SHRI PRAKASHKUMAR NATVARLAL PATEL,AHMEDABAD vs. THE INCOME TAX OFFICER, WARD-3(3), AHMEDABAD

By way of this appeal, the assessee appellant has challenged correctness of the order dated 15th December 2014 passed by the CIT(A) in the matter of assessment under section 143(3) of the Income Tax Act, 1961, for the assessment year 2010-11.

Grievances raised by the assessee appellant are as follows:

We have heard the rival contentions, perused the material on record and duly considered facts of the case in the light of the applicable legal position.

So far assessee’s grievance against the disallowance of interest to the extent of Rs 3,00,000 is concerned, once the CIT(A) holds, as she has held in this case, that the assessee had sufficient interest free funds available, there cannot be any justification of the disallowance of interest on borrowed funds. As is the settled legal position, when the assessee has sufficient interest free funds, the presumption has to be that the interest free funds have been utilized for the purpose of advancing interest free loans. Hon’ble Bombay High Court’s judgment in the case of CIT Vs Reliance Utilities & Power Pvt Ltd [(2009) 313 ITR 340 (Bom)], which has been followed, with approval, by Hon’ble jurisdictional High Court in the case of CIT Vs UTI Bank Ltd [(2013) 32 taxmann.282 (Guj)] holds so. In this view of the matter, the disallowance of Rs 3,00,000 must stand deleted.

Ground no. 2 is thus allowed

On the question of the loss of Rs 40,07,962 being treated as speculation loss and ineligible to set off against normal income, the assessee has an altogether new plea. He contends that loss on account of derivate trading cannot be treated as speculation loss at all. He finds support from certain judicial precedents in support of this proposition. In all fairness, however, he admits that this plea was never before the authorities below, even as he contends that he has all the rights to present a new legal plea at the stage of the Tribunal. When we, however, suggested that this plea should be first examined by the CIT(A), he very graciously, even though somewhat reluctantly, agreed to the suggestion. Learned Departmental Representative also did not oppose the suggestion. The plea taken by the learned counsel certainly deserves judicious consideration but taking up this plea directly at this stage, and allowing the lower appellate forum to be bypassed altogether, would not be appropriate.

In view of these discussions, as also bearing in mind entirety of the case, we deem it fit and proper to remit the issue to the file of the CIT(A) for adjudication de novo in the light of our above observations, in accordance with the law and by way of a speaking order. As the matter is being remitted to the file of the CIT(A) for fresh consideration, all issues are left open.

Ground no. 1 is thus allowed for statistical purposes.

In the result, the appeal is partly allowed in the terms indicated above. Pronounced in the open court today on the 3rd day of June, 2019.