TaxTMI 
TaxTMI 
2021 (6) TMI 814
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....be taken as the lead year in ITA No. 6321/Mum/2019 and the decision rendered thereon could be applied for other assessment years except variance in figures. The ld AR also fairly agreed for the said submission of the ld DR. Accordingly, the facts of Asst Year 2014-15 in the case of Nirshilp Securities Private Limited are taken up for adjudication and the decision rendered thereon would apply with equal force for other assessment years with respect to same assessee and also in the case of Dolat Investments Ltd in respect of identical issues, except with variance in figures. 2. The Ground No. 1 raised by the revenue is challenging the deletion of disallowance u/s 14A of the Act read with Rule 8D(2) of the Rules. 2.1. We have heard the rival submissions and perused the materials available on record. We find that the assessee had earned exempt income in the form of dividend to the tune of Rs. 2,03,57,802 /- and had made suo moto disallowance u/s 14A of the Act amounting to Rs. 20,35,780/-, being 10% of dividend income , while filing its return of income. The ld AO recomputed the disallowance u/s 14A of the Act by applying the computation mechanism provided in Rule 8D(2) of the Rules ....
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....NSEL is a national-level institutionalised, electronic, transparent spot trading platform for commodity. It commenced "Live" trading on October 15, 2008. It was operational in 16 states in India, providing delivery-based spot trading in around 52 commodities. NSEL provided the following functions for trading opportunities :- * Traders can trade and lock their returns * Trader has to buy in near settlement contract and sell in far settlement contract simultaneously * Price for both settlement available * Exchange Provides counterparty guarantee risk * No basis risk, No link with future contracts 3.1.1. The type of contracts stated above are loosely termed as 'paired contracts'. 3.2. We find that the assessee is a Private Limited Company engaged in the business of trading in shares, securities and commodities. We find that the assessee is a group concern of "DOLAT GROUP", also known as "SHAH FAMILY". The trading in shares, securities and commodities are carried out by the broking firms owned by the group namely,Nirpan Securities Pvt Ltd which is a broking firm registered under SEBI and is authorised to trade on National Stock Exchange in shares and securities. Another br....
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....ent of trading in each commodity contained specific details on the quantity, quality, warehouse, etc. These Circulars together with the risk management practices set out by the NSEL in its Bye-laws, confirmed that the warehouses, quantity and quality of goods were under the complete administration and control of the NSEL. 3.2.2. Further, as per the Bye-laws of the NSEL, it acts as the legal counter party in respect of transactions executed on the NSEL platform in accordance with its Bye-law No. 5.26. In any event, the NSEL also guarantees the settlement of net financial obligation. When a client trades on the anonymous order driven trading system on the NSEL, the buyer does not know the seller and in the same way the seller does not know the buyer, and the NSEL guarantees the settlement of trade executed in compliance with the Bye-laws as per Bye- Law Nos. 7.9.1., 7.9.2 and 9.6. thereon. 3.2.3. On 31.7.2013, the NSEL issued a circular suspending trading in one day forward contracts and deferring settlement to 15 days, stating that there had been 'loss of trading interest in the market due to underlying uncertainties, which led to trade inequilibrium'. The circular further went on....
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.... 19/6/2013 Total For CASTOILKLS 200 14,362,872.00 Total For CASTOLKL30 200 14,615,076.40 14,615,076.40 2923.60 14,618,000.00 20/6/2013 Total For CASTOILKLS 200 14,322,864.00 Total For CASTOLKL30 200 14,573,084.80 14,573,084.80 2915.2 14,576,000.00 21/6/2013 25/6/2013 Total For CASTOILKLS 340 24,314,862.00 Total For CASTOLKL30 340 24,730,053.00 24,730,053.00 4,947.00 24,735,000.00 Total For CWOILKD12 1300 80,928,182.40 Total For CWOILKDI25 1300 82,273,542.00 82,273,542.00 16,458.00 82,290,000.00 26/6....
