AI OCR 
TaxTMI 
TaxTMI 
TaxTMI 
2019 (4) TMI 1781
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....4A of the Income Tax Act, 1961 by ignoring the provisions of CBDT Circular no. 5/2014 dated 11.02.2014 wherein, it has been clarified that the Rule 8D r.w.s.14A provides for the disallowance of expenditure even where the assessee in particular has not earned exempt income" (iii) On the facts and circumstances of the case and in law, the Ld. CIT(A) has erred in deleting the addition u/s 14A of the Income Tax Act, 1961 relying upon the decision of the Hon'ble Delhi High Court in the case of Cheminvest Ltd. overlooking the fact that the above decision is not accepted by the revenue and Civil Appeal has been preferred before the Hon'ble Supreme Court and same is pending?" The appellant prays that the order of the CIT(A) on the grounds be set aside and the DC be restored. The appellant craves to amend or alter any ground or add new ground which may be necessary." 3. Common grounds raised in assessee's appeal read as under :- 1. On the facts and in the circumstances of the case and in law, the Commissioner of Income Tax (Appeals) (CIT(A) has erred in not granting the appellant the set off of carried forward speculative loss of AY 2005- 06, thereby rejecting the assesse....
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....rolling interest is liable to be taxed whenever sold and hence the same would not attract the rigors of sec 14A. d. During the year the assessee has received dividend income of Rs. 61,34,107/- which have been received from mutual funds and no dividend has been received from subsidiaries & group entities during the year. e. So far as the investment in subsidiaries & Group entities are concerned they are strategic in nature and hence they should be excluded while computing disallowance u/s 14A rw Rule 8D. The assessee has placed reliance on the decision of the Hon'ble Delhi High court in the case of Oriental Structural Engineering P Ltd in ITA No. 605 of 2012, The assessee has also placed reliance on the decision of Ld. CIT(A) in assessee's own case for AY 2010-11 order dated 29.10.2014 in Horizon Infrastructure Ltd. f. The assessee has submitted that where no dividend is received no disallowance u/s 14A rw Rule 8D can be made and in support of its contention the assessee has placed reliance on decision of the Hon'ble Delhi High Court in the case of Cheminvest Ltd. The assessee has also placed reliance on the decision of the Hon'ble Bombay High Court in the c....
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.... vide order dated 12.4.2018. 10. Upon careful consideration we find that assessee's claim of relief from disallowance under section 14A for strategic investment is liable to be rejected on the touchstone of Hon'ble Apex Court decision in the case of Maxopp Investment Ltd. (supra). As regards other direction that disallowance under section 14A should not exceed the exempt income and that for the purpose of computation of disallowance only those investments should be considered which have yielded exempt income, we find that the same is duly sustainable on the touchstone of Hon'ble Delhi High Court decision in the case of Cheminvest Ltd. (supra) and Hon'ble Bombay High Court decision in the case of Delite Enterprise (supra) and Ballarpur Industries Ltd. and Special Bench ITAT decision in the case of Vireet Investment. 11. The decision referred by learned Departmental Representative is not applicable on the facts of this case. Hence, qua these issues we uphold the order of learned CIT(A). 12. In the result, appeals filed by the Revenue stand dismissed. Issue in assessee's appeal :- 13. As regards the issue of disallowance under section 14A for strategic investment....
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....rofits, whichever is advantageous to the assessee." On verification of records, it is noticed that assessee has filed an appeal to ITAT, on 08.06.2012, for AY 2005-06, on this issue. This being subjudice issue depending upon the outcome of the appeal of AY 2005- 06, set off brought forward losses of Rs. 3,35,42,2771- against the current year speculative income cannot be allowed and hence the same has been added back to the income of the assessee." 16. Upon assessee's appeal learned CIT(A) noted that assessee's submissions as under : a) The Ld. AO has not allowed set off of carried forward deemed speculative loss of AY 2005-06, amounting to Rs. 3.35 crores against share trading income of Rs. 3.35 crores of the current year. The profit of Rs. 3.35 crore has arisen on the grounds of revaluation of the shares at "Mark to Market" held as stock-in-trade by the assessee. The assessee has been following the method of valuation of closing stock of shares at cost or market, whichever is lower. The Bombay High court in the case of Prasad Agents P Ltd reported in 226 CTR 13 has held that even shares in stock at the close of the accounting year resulting in Profit and loss and such prof....
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....hat the appellant for AY 2005-06 has filed the appeal before the Hon'ble ITAT and the same is pending for adjudication. The appellant has also submitted though the provisions of sec 73 of the Act has been amended by the Finance Act 2005, w.e.f 01.04.2006, whereby the speculation Joss can be carried forward for 4 years only as against 8 years prior to said amendment, the same is not applicable in relation to deemed speculation loss for AY 2005-06, as the appellant had got vested right and hence in its case the speculation loss of AY 2005-06 can be carried forward and set off against speculative profit for AY 2010-11. In support of its contention the appellant has placed reliance on the decision of the Hon'bfe ITAT, Mumbai Special Bench in the case of Kotak Mahindra Capital Co. Ltd (supra). The contentions of the appellant have been considered carefully. The provisions of sec 73(4) of the Act stipulates as under. "(4) No loss shall be carried forward under this section for more than [four] assessment years immediately succeeding the assessment year for which the loss was first computed." 6.4.2 From the above referred provisions of sec 73(4) of the Act it is unambiguous ....
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....nd (a) in so far as such loss relates to a short-term capital asset, it shall be set off against income, if any, under the head "Capital gains" assessable for that assessment year in respect of any other capital asset; (b) in so far as such loss relates to a long-term capital asset, it shall be set off against income, if any, under the head "Capital gains" assessable for that assessment year in respect of any other capital asset not being a short-term capital asset; (c) if the loss cannot be wholly so set off, the amount of loss not so set off shall be carried forward to the following assessment year and so on;" The Hon'ble ITAT Special Bench considered the words "is", "carried forward" and "cannot be" appearing in the above referred provisions and held that the same are used in present tense and hence refers to the long term capital loss of the current year. In view of the same it was further held that the provisions of sec 74(1) as substituted w.e.f 01.04.2003 are applicable to the long term capital loss of AY 2003-04 onwards and not to the long term capital loss relating to the period prior to AY 2003-04. The phraseology used in the provisions under consideration....
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....), as amended in 1957, govern the assessment for the assessment year 1960-61, the High Court is right in affirming that the unabsorbed loss of Rs. 15,50,189 of the assessment year 1950-51 cannot be carried forward for more than eight years, and consequently cannot be set off against the business income of the assessment year 1960-61. 7. It is pointed out that the AAC mentioned- in his order for the assessment year 1959-60 that the unabsorbed loss of Rs. 15,50,189 should be carried forward. That direction has meaning only if the law in force in the, assessment year 1960-61 permits the unabsorbed loss to be carried forward into the assessment of that year. The direction by the AAC assumes that the law permits the unabsorbed loss to be carried forward into future years, but as we have seen that is not the law and, therefore, the assessee can derive no advantage from that direction." In view of the above discussed law laid down by the Hon'ble Supreme Court, I am of the considered opinion that in the present case the amended provisions of sec 73(4) of the Act are applicable. Since the provisions of sec 3(4) of the Act mandates that speculative loss shall not be carry forward f....