TaxTMI 
TaxTMI 
2021 (4) TMI 652
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....t the respondent assessee- company is a company owned and controlled by the Government of Karnataka and has been incorporated to provide finance to the industries in the State of Karnataka. The assessee-company filed its return of income for the assessment year 2011-12 declaring nil income. The matter was looked into scrutiny assessment proceedings and it was observed that the assessee has made investment in equity shares and also it had worked out its disallowance under Section 14A of the Income Tax Act, 1961 (for short, 'I.T. Act'). The Assessing Officer passed an order under Section 143(3) of the I.T. Act, re-computed the disallowance under Section 14A of the I.T.Act for Rs. 2,48,72,710/- and the same was disallowed by adding back to inc....
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.... "2. Whether on the facts and in the circumstances of the case, the Tribunal is right in law in allowing carry forward of loss on derivatives contracts without appreciating that the transaction was speculative in nature in terms of Board's Circular No.3/2010 and Section 73 does not allow setting off of speculation loss against any other income other than speculation income?" 5. The Division Bench of this Court in the aforesaid appeal in paragraphs 14 & 15 has held as under: "14. Now we may advert to the second substantial question of law. It is pertinent to note that for Assessment Year 2009-10 the assessee has not earned dividend income. The aforesaid fact has not been disputed by the revenue. It is also relevant to mention tha....
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....MANN.COM 118 (DELHI) and held that since no exempt income has accrued to the assessee therefore, the provisions of Section 14A of the Act do not apply to the fact situation of the case. Therefore, it has become necessary for us to clarify the view taken in the two decisions viz., KINGFISHER FINVEST INDIA LTD. AND M/S NOVEL SOFTWARE INDIA (P) LTD. supra. At this stage, we may refer to Paragraph 40 of the decision of the Supreme Court in MAXOPP supra, the relevant extract of which reads as under: It is to be kept in mind that in those cases where shares are held as 'stock-in-trade', it becomes a business activity of the assessee to the deal in those shares as a business proposition. Whether dividend is earned or not becomes i....
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....correct and we hasten to clarify the same. However, from relevant extract of Paragraph 40, it is evident that only expenses proportionate to earning of exempt income could be disallowed under Section 14A of the Act and the decision of MAXOPP INVESTMENT LTD is an authority for the aforesaid proposition that the provision is relatable to earning of actual income. The object of Section 14A is to curb the practice to claim deduction of expenses incurred in relation to exempt income against taxable income and at the same time avail of the tax incentive by way of exemption of exempt income without making any apportionment of expenses incurred in relation to exempt income. The High Court of Madras has relied on the decision of the Supreme Court in....