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....; Total For CWOILKDI25 1550 96,545,687.00 96,545,687.00 19,313.00 985,650.00 3/7/2013 470 33,508,300.32 Total For CASTOILKLS Total For CASTOLKL30 470 34,115,175.60 34,115,175.60 6,824.40 34,122,000.00 Total For CWOILKD12 1200 73,792,755.60 Total For CWOILKDI25 1200 74,985,000.00 74,985,000.00 15,000.00 75,000,000.00 4/7/2013 Total For CASTOILKLS 300 21,547,308.60 Total For CASTOLKL30 300 21,955,608.00 21,955,608.00 4,392.00 21,960,000.00 Total For CWOILKD12 1300 80,001,997.20 Total For CWOILKDI25 1300 81,233,750.00 81,233,750.00 16,250.00 81,250,000.00 Total For 04/07/2013 1600 101,549,305.80 1600 103,189,358.00 1,640,052.20 5/7/2013 &n....
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....cheques amounting to Rs. 4900 crores against their settlement obligations. On 14.8.2013, the NSEL uploaded a circular setting out details in respect of the revised schedule for settlement of outstanding dues payable to the brokers. Pursuant to the scheduled payouts under the settlement schedule, the NSEL made payments towards settlement of the outstanding contracts and assessee's broker received the payments from the NSEL on various dates commencing from 20.8.2013 to 22.3.2014 totalling to Rs. 5,56,00,000.68. Pursuant to the above receipts by the assessee from NSEL through its broker, the loss suffered by the assessee due to non-receipt of goods was Rs. 87,93,32,350/- being cost of goods purchased and not delivered by NSEL. 3.3.5. It was clear from the SGS audit report that significant stock shortage has been found in some so-called NSEL 'accredited' warehouses relating to certain defaulters. It has been reported that SGS audit team was not even allowed inside the premises of the majority of the NSEL warehouses for audit and inspection in certain warehouses relating to certain defaulters. 3.3.6.The assessee filed a complaint before Economic Offence Wing (EOW) jointly with other t....
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....nding upon the nature of contract. This pattern was followed by the assessee month after month and year after year and assessee was in genuine belief that transactions referred above will be honored by NSEL in normal course of business. But assessee was taken by surprise when NSEL announced suspension of trade and thereafter it tried to merge the settlements. Assessee along with other similar traders , brokers of NSEL, so called investors in NSEL had gathered and formed a group to pursue the matter with NSEL but no physical stock stated to have been delivered to assessee and others was not traceable at warehouses which means that stock purchased has been lost and cost paid for the same has been reduced to zero. The non -availability of requisite stocks at NSEL warehouses was confirmed by SGS audit report. The assessee had accounted for stock on date of purchase for which delivery allocation report was received and when same was not found up till balance sheet date and in view of non-cooperation of NSEL, the stock purchased has been valued at NIL while preparing trading results of the year though amount received from NSEL in lieu of claim has been separately credited in books of acc....
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.... were in knowledge about the true nature of the transactions. Thus, there is no doubt that assessee was aware of the true nature of the transactions as fictitious. Thus the treatment of both purchases and sales are to be treated as identical. Either both purchase and sales are fictitious or both are real and genuine. g) The closing stock of commodities cannot be valued at NIL. h) The onus was on the assessee to prove that sale was not reversed. The assessee had paid VATR on 5.7.2013 and did not know of the scam till 31.7.2013. Thus for 25 days, the assessee was treating the transaction as sale. Thereafter while finalising the books, it has reversed the sale, This is clear from qualitative chart of stock submitted as part of audit report. The same has been noted by the auditor who has gone through the basic primary documents like sale ledger, stock ledger etc and gave his finding on the audit report. The assessee did not dispute the findings of the auditors. The assessee has deliberately reversed the sale while finalising the accounts so that the stock can be taken as Nil. If assessee had credited sale, then the claim of assessee would have come to writing off receivables from....
