DCIT 4(1), MUMBAI vs. INDIA ADVANTAGE SECURITIES LTD, MUMBAI

This appeal filed by the Revenue on 23.11.2015 is against the order of the CIT (A)-8, Mumbai dated 18.3.2014 for the assessment year 2009-2010. In this appeal, Revenue raised the following solitary ground and the same reads as under:- “Whether, on the facts and in the circumstances of the case and in law, the CIT (A) is right in directing the AO to delete the addition of deemed speculation loss of Rs. 3,55,93,499/- made by the AO under Explanation to section 73 of the IT Act, 1961 as the assessee has wrongly set off speculative loss against non-speculative income.”

The only issue raised by the Revenue relates to the applicability of the provisions of Explanation to section 73 of the Act. The case of the Assessing Officer is that the said provisions apply to the present case, since, the loss earned on trading of securities should be treated as a speculation loss and therefore, it should not be set-off against the normal profits of the business. During the first appellate proceedings, CIT (A) discussed the facts of the case, analysed the reasons and gave a finding that the provisions should not apply to the case as the income earned by the assessee from other sources being Rs. 57,70,782/- is higher. He analysed the said Explanation to section 73 of the Act in para 3.3.9 of his order before for coming to the above conclusion. Considering the judgment of the Hon’ble juri ictional High Court in the case of CIT vs. Darshan Securities P. Ltd [341 ITR 556 (Mum)] (para 3.3.11 of the CIT (A)’s order is relevant in this regard), CIT (A) held that the provisions of Explanation to section 73 do not apply to the facts of the present case. CIT (A) also discussed other arguments of the Revenue before dismissing the arguments of the AO. Aggrieved, Revenue carried the matter in appeal before the Tribunal by raising the above mentioned ground.

During the proceedings before us, Ld Counsel for the assessee demonstrated that the declared speculation loss was never adjusted against the non-speculative business profits of the assessee. Relying on the contents of pages 1, 2 and 3 of the paper book, being the computation of income, Ld Counsel for the assessee demonstrated that loss of Rs. 59,58,527/- was carried forward for future set-off, if any.

On the other hand, Ld DR for the Revenue relied on the order of the AO.

After hearing both the parties and on perusal CIT (A)’s order in general and paras 3.3.10 and 3.3.11 of his order in particular, we find the same are relevant

Considering the above settled nature of the issue in the light of the juri ictional High Court judgment in the case of Darshan Securities P. Ltd (supra), we are of the opinion that the order of the CIT (A) on this issue is fair and reasonable and it does not call for any interference. Accordingly, Ground raised by the Revenue is dismissed.

In the result, appeal of the Revenue is dismissed. (By assessee)

This appeal filed by the assessee on 20.5.2015 is against the said order of the CIT (A)-8, Mumbai dated 18.3.2014 for the assessment year 2009-2010. In this appeal, assessee raised the following grounds which read as under:- “1. The CIT (A) has erred in law and facts in confirming disallowance of Rs. 23,95,721/- invoking section 14A of the Act.

The Ld CIT (A) has erred in law and in facts not appreciating that the Assessing Officer had not complied with the provisions of Rule 8D(1) while making the disallowance u/s 14A of the Act.”

At the outset, Ld Counsel for the assessee mentioned that in the order of the Revenue there is an error by way of inclusion of stock-in-trade for the purpose of determining the disallowable u/s 14A of the Act. In this regard, Ld Counsel for the assessee mentioned that such inclusion of stock-in-trade is not approved by the juri ictional High Court in assessee’s own case in Income Tax Appeal No.1131 of 2013, dated 13th April, 2015. In support, assessee filed the Tribunal order in ITA No.6711/M/2011 (AY 2008-2009), dated 14.9.2012. Para 6 of the said Tribunal’s order (supra) is relevant in this regard and the relevant lines from the said para 6 are extracted as under:- “6.......We, therefore, see no infirmity in the order of the Ld CIT (A) in deleting the disallowance u/s 14A computed by the AO in relation to the stock-in-trade......”

Ld Counsel for the assessee also submitted that in the judgment of the Hon’ble juri ictional High Court (supra) dated 13.4.2015, which is agitated by the Revenue, the High Court held that no substantial question of law arises out of the order of the Tribunal on the above issue. It is the submission of the Ld Counsel that considering the same, assesse’s case may be allowed.

We have heard Ld Representatives of both the parties and perused the orders of the Revenue as well as the cited judgment of the Hon’ble juri ictional High Court (supra) and the order of the Tribunal (supra) dated 14.9.2012. Considering the same, we direct the AO to comply with the said Tribunal’s order as well as the judgment of the juri ictional High Court for the AY 2008-2009 and decide the issue afresh. The arguments relating to the applicability of the High Court judgment in the case Reliance Utilities and Power Limited [2009] 313 ITR 340 (Bom) is also remanded to the file of the AO for similar adjudication. AO shall grant a reasonable opportunity of being heard to the assessee as per the set principles of natural justice. Accordingly, grounds raised by the assessee are allowed for statistical purposes.

In the result, appeal of the assessee is allowed for statistical purposes. Order pronounced in the open court on 10th February, 2016. (SANJAY GARG) ACCOUNTANT MEMBER भुंफई Mumbai; ददनांक 10.2.2016 व.नन.स./ OKK , Sr. PS

ITAT, Mumbai गार्ड पाईर / Guard file. 6. सत्मावऩत प्रनत ////