TaxTMI 
TaxTMI 
2016 (11) TMI 248
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....43,030/- after making certain additions/disallowances by the Assessing Officer. The CIT(A) has allowed partial relief and accordingly assessee is in appeal on the issues on which the CIT(A) did not allow relief, whereas the Revenue is in appeal challenging some of the reliefs allowed by the CIT(A). In this background we may now proceed to adjudicate respective grounds of appeal in the captioned appeals. 3. We shall first take up the appeal of the assessee . The Grounds of appeal raised by the assessee read as under:- " 1. (a) The Commissioner of Income-tax (Appeals) - XLVI, Mumbai [hereinafter referred to as the CIT(A)] erred in upholding the action of the Joint Commissioner of Income-tax, Special Range 27, Mumbai (hereinafter referred to as the JCIT) of not allowing Rs. 26,99,627 as a deduction in respect of interest paid for broken period at the time of purchase of the securities. The appellants submit that the securities were purchased by them as stock in trade and not as investments and hence the interest paid for the broken period at the time of purchase of securities should be allowed as a deduction in the year of purchase of securities. Therefor....
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....rejudice the appellants submit that the alleged excess amount paid is allowable under section 36(1 )(iii) or under section 37 or under section 28. The appellants pray that the JCIT be given suitable directions in the matter. 4. a) The CIT(A) ought to have granted relief in respect of loss on account of sale of units to bank and non-bank clients amounting to Rs. 3,20,79,500. The CIT(A) erred in directing the JCIT to rework the disallowance keeping in mind the Board's guidelines and the Supreme Court's decision in the case of BOI Finance Ltd. Vs. Custodian (12 SCL 99) and Davenport's case (100 ITR 715). The CIT(A) ought to have held that the losses arose in the ordinary course of the appellant's business, and that the transactions giving rise to the loss were neither speculative nor illegal transactions and therefore the loss should be set off against the appellant's business income. b) Without prejudice and in any event, in view of the CBDT guidelines dated 28th February, 1995 the CIT(A) ought to have directed the JCIT to reduce the loss by Rs. 7,80,000 being the profit in respect of another unit transaction. c) Without prejudi....
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....rties that the said issue is liable to be decided against the assessee in view of the decision of the Tribunal in assessee's own case for assessment year 1990-91 vide ITA No.815/Mum/96 dated 30/11/2007. A copy of the said order has also been placed on record. The Tribunal notes that assessee had paid interest in excess of the guidelines of Reserve Bank of India and, therefore, such excess payment of interest was disallowable. Since facts and circumstances in the instant year are similar, following the decision of the Tribunal dated 30/11/2007(supra), the stand of the income tax authorities is hereby upheld and accordingly, assessee fails in Ground of appeal No.3. 5. The next issue raised by the assessee in Ground of appeal No.4 relates to a disallowance of Rs. 3,20,79,500/-, which represents loss on account of sale of units to bank and non-bank clients. The details of such loss has been duly noted in the orders of the Assessing Officer as well as the CIT(A) and the same is as under:- Date of sale Sale price Nos. face value in crores Name of the party to whom sold Date of purchase Cost (Rs.) Loss on the transaction 5/7/90 6,56,26,250 5 ....
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.... receipts, which are legal transfers. Another pertinent point which was raised by the assessee was that in any event no loss has been suffered by the assessee by entering into these transactions considering that assessee had also earned dividend income on such units. In this context, a working was made before the CIT(A) to show that there was a profit of Rs. 47,00,500/- on an overall basis, which is detailed as under:- Date of sale Sale price (Rs.) Face value in crores (Rs.) Name of the party to whom sold Date of purchase Cost (Rs.) Gain/(Loss) On the transaction (Rs.) Dividend (Rs.) Net Gain (Rs.) 5/7/90 6,56,250 5 Punjab National Bank- Capital Market 21/5/90 7,35,25,000 (78,98,750) 90,00,000 11,01,250 20/7/90 13,19,02,500 10 Bank of Madura 21/5/90 5,15,10,000 (1,63,47,000) 90,00,000 16,53,000 31/5/90 9,67,39,500 90,00,000 20/7/90 6,61,76,250 5 UCO Bank 21/5/90 7,38,00,000 (76,23,750) 90,00,000 3,76,250 23/11/90 4,17,00,000 3 HSBC Ltd. 1/1....