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....Act. 5. We find that the ld CIT(A) deleted the disallowance of loss by placing reliance on the decision rendered by him in the case of group concern of the assessee namely,Dolat Investments Limited for Assessment Year 2014-15where exactly similar disallowance was made by the ld AO. 6. The ld DR vehemently argued by placing heavy reliance on the assessment order. The gist of the various arguments made by the ld DR could be summarised as under:- a) NSEL is a commodity exchange which is completely different from National and Bombay Stock Exchange (NSE and BSE) . With regard to commodities transaction traded in NSEL platform, the commodities purchased are supported by a warehouse receipt and hence there can be no situation of non-delivery of goods to the assessee. Hence correspondingly assessee incurring loss on account of non-delivery of goods by NSEL is a mere impossibility. b) The assessee had claimed this loss on account of cost of commodities purchased (stated to be not delivered by NSEL) in the same year in which the purchases were made. Admittedly the Asst Year 2014-15 was the year in which the NSEL scam also got unearthed and how can the assessee reach to the conclusion t....
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....gh NSEL , the sales recognised is reversed due to fact that NSEL ahs not been able to adhere to its payment obligations. Further as company has paid Rs. 8793.87 lakh as cost of purchases for which no stock is received by the company as referred above, hence the said cost is written off as business loss while determining stock in trade as on 31.3.2014. Company received a sum of Rs. 556.00 Lakhs towards disputed transaction on platform of NSEL and same is offered as income and shown under income from operation. (emphasis supplied by us) Economic Offence Wing (EOW) of Mumbai Police is investigating the unsettled transactions of NSEL on the basis of complaint filed by NSEL Investors Forum of which Company's Broker is a member and said forum has also filed writ petition in the Bombay High Court. 7.2. We find that the Statutory Auditors in their Statutory Audit Report had categorically stated that the company is maintaining proper records of inventory (being shares, securities and commodities). Discrepancies noted on physical verification of inventories were not material, except for transactions on National Spot Exchange Ltd (NSEL) platform. 7.3. We find that the assessee had giv....
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.... purchase cost of commodities on impugned specified contracts alone become speculative in nature. We are unable to persuade ourselves to accept to this proposition of the ld DR. Only when the commodities are actually delivered to the assessee for the payments made by the assessee to NSEL, the assessee would in turn be able to sell the same again in NSEL platform through registered brokers. In the instant case, the non-delivery of the commodities to the assessee by the NSEL had been proved beyond doubt as is evident from the (i) SGS Audit Report not being allowed to inspect certain NSEL accredited warehouses and wherever they had been allowed, they found huge shortage of stocks lying in warehouses ; (ii) assessee lodging complaint with EOW along with other traders for recovery of dues from NSEL ; (iii) NSEL initially issuing a press release on 4.8.2013 that it has got post dated cheques of Rs. 4900 crores to honor its commitments to various traders ; (iv) assessee along with other traders forming an Investors Forum to fight the case against NSEL for recovery of the dues ; and (v) NSEL itself trying to sell the commodities lying in its warehouses and making payments to the assessee a....
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....n the contract notes have been duly executed on the online exchange platform of NSEL. A perusal of the contract notes and the Delivery Allocation Reports reveals that the purchase and sale transaction of the assesseecompany cannot be held to be non-genuine / bogus by any stretch of imagination. The ld CIT(A) further goes on to discuss the DAR issued by the NSEL and holds that its contents clearly shows that NSEL had duly informed the assessee company that for the purchases made by it, the ownership of the commodities in the form of the warehouse receipts is with the assessee company. However, such warehouse receipts were in the custody of NSEL. This clearly shows that the assessee company had made a valid purchase transaction on the Exchange and further, the Exchange had confirmed the same by giving the Delivery Allocation Report of the said commodities. c) In para 21, the ld CIT(A) discusses the letter issued by the broker namely, Purvag Commodities and Derivatives Pvt. Ltd. to the assessee company dated 20.08.2013, wherein the assessee company had been informed that the payment towards the sales transaction has not been received from NSEL and hence, the receivable amounting to ....
