TaxTMI 
TaxTMI 
2021 (10) TMI 501
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....e us: "On the facts and circumstances of the case and in law, the Ld. CIT(A) erred in allowing mark to market loss of Rs. 10,68,95,694/- on account of decrease in the value of closing stock without taking into consideration Board circular No. 3/2010 dated 23.03.2010 and the fact that such loss is nothing but speculation loss within the meaning of Explanation to section 73 of the IT Act, 1961." 3. Briefly stated, the assessee company which is engaged in the business of investment and dealing in shares and securities had filed its return of income for A.Y. 2009-10 on 26.09.2009, declaring a loss of Rs. (-) 27,55,34,864/-. The return of income was initially processed as such u/s. 143(1) of the Act. Subsequently, the case of the assessee was reopened u/s. 147 of the Act. 4. Assessment was framed by the A.O. vide his order passed u/s. 143(3) r.w.s. 147, dated 28.03.2016, wherein after making an addition of "Mark to Market loss" of Rs. 10,68,95,694/- the returned loss of the assessee company was scaled down by the A.O. to an amount of Rs. (-) 16,89,39,170/-. During the course of assessment proceedings, it was observed by the A.O. that there was a diminution in the value of....
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....1 (SC). It was further observed by the A.O. that the valuation of the 'closing stock' at less than the cost by the assessee cannot be said to be a loss that had arisen from the valuation of the 'closing stock', but in fact was a part and parcel of the loss of its business of purchase and sale of shares. It was observed by the A.O. that the valuation of the 'closing stock' at less than the cost is accounting for the anticipated loss from the business of purchase and sale of shares. Backed by his aforesaid observations, the A.O. vide his order passed u/s. 143(3) r.w.s. 147, dated 28.03.2016 after making an addition of the "Mark to Market loss" of Rs. 10,68,95,694/- assessed the loss of the assessee company at Rs. (-) 16,89,39,170/-. 5. Aggrieved, the assessee carried the matter in appeal before the CIT(A). It was observed by the CIT(A) that the issue involved in the appeal before him, viz. disallowance of the loss on account of "Mark to Market value" of closing stock of equity shares was squarely covered by the order passed by the Tribunal in assessee's own case for A.Y. 2002-03, A.Y. 2003-04, A.Y. 2010-11 and A.Y. 2011-12, wherein disallowance of the a....
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....e have considered the submissions made by both parties, material on record and orders of authorities below. We find that in the similar facts, the Tribunal in assessee's own case in ITA No. 4738/Mum/05 for A.Y. 2002-03 vide order dated 11th February, 2008 decided in favour of assessee. The Tribunal, after examining the issue in detail, confirmed the order of ld. CIT(A). The relevant findings of the Tribunal are as under: 'We have heard, rival submissions and considered them carefully. We noted in the findings of the ld. CIT(A) the assessee has been following this method of valuation of closing stock consistently and the same has been accepted by the department itself. We have further noted that this method of valuation has been approved by the Supreme Court in various cased mentioned above and in the case of Sakthi Trading Co. in 250 ITR 871. Therefore, in view of these facts and circumstances, we have no hesitation in confirming the order of the ld. CIT(A)". Accordingly, we confirm the order of the ld. CIT(A)". Respectfully following the decision of the co-ordinate Bench of the Tribunal, we confirm the order of ld. CIT(A). Thus, this ground of the Revenue....
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....dly, neither the A.O. nor CIT(A) has discussed the facts but we find from the details that the assessee has valued outstanding equity derivative transactions at lower of cost or market value in the balance sheet as on 31.3.2010. Admittedly, the assessee has debited mark to market losses on account of diminution in the value of outstanding equity derivatives. We find that this issue has been settled by Hon'ble Supreme Court in the case of Woodward Governor India P. Ltd. (supra), wherein, it is clearly held that losses suffered by the assessee on account of fluctuation in the rate of foreign exchange has on the date of balance sheet is item of expense under section 37(1) of the Act. For valuing closing stock at the end of the year, the value prevailing of the last date is relevant because profit and loss is embedded in the closing stock, While anticipated loss is taken into account and the anticipated profit in the shape of appreciation of value of the closing stock Is to be brought into accounts. In view of the principle laid down by the Hon'ble Supreme Court, we are of the view that the assessee is entitled to this loss and he has rightly claim so. Accordingly, we reverse t....
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....(A) and uphold the same. Insofar the support drawn by the A.O. from the CBDT Instruction No. 03/2010, dated 23.03.2010, to the effect that the notional loss should not be allowed is concerned, we are of the considered view that as stated by the ld. A.R., and rightly so, as the said CBDT instruction is in context of reporting of mark-to-market losses on account of forex-derivatives by an assessee, thus, the same cannot be applied to the method of valuation of closing stock of equity shares. 8. Before parting, we may herein observe that the ld. A.R. had in the course of hearing of the appeal had apart from supporting the order of the CIT(A) also assailed the validity of the jurisdiction assumed by the A.O. for reopening the assessee's case u/s. 147 of the Act. However, in the absence of any cross-appeal or cross-objection or a preliminary objection having been filed by the assessee before us, we are afraid that the said claim of the assessee cannot be adverted to and therein adjudicated upon by us. 9. Resultantly, the appeal filed by the revenue is dismissed in terms of our aforesaid observations. ITA No. 5413/Mum/2019 (AY 2013-14) 10. We shall now take up the appeal ....
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....he issue involved in respect of the said issue remain the same as were there before us in the appeal filed by the revenue before us in the assessee's own case for A.Y. 2009-10 in ITA No. 5412/Mum/2019. Accordingly, our view taken while disposing off the ground of appeal No. 1 in the aforesaid appeal for A.Y. 2009-10 in ITA No. 5412/Mum/2019 shall apply mutatis mutandis for the purpose of disposal of the aforesaid ground. Accordingly, the Ground of appeal No. 1 is dismissed in terms of our aforesaid observations. 16. We shall now take up the claim of the revenue that the CIT(A) had erred in deleting the addition made by the A.O. of the "Provision for MTM margin Equity Stock Future" of Rs. 4,44,461/-. As is discernible from the records, the CIT(A) while vacating the addition made by the A.O. of the Provision for Mark-to-Market Equity Stock Futures had relied on the order passed by the Tribunal in the assessee's own case for A.Y. 2010-11 and A.Y. 2011-12. On a perusal of the aforesaid orders of the Tribunal, we find that it was therein observed as under: "7.3.1. I have considered the submission of the assessee, carefully gone through the order of the AO, perused th....