KUNAL POLYMERS P. LTD, Pune V. DCIT CIR- 11[1], Pune

ITA 1859/PUN/2012

• Counselvise Citation: 185924514 RSA 2012
• Duration Of Justice: 2 year(s) 9 month(s) 21 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 15-07-2015
• Appeal Filed By: Assessee
• Order Result: Partly Allowed
• Bench Allotted: B
• Next Hearing Date: 02-03-2015
• Assessment Year: 2008-2009
• Appeal Filed On: 24-09-2012
• Result in Favour of: Partly Allowed
• Court: TRIBUNAL
• Assessee Lawyers: K S MEHTA
• Keywords: Business income; Earning of tax free income; Speculation loss; Condonation of delay
• Section: 6; 28; 14A

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL B BENCH, PUN E , , !'#$ BEFORE SHRI R.K. PANDA, AM AND SHRI VIKAS AWASTHY, JM / ITA NO. 1859/PN/2012 #% & '& / ASSESSMENT YEAR : 2008-09 KUNAL POLYMERS PVT. LTD., 118, SATYAM ESTATE, OFF KARVE ROAD, ERANDVANE, PUNE . / APPELLANT PAN : AAACK7498R (% V/S. DY. COMMISSIONER OF INCOME TAX, CIR - 11(1), PUNE . / RESPONDENT / APPELLANT BY : SHRI K.S. MEHTA / DEPARTMENT BY : SHRI A.K. MODI/ SHRI MANISH KUMAR SINGH ) DATE OF HEARING :18-05-2015 / DATE OF PRONOUNCEMENT :15-07-2015 ! ORDER PER VIKAS AWASTHY, JM : THE APPEAL HAS BEEN FILED BY THE ASSESSEE AGAINST THE OR DER OF COMMISSIONER OF INCOME TAX (APPEALS)-I, PUNE DATED 30-03- 2012 FOR THE ASSESSMENT YEAR 2008-09. 2. THE BRIEF FACTS OF THE CASE AS EMANATING FROM RECORDS ARE : THE ASSESSEE COMPANY IS A DISTRIBUTOR OF MOBILE HANDSETS, PCOS AND RCVS OF RELIANCE COMMUNICATION INFRASTRUCTURE LTD. AND SET TOP BOX OF TAT A SKY ETC. 2 ITA NO. 1859/PN/2012, A.Y. 2008-09 APART FROM ABOVE, THE ASSESSEE IS ALSO TRADING IN SHARES AND IS A DEALER OF FIBC PLASTIC BAGS. THE ASSESSEE FILED ITS RETURN OF INCO ME FOR THE ASSESSMENT YEAR 2008-09 ON 30-09-2008 DECLARING TOTAL LOSS OF RS.32,11,919/-. THE CASE OF THE ASSESSEE WAS SELECTED FO R SCRUTINY AND NOTICE U/S. 143(2) WAS ISSUED TO THE ASSESSEE ON 20-08-2 009. THE ASSESSEE HAD SUFFERED LOSS OF RS.1,22,51,544/- IN SHARE TRADING BUSINE SS. THE ASSESSEE CLAIMED THE SAME AS BUSINESS LOSS. DURING THE COURSE OF SCRUTINY ASSESSMENT, THE ASSESSING OFFICER HELD THAT IN VIEW OF EXPLANATION TO SE CTION 73, THE LOSS SUFFERED BY THE ASSESSEE IN SHARE TRADING BU SINESS IS SPECULATIVE LOSS AND HENCE, THE SAME CANNOT BE ALLOWED AG AINST BUSINESS INCOME FROM OTHER TRADING ACTIVITIES. THE ASSESSING OFFICER FURTHER