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....he ld CIT(A) also discusses the reply sent by NSEL in response to the Statutory Winding Up notice given by the assessee company. A perusal of the said reply reveals that the NSEL has clearly stated that they are not bound to pay the outstanding balance to the assessee company, as it is not a trading member of NSEL. Thus, NSEL had totally brushed off the claim made by the assessee company on the ground that they have not contracted with them. The reply of NSEL clearly states that they have contractual obligation towards the members only and not towards their clients. e) In para 23, the ld CIT(A) observes that assessee company had made every effort to recover the disputed amount resulting from the disputed transactions on NSEL. f) In para 24, the ld CIT(A) notes that the assessee company had voluntarily offered for taxation on receipt basis in subsequent years, whatever had been recovered from the said amount of loss - the same is accepted by the ld AO as business income. g) In para 25, the ldCIT(A) discusses the reliance of the ld AO on financial capability of NSEL and their legal responsibility to hold that the business loss of the assessee company is still recoverable and henc....
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....mmodities lying in the designated delivery centres/warehouses relating to transactions carried out by members on the Exchange Platform. Thus, the ldCIT(A) holds that the ld AO had grossly erred in holding that the NSEL had the legal as well financial responsibility for making good the business loss of the assesseecompany, arising out of the missing goods. k) In para 29, the ldCIT(A) counters the argument of the ld AO that the Settlement Guarantee Fund (SGF) of NSEL, also guarantees the settlement of net financial obligation. The ldCIT(A) observes that there is only Cash Margin amounting to Rs. 37,46,08,831/-, which is available in the SGF-MC account. This amount lying in SGF is too meagre to cater to the financial liability of more than Rs. 5600 Crore arising out of the Scam. Further, the notes to accounts of NSEL also makes it clear that the Margin money is refundable to the respective member and is only subject to adjustment of the exposure of that particular member. The above discussion makes it clear that nothing is available from the corpus of SGF, which can be paid to the assessee company or the other clients, who had lost their money in the scam. The ld CIT(A) thus, states....
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....at Note 2.7 clearly states that commodities stock held as stock-in-trade under current assets are valued at cost or market value, whichever is lower on a FIFO basis. He further, notes that when a theft, burglary etc. occurs, the goods are written off by valuing them at Rs. NIL, if there is no chance of any recovery of goods. In the present case, SGS Audit Report had clearly revealed that goods purchased by the assessee company had not been found in the designated warehouses of NSEL. Further, the assessee company had already made the payments for such purchases. In these facts and circumstances, the closing stock had been rightly valued at Rs. Nil by the assessee company. The ld CIT(A) then observes that the assessee company had correctly followed the Accounting Standard - 9 and holds that the Accounting Policy followed by the assessee company, the contract for sale cannot be recognized as revenue, since the goods cannot be transferred to the buyer on a date, when it was supposed to have been transferred. This was because of the fact that there was no stock of goods in the warehouse of NSEL. The sale transactions therefore do not qualify to be accounted for as revenue, as per the A....
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.... definition of 'speculative transaction' in section 43(5) of the Act. The award of damages for breach of a contract is not the same thing as a party to the contract accepting satisfaction of the contract otherwise than in accordance with the original term thereof. It may be that in a general sense the layman would understand that the contract must be regarded as settled when damages are paid by way of compensation for its breach. What is really settled by the award of such damages and their acceptance by the aggrieved party is the dispute between the parties. Section 43(5) speaks of a settlement of the contract, and, consequently, where there is a breach of the contract resulting in a dispute between the parties and culminating in award of damages as compensation by an arbitration award, the transaction cannot be treated as a 'speculative transaction' within the meaning of section 43(5) of the Act. Thus, the ld CIT(A) holds that a contract which is not performed or is breached cannot be covered under the provisions of Section 43(5) of the Act relating to speculative transactions. The ld CIT(A) further, makes a mention of the fact that delivery allocation report is ....
