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Income Tax Appellate Tribunal, KOLKATA ‘A’ BENCH, KOLKATA
Before: Sri J. Sudhakar Reddy & Sri S.S. Viswanethra Ravi
Assessment Year: 2014-15 Assistant Commissioner of Income Tax, Central Circle-2(4), Kolkata......…………….......Appellant Vs. M/s. Asian Capital Market Ltd....…...................................…..……………….…...………...............Respondent 4/1, Middleton Street 5th Floor Kolkata – 700 071 [PAN : AACCA 4879 N] Appearances by: Shri Miraj D. Shah, A/R, appeared on behalf of the assessee. Shri Sankar Halder, JCIT Sr. D/R. appearing on behalf of the Revenue. Date of concluding the hearing : November 22nd, 2018 Date of pronouncing the order : December 12th , 2018 ORDER Per J. Sudhakar Reddy, AM :- This is an appeal filed by the revenue directed against the order of the Learned Commissioner of Income Tax (Appeals) - 20, Kolkata, (ld. CIT(A)) passed u/s. 250 of the Income Tax Act, 1961, (the ‘Act’), dt. 07/06/2017, for the Assessment Year 2014-15, on the following grounds:- “
1. That in the facts and circumstances of the case and under law, the Ld CIT(A) has erred allowing the appeal of the assessee and deleting the disallowance of loss made by the assessee on account of Derivative Trading of Rs. 2,96,85,183/-
2. That in the facts and circumstances of the case and under law, the Ld. CIT(A) has erred in holding that disallowance u/s 14A read with Rule 80 will not apply where no exempt income is received or receivable during the previous year by ignoring the provisions of Rule 80 that provides for computation of expenditure in respect of not only those investments, income from which does not form part of total income but also those investments, income from which shall not form part of total income.
3. That in the facts and circumstances of the case and under law, the Ld CIT(A) has erred in holding that disallowance u/s 14A read with Rule 80 cannot be made Assessment Year: 2014-15 M/s. Asian Capital Market Ltd. in a year in which no exempt income has been earned or received by the Assessee without considering the CBDT's Circular No 5/2014 dated 11.02.2014.
4. That the department craves leave to add, alter or modify any grounds of appeal in the course of Appellate proceedings.”
We have heard rival contentions. On careful consideration of the facts and circumstances of the case, perusal of the papers on record, orders of the authorities below as well as case law cited, we hold as follows:- 3. Ground No.1, is against the deletion of disallowance of loss made by the assessee on account of derivative trading. The Assessing Officer has dealt with the issue at para 2.2. of his order. The basis of disallowance was that the assessee was not a regular trader in derivatives market and that he only engaged in such trades on 16 occasions during the current year and except on one occasion had incurred huge loss. The transactions on which profit was derived was accepted as genuine by the Assessing Officer. He further held that the margins of gain and loss in the derivative market is very small and the brokerage charges would be very high. The sum and substance of his finding was that the transactions were pre-meditated trading. The ld. CIT(A) at pages 8 to 14 had considered the issue. After considering all the submissions of the assessee to the various objections raised by the Assessing Officer, he held as follows:- “I have considered findings of the AO and the written submission, case laws and point-wise rebuttal filed by the AR on this issue, I think the AO's action of accepting only the positive gains by the assessee from derivative business and not accepting the losses incurred in some transactions in the same business is not justified. The AO should either accept the derivative business in its totality or he should have rejected it in totality. He cannot resort to accept only gains from it and reject losses incurred therein. Accordingly, assessee's appeal on grounds no 2 and 3 are allowed.” 4. We find no infirmity in this order as admittedly all the details of the profit as well as loss along with supporting documents such as contract notes, bank statements etc. have been filed by the assessee. The disallowance was made on presumptions and surmises. The Hon’ble Calcutta High Court in the case of Principal Commissioner Of Income vs M/S. Blb Cables And Conductors; ITAT No.78 of 2017, GA No.747 of 2017; dt. 19 June, 2018, had upheld the order of the Tribunal by observing as follows:-
Assessment Year: 2014-15 M/s. Asian Capital Market Ltd.