DISALLOWED INTEREST ON ACCOUNT OF DIVERSION OF BORROWED FUN DS FOR NON- BUSINESS PURPOSES, DISALLOWANCE U/S. 14A R.W. RULE 8D, DISALLOW ANCE OF PAYMENT OF COMMISSION TO M/S. EAGLE KING INVESTMENTS DEVE LOPMENT LTD., SINGAPORE FOR NON-DEDUCTION OF TDS, ETC. AGGRIEVED BY THE ASSESSMENT ORDER DATED 10-12-2010, T HE ASSESSEE FILED AN APPEAL BEFORE THE COMMISSIONER OF INCOME TAX (APPEA LS). THE COMMISSIONER OF INCOME TAX (APPEALS) VIDE IMPUGNED ORDER U PHELD THE FINDINGS OF ASSESSING OFFICER AND DISMISSED THE APPEAL OF THE ASSESSEE. AGAINST THE ORDER OF COMMISSIONER OF INCOME TAX (APPEALS), T HE ASSESSEE IS IN SECOND APPEAL BEFORE THE TRIBUNAL. 3. SHRI K.S. MEHTA APPEARING ON BEHALF OF THE ASSESSEE S UBMITTED THAT THE AUTHORITIES BELOW HAVE ERRED IN COMING TO THE CONCLUS ION THAT THE LOSS SUFFERED BY ASSESSEE IN SHARE TRADING BUSINESS IS SPECULAT IVE LOSS. THE ASSESSEE IS REGULARLY ENGAGED IN SHARE TRADING BUSINESS. IN THE EARLIER ASSESSMENT YEARS, THE ASSESSEE HAS BEEN FILING RETURN OF INCOME BY TREATING THE INCOME FROM SALE OF SHARES AS BUSINESS INCOME. THE REVENUE HAS BEEN ACCEPTING THE SAME. IN THE IMPUGNED ASSESSMENT YEAR, T HE ASSESSEE 3 ITA NO. 1859/PN/2012, A.Y. 2008-09 SUFFERED HUGE LOSS IN SHARE BUSINESS. THE ASSESSEE CLAIMED THE LOSS FROM SHARE TRADING BUSINESS. THE REVENUE AUTHORITIES IN AN A RBITRARY AND UNJUSTIFIED MANNER HAVE DENIED THE SAME BY TAKING THE SH ELTER OF EXPLANATION TO SECTION 73 OF THE ACT. THE LD. AR SUBMITTED THAT EXPLANATION TO SECTION 73 HAS BEEN AMENDED BY FINANCE ACT (NO. 2), 20 14. WITH THIS AMENDMENT THE COMPANIES WHICH HAVE PRINCIPAL BUSINESS OF T RADING IN SHARES HAVE ALSO BEEN EXCLUDED FROM THE AMBIT OF EXPLANAT ION TO SECTION 73. IN OTHER WORDS, IF THE PRINCIPAL BUSINESS OF THE COMPANY IS TRADING IN SHARES, IN CASE OF SUCH COMPANY THE BUSINESS OF PURCHAS E AND SALE OF SHARES OF OTHER COMPANIES SHALL NOT BE REGARDED AS SPEC ULATIVE. THE LD. AR CONTENDED THAT ALTHOUGH THE AMENDMENT IS EFFECTIVE FROM 0 1-04-2015 BUT THE AMENDMENT IS CLARIFICATORY IN NATURE AND THUS, WOULD AP PLY RETROSPECTIVELY. 