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Income Tax Appellate Tribunal, “A” BENCH: KOLKATA
Before: Shri J. Sudhakar Reddy, AM & Shri A. T. Varkey, JM]
ITA No. 346/Kol/2017 Baljit Securities, A.Y. 2012-13 आयकर अपील�य अधीकरण, �यायपीठ –“A” कोलकाता, IN THE INCOME TAX APPELLATE TRIBUNAL “A” BENCH: KOLKATA [Before Shri J. Sudhakar Reddy, AM and Shri A. T. Varkey, JM] I.T.A. No. 346/Kol/2017 Assessment Year: 2012-13
Assistant Commissioner of Income- Vs. Baljit Securities tax, Circle-15(1), Kolkata. (PAN:AABCB0779P) Appellant Respondent
Date of Hearing 11.02.2021 Date of Pronouncement 24 .02.2021 For the Appellant Shri Dhrubajyoti Roy, JCIT For the Respondent S/Shri Arvind Agarwal, Advocate & Rajat Agarwal, CA ORDER Per Shri A. T. Varkey, JM: This is an appeal preferred by the revenue against the order of Ld. CIT(A)-16, Kolkata dated 15.12.2016 for AY 2012-13.
The first ground of appeal of the revenue is against the action of the Ld. CIT(A) in allowing relief of Rs.9,37,263/- to the assessee u/s. 14A of the Income Tax Act, 1961 (hereinafter referred to as the “Act”).
Brief facts of the case as noted by the AO are that the value of investments as on 01.04.20101 and 31.03.2011stood at Rs. 5,19,63,994 /- and Rs.4,40,42,041/- respectively. The AO noted that during the year the assessee earned tax exempt dividend income of Rs. 1,79,466/- out of its investment in shares and units of mutual fund. According to the AO, he requested the assessee to furnish details of expenses incurred on such investments, income form which is not includible in the total income of the assessee. The AO noted that the assessee was unable to furnish a satisfactory reply. So, he took note of the Circular no. 05/2014 dated 11.02.2014 issued by the CBDT and observed that the legislative intent is to allow only that expenditure which is relatable to earning of income and therefore expenses which are relatable to earning of exempt income have to be considered for disallowance,
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ITA No. 346/Kol/2017 Baljit Securities, A.Y. 2012-13 irrespective of the fact whether any such income has been earned during the financial-year or not. The AO further noted that since the assessee did not maintain any separate books of accounts for accounting for expenses incurred in relation to income not includible in its total income, he was of the opinion that amount of expenses actually incurred could not be ascertained from the assessee's books of accounts. Accordingly, the AO applied the provisions of section 14A of the Act r.w. Rule 8D in order to compute the disallowance as under:
As per rule 8D(2)(i)-direct expenses: Nil, as there is no direct expenses in connection to incurred exempt income.
As per rule 8D(2)(ii) - proportionate interest expenditure:
Total amount of interest paid Rs.29,80,759/-which would stand for "A" as referred to in rule 8D(2)(ii). The average value of investment is Rs.4,80,03,018/- which would stand for "B" as referred to in rule 8D(2)(ii). It is observed from the Balance sheet that the average value of assets as per rule 8D(2)(ii) is Rs.20,52,14,580/- called as (C). Therefore, disallowance under rule 8D(2)(ii) = interest (A)x(B)/(C) = Rs.29.80.759/- Rs.4.80,03,018/- Rs.20,52,14,580/- = Rs.697248/-
As per rule 8D(2)(iii) –
The average of value of investment is Rs.4,80,03,018/- as worked out earlier. In this view of the matter, the disallowance under rule 8D(2)(iii) is made as under :-
Disallowance u/r 8D(2)(iii) = 0.5% of the average of value of investment = 0.5% of Rs.4,80,03,0i8/- = Rs.2,40,015/-
Accordingly, the total disallowance was made at Rs.937263/- u/s 14A read with rule 8D(2) of the Act. Thus Rs.9,37,263/- was added back in computing the income under normal provisions as well as in computing book profit u/s 115JB of the Act.