4. We have heard both the side and perused the materials available on record. The ld. AR submitted two papers books. First book is running in pages no. 1 to 88 and 2nd paper book is running in pages 1 to 34. Before us the ld. AR submitted that the order of the AO is silent about the date from which the broker was expelled. There is no law that the off market transactions should be informed to stock exchange. All the transactions are duly recorded in the accounts of both the parties and supported with the account payee cheques. The ld. AR has also submitted the IT return, ledger copy, letter to AO land PAN of the broker in support of his claim which is placed at pages 72 to 75 of the paper book. The ld. AR produced the purchase & sale contracts notes which are placed on pages 28 to 69 of the paper book. The purchase and sales registers were also submitted in the form of the paper book which is placed at pages 76 to 87. The Board resolution passed by the company for the transactions in commodity was placed at page 88 of the paper book. On the other hand the ld. DR relied in the order of the lower authorities. 4.1 From the aforesaid discussion we find that the assessee has incurred losses from the off market commodity transactions and the AO held such loss as bogus and inadmissible in the eyes of the law. The same loss was also confirmed by the ld. CIT(A). However we find that all the transactions through the broker were duly recorded in the books of the assessee. The broker has also declared in its books of accounts and offered for taxation. In our view to hold a transaction as bogus, there has to be some concrete evidence where the transactions cannot be proved with the supportive evidence. Here in the case the transactions of the commodity exchanged have not only been explained but also substantiated from the confirmation of the party. Both the parties are confirming the transactions which have been duly supported with the books of accounts and bank transactions. The ld. AR has also submitted the board resolution for the trading of commodity transaction. The broker was expelled from the commodity exchange cannot be the criteria to hold the transaction as bogus. In view of above, we reverse the order of the lower authorities and allow the common grounds of assessee's appeal.
[quoted verbatim] This is essentially a finding of the Tribunal on fact. No material has been shown to us which would negate the Tribunal's finding that off market transactions are not prohibited. As regards veracity of the transactions, the Tribunal has come to its conclusion on analysis of relevant materials. That being the position, Tribunal having analysed the set of facts in coming to its finding, we do not think there is any scope of interference with the order of the Tribunal in exercise of our jurisdiction under Section 260A of the Income Tax Act, 1961. No substantial question of law is involved in this appeal. The appeal and the stay petition, accordingly, shall stand dismissed. There shall be no order as to costs.”
Assessment Year: 2014-15 M/s. Asian Capital Market Ltd. 4.1. The Jurisdictional Tribunal in the case of Kamla Prasad Kajaria (HUF) vs. ITO; order dt. 24/05/2018, under similar circumstances held as follows:-
“4. I have heard the arguments of both the sides and also perused the relevant material on record. It is observed that the claim of the assessee for the impugned loss incurred in trading in derivatives was disallowed by the authorities below mainly on the ground that the assessee had not given any margin money to the broker before the relevant transactions and in his statement, the Director of the broker company had admitted that his company was indulging in providing bogus loss in currency derivatives as per the requirement of the clients. At the time of hearing before the Tribunal, the learned DR has laid emphasis on these two aspects in support of the revenue's case. However, as contended by the learned counsel for the assessee by relying on the decision of Hon'ble Bombay High Court in the case of Bonanja Commodities Brokers Pvt. Ltd. vs Mrs. Roshanara Bhinder (arbitration petition 195 of 2015 dated 16.04.2015), the collection of margin money as per