TaxTMI 
TaxTMI 
2017 (10) TMI 239
X X X X Extracts X X X X
X X X X Extracts X X X X
..... The facts relating to the issues under consideration are discussed hereunder with reference to A.Y 2010-11. ITA No.4914/Mum/2016 2. The grounds of appeal taken by the assessee are as under : "1) On the facts and circumstances of the case as well as in Law, the Learned CIT(A) has erred in confirming the action of Learned Assessing in disallowing the further expenses of Rs. 16,65,8031 - u/s.14A of the Income Tax Act, 1961 by invoking the rule 80, without considering the facts and circumstances of the case. 2) On the facts and circumstances of the case as well as in Law, the Learned CIT(A) has erred in confirming the action of Learned Assessing in disallowing the claim of Bad Debts, without considering the facts and circumstances of the case. 3) On the fact and circumstances of the case as well as in Law, the Learned CIT(A) has erred in confirming the action of Learned Assessing Officer in disallowing Research and processing fees of Rs. 11,75,000/- without considering the fact and circumstances of the case." 3. The issue raised in the first grounds of appeal is against the confirmation of disallowance of Rs. 16,65,803/- u/s 14A of the Income Tax A....
X X X X Extracts X X X X
X X X X Extracts X X X X
.... disallowance computed at Rs. 3,64,098/-_ Therefore it is categorically held that in this case the Assessing Officer was correct in applying Rule 80 la compute the disallowance under 8.14A. The appellant has raised a contention that it has enough own funds and when the investments made arc much less that the own funds available, it can be deducted that the investment are made out of own funds. This is too facile an explanation to be accepted. In matters with regard to a fiscal statute there can be no assumptions/presumptions nor can anything be left to be deduced from. It is the statutory obligation of a tax payer to prove the contentions as raised by him. The appellant has not made any effort to establish that it had enough own free funds available to make the investments. It is one thing to have enough own funds and another thing to have enough own free funds available. As per the Balance Sheet as at 31.3.2010. the appellant has a share capital of Rs. 3.26 Crores and Reserve and surplus of Rs. 1.84 crores. But then it is common knowledge that the shareholders Funds have been deployed as fixed assets and otherwise. Hence, what is to be established is what is the quantum of own fre....
X X X X Extracts X X X X
X X X X Extracts X X X X
....onditions of section 36(1)(vii) r.w.s.36(2) of the Act. The assessee submitted before the AO that this amount has been written off as the same pertains to clients the receipts from whom stand offered as income in the past and the money which could not be recovered was charged as per the provisions of the Act. However, the reply of the assessee did not find favour with the AO and he disallowed the same by observing that the assessee has failed to satisfy the conditions as laid down in section 36(1)((vii) read with section 36(2). 4.2.In the appellate proceedings, the ld. CIT(A) after taking into account the contentions and submissions of the assessee partly allowed the appeal by observing and holding as under vide para 6.3: "6.3 I have carefully examined the matter. After the amendment to section 36(1)(vii), the act of writing off a debt as irrecoverable in the accounts is deemed to be discharging the onus of the assessee in holding a debt as bad debt. Furher, in the instant case, the appellant is in the business of share broking. In the case of Shri Vinod Kumar Shastri of Rs. 21,69,307/- and Bharat Kumart Vacchani of Rs. 24,36,361/- the details as furnished show that all....
X X X X Extracts X X X X
X X X X Extracts X X X X
....,75,000/- by the CIT(A) by upholding the order of AO on this issue. 5.1. Facts of the issue in brief are that the AO noticed that the assessee has debited to profit and loss account an amount of Rs. 11,75,000/- towards Research and processing fees. Accordingly, the AO issued notice to the assessee as to why the same should not be disallowed. In response, the assessee submitted that the main object of the assessee was to provide of business centers, housekeeping and infrastructural facilities, project consultancy and management services and also prove services in research development and marketing, manpower and conferencing internet facilities, develop e-commerce and electronics facilities and establish centres for providing facilities in software, hardware and web designing and also charging remuneration of the employees. However, the reply of the assessee did not find favour with the AO and accordingly, added the same to the total income of the assessee on the ground that the assessee failed to prove the genuineness of the claim and to failed to prove the wholly and exclusivity u/s 37(1). 5.2.In the appellate proceedings, the ld.CIT(A) confirmed the action of the AO by obser....