On appeal, the Ld. CIT(A) deleted the addition as under:
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ITA No. 346/Kol/2017 Baljit Securities, A.Y. 2012-13 “The A.R has stated that "Written submission before the A.O. are appearing at pages 1,13- 14 of attachments to Statement of facts! Case relied on by the appellant assessee before the A.O. - ACIT vs. Champion Commercial Ltd. -. Please refer Balance Sheet appearing at Page 41 and notes on accounts 10 at page 46 of Statement of facts attachments, you will notice1 that the assessee -held shares & securities as stock in trade in the course of shares & securities trading. The result of this activity is taxable & not exempt income. Therefore, section 14A cannot be applied in respect of activities which results taxable income. But the A.O. had observed in the assessment order at paragraph 2 that the assessee earned tax exempt dividend income out of ifs investments in shares & units of mutual funds. This is not a fact, rather such shares & units of mutual funds were held be as stock in trade. The above issue was held in favour of the assessee in the A.Y.2013-14 vide Appeal order dated 21/10/2016 passed by Learned CIT(A)- 5, Kolkata, copy of the appeal order appears at Page. 15A to 15C of paper book. Moreover Hon’ble ITAT, Kolkata had held in assessee’s own case in the A.Y.2009-10 that earning of dividend was merely incidental! to the holding of shares (as stock in trade) for the particular period within which dividend was declared - The balance sheet of the assessee does not show any investment & all the shares are being held as stock in trade only - The A.O. has calculated the disallowance from the stock in trade/inventories held by the assessee - Rule 8D (2) (ii) (iii) can only be applied where shares are held as an investment & this rule will not have any application when these shares are held as stock in trade. This view finds supports from Kolkata Tribunal's decision in the case of "Dy. CIT vs. Gulshan Investment Co Ltd" & Hon'ble Karnataka High Court judgement in the case of "CCI Ltd vs J.T. C.I.T (2012) 206 Taxmann 563.". The AO had referred the Board Circular No. 05/2014 dated 11th February, 2014 in the impugned assessment order to disallow u/s.14A read with Rule 8D of the Act at Page - 2 of the assessment order. A copy of the said Circular is attached at Page - 15D of Paper Book. At Paragraph - 6 of the said Circular the hoard had clarified that "Rule 8D read with Section 14A of the Act provides for disallowance of the expenditure even where tax payer in a particular year has loot earned any exempt income." Thus this Circular has been issued to clarify for disallowance of expenditure u/s.'14A in cases where exempt income has not been earned by the assessee. In the instant case, the assessee had earned exempt income in the shape of dividend for Rs. 1,79,465.70. Refer Page - 48 of attachment to Statement of Facts - Note- - 14 - Other Income forming part of Statement of Profit & Loss Account at Page - 42. And in the computation of taxable income, appearing at Page - 31 of attachment to statement of facts] tax free income u/s.10(33) - dividend - Rs. 1,79,466/- has been deducted in computing total taxable income. Thus the instant circular is not at all applicable {to the facts of this case. In view of the above the addition made by the A.O. for Rs.9,37,263 u/s 14A of the Act read with Rule 8D(2)(ii) & (iii) should be deleted".
I agree with the submission of the A.R. of the assessed. Ld. CIT(A) -.5, Kolkata has decided this issue in the favour of the assessee for AY 2013-14. Being bound by coordinate Ld. CIT(A), I decide this issue in the favour of the assessee. The addition is deleted and the appeal of the assessee is allowed.”
Aggrieved, revenue is in appeal before us.
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ITA No. 346/Kol/2017 Baljit Securities, A.Y. 2012-13 5. We have heard rival submissions and perused the material available on record. The Ld. AR submitted that the assessee has received only Rs.1,79,466/- as the dividend income and contended that the disallowance u/s. 14A of the Act even if made cannot exceed Rs.1,79,466/-. In the light of the aforesaid discussion and the facts taken note by the AO, we note that even if the computation is made by applying Rule 8D, the disallowance cannot exceed the dividend income as held by the Hon’ble High Courts. In such a scenario, we are restricting the disallowance at Rs.1,79,466/- in place of Rs.9,37,263/- as made by the AO. This ground of Revenue appeal is partly allowed.