the by-laws of MCX Stock Exchange Ltd. is only discretionary in nature and the transactions entered into by the clients without payment of margin money cannot be considered as illegal. As further contended by the learned counsel for the assessee, there is nothing in the statement of Shri Sachit Saraf, Director of the broker company nor anything has been brought on record by the A.O. to show that the transactions entered into by the assessee company through the said broker were bogus. As matter of fact, a perusal of the order of the A.O. shows that enquiry was directly made by him from MCX Stock Exchange Ltd. by issuing the notice u/s 133(6) of the Act in order to verify the transactions entered into by the assessee through M/s. Marigold Vanijya Pvt. Ltd. and in reply to the said notice, MCX Stock Exchange Ltd. had not only confirmed the transactions but had also furnished the required information along with a CD containing details of all transactions made by the assessee during the year under consideration through broker Marigold Vanijya Pvt. Ltd. As found by the A.O. on verification of the said details, total transactions involving sales of Rs. 15,19,22,392/- and purchases of Rs. 15,19,23,880/- were made by the assessee resulting into a loss of Rs. 1,488/-. This relevant evidence confirming the genuineness of the transactions made by the assessee on MCX Stock Exchange Ltd. was brushed aside by the A.O. on the ground that loss shown therein was Rs. 1,488/- whereas the assessee had claimed a loss of Rs. 5,17,141/-. As submitted on behalf of the assessee before the Assessing Officer as well as before us, expenditure was incurred by the assessee relating to the said transactions on account of brokerage, service tax and other charges levied by the broker aggregating to Rs. 5,15,653/- and accordingly the total loss as claimed by the assessee was to the tune of Rs. 5,17,141/-. As pointed out by the learned counsel for the assessee, this additional expenditure incurred by the assessee on account of brokerage, service tax and other charges was duly supported by the documentary evidence in the form of relevant bills issued by the broker and there was no reason whatsoever given by the A.O. for not accepting this explanation of the assessee. Keeping in view all these facts and circumstances of the case, I am of the view that the genuineness of the transactions made by the assessee on MCX Stock Exchange Ltd. through broker Marigold Vanijya Pvt. Ltd. was duly established and the action of the authorities below in disallowing the claim of the assessee for the resultant Assessment Year: 2014-15 M/s. Asian Capital Market Ltd. loss in dealing in currency derivatives is not tenable. I, therefore, delete the said disallowance and allow the appeal of the assessee.”
Consistent with the view taken therein, we uphold the order of the ld. CIT(A) and dismiss the Ground No. 1 of the revenue.
Ground No. 2 & 3, are against the disallowance u/s 14A r.w.r. 8D. 6.1. Admittedly, there is no exempt income earned during the year and hence not disallowance can be made u/s 14A r.w.r. 8D, as held by the Hon’ble Jurisdictional High Court in the case of CIT vs. Ashika Global Securities Ltd. ITAT 100 of 2014, GA 2122 of 2014, judgment dt. 11/06/2018. The Hon’ble Delhi High Court in the case of Cheminvest Ltd. v. Commissioner of Income-tax-IV [2015] 378 ITR 33 (Delhi) has laid down a similar proposition of law. The ld. CIT(A) in this case as restricted the disallowance to Rs.7604/- only. As the assessee has not filed an appeal in this regard, we do not interfere with this order of the ld. CIT(A).
In the result, Ground No. 2 & 3 of the revenue are dismissed.
Ground No. 4 is general in nature.
In the result, appeal of the revenue is dismissed.
Kolkata, the 12th day of December, 2018. Sd/- Sd/- [S.S. Viswanethra Ravi] [J. Sudhakar Reddy] Judicial Member Accountant Member Dated : 12.12.2018 {SC SPS} Assessment Year: 2014-15 M/s. Asian Capital Market Ltd. Copy of the order forwarded to: 1. M/s. Asian Capital Market Ltd 4/1, Middleton Street 5th Floor Kolkata – 700 071 2. Assistant Commissioner of Income Tax, Central Circle-2(4), Kolkata 3. CIT(A)- 4. CIT- , 5. CIT(DR), Kolkata Benches, Kolkata.