X X X X Extracts X X X X
X X X X Extracts X X X X
....AY-2009-10 and the revenue has not challenged the decision of ld.CIT(A) before the Tribunal. Therefore, revenue's plea cannot be raised at this juncture to rake up the same issue in the subsequent issue as the issue has been settled in the previous year. Moreover, even on merits the case of the assessee is very strong case as the payment is made to the same party viz M/s Key tone Corporate Solutions P. Ltd for providing data analysis and research on the stock market as well as commodity market. In view of the said facts and circumstances, we are inclined to direct the AO to delete the addition by reversing the findings of the ld. CIT(A).The appeal is allowed on this ground. ITA NO.4977/Mum/2014 6. Grounds of appeal raised by the revenue are as under : "1) Whether on the facts and circumstances of the case and in Law, the Learned CIT(A) has erred in deleting the disallowance of claim of bad debts of Rs. 59,84,843 made by the AO. 2) Whether on the facts and circumstances of the case and in Law, the Learned CIT(A) has erred in deleting the disallowance of claim of repairs and maintenance expenses of Rs. 23,83,275/- 7. The ground raised by the revenue in the ....
X X X X Extracts X X X X
X X X X Extracts X X X X
....office premises and therefore the same cannot be treated as capital in nature. We are, therefore, in complete agreement with the ld.CIT(A) that the said expenses are admissible as revenue expenditure. Accordingly we uphold the order of CIT(A) dismissing the ground raised by the revenue. ITA No.4564/Mum/2014 9. Only ground raised by the assessee in this appeal is as under : 1) On the facts and circumstances of the case as well as in Law, the Learned CIT(A) has erred in confirming the addition of Rs. 29,77,239/- made by the AO by wrongly interpreting and applying the provisions of section 14A of the IT Act, 1961 r.w.rule 8D of the Income Tax Rules, 1962 while ignoring he submissions of the AR.:" 10. The facts of this issue are identical to that of ITA No. No.4914/Mum/2016, which we have decided in para 3 and 4 of this order above in favour of the assessee. Therefore, to maintain the consistency with our findings, we follow the same and direct the AO to delete the addition of Rs. 29,77,239/-. Accordingly this ground is allowed. ITA No.3672/Mum/2014 11. The grounds of appeal taken by the revenue are as under : 1. "Whether on the facts and in the circums....
X X X X Extracts X X X X
X X X X Extracts X X X X
....osition wherein-it is clear that explanation to sec. 73 is to be applied ignoring the definition of speculation profit / loss u /s 43(5) of the Act defining a speculative transaction.. on all the transactions by way of purchase and sale of shares of other companies. In view of the same one cannot apply the deeming provisions of explanation to sec. 73 only to the trading in delivery based share transaction as they are not included in speculative transaction u/ s. 43(5) of the Act and exclude F&O transactions which. are although non- delivery based and covered u/ s. 43(5) of the Act but specifically excluded as an exception to section 43(5) of the Act by way of a proviso (d) w.e.f as 1.4.2006 as such transaction are also by way of purchase and sale of shares of other companies within the definition of the Securities Contracts (Regulation) Act, 1956 and are carried out at recognized stock exchanges only. 12.2. However, the reply of the assessee did not find favour with the AO and He rejected the contentions of assessee regarding said loss of Rs. 77,49,222/- by treating the same as speculation loss under explanation (1) to section 73 of the Act thereby rejecting the setting off clai....
X X X X Extracts X X X X
X X X X Extracts X X X X
....stors, who overtook Microsoft Maestro in 2008 to become the richest man in the world and who is known as the 'Sage of Omaha or Oracle of Omaha'. Derivatives, according to him, can push companies on to a spiral that can lead to a corporate melt down....‖ The High Court then, after examining the nature and characteristics of derivatives transactions, observed that: ―5. What are these 'derivatives' which have gained such a great deal of notoriety? In simple terms, derivatives are financial instruments whose values depend on the value of other underlying financial instruments. The International Accounting Standard (IAS) 39, defines "derivatives" as follows: A derivative is a financial instrument: (a) whose value changes in response to the change in a specified interest rate, security price, commodity price, foreign exchange rate, index of prices or rates, a credit rating or credit index, or similar variable (sometimes called the 'underlying'); (b) that requires no initial net investment or little initial net investment relative to other types of contracts that have a similar response to changes in market conditions....
X X X X Extracts X X X X
X X X X Extracts X X X X
....definition section, namely, unless there is anything repugnant in the subject or context. In view of this qualification, the court has not only to look at the words but also to look at the context, the collocation and the object of such words relating to such matter and interpret the meaning intended to be conveyed by the use of the words under the circumstances.‖ Similarly, in N.K. Jain and Ors. v C.K. Shah and Ors. AIR 1991 SC 1289, it was held that: ―4. The subject matter and the context in which a particular word is used are of great importance and it is axiomatic that the object underlying the Act must always be kept in view in construing the context in which a particular word is used...........‖ 11. The stated objective of Section 73- apparent from the tenor of its language is to deny speculative businesses the benefit of carry forward of losses. Explanation to Section 73 (4) has been enacted to clarify beyond any shadow of doubt that share business of certain types or classes of companies are deemed to be speculative. That in another part of the statute, which deals with ITA 94/2013 Page 12 computation of business income, derivatives are e....