3.1 THE LD. AR ARGUED, THAT THE MAIN REASON AND OBJECT FOR INSERTING EXPLANATION TO SECTION 73 WAS TO PREVENT INDUSTRIAL AND O THER MEGA BUSINESS HOUSES AND COMPANIES FROM SETTING OFF LOSSES IN PU RCHASE AND SALE OF SHARES OF RELATED OR ASSOCIATE COMPANIES AGAINST THE B USINESS PROFITS. HOWEVER, WITH INTRODUCTION OF SAID EXPLANATION EVEN GENUINE TRANSACTION IN SHARES CARRIED ON THROUGH STOCK EXCHANGES BY MEANS O F ON-LINE TRADING PLATFORMS, WERE REGARDED AS SPECULATIVE EVEN WHERE ACT UAL DELIVERIES WERE TAKEN AND GIVEN. THUS, THE LEGISLATURE RECOGNIZED THAT IF T HE TRANSACTIONS ARE CARRIED ON THROUGH ON LINE AND ELECTRONIC TRADING PLAT FORM ON APPROVED STOCK EXCHANGES AND WHERE SUCH TRANSACTIONS ARE SUPP ORTED BY TIME STAMPED CONTRACTS BEARING UNIQUE TRANSACTION NUMBER, TH EN THE GENUINENESS OF PROFIT/LOSS FROM SUCH TRANSACTION NEED TO B E ACCEPTED. IN SUPPORT OF HIS SUBMISSIONS, THE LD. AR PLACED RELIANCE ON THE JUDGMENT OF HON'BLE BOMBAY HIGH COURT IN THE CASE OF CIT VS. HSBC S ECURITIES & CAPITAL MARKETS INDIA (P.) LTD. REPORTED AS 23 TAXMANN.COM 377 (BOM.). 4 ITA NO. 1859/PN/2012, A.Y. 2008-09 3.2 IN RESPECT OF SECOND GROUND IN APPEAL, THE LD. AR SUB MITTED THAT THE COMMISSIONER OF INCOME TAX (APPEALS) HAS ERRED IN CONFIRMING ADDITION OF RS.3,81,863/-. THE SAID AMOUNT WAS RECEIVED AS INTEREST FR OM M/S. YASH DEVELOPERS. ON THE INTEREST AMOUNT RECEIVED FROM M/S. YA SH DEVELOPERS HAD DEDUCTED TAX IN THE ASSESSMENT YEAR 2009-10. THE ASSESSEE ACCORDINGLY OFFERED THE INCOME FOR TAX IN THE ASSESSMENT YEAR 2009-10. HOWEVER, THE ASSESSING OFFICER INSISTED THAT THE AMOUNT SH OULD BE ASSESSED TO TAX IN THE IMPUGNED ASSESSMENT YEAR. THE LD. AR CONT ENDED THAT IF THE INTEREST AMOUNT IS TAXED IN ASSESSMENT YEAR 2008-09, TH ERE WILL BE MISMATCH OF TDS IN ASSESSMENT YEAR 2009-10. MOREOVER, T HE AMOUNT HAS ALREADY BEEN OFFERED TO TAX IN ASSESSMENT YEAR 2009-10. THE SAME AMOUNT CANNOT BE TAXED TWICE I.E. IN ASSESSMENT YEARS 2008-09 A S WELL AS, IN ASSESSMENT YEAR 2009-10. 3.3 THE LD. AR FURTHER ARGUED THAT THE COMMISSIONER OF INC OME TAX (APPEALS) HAS ERRED IN CONFIRMING DISALLOWANCE OF RS.3,41,955/- IN RESPECT OF INTEREST PAID ON BORROWED FUNDS AND DIVERTED FOR NON-B USINESS PURPOSES. THE LD. AR SUBMITTED THAT THE ASSESSEE HAD SUFFICIENT OWN FUNDS. HOWEVER, THE LD. AR CONCEDED THAT THE PROPORTIONATE RELIEF MAY B E GRANTED TO THE ASSESSEE TO THE EXTENT OF AVAILABILITY OF OWN FUNDS OF THE ASSESSEE. 3.4 IN RESPECT OF PAYMENTS MADE TO M/S. EAGLE KING INVE STMENTS DEVELOPMENT LTD., SINGAPORE, THE LD. AR SUBMITTED THAT THE PAYMENT WERE MADE TO COMPANY AS COMMISSION CHARGES FOR THE SERVICES RENDERED ABROAD AND THE SAID COMPANY HAS NO PE IN INDIA. IN SUCH CIRCU MSTANCES, THERE IS NO QUESTION OF ITS INCOME BEING TAXABLE IN INDIA. THE AUT HORITIES BELOW HAVE ERRED IN COMING TO THE CONCLUSION THAT THE PAYMENTS MAD E ARE IN THE NATURE OF FEE FOR TECHNICAL SERVICES. 