TaxTMI 
TaxTMI 
2021 (5) TMI 1004
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....umstances of the case and in law, the Tribunal is right in remanding back the issue to assessing authority with a direction to allow the relief as the assessee do not have exempt income and as such no disallowance can be made under Section 14A read with Rule 8D of the Act contrary to provisions of Section 14A and Rule 8D and Circular No.5/2014 dated 11.2.2014 which has clarified that Rule 8D read with Section 14A provides for disallowance of the expenditure even when the tax payer in a particular year has not earned any exempt income?" 4. Sri Balaram Rao, learned counsel for the assessee has stated that in ITA No.133/2015 the same question of law has been answered in favour of the assessee and against the revenue. 5. Sri K.V.Aravind, learned counsel for the revenue has not disputed the aforesaid judgment. 6. The order dated 15.2.2021 passed in ITA No.133/2015, in paragraphs 11 to 14 reads as under; "11. We have considered the submissions made on both sides and have perused the record. Substantial questions of law No.1 and 3 are interlinked, therefore, we proceed to deal with the same together. Before proceeding further it is apposite to take note of the relevant statutory prov....
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....business as such member; [or] (d) an eligible transaction in respect of trading in derivatives referred to in clause (ac) of section 2 of the Securities Contracts (Regulation) Act, 1956 (42 of 1956) carried out in a recognised stock exchange; [or] (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. Section 43AA: Subject to the provisions of section 43A, any gain or loss arising on account of any change in foreign exchange rates shall be treated as income or loss, as the case may be, and such gain or loss shall be computed in accordance with the income computation and disclosure standards notified under sub-section (2) of section 145. (2) For the purposes of sub-section (1), gain or loss arising on account of the effects of change in foreign exchange rates shall be in respect of all foreign currency transactions, including those relating to - (i) monetary items and non-monetary items. (ii) translation of financial statements of foreign operations; ....
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....nciated by the Hon'ble Apex Court in the case of Woodward Governor India Pvt. Ltd. (supra) are applicable to the facts of the case on hand. 13. It is pertinent to mention here that the revenue has not questioned / doubted the genuineness and reasonableness of the transaction. Similarly, the revenue has not disputed the fact that the estimation was made on reasonable basis and not on adhoc basis which is evident from Paragraph 6.1 of the order of Commissioner of Income Tax (Appeals). The loss which is claimed by the assessee, is claimed as deductible business expenditure and therefore, provision for loss has to be allowed at the close of the year in accordance with Paragraphs 3 to 39 of the Accounting Standard 11, which deals with foreign exchange contract. It is not disputed by the revenue that forward contracts were entered to protect the assessee from foreign exchange fluctuation in respect of consideration for export proceeds. The tribunal, therefore, rightly relied on the decision in WOODWARD GOVERNOR INDIA supra while allowing the market to market loss as relating to forward exchange contract as deduction. It is pertinent to mention here that Instruction No.3 of 2010 was....
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....as the decision of the Supreme Court in MAXOPP INVESTMENTS LTD. supra and it was held that the aforesaid decision does not deal with applicability of Section 14A of the Act. However, eventually this court agreed with the view taken by High Court of Madras in CIT VS. CHETTINAD LOGISTICS P LTD., (2017) 80 TAXMANN.COM 221 (MAD.) AND KEM INVEST LTD. VS. CIT, (2015) 16 TAXMANN.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 immaterial. In fact, it would be a quirk of fate that when the investee company declared....