Kalyani consultants Pvt. Ltd., Pune V. ITO, Ward 11(3), Pune

ITA 1279/PUN/2010

• Counselvise Citation: 127924514 RSA 2010
• Duration Of Justice: 1 year(s) 2 month(s) 26 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 30-12-2011
• Appeal Filed By: Assessee
• Order Result: Allowed
• Bench Allotted: B
• Assessment Year: 2006-2007
• Appeal Filed On: 04-10-2010
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: NEERA MALHOTRA
• Assessee Lawyers: C H NANIWADEKAR
• Keywords: Transactions in derivatives
• Section: 14A; 43(5)

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL PUNE BENCH B, PUNE BEFORE SHRI SHAILENDRA KUMAR YADAV, JUDICIAL MEMBER AND SHRI D. KARUNAKARA RAO, ACCOUNTANT MEMBER I.T.A. NO. 1279/PN/2010 : A.Y. 2006-07 KALYANI CONSULTANT PVT. LTD., 1 ST FLOOR, B & C WING SHANGRILA GARDEN, OPP. BUND GARDEN, PUNE-411 001 PAN AAACK 7314 C APPELLANT VS. I.T.O. WARD 11(3) PUNE RESPONDENT APPELLANT BY: SHRI C.H. NANIWADEKAR RESPONDENT BY: MS. NEERA MALHOTRA DATE OF HEARING: 28-12-2011 DATE OF PRONOUNCEMENT: 30-12-2011 ORDER PER SHAILENDRA KUMAR YADAV, JM THIS APPEAL HAS BEEN FILED BY THE ASSESSEE AGAINST THE ORDER OF THE CIT-(A)-I PUNE DATED 11-12-2009 FOR A. Y 2006- 07 ON THE FOLLOWING GROUNDS. 1. THE LEARNED CIT(A) ERRED ON FACTS AND IN LAW IN DISALLOWING A SUM OF RS 20,84,208/- BEING LOSS INCURRED IN DEALING IN OPTIONS AND FUTURES TRANSACTIONS. 2. THE LEARNED CIT(A) ERRED ON FACTS AND IN LAW IN CONFIRMING THE DISALLOWANCE FOR RS. 64,01,652/- U/S 14A OF THE ACT. 3. THE FIRST ISSUE IS WITH REGARD TO THE DISALLOWA NCE OF RS. 20,84,208/- BEING LOSSES INCURRED IN DEALING OP TIONS AND FUTURE TRANSACTIONS. ACCORDING TO THE ASSESSIN G 2 ITA NO. 1279/PN/2010 KALYANI CONSULTANTS PVT.LTD. A.Y. 2006-07 OFFICER, SUCH LOSSES ON FUTURES AND OPTIONS ARE NOT ALLOWABLE AND IT IS ALSO MENTIONED THAT THE ASSESSE E ITSELF HAS ADDED BACK SUCH LOSSES IN THE COMPUTATION OF TO TAL INCOME. THE STAND OF THE ASSESSEE WAS THAT THE ASS ESSING OFFICER HAS SIMPLY DISALLOWED THE LOSSES BY MENTION ING THAT SUCH LOSSES ON DEALING IN FUTURE AND OPTIONS IS NOT ALLOWABLE WITHOUT ELABORATING OR CITING ANY REASONS FOR SUCH CONCLUSION. ACCORDING TO THE LEARNED AR FOR T HE ASSESSEE, THIS OBSERVATION IS CONTRARY TO THE FACTS AS THE ASSESSEE HAD NEVER ADDED BACK SUCH LOSSES IN THE COMPUTATION. IT IS FURTHER POINTED OUT THAT AS PE R CLAUSE (D) TO SECTION 43(5) OF THE ACT INSERTED W.E.F. 1-4 -2006 THE TRANSACTIONS