5 ITA NO. 1859/PN/2012, A.Y. 2008-09 3.5 IN RESPECT OF DISALLOWANCE OF RS.13,23,167/- MADE U/S. 14 A R.W. RULE 8D, THE LD. AR SUBMITTED THAT THE ASSESSEE HAS EARNED D IVIDEND INCOME ON SHARES HELD AS STOCK-IN-TRADE. THE DIVIDEND INCOME EARNE D BY THE ASSESSEE HAS BEEN OFFERED TO TAX AS BUSINESS INCOME. MOREOVER, N O DISALLOWANCE IS TO BE MADE U/S. 14A ON THE SHARES HELD AS STOCK-IN-TRADE. HE FURTHER SUBMITTED THAT DISALLOWANCE CANNOT EXCEED THE QUANTUM O F DIVIDEND INCOME. IN SUPPORT OF HIS SUBMISSIONS, THE LD. AR PLACED RE LIANCE ON THE JUDGMENT OF HON'BLE BOMBAY HIGH COURT IN THE CASE OF CI T VS. INDIA ADVANTAGE SECURITIES LTD. IN INCOME TAX APPEAL NO. 1131 OF 2013, DECIDED ON 13-04-2015. 4. ON THE OTHER HAND SHRI A.K. MODI AND SHRI MANISH KUMA R SINGH REPRESENTING THE DEPARTMENT VEHEMENTLY SUPPORTED THE FINDINGS OF COMMISSIONER OF INCOME TAX (APPEALS). THE LD. DR SUBMITTED THAT THE ASSESSEE FALLS WITHIN THE AMBIT OF EXPLANATION TO SECTION 7 3 OF THE ACT. THEREFORE, THE LOSS SUFFERED BY THE ASSESSEE IN SHARE TRA DING ACTIVITY IS TO BE ASSESSED AS SPECULATIVE LOSS. THE ASSESSEE DOES NOT FA LL IN ANY OF THE EXCEPTIONS CONTAINED IN THE EXPLANATION. THEREFORE, THE AS SESSEE CANNOT CLAIM SET OFF OF LOSS FROM SHARE TRADING AGAINST BUSINESS INC OME OF THE ASSESSEE. WITH REGARD TO INTEREST RECEIVED FROM M/S. YAS H DEVELOPERS, THE LD. DR SUBMITTED THAT THE ASSESSEE HAD NOT FILED ANY DOCU MENT TO SHOW THE INTEREST WAS EARNED BY THE ASSESSEE IN ASSESSMENT YEA R 2009-10. THE LD. DR DEFENDING THE DISALLOWANCE MADE U/S. 14A SUBMITTED THA T IRRESPECT OF THE FACT WHETHER THE ASSESSEE HAS HELD THE SHARES AS INVESTME NT OR STOCK-IN- TRADE DISALLOWANCE U/S. 14A HAS TO BE MADE. THE ASSESS EE HAS EARNED TAX FREE INCOME. THE ASSESSING OFFICER IS BOUND TO MAKE DISALLOWA NCE U/S. 14A R.W. RULE 8D, ONCE HE IS SATISFIED THAT THE ASSESSEE HAS N OT MADE CORRECT DISALLOWANCE U/S. 14A. 6 ITA NO. 1859/PN/2012, A.Y. 2008-09 IN RESPECT OF DISALLOWANCE U/S. 40(A)(I), THE ASSESSEE FAILED TO SHOW THAT THE PAYMENT MADE WAS NOT TAXABLE IN INDIA. THERE IS NO EVIDENCE TO SUPPORT THE CONTENTIONS OF THE ASSESSEE. THE LD. DR P RAYED FOR DISMISSING THE APPEAL OF THE ASSESSEE. 