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....ment order, and did not controvert the fact-situation. 5.4 With respect to the aforesaid preliminary point raised by the assessee, we find that before the Assessing Officer assessee furnished a reply dated 15/02/1994, which has been reproduced in the assessment order, and the relevant contents read as under:- " Trading in Units, Government Securities and Bonds has been a part of the normal business activity of the Bank. The surplus funds available have to be put to optimum use having regard to risk and returns. As regards the transaction in Units you will observe that physical deliveries have been taken or given as the case may be. Where it was convenient Units purchased from a party may have been sold to the same party instead of trying to locate a buyer in the market which may entail additional cost and administrative hassels. As the transactions have been conducted at the proximate market values, the position shown in the books represents the correct picture about the profit or loss incurred on the transactions. The transactions having been carried out in the normal course of business and at arms length the loss incurred is properly allowable as normal business loss.....
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....annot be construed to be 'buy-back transactions' because in all the cases the dates of sale are much after the date of respective purchases and further these have been effected through physical /bank receipts, as asserted by the assessee, consistently before the lower authorities. Under these circumstances, in our view, the points raised by the Assessing Officer regarding the illegality in nature of transactions became irrelevant because the entire edifice of the Assessing Officer is based on a misconception that the instant transaction is buy-back in securities. Therefore, on this preliminary issue itself, we do not find any merit to uphold the orders of the authorities below. Consequently, the order of the CIT(A) is set aside and the Assessing Officer is directed to delete the addition. As a consequence, on this issue assessee succeeds. 6. The last ground in the appeal of the assessee relates to expenditure of Rs. 39,07,409/- incurred on mobilization of deposits abroad. The Assessing Officer as well as the CIT(A) have disallowed the said expenditure following their stand for the earlier assessment years. 6.1 Before us, it was a common point between the parties that in asses....
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....enditure not being debited in the books of accounts of India operations is concerned, this is not really relevant in the light of law laid down by the Hon'ble Supreme Court in the case of Kedarnath Jute Mills Limited (82 ITR 363). As long as the expenditure is really incurred and is otherwise deductible, the deduction cannot be declined on the ground that it has not been debited in the books of accounts. We have also noted that as noted in the Assessing Officer's order itself, the requisite details were duly furnished by the assessee. Keeping all these factors in mind, as also entirety of the case, we deem it fit and proper to delete the impugned disallowance of Rs. 86,75,197...... The assessee gets relief accordingly." Following the aforesaid precedent, the claim of the assessee is allowed and accordingly assessee succeeds in Ground No.5 7. In the result, appeal of the assessee is partly allowed as above. 8. Now, we may take up the Revenue's appeal in ITA No.4077/Mum/99. In this appeal, Revenue has raised the following Grounds of appeal:- "1) On the facts and circumstances of the case and in law the C.I.T(A) has erred in accepting the claim of the assessee th....
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.... para- 3 of the impugned order. Accordingly, the CIT(A) sustained the action of the Assessing Officer. An alternate issue was raised arising out of the action of the Assessing Officer in not allowing deduction of Rs. 15,26,376/-, being the interest paid for the broken period in respect of securities purchased in the previous year relevant to the assessment year 1990-91, which were sold during the previous year relevant to the assessment year under consideration. On this aspect, assessee pointed to the CIT(A) that in assessment year 1990-91 the CIT(A) allowed relief to the assessee and that in case such favourable order of the CIT(A) be reversed, then such amount should be allowed as deduction in the instant assessment year. The CIT(A) upheld the plea of the assessee and held that " that should be the favourable order of the CIT(A) for the assessment year 1990-91 be reversed in subsequent proceedings, then this amount should be allowed as a deduction in the assessment year 1991-92". Against such direction of the CIT(A), Revenue is in appeal before us. 10. At the time of hearing, it was a common point between the parties that the order of the CIT(A) for assessment year 1990-91 has....