AI Drafter 
TaxTMI 
TaxTMI 
2018 (9) TMI 948
X X X X Extracts X X X X
X X X X Extracts X X X X
....he learned Assessing officer has erred in making and the learned CIT(A) has erred in confirming disallowance under section. 14A read with section Rule 8D at Rs. 73,56,506/- as against Rs. 28,13,275/- computed by the Appellant." 3. Brief facts relating to this issue are that the assessee has earned dividend income of Rs. 1,58,90,854/- and long term capital gain of Rs. 1,62,42,661/- and claimed the same as exempt under section 10(38) of the Act. The AO noticed that the assessee has earned dividend income and also made investment in equity and mutual funds, not being stock-in-trade, amounting to Rs. 71.45 crores as on 31-03-2009 and Rs. 20.73 crores as on 31-03-2010. According to AO, the assessee has suo moto disallowed a sum of Rs. 28,13,275/- as expenditure incurred in earning this exempt income. According to AO, the working of such disallowance clearly reveals that the disallowance is not reasonable and he computed the disallowance under Rule 8D(2)(i) at Rs. 2,63,432/-, under Rule 8D(2)(ii) at Rs. 49,68,448/- and under Rule 8D(2)(iii) at Rs. 23,04,626/-. Accordingly, the AO computed the disallowance at Rs. 1,75,36,506/- and after allowing the sum already disallowed by assessee a....
X X X X Extracts X X X X
X X X X Extracts X X X X
....ew our attention to Para 9 of the Tribunals order, wherein complete details of assessee's interest expenditure and investment is dealt with and the same reads as under: - "9. By the impugned order, CIT(A) directed the AO to recompute the disallowance of interest by taking interest of Rs. 57,57,409/- instead of Rs. 8,58,89,421/- after having the following observation:- ―During the course of appellate proceedings before me the appellant has filed the details of own funds and borrowed funds bearing interest burden and work out the interest attributable to earning of exempt income and taxable income as under:- 1. Own funds. share capital and reserves 149 cr interest free loan from directors 5 cr 154cr 2. Secured loans pre-shipment export credit 32 -post- shipment export credit 104 136cr 3. Investments 71.45cr 4. Interest expenditure Interest attributable to exempt income 0.57 interest attributable to taxable income 8.01 8.58cr As seen from the above, no doubt the appellant is having enough interest free funds when compared to the investments. It has also got borrowed funds but the same were ....
X X X X Extracts X X X X
X X X X Extracts X X X X
....On the other hand, the learned Sr. DR heavily relied on the assessment order of CIT(A). 7. We have heard the rival contentions and gone through the facts and circumstances of the case. We have compared the investments earlier to this year and find in the immediate preceding year i.e. as on 31-03-2009 investment to the tune of Rs. 71,45,14,402/-, which ultimately reduced in this year to Rs. 20,73,35,924/-. Accordingly we presume that no interest bearing loans have been invested in these investments. Further, the assessee is having interest free funds available with the assessee in the shape of shares capital and reserve surplus to the tune of Rs. 235,49,56,327/- as against the available funds at Rs. 149,41,49,811/- in the immediate preceding year. Further, we agree with the argument of the learned Counsel for the assessee that in the immediate preceding year the interest expenses paid by assessee to PCFC and PSFL amounting to Rs. 5,46,97,902/- has already been considered in earlier year and finding is given by the Tribunal in assessee's own case that the same has been invested in the business of the assessee. In view of the above, we are of the view that only proportionate disall....
X X X X Extracts X X X X
X X X X Extracts X X X X
....ading in shares and securities as profit from such activity falls within purview of the explanation to section 73." 11. At the outset, the learned Counsel for the assessee fairly admitted that the Tribunal in immediate preceding year has considered the issue of loss incurred in share trading activity as speculation loss instead of business loss in ITA No. 576/Mum/2016 for AY 2009-10 vide order dated 25-03-2018 vide Para 2 and 3 as under: "2. In the appeal filed by assessee, assessee is aggrieved for treating loss incurred in share trading activity as 'speculation loss' instead of 'business loss'. 3. At the outset, learned AR fairly conceded that the issue is covered against the assessee by the decision of Jurisdictional High Court in case of Prasad Agents (P) Ltd.,333 ITR 275. Accordingly, we dismiss the ground raised by assessee being covered against it by the decision of the Bombay High Court." 12. The learned Counsel for the assessee made alternative submission that if this is speculative loss, the same should be set off against profit earned from trading in shares and securities as profit from such activity falls within the purview of explanation to sect....
X X X X Extracts X X X X
X X X X Extracts X X X X
.... that purpose alone. The explanation stipulates that where an assessee is a company whose business consists in any part of the purchase and sale of shares of other Companies, it shall be deemed to be carrying on a speculation business to the extent to which the business consists of purchase and sale of such shares. Whether or not it is a profit or loss that has resulted from carrying on such business, is a consideration which is alien to the meaning of what constitutes a speculation business by the explanation to Section 73. Once an assessee is deemed to be carrying on a speculation business for the purpose of Section 73, any loss computed in respect of that speculation business, can be set off only against the profits and gains of another speculation business. Similarly, for the purposes of sub-section (2), the loss in respect of a speculation business which has not been set off either in whole or in part, can be carried forward and can be set off against profits and gains "of any speculation business". The expression "any speculation business" means a speculation business of the assessee in respect of which profits and gains for the Assessment Year in question have arisen and the....