for the period of membership and is not long lasting. By subscribing to the membership of a club, no capital asset is created or comes into existence. By such membership, a privilege to use facilities of a club alone, are conferred on the assessee and that too for a limited period. Such expenses are for running the business with a view to produce the benefits to the assessee. Consequently, it cannot be treated as capital asset. [Para 16]" Respectfully following the judgment of Hon'ble Punjab and Haryana in the case of Groz Beckert Asia Ltd (supra) we allow assessee's ground of CO. 21. The last issue raised by the assessee in its CO is that Ld. CIT(A) erred in confirming the order of AO by sustaining the disallowance of Rs. 1,98,500/- u/s 40(a)(ia) of the Act on account of catering charges. 22. The assessee, during the year, has incurred catering charges without deducting TDS u/s 194C of the Act. Therefore, the AO disallowed the same and added back to the total income of assessee. 23. Aggrieved, assessee preferred an appeal before Ld. CIT(A) who has confirmed the action of AO by observing as under:- "17. Explanation II to sub-section 2 of Section 194C clearly provides ....