TaxTMI 
TaxTMI 
TaxTMI 
2025 (9) TMI 1295
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.... 2. The grounds of appeal are as under:- Ground No. 1: Incorrect remand of matter relating to allowance of hedging loss of INR 1,89,24,728. The Learned CIT(A) has erred in directing the Learned AO to examine/verify the records relating claim of hedging loss from trading in Mentha and Commodity verify the records relating 1,89,24,728. The Learned CIT(A) has failed to appreciate that Learned AO in his order has not doubted the amount of hedging loss claimed by the Appellant for the year under consideration and therefore, remanding the matter to verify the claim is unwarranted. The Learned CIT(A) has erred in remanding the matter despite accepting that facts and circumstances of the current year is covered by the decision of Hon'ble Bombay High Court in Appellant's own case for A.Y 2006-07, ΑΥ 200708, ΑΥ 2008-09 & AY 2009-10, wherein the Hon'ble Bombay High Court has accepted that hedging contracts were a part of the Appellants business activity of manufacturing act and accordingly allowed such loss to be set off against business profits. 2.1 In the course of appeal hearing, however, the ld.AR of the assessee did not press the ground. It is s....
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....course of assessment proceedings, the AO found that the appellant had an investment portfolio of Rs. 70.48 cr. and there was also addition of Rs. 57.80 cr. during the year under consideration, and from these investments, the assessee earned dividend income of Rs. 47,37,915/- which was claimed exempt. The AO was not satisfied with the working of disallowance given by the appellant, which is mentioned in the assessment order. While making the disallowance, the AO observed that the sole purpose of the investments made by the appellant was to earn exempt income. The AO also noted that the working of disallowance under section 14A r.w. Rule 8D given by the appellant was not correct. Thus, applying the Rule 8D, the AO computed the total disallowance under section 14A of the Act at at Rs. 48,51,700/- and added back to the total income of the appellant. 4.1 The ld.CIT(A) further observed that in the appellate proceedings, the appellant reiterated its contention, which was submitted before the AO during the course of assessment proceedings. Having considered the submissions of the appellant, and keeping in mind the case laws relied upon by the appellant, it was observed that while making t....
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....the surplus fund and not from borrowed funds. It had Reserve and surplus of Rs. 677.55 cr. as evident in the balance sheet as on 31.3.2013. It is submitted that the Authorities did not appreciate that the company had no common or general purposes borrowings. As such there was no common interest expenses and no porting of interest expenses incurred towards export business could be allocated towards investment. It is also submitted that in assesses own case, hon'ble Bombay High Court in AY 2008-09 upheld the decision of ITAT held in its favour where facts were identical as share capital and general reserve of the company were far more than the investments in securities yielding dividend income. The subsequent appeal of the Department was dismissed by the Court which has also been accepted by it. As far as disallowance u/r 8D(ii) of Rs 21.57 lakh is concerned, it is submitted that the assessee did not have to incur any expenses to earn exempt income as any income is directly credited to its bank account after the investment is made. As an alternative arguments, it is submitted that following the decision of hon'ble Supreme Court in PCIT vs Caraf Builders and Constructions Ltd 112 Taxm....
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....he assessee asking him to place on record all the relevant facts including his accounts and thereafter, recording of reasons by the AO in the event he comes to conclusion that he is not satisfied with the claim of the assessee. The satisfaction must reflect the fairness and fair procedure adopted by the AO in rejecting the claim of the assessee. Hon'ble Supreme Court in the case of Maxopp Investment Ltd. v. CIT [2018] 402 ITR 640 (SC) has held that proper satisfaction ought to have been recorded by the AO while making the disallowance u/s 14A of the Act. Held that the disallowance u/s 14A r.w. rule 8D of Income Tax Rule has been made by the AO in a mechanical manner and without recording proper satisfaction as envisaged u/s 14Ar.w. rule 8D of the I.T. Rules. Consequently, the interest expenditure cannot be disallowed under Section 14A read with Rule 8D(2)(ii) under any circumstances. 6.1 The Hon'ble Karnataka High Court in the case of CIT -Vs- Microlabs Ltd., [2016] 383 ITR 490 (Karn) summed up the law on the issue after noticing the availability of own funds as per Balance Sheet of the assessee and after digesting all decisions on the subject, the Court noticed the decision o....
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....en by the assessee. He simply rejected the disallowance offered by the assessee. In view of the alternative submission of the ld.AR, we consider it reasonable and fair to accept its proposition for restricting the disallowance u/r 8D(iii) at 5% of the dividend income respectfully following decisions of the co-ordinate bench in assessee's own case in AYs 2011-12 and 201213 where facts were identical as those prevailing in the year under consideration. 7. In the result, the appeal of the assessee in ITA No. 5763/Mum/2024 is partly allowed. ITA No. 5915/MUM/2024(Revenue) 8. Ground of appeal before ITAT (i) Whether on the facts and circumstances of the case and in law, the Ld.CIT(A) is right in accepting the loss of Rs. 1,89,24,728/- created by hedging in Mentha Oil in commodity exchange as business loss without appreciating the fact that the same is speculative loss. 9. In the course of appeal hearing, it was submitted that the AO while giving effect to the appellate order in his order dated 7.11.2024 has already allowed the claim of the assessee. The ld.DR did not object to it. The ground(i) above taken by the Revenue is dismissed. 10. (ii) Whether on the facts and circumstan....