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....iness. Further, he relies on various decisions of Hon'ble Supreme Court and various Hon'ble High Courts and concludes that the business loss incurred by the assessee company, as a result of the NSEL Scam on the transactions executed on the Exchange Platform is allowable, as the same had been incurred in the normal course of business. t) In para 38, the ld CIT(A) refutes the arguments of the ld AO that the transactions executed by the assessee company are non-genuine / bogus by stating that all the purchase and sale transactions of the assessee company had been conducted online on the exchange platform of NSEL. Trading on the electronic exchange platform is anonymous order driven trading system i.e. the buyer does not know the seller in the same way the seller does not know the buyer, and that the ld AO has not brought any adverse material on record to show that the assessee company or its broker have manipulated the online trading system. The ld CIT(A) also places reliance on various decisions of Tribunals and a decision of Hon'ble Jurisdictional High Court in the case of CIT v. Jamna Devi Agarwal reported in 328 ITR 656 (Bom). u) In para 39, the ld CIT(A) states that the claim o....
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.... 7.8. We deem it fit to address the issue as to whether the loss arising on the impugned transaction could be construed as speculative loss specifically as more emphasis has been laid on the same by the ld DR at the time of his arguments as well as during his rejoinder at the time of hearing. We find that the ld AO had disallowed the claim of business loss of the assessee on the ground that loss claimed is speculative in nature and therefore the same would be eligible for set off only against speculation profit. In our considered opinion, the ld AO had wrongly interpreted the provisions of section 43(5) of the Act. For the sake of convenience, the said provisions are reproduced below:- "43. In sections 28 to 41 and in this section, unless the context otherwise requires - .......... (5) "speculative transaction" means a transaction in which a contract for the purchase or sale of any commodity , including stocks and shares , is periodically or ultimately settled otherwise than by the actual delivery or transfer of the commodity or scrips: Provided that for the purposes of this clause- (a) a contract in respect of raw materials or merchandise entered into by a person in the....
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....may be prescribed and notified 74 by the Central Government for this purpose;] The following Explanation 2 to clause (5) of section 43 shall be inserted by the Finance Act, 2013, w.e.f. 1-4-2014 : Explanation 2.-For the purposes of clause (e), the expressions- (i) "commodity derivative" shall have the meaning as assigned to it in Chapter VII of the Finance Act, 2013; (ii) "eligible transaction" means any transaction,- (A) carried out electronically on screen-based systems through member or an intermediary, registered under the bye-laws, rules and regulations of the recognised association for trading in commodity derivative in accordance with the provisions of the Forward Contracts (Regulation) Act, 1952 (74 of 1952) and the rules, regulations or bye-laws made or directions issued under that Act on a recognised association; and (B) which is supported by a time stamped contract note issued by such member or intermediary to every client indicating in the contract note, the unique client identity number allotted under the Act, rules, regulations or bye-laws referred to in sub-clause (A), unique trade number and permanent account number allotted under this Act; (iii) "rec....
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....be construed as settlement. But the undisputed fact is that the warehouse receipt was retained by NSEL itself and never handed over the assessee company. Moreover, as per SGS audit report, there were no physical goods in requisite quantity as stated in the delivery allocation report and warehouse receipt, present in the accredited warehouses of NSEL, which came to light during physical inspection by SGS. Hence the transfer of warehouse receipts by NSEL on behalf of buyers and sellers cannot be considered as 'actual delivery' for the purpose of section 43(5) of the Act as settlement of contract did not take place at all as is evident from SGS audit report reporting the stock discrepancies. In the instant case, the impugned loss arose upon not finding the stock belonging to the assessee in accredited warehouse of NSEL. It does not arise upon settlement of a contract which in reality remains unperformed for the promise made. The loss also does not arise upon settling of contract for purchase with contract for sale. The impugned transactions and therefore loss arising from these purchase transactions cannot by any stretch of imagination be treated as 'speculative transaction' covered u....
