TaxTMI 
TaxTMI 
2016 (12) TMI 1078
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....tion loss by the ld AO in the assessment and accordingly proceeded to disallow the expenditure to the tune of Rs. 19,75,939/- being 10% of total expenses as attributable to speculation business of the assessee. Later the ld AO had by way of an order u/s 154 of the Act had allowed the claim of the assessee as a regular business loss in respect of the loss on sale and purchase of shares. The assessee before the ld CITA brought this fact to the notice of the ld CITA vide written submission that since the loss had been treated as regular business loss by the ld AO , the relevant expenditure of Rs. 19,75,939/- becomes an allowable expenditure. The assessee stated that in view of the order of the ld AO u/s 154 of the Act , the grounds raised before the ld CITA with regard to the treatment of loss as speculation loss is not pressed. But the ld CITA dismissed the entire grounds in this regard as not pressed without appreciating the contentions of the assessee. Aggrieved, the assessee is in appeal before us on the following ground:- "1. That the Ld. CIT(A) erred in dismissing Ground no. 3 of the appeal before him relating to unjustified allocation of a sum of Rs. 19,75,939/- toward....
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.... incurred long term capital loss of Rs. 41,07,607/- on sale of equity shares of private limited companies on which obviously securities transaction tax could not be incurred. The ld AO observed that the assessee had taxable long term capital gains amounting to Rs. 4,92,598/- on which tax is payable at 20%. The ld AO observed that the long term capital loss had occurred to the assessee due to trading of shares made with interested persons by the assessee with a malign intention to accommodate the interested person. Accordingly he concluded that the loss claimed amounting to Rs. 41,07,607/- on the unquoted shares amongst group associates are not genuine losses but mere accommodation loss and accordingly disallowed the same. Hence he levied tax on the Long Term Capital Gain of Rs. 4,92,598/- at the rate of 20% in the assessment. 3.2. Before the ld CITA, the assessee submitted that the ld AO had alleged that the assessee failed to furnish the break up value of shares of M/s Herbicure (P) Ltd and M/s Modipan Ldd and on the basis of such allegation , the loss claimed thereon was disallowed. It was claimed that the allegation was incorrect in as much as the assessee had submitted the b....
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....rnish the break up value of the said shares. It was explained further that since the shares of Modipan Ltd were quoted at BSE and therefore the market price of the share is available all the time, the ld AO was not justified in asking for the break up value of these shares. 3.2.3. The ld CITA observed that the assessee had declared long term capital gain of Rs. 53,11,993/- and claimed the same as exempt u/s 10(38) of the Act and accordingly the long term capital loss needs to be adjusted with long term capital gain and only balance loss should be allowed to be carried forward to subsequent years. He held that since the long term capital loss is Rs. 41,0,7607/- and after setting off the same with long term capital gain of Rs. 53,11,993/- as stated supra, there would be no loss left with the assessee for carrying it forward and hence he dismissed the ground of appeal raised by the assessee. Aggrieved, the assessee is in appeal before us on the following grounds:- "2. The Ld. CIT(A) erred in holding that the loss of Rs. 41,07,607/- incurred by the Appellant Company on sale of its long term investment in equity shares of private limited companies and not subjected to Securi....
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.... not suffered, could not be set off against long term capital gains on sale of quoted shares on which STT was suffered. We hold that the long term capital gains on sale of shares of quoted shares on which STT was suffered would be eligible for exemption u/s 10(38) of the Act. We find from the details available on record, that the assessee had sold the shares of unquoted share (i.e Herbicure P Ltd) at Rs. 8.65 per share which is much more than the break up value per share of the said company (based on its balance sheet) of Rs. 1.09 per share. We find that the assessee had incurred long term capital loss thereon and short term capital gains thereon in respect of two lots of shares sold by it depending upon the period of holding. We find that the revenue having accepted the said sale price per share in the event of deriving gains ought not to have disputed the same in the event of incurring losses as stated supra. With regard to Modipan Ltd, we find that the shares of the said company are listed in BSE and the prevailing market price was Rs. 13.75 per share and the assessee had sold the share on off market basis at Rs. 14 per share . Accordingly, we hold that the long term capital los....
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....y of bank statements with one to one correlation thereon. It was stated that whenever the assessee received payments from Religare Securities Ltd, the same was immediately refunded back to Religare Finvest Ltd . The profits and losses arising from business transactions with Religare Securities Ltd have been treated and taxed as business income / loss of the assessee. Hence it was submitted that none of the borrowings from Religare Finvest Ltd were ever used for advancing interest free loans / advances to any of the sister concerns of the assessee or any other concern whatsoever. Hence the assessee prayed for allowability of interest paid to Religare Finvest Ltd in the sum of Rs. 54,08,574/- in full as held for the purpose of business. 4.3. Similarly the second account was used for financing business transactions with India Bulls Securities Ltd. All cheques received from India Bulls Financial Services Ltd were deposited in the said bank account and immediately thereafter the amounts were given to M/s India Bulls Securities Ltd for assessee's business transactions relating to business of derivatives and dealing in securities. The assessee explained its contentions through its copy....
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....ssions made before the lower authorities and impressed upon the bench by referring to relevant pages of the paper book vide pages 40 to 92 containing the bank statements of HDFC Bank vide A/c Nos. 05982030000542 and 05982030000034 for the period 1.4.2008 to 31.3.2009 , Ledger account of India Bulls Financial Services Ltd & India Bulls Securities Ltd and Ledger account of Religare Finvest Ltd & Religare Securities Ltd to link the one to one correlation of receipts and payments thereon. He accordingly argued that this aspect of the matter had not been properly examined by the lower authorities and fairly stated that the same be examined by the ld AO for better appreciation of facts. In response to this, the ld DR vehemently relied on the orders of the lower authorities. 4.7. We have heard the rival submissions and perused the materials available on record including the relevant pages of the paper book of the assessee filed in this regard. We find that the details in the paper book vide pages 40 to 92 were not properly examined by the ld AO. Hence in the facts and circumstances of the case, we deem it fit and appropriate in the interest of justice and fair play , to set aside this ....
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....re Finvest Ltd and India Bulls Financial Services Ltd on which interest was paid by the assessee were used for other than investment in shares (i.e investment activity) as the same were used only for business activities and in view of the availability of adequate own funds with the assessee company, no disallowance u/s 14A of the Act read with Rule 8D of the Rules would operate in the instant case. In response to this, the ld DR vehemently relied on the orders of the lower authorities. 5.3. We have heard the rival submissions and perused the materials available on record. We had already set aside the issue to the file of the ld AO to verify whether the borrowed funds from Religare Finvest Ltd and India Bulls Financial Services Ltd on which interest was paid by the assessee to verify the utilization of the said loans by the assessee in earlier Ground No. 4. The ld AO should also verify the availability of own funds with the assessee company and consider the same while deciding the aspect of disallowance u/s 14A of the Act, if any, in the facts and circumstances of the case. Hence we deem it fit and appropriate to set aside this issue also to the file of the ld AO to decide the sa....