IN DERIVATIVES I.E. FUTURES AND OPTION S SHALL NOT BE CONSIDERED AS SPECULATIVE TRANSACTIONS AND THEREFORE, THE ASSESSING OFFICER WAS NOT JUSTIFIED IN DISALLOWING THE IMPUGNED LOSSES HOLDING IT AS SPECU LATION LOSS. IN THIS BACKGROUND, IT WAS SUBMITTED THAT TH E MATTER BE RESTORED TO THE FILE OF THE ASSESSING OFFICER F OR PROPER ADJUDICATION ON THE ISSUE AS PER FACT AND LAW. TAKI NG OVERALL VIEW OF THE SITUATION, ACCORDING TO US, THE MATTER REQUIRES DEEP PROBE IN THE LIGHT OF LATEST LEGAL DE CISIONS. SO, THE ISSUE IS RESTORED TO THE FILE OF THE ASSESS ING OFFICER WITH A DIRECTION TO DECIDE THE SAME AFRESH AS PER F ACT AND LAW AFTER PROVIDING DUE OPPORTUNITY OF HEARING TO T HE ASSESSEE. 4. THE NEXT ISSUE IS WITH REGARDS TO DISALLOWANCE O F RS. 64,01,652/- MADE BY THE ASSESSING OFFICER U/S 14A OF THE ACT BEING EXPENSES RELATABLE TO THE EXEMPT INCO ME AND CONFIRMED BY THE CIT(A). THE LEARNED COUNSEL FOR TH E ASSESSEE CONTENDED THAT THE EXPENSES, ASSUMING WIT HOUT ADMITTING THAT THEY ARE TO BE CONSIDERED FOR DISALL OWANCE 3 ITA NO. 1279/PN/2010 KALYANI CONSULTANTS PVT.LTD. A.Y. 2006-07 U/S 14A OF THE ACT, ARE REQUIRED TO BE APPORTIONED ON THE BASIS OF VOLUME OF ACTIVITIES (I.E. GROSS INCOME AN D NOT NET INCOME AS DONE BY THE ASSESSING OFFICER). IF AT AL L, THE DISALLOWANCE IS TO BE MADE, ONLY 20% OF THE EXPENSE S NEEDED TO BE DISALLOWED. IN THIS BACKGROUND, IT WAS SUBMITTED THAT THE MATTER BE RESTORED TO THE FILE O F THE ASSESSING OFFICER FOR PROPER ADJUDICATION ON THE I SSUE AS PER FACT AND LAW. TAKING OVERALL VIEW OF THE SITUAT ION, DISALLOWANCE MADE U/S 14A NEEDS DEEP PROBE INTO THE MATTER IN THE LIGHT OF FACTUAL AND LEGAL MATRIX WHI CH HAS NOT BEEN DONE BY THE LOWER AUTHORITIES. SO IN THE INTEREST OF JUSTICE, WE RESTORE THE MATTER TO THE FILE OF TH E ASSESSING OFFICER WITH A DIRECTION TO DECIDE THE SAME AS PER FACT AND LAW AFTER PROVIDING DUE OPPORTUNITY OF HEARING TO T HE ASSESSEE. IN THE RESULT, THE APPEAL IS ALLOWED FOR STATISTIC AL PURPOSES. PRONOUNCED IN THE OPEN COURT ON 30-12-2011. SD/- SD/- D. KARUNAKARA RAO SHAILENDRA KUMAR YADAV ACCOUNTANT MEMBER JUDICIAL MEMBER PUNE DATED THE 30 TH DECEMBER 2011 ANKAM COPY OF THE ORDER IS FORWARDED TO : 1. THE APPELLANT 2. THE RESPONDENT 3. THE CIT-I THANE 4. CIT(A)-I PUNE 4. THE D.R, ITAT PUNE BENCH, PUNE 5. GUARD FILE BY ORDER SR. PRIVATE SECRETARY INCOME TAX APPELLATE TRIBUNAL 4 ITA NO. 1279/PN/2010 KALYANI CONSULTANTS PVT.LTD. A.Y. 2006-07