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.... nature of the transaction that they are fictitious. We find that these allegations are baseless and are only based on conjectures and assumptions. The transactions were entered on electronic platform provided by NSEL. The counter party for sale or purchase of commodity were not known to the assessee when trades were executed. The assessee has paid for the purchases from own funds. The delivery allocation report are received for the purchases made. NSEL as per regulation of bye-laws was required to verify and weigh the goods before receiving the goods in their accredited warehouse and then only warehouse receipt was to be issued. The delivery allocation report mentioned full details of goods, and hence the goods were identifiable. The details mentioned included End Client code (in present case "2101") for the assessee, WR/SR No. (Warehouse Receipt No.), Lot/QC No., Weight, and warehouse location. When the assessee acted on knowing these facts, it cannot be made a party to wrong doing of others, moreso when it is not a beneficiary to the wrong doing but in fact a sufferer of the loss. The allegation of the ld AO that the assessee was aware of the fictitious and managed transaction....
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....s agent and custodian of the goods purchased by the assessee. Upon payments to NSEL and receipt of the Delivery Allocation Report, the property in goods lying in warehouse is transferred to the assessee and NSEL acts as custodian/trustee to the assessee. Non-existence of goods was revealed when audit by SGS Report found that in most of the cases goods were not available in the warehouse. Since payments for purchases were already made and delivery of goods were received by way of Delivery Allocation Report the purchases are rightly accounted for by the assessee as per the accounting principles followed. Once purchases are accounted in the books then under normal circumstances, sales are booked if they are sold. But in the instant case, the sales could not be effected actually as there were no goods lying in the NSEL accredited warehouses as confirmed in SGS audit report. As per Para 10 of Accounting Standard-9 (AS-9) on 'Revenue Recognition' issued by Institute of Chartered Accountants of India (ICAI), the revenue from sales are to be recognized when requirements as to the performance of the contract are satisfied . The performance for sale of goods are to be as per set out in Parag....
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....nce it is booked in the accounts vide para 6.8 and 6.9 of his order as under. We find that the the matter of recognizing the revenue depends upon the accounting policy followed regularly by the assessee. The accounting policy followed by the assessee in respect of sale of goods as stated in their audited annual accounts at Note No. 2.3 (g) and the same is reproduced below :- "g) Sales The amount recognized as sale is exclusive of sale/VAT and are net of returns and excludes freight and other charges and accounted at time when the invoices are raised andgoods are delivered." (Emphasis supplied) 7.13. Another aspect which the ld AO had raised in his assessment order is the inconsistency in quantitative details in tax audit report and notes to accounts in audited accounts. We find that these are not relevant at all to determine the fact of incurring a loss claimed by the assessee when other facts and supporting evidences are sufficient to establish the occurrence of loss. The loss incurred by the assessee is established from the documents produced as also reports from several investigation agencies like EOW. The fact of suffering loss cannot be doubted when there was big hue an....
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....hases, sales , amount written off, and closing stock of commodities for the year ended 31.3.2014 which are matching with each other. The disputed transactions with NSEL had been separately reflected in such statements. Hence it could be safely concluded that the entire quantitative details of commodities transactions had been duly reconciled by the assessee with its books, stock register, VAT returns filed by broker. Hence the genuinity of loss claimed by the assessee cannot be doubted at all. 7.16. We also find that the co-ordinate bench of Delhi Tribunal in the case of Chowdry Associates vs ACIT reported in 117 Taxmann.com 840 (Delhi Tribunal) dated 11.3.2020 ,had an occasion to adjudicate the identical facts and circumstances of allowability of loss in respect of payments made for purchase of commodities to NSEL wherein it was held that the loss arising thereon would be allowable as business loss u/s 28 of the Act. The operative portion of the said judgement is reproduced hereinbelow for the sake of convenience :- 5. During the AY 2015-16, the assessee was trading in commodity derivatives in the association which is National Spot Exchange Limited (NSEL). NSEL ran into regula....
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.... as well as selling. Hence, the AO held that the assessee is entered speculation business. .................................. 12. From the above events and the arguments of the Ld. DR, the following points are flagged: 1. The assessee has been claiming the transactions of trading on NSEL platform as business income which has been accepted by the revenue in all the earlier years. 2. The AO has taken a conscious decision to treat the transactions has speculative in nature during the current year only. 3. The AO held that since the contracts are paired there cannot be any loss to the assessee as sale and purchase have been taken simultaneously with the same person. 4. The AO held that the SPOT contracts have to be necessarily settled by delivery within a period of 11 days. 5. The AO held that the assessee is dealing in "commodity derivatives" and not commodities. (AO-para 5.14) 6. The AO held that the transactions of the assessee are speculative transactions as defined u/s 43(5). 7. The CEO/NSEL advised not to give benefit of bad debts claimed. 8. The CEO/NSEL advised that it is premature to allow the bad debts owing to unsettling of amount of Rs. 5600 crores. ....