5. WE HAVE HEARD THE SUBMISSIONS MADE BY THE REPRESEN TATIVES OF RIVAL SIDES AND HAVE PERUSED THE ORDERS OF THE AUTHORITIES BE LOW. THE ASSESSEE HAS RAISED SIX GROUNDS IN ITS APPEAL. THE SAME ARE SUMMARIZED AS UND ER: I. LOSS IN SHARE BUSINESS CLAIMED AS BUSINESS LOSS, TREATED A S SPECULATIVE LOSS IN TERMS OF EXPLANATION TO SECTION 73 OF THE ACT BY THE REVENUE. II. INTEREST OF RS.3,81,863/- HELD TO BE TAXABLE IN IMPUGNED AS SESSMENT YEAR. WHEREAS, THE ASSESSEE HAS CLAIMED THE SAME IN ASS ESSMENT YEAR 2009-10 AND THE TDS CERTIFICATE HAVE ALSO BEEN ISSU ED IN THE ASSESSMENT YEAR 2009-10. III. THE INTEREST OF RS.3,41,955/- ON BORROWED FUNDS ALLEGEDLY DIVERTED BY THE ASSESSEE FOR NON-BUSINESS PURPOSES DISALLOWED U/S. 36(1)(III). IV. THE COMMISSION PAID TO M/S. EAGLE KING INVESTMENTS DEVELO PMENT LTD., SINGAPORE DISALLOWED, AS NO TDS WAS DEDUCTED THEREON. V. DISALLOWANCE MADE U/S. 14A R.W. RULE 8D ON SHARES HELD AS STOCK-IN- TRADE. VI. THE GROUND NO. 6 IS GENERAL IN NATURE. 6. THE GROUND NO. 1 RAISED BY THE ASSESSEE IN APPEAL IS WITH RESPECT TO TREATING OF LOSS FROM SHARE TRADING AS SPECULATIVE. THE CONTENTION OF THE ASSESSEE IS THAT IN THE EARLIER ASSESSMENT YEARS, THE AS SESSEE HAS BEEN RECKONING INCOME FROM SHARE TRADING BUSINESS AS BUSINESS INCOME AND THE REVENUE HAS NOT RAISED ANY OBJECTION TO THE INCOME FROM SHARE TRADING ACTIVITY. IT IS ONLY IN THE IMPUGNED ASSESSMENT YEAR WHE N THE ASSESSEE HAS SUFFERED LOSS IN SHARE TRADING ACTIVITY AND THE ASSESSEE H AS CLAIMED SET OFF OF 7 ITA NO. 1859/PN/2012, A.Y. 2008-09 THE SAME FROM OTHER BUSINESS INCOME, THE REVENUE HAS RA ISED OBJECTION AND TREATED THE SAME AS SPECULATIVE LOSS BY INVOKING EXPLANAT ION TO SECTION 73 OF THE ACT. IT IS AN UNDISPUTED FACT THAT THE ASSESSEE IS CARRYING ON SHARE TRADING ACTIVITY ALONG WITH OTHER THE BUSINESS OF SALE OF S IM CARDS, MOBILE HANDSETS, RECHARGE COUPONS ETC. THE ASSESSEE HAS FURN ISHED A COPY OF PROFIT AND LOSS ACCOUNT AT PAGE 21 OF THE PAPER BOOK. A PERUSAL OF THE PROFIT AND LOSS ACCOUNT FOR FINANCIAL YEAR 2007-08 SHOWS, OPENING STOCK OF SHARES, CLOSING STOCK OF SHARES, PURCHASE OF SHARES DURING THE YE AR AND INCOME FROM SALE OF SHARES AND OTHER COMMODITIES. THE ASSESSEE HAS TOTAL SALE PROCEEDS OF RS.12,15,35,268.36. THE REVENUE GENERATED FROM SALE OF SHARES IS TO THE TUNE OF RS.12,12,30,860.36, WHEREAS, INCOME FROM