Ground no. 2 of the revenue appeal is as under: “That on the facts and circumstances of the case and in law, the Ld. CIT(A) erred in deleting the additions of Rs. 3,72,08,053/- by interpreting law on account of derivative loss, whereas AO was right in treating it as speculation loss and by invoking Sec. 73 of the I. T. Act denying the assessee’s claim of set off of the said loss from income of business of dealing in shares. Thereby Ld. CIT(A) erred in allowing relief to the assessee by setting off of share trading loss which is deemed speculative loss with derivative income and other business income.
Brief facts of the case are that the assessee company in the e-filed return of income in this relevant AY 2012-13 reflected total loss of Rs.2,57,18,558/-. The assessee is engaged in the business of brokerage of securities and functions as registered stock broker in recognized stock exchange (NSE, BSE & Forward Exchange etc.). It also transacts in the purchase and sale of shares and securities of other companies on self account where the actual delivery is taken and given. According to the assessee, the assessee gets income from brokerage and share trading business by delivery and of derivative transactions where the actual delivery is not intended to be taken or given. Gross income from share trading was shown at Rs.3,15,992/-. And it incurred gross loss from derivative transaction of Rs.37,48,335/-. The assessee has earned gross income of brokerage of Rs.1,52,68,296/-. As per the assessee since it is a registered share broker of stock exchanges, the assessee had to record purchase and sale of shares and securities on line by giving clients’ code and where transaction is made on the brokerage account, details of the code are mentioned while booking purchase and sale transaction. It was pointed out that where purchase and sale of shares and securities are made on self account under the clients’ code column, self code is mentioned. In other words, according to the assessee, the business of buying and
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ITA No. 346/Kol/2017 Baljit Securities, A.Y. 2012-13 selling of shares on behalf of clients and on behalf of self are the same. Thus, it was contended by the assessee that it is into business of share trading on self account and shares and securities brokerage are composite business and returned total loss of Rs.2,57,18,558/-. However, the AO did not accept the assessee’s contention and held that the business of the assessee consisting of and relating to purchase and sale of shares is deemed to be a speculation business and loss thereon is deemed to be a speculation loss. So, according to AO, since the assessee has not accounted for the expenses incurred on account of speculation business as compared to the non-speculation business separately to arrive at the correct quantum of profit or loss on account of deemed speculation business, he apportioned the expenditure connected with and related to the two distinct and separate business and then held as under: “Accordingly, on apportioning the expenses incurred on account of establishment and other expenditure and interest (arrived at on the basis of apportionment of expenditure in relation to the turn over from each business as compared to the cumulative turnover of the business) the income/loss from speculative as well as the non-speculative business is recomputed as under: Total turnover as Income as per P&L Apportioned Income (Loss) per P&L a/c. (Rs.) a/c (Rs.) expenditure (Rs.) Sale of shares 12,60,52,263 3,15,992 3,28,19,770 (3,25,03,778) Derivative loss 37,48,335 (37,48,335) 9,75,940 (47,24,275) Expenditure - - 40,26,232 relatable to earning non- speculative income
Loss from speculation business: Rs.3,72,28,053/- Accordingly, AO held that an amount of Rs.3,72,28,053/- is deemed to be loss on account of speculation business and is, therefore, not allowed to be set off against non-speculation business income as per provisions of Sec. 73 of the Act.”
Aggrieved by the aforesaid action of AO, the assessee preferred an appeal before the Ld. CIT(A), who gave relief to the assessee by holding as under: “Grounds No. 2 and 3 are the addition of Rs. 3,72,28,053/- on account of derivatives loss treated as speculation business invoking Explanation to section 73 of the Act:- The A.R has stated that "Facts are mentioned in brief in the Statement of facts at paragraphs 4.1 to 4.3. Written submission on this issue before the A.O. appears at pages 25-28 of attachments to Statement of Facts. Turnover in client account wherefrom brokerage income was earned appears at Page 30 & statement of apportionment of expenditure with reference to turnover of shares & securities appears at Page 29 of attachments to Statement of facts.
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ITA No. 346/Kol/2017 Baljit Securities, A.Y. 2012-13 The principle held by Hon'ble ITAT Kolkata (following the judgement of Calcutta High Court in assessee's own case) held in asst, year 2009-10 that aggregation of the business profit/loss is to be worked out irrespective of the fact, whether it is from share delivery transaction or derivative transaction, before application of the explanation to section 73. (Copy of appeal] order appears at page 2-12 of Statement of Facts Attachments). In the year under appeal - gross profit from share delivery transaction is Rs.82,37,944/- [sale price of shares and securities Rs.12,60,52,263/- less cost of shares and securities Rs.11,78,14,319/- (Page - 48 of Index of statement of fact -notes annexed to and forming part of balance sheet) and derivative loss Rs. 37,48,335/-] Hon'ble Kolkata High Court had held in assessee's own case that the share broker was entitled to set off loss incurred in transactions of derivatives and day trading of shares against its profits and gains from purchase and sale of shares on delivery basis. Abstract of this judgement appears in ITAT, Kolkata’s order in assessee's case for A.Y. 2009-10 in paragraph 6 of the order. This very principle have further been held, in favour of the assessee by Hon'ble Kolkata High Court in "Asian Financial Services Ltd, v. CIT [2016] 70 Taxmann. corn 9 (Calcutta) (HC)". Further the above principle has been reiterated by Hon'ble Kolkata Tribunal in following cases:- a) DCIT, Kol v. MPC Securities Ltd. -[2016] 72 taxmann.com 209/[2016] 160 ITD 199 (Kolkata - Trib.)J b) DCIT Kol v. Guiness Securities Ltd. [2016] 68 taxmann .com 375 (Kolkataf- Trib.) c) Lohia Securities Ltd. v. DCIT, Kol [2016] 66 taxmann.com 86 / [20jl6] 157 ITD 265 (Kolkata - Trib.). Explanation to section 73 was amended by the Finance (2) Act, 2014 whereby in the exception clause was modified to include the Companies whose principle business consists of trading in shares - w.e.f. 01.p4.2015. Hon'ble Mumbai FEAT had held in the case of "Fiduciary Shares & stock P. Ltd Vs. ACIT- ITA No. 321/Mum/2013 - A.Y.2009-10 - Date of Pronouncement: 13.05.2016" that the aforesaid amendment is clarificatory in mature & would operate retrospectively from 01/04/1977. - from which date explanation to Section 73 was placed on the statute, copy of the order appears at page 53 to 72 of the paper book. Hon'ble Tribunal had cited a number of Honble Supreme Court decisions at paras 5.6.3 to 5.6.9 of the order & following; the same held as staled herein before. Since the principle business of the assessee is dealing in shares & stock broker, it qualifies for exemption from applicability of explanation 2 section 73 of the Act during the year under appeal as well because of the aforesaid Mumbai Tribunal order. In any case Hon'ble Tribunal & High Court had held; in favour of the assessee's in its own cases (In earlier year) without considering the aforesaid amendment. Therefore, Explanation to section 73 should not be invoked & the addition made on this account should be deleted". In view of the judgment of Hon'ble Kolkata I FAT in the case of the assessee and Hon'ble Kolkata High Court in assessee's own case, the addition on account of derivative loss is deleted, and the appeal of the assessee is allowed.”
Aggrieved revenue is in appeal before us.
We have heard rival submissions and gone through the facts and circumstances of the case. At the outset, it has been brought to our notice that similar issue arose in assessee’s own case for AY 2009-10 came up before the Tribunal wherein the Tribunal was pleased to allow the claim of the assessee; and in assessee’s own case for AY 2005-06,
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ITA No. 346/Kol/2017 Baljit Securities, A.Y. 2012-13 such a claim of the assessee was allowed by the Tribunal which was later confirmed by the Hon’ble Calcutta High Court vide order dated 12.03.2014. It is noted that assessee is engaged in the business of share trading and assessee is also functions as a broker of securities and is a registered stock broker (stock exchanges i.e. NSE, BSE & forward exchange etc.). The assessee admits that it is involved in the purchase and sale of shares & securities of other companies on self account where the actual delivery is taken and given from which gross income has been shown at Rs.3,15,992/-. It is noted that the assessee is also engaged in derivative transaction [wherein the actual delivery is not taken or given] and, it incurred gross loss from derivative transaction at Rs.37,48,335/-The assessee has admitted to have earned gross income on brokerage at Rs.1,52,68,296/-. . The assessee computed the gross income from the three businesses being composite in nature and has returned loss of Rs.2,57,18,558/-. The AO has not accepted this action of assessee and after scrutiny has accepted the assessee’s income from brokerage as business income i.e. Rs.1,52,68,296/-. However, the AO apportioned some expenses and determined the business income from brokerage as Rs.1,25,59,636/- and not Rs.1,52,68,296/-; And thereafter treated the income from share (delivery based) and derivative as speculation in nature u/s. 73 of the Act and has disallowed Rs.3,72,28,053/- (supra). Now the question is whether the action of AO is legally correct/sustainable i.e. whether the income from share trading (delivery based) and derivatives can be treated separately and the loss from it is hit by section 73 (Explanation) of the Act. For answering this question let us look at the scheme of the Act. Under Chapter IV which is titled ‘Computation of Total Income’ and the business receipts/income is dealt under Group “D” i.e. under the Heads of Income ‘D’ - Profit and gain of business which consists of section 28 to 44 DB of the Act. It is trite law that profit includes losses because loss has been construed as negative profit and we note that Explanation (2) to section 28 provides in respect of “Speculative transactions” as follows:
“Explanation 2 – Where speculative transactions carried on by an assessee are of such a nature as to constitute a business, the business (hereinafter referred to as “speculation business”) shall be deemed to be distinct and separate from any other business.”
From a plain reading of the above Explanation (2) it can be discerned that speculative transactions carried on by an assessee may be of such a nature as to constitute a 7 | P a g e
ITA No. 346/Kol/2017 Baljit Securities, A.Y. 2012-13 business, then such business shall be deemed to be distinct and separate from any other business. Subsection (5) of section 43 of the Act gives the definition of speculative transaction as under:
“Sec. 43 – In section 28 to 41 and in this section, unless the context otherwise requires: - 1…… 2….. 3….. 4…. (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 course of his manufacturing or merchanting business to guard against loss through future price fluctuations in respect of his contracts for actual delivery of goods manufactured by him or merchandise sold by him; or (b) a contract ·in respect of stocks and shares entered into by a dealer or investor therein to guard against loss in his holdings of stocks and shares through price fluctuations; or (c) a contract entered into by a member of a forward market or a stock exchange in the course of any transaction in the nature of jobbing or arbitrage to guard against loss which may arise in the ordinary course of his 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 J 956) 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 of2013)] shall not be deemed to be a speculative transaction;”
From a perusal of the above, it can be seen that this definition of speculative transaction is only for the purpose of section 28 to 41 of the Act. From a conjoint reading of Explanation 2 to section 28 of the Act and definition in section 43(5) of the Act it is understood that when an assessee is engaged in the business of purchase or sale of any commodity including stocks and shares which are periodically or ultimately settled otherwise than by actual delivery or transfer of the commodity or scrips will be termed as speculative transaction. So, non-delivery or transfer of the commodity or scrips would be treated as speculative transaction. However, the proviso exempts the transactions or activities appearing in clauses (a) to (e) which are not to be deemed to be speculative 8 | P a g e
ITA No. 346/Kol/2017 Baljit Securities, A.Y. 2012-13 transactions. Since in this case, the derivative transaction falls in the exemption, therefore the profit or loss from derivatives cannot be deemed to be a speculative transaction. Since the loss from derivative transaction is not a speculative loss, it can be set off with the profit and gain of business. So, in this case, the derivative loss suffered by the assessee can be set off with the assessee’s income from Brokerage and trading of shares (i.e. intra-head adjustment). This view of ours gets support from the decisions the Hon’ble jurisdictional High court in Asian Financial Services Ltd. Vs. CIT-3, Kolkata reported in 240 Taxman 192 (Kol) wherein it eas held that the activities covered in clause (a) to (e) of section 73 of the Act even though are not deemed as speculative business, however, these deemed businesses are distinct and separate from any other business. Thereafter, the Hon’ble High Court (supra) in similar circumstances observed that “now the question is whether the loss arising out of such being the business can be set off against the profit arising out of other business or businesses which may for clarity be called proper business. Under section 70 of the Act, the assessee is entitled to have the loss set off against his income from any other source under the same head unless otherwise provided. The question, however remains whether the explanation to sub-section (4) of section 73 relied upon by Mr. Lodh provides otherwise. A plain reading of the explanation quoted above cannot be said to have provided otherwise. In that case the irresistible conclusion is that the assessee is entitled to set off such loss arising out of deemed business against the income arising out of business proper.” In this case the total turnover on account of shares and securities trading, derivative transactions and broker transactions are given as under: Sl. Particulars Total Apportioned Gross Income Net No. Turnover Expenditure As per P/L Income/Loss (Rs.)(Col.A) (Rs.) Account(Rs.) (Rs.) (Col.D) Establishment (Col. C) [C-B] and other expenditure / interest) (Col. B) 1. Sale and purchase of 126,052,263 193701 315992 122291 shares (trading) 2 Derivative sale and 3,748,335 5760 -3748335 -3754095 purchase of shares 3. Income of Brokerage 24,483,100,897 37622482 15268296 -22354186 (Purchase & Sales turnover) Total 24,612,901,495 37821943 11835953 -25985990 9 | P a g e
ITA No. 346/Kol/2017 Baljit Securities, A.Y. 2012-13
From the table above it can be noted that the assessee has shown sale and purchase of shares by delivery, the gross income at Rs.3,15,992/- and the loss from derivative is (minus) Rs.37,48,335/-. Since derivative loss cannot be termed as from speculative transaction after the amendment w.e.f. AY 2006-07 where-after derivative transactions needs to be treated as non-speculative transactions. Thus, in view of the Tribunal’s view in assessee’s own case for AY 2009-10, the derivative loss cannot be held to be as a result of speculative transaction. Thus, for computation of total income which comes under group D (section 28 to 44 DB) all the three sources of income/loss should be aggregated first before application of the deeming fiction as per explanation to section 73 of the Act is concerned. Sub-section (4) of section 73 and explanation to it are as follows (For AY 2012-13): “Losses in speculation business- 1……. 2…… 3…… 4. No loss shall be carried forward under this section for more than [four assessment years] immediately succeeding the assessment year for which the loss was first computed. Explanation .- Where any part of the business of a company (other than a company whose gross total income consists mainly of income which is chargeable under the heads “Interest on securities", Income from house property", "Capital gains”, and Income from other sources”) or a company (the principal business of which is the business of banking) or the granting of loans and advances) consists in the purchase and sale of shares of other companies, such company shall, for the purposes of this section, be deemed to be carrying on a speculation business to the extent to which the business consists of the purchase and sale of such shares.' 13. We find from a reading of the above explanation that in the case of a company whose business consists mainly or partly of purchase and sale of shares of other companies, it will amount to speculation business, unless such company’s gross total income consists mainly of income under the heads of “Interest on securities” and “Income from house property”, “Capital Gains” and “Income from other sources”, or where the principal business of the company is the business of banking or of granting loans and advances. Hence from this, the following points emerge:-
• It applies to companies whose business consists of purchase and sale of shares of other companies.
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ITA No. 346/Kol/2017 Baljit Securities, A.Y. 2012-13 • It applies to all purchase and sale of shares. • It does not differentiate between ‘Delivery based transactions’ and ‘F&O’ operations. • It applies to the entire business of purchase and sale of shares, whether such trading is delivery based or non-delivery based and such business is deemed as “speculation” to the extent to which the business consists of the purchase and sale of such shares.
From a reading of the above provision it understood that if an assessee is a company which deals in purchase and sale of shares of other companies [and which does not come within the exception stated in the provision itself] so, then such a company shall for the purpose of this section be deemed to be carrying on speculation business to the extent to which the business consists of the purchase and sale of such shares. Here in this case on hand, there is no doubt that the assessee is a company and is in the business of purchase and sale of shares of other companies. And the deeming provision u/s. 73 of the Act is attracted since in this case there is net loss of assessee’s business of purchase and sale of shares of other companies. However as held (supra), since the assessee transacted in sale & purchase of shares of other companies, by delivery as well as non-delivery (transactions of derivatives) are not hit by Sec.43(5) of the Act and hence the aggregation of the brokerage, share trading profit and loss from derivative transactions should be done before application of the Explanation to Sec.73 of the Act.
We find that the assessee had treated the entire activity of brokerage, purchase and sale of shares which comprised of both delivery based and non-delivery based trading as one composite business before the application of deeming provision contained in Explanation to Sec.73 of the Act and accordingly, claimed set off of the loss incurred in non-delivery based trading (derivative) with profit derived from delivery based share trading and brokerage which is legally valid. Therefore, we confirm the action of the Ld. CIT(A) and dismiss this ground of appeal of the revenue.
Ground no. 3 of the revenue is against the action of the Ld. CIT(A) in deleting the addition of Rs.4,74,350/- u/s. 36(1)(va) read with section 2(24)(x) of the Act in respect of
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ITA No. 346/Kol/2017 Baljit Securities, A.Y. 2012-13 employees contribution to Provident Fund deposit beyond the due date prescribed under the PF Act.
The AO disallowed Rs.4,74,350/- since the deposit of employees’ contribution to PF was beyond the due date prescribed under the PF Act. On appeal, the Ld. CIT(A) has deleted the addition by observing as under: “The A.R has stated that "Please refer Annexure - C of the Tax Audit Report appearing at Page 63 of attachments to Statement of facts, which was available before the A.O. in assessment proceeding, giving details of employee's contribution to PF, date of deduction, due date of payment & date of actual payment. Details of addition made by the A.O. in respect of deposit' of contribution amount beyond the due date prescribed in the Act but before filing of return of income are appearing in the modified statement attached herewith. Hon’ble High Court had held in the case of "CIT Circle-1, Kol vs. M/s Vijay Shree Ltd " copy of order appearing at page 73 to 74 of this paper book had held that the deposit of employees' contribution to PF before the due date of filing of return cannot be disallowed u/s 36(1 )(va) & 2(24)(x) in view of the provisions of section 43B of the act. This judgment is finding Support from orders of other courts as well, copies attached with paper book. Relying upon the judgment of jurisdictional High Court the appeal on this ground no 4 is allowed.”
We have heard rival submissions and gone through the facts and circumstances of the case. We note that the assessee has deposited the employees’ contribution to Provident Fund before filing of return of income which fact has not been assailed by the revenue before us. Since the assessee has deposited the contribution amount to the Provident Fund before filing of return of income, the Ld. CIT(A) relying on the decision of the Hon’ble jurisdictional High court in the case of CIT Vs. Vijayshree Ltd. (2014) 43 taxmann.com 396 (Cal) has allowed the appeal of the assessee, which decision is binding on this Tribunal and at the time of hearing before us, no other order of the Hon’ble Supreme Court has been cited reversing this view of the Hon’ble High Court. Therefore, we confirm the order of the Ld. CIT(A) and dismiss this ground of appeal of the revenue.
In the result, the appeal of revenue is partly allowed. Order is pronounced in the open court On 24th February, 2021. Sd/- Sd/- (J.S. Reddy) (A. T. Varkey) Accountant Member Judicial Member Dated: 24.02.2021 JD, Sr. PS 12 | P a g e
ITA No. 346/Kol/2017 Baljit Securities, A.Y. 2012-13
Copy of the order forwarded to:
Appellant- ACIT, circle-15(1), Kolkata
M/s. Baljit Securities, Ground Floor, Baljit Kunj, 7A, Pretoria Street, Kolkata-700 071. 3. The CIT(A)- 16, Kolkata (sent through e-mail) 4. CIT- , Kolkata 5. DR, Kolkata Benches, Kolkata (sent through e-mail) True Copy By Order
Assistant Registrar ITAT, Kolkata Benches, Kolkata
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