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.... outstanding unsettled transactions of the assessee through both the brokers has also been furnished to the revenue authorities by the NSEL. 16. The AO disallowed the losses as claimed by the assessee on the ground that transactions has carried out by the assessee are speculative transactions settled without the delivery in terms of Section 43(5) of the Act. The AO in the assessment order reproduced the relevant provisions of Section 43(5) upto sub-Section (d) of 45(3). The AO stopped at short of sub-Section (d) without going further to sub-Section (e). 17. Reading further, sub-Section (e) which was introduced by the Finance Act, 2013 w.e.f. 1st April 2014 reveals that in respect of trading and commodity derivatives carried out in a recognized association shall not be a speculative transaction. The relevant provisions of Section 43(5)(e) are as detailed below. [(e) an eligible transaction in respect of trading in commodity derivatives carried out in a recognised association [, which is chargeable to commodities transaction tax under Chapter VII of the Finance Act, 2013 (17 of 2013),]] shall not be deemed to be a speculative transaction: 18. Further, Explanation 2 for the ....
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....very. However, certain categories of transactions are excluded from the purview of the said provision. Further the unabsorbed speculation losses are allowed to be carried forward for eight years for set-off against speculation profits in subsequent years. These restrictions were essentially designed as an anti-evasion measure to prevent claims of artificially generated losses in the absence of an appropriate institutional infrastructure. Recent systemic and technological changes introduced by stock markets have resulted in sufficient transparency to prevent generating fictitious losses through artificial transactions or shifting of incidence of loss from one person to another. The screen based computerized trading proves for an excellent audit trail. Therefore, the present distinction between speculative and non-speculative transactions, particularly relating to derivatives is no more required. The proposed amendment, therefore, seeks to provide that an eligible transaction carried out in respect of trading in derivatives in a recognized stock exchange shall not be deemed to be a speculative transaction. The proposed amendment also seeks to notify relevant rules etc. regarding co....
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....the NSEL was in the process of settling the outstanding dues of its traders and auctioning its assets for the said purpose. The revenue claimed that the claim of bad debts was premature. However, the ITAT has allowed the claim of the assessee based on the judgment of the Hon'ble Apex Court in the case of TRF Ltd. v. CIT 320 ITR 397 wherein it was held that after 1st April, 1989, it was not necessary for the assessee to establish that the debt has become irrecoverable and it was enough if the debt was written off as irrecoverable in the books. Further, the CBDT vide Circular No. 12/2016 clarified regarding the claim of the bad debts, the same is reproduced as under: Circular No. 12/2016 F.N o.2 79/Misc/1 4 0/2015-ITJ Government of India Ministry of Finance Department of Revenue Central Board of Direct Taxes New Delhi, Dated 30th May, 2016 Subject: - Admissibility of claim of deduction of Bad Debt under section 36(1) (vii) read with section 36(2) of the Income-Tax Act, 1961-reg. Proposals have been received by the Central Board of Direct Taxes regarding filing of appeals/pursuing litigation on the issue of allowability of bad debt that are written off as irrecover....
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....ious year, the debt has been written off as bad and the relevant deduction has also been claimed but later on the same debt is recovered in full or part, then the amount so recovered will be included as income of the financial year in which such amount has recovered. Owing to taxability of the amounts recovered, the revenue would at liberty to tax the amount as and when received in accordance with the provisions of the Act. The department must obtain the information pertaining to payment by the NSEL to brokers/traders on real time basis and bring these amounts to tax net. Hence, the advisory of the NSEL not to allow the bad debts claim would be legally untenable owing to the provisions of the Act, Circular of the CBDT and ruling of the Hon'ble Apex Court in the case of TRF Ltd. v. CIT (323 ITR 397). 30. Further, we have also perused the order in the case of M/s Omni Lens Pvt. Ltd. in ITA No. 2818/Ahd./2010 wherein the matter was referred back to the file of the AO to examine the issue of speculation/non-speculation business after taking note of crucial aspect of actual delivery of the commodity, if any, as claimed and to ascertain as to how the entire debt has turned bad when....
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....the assessee is allowed. 7.17. In view of our elaborate observations in the facts and circumstances of the instant case and respectfully following the aforesaid judicial precedent relied upon, we hold that the loss arising on account of payment made to NSEL through registered broker towards purchase of commodities (which were never delivered to assessee) , shall be allowable as regular business loss u/s 28 of the Act. We further hold that the said loss cannot be construed as speculative in nature. Accordingly, we do not find any infirmity in the order of the ld CITA in this regard. Accordingly, the Ground Nos. 2 & 3 raised by the revenue in the case of Nirshilp Securities Private Limited in ITA No. 6321/Mum/2019 for the Asst Year 2014-15 are dismissed. 8. In the result, the appeal of the revenue in ITA No. 6321/Mum/2019 is dismissed. ITA No.6318/Mum/2019 (A.Y.2014-15) (Dolat Investment Ltd) 9. The grounds raised by the revenue are identical to the Ground Nos. 2 & 3 raised by the revenue in ITA No. 6321/Mum/2019 for the Asst Year 2014-15 in the case of Nirshilp Securities Private Limited and hence the decision rendered thereon would apply with equal force for this assessee also ....
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....axable as business income. It was pleaded that the investment in fixed deposit was therefore inextricably linked with the purpose of the business and therefore interest on fixed deposits would be taxed only as business income. The assessee further submitted that similar treatment given by the assessee was accepted by the ld AO for the Asst Year 2015-16 while completing the scrutiny assessment u/s 143(3) of the Act. The assessee placed reliance on the following decisions in support of its contentions:- a) Decision of Mumbai Tribunal in the case of Voltas International Ltd vs ACIT reported in (2010) 2 ITR (Trib) 410 b) Decision of Hon'ble Delhi High Court in the case of CIT vs Koshika Telecom Ltd reported in 287 ITR 479 (Del) c) Decision of Vishakapatnam Tribunal in the case of VBC Industries Ltd vs DCIT reported in 40 SOT 55 d) Decision of Mumbai Tribunal in the case of Sanchita Marine Products Pvt Ltd vs DCIT reported in 15 SOT 280 e) Decision of Hon'ble Jurisdictional High Court in the case of CIT vs Paramount Premises (P) Ltd reported in 190 ITR 259 (Bom) f) Decision of Hon'ble Jurisdictional High Court in the case of CIT vs Lok Holdings reported in 189 Taxman 452 (Bo....
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....sment, without recording any satisfaction in terms of Section 14A(2) read with Rule 8D(1) of the Rules and without even mentioning about the voluntary disallowance of Rs. 33,886/- made by the assessee towards demat charges. 14.2. We find that the ld CITA appreciated the fact that the assessee had earned dividend income of Rs. 1,52,093/- on investment in Goldman Sachs Liquid Bees Fund ; dividend and interest on tax free bonds both comprised in stock in trade in the sums of Rs. 1,31,65,513.58 and Rs. 3,07,08,660/- respectively and had claimed all these income as exempt in the return of income. We find that the ld CITA got into each and every investment made by the assessee together with the details of exempt income derived thereon. The assessee also pleaded before the ld CITA that it is having sufficient own funds in the form of share capital and reserves as on 31.3.2016 and 31.3.2015 at Rs. 260.26 crores and Rs. 229.55 crores respectively, whereas the corresponding figure of stock in trade of shares & securities were only Rs. 160.23 crores and Rs. 215.23 crores respectively. Hence it was pleaded that no borrowed funds were utilised for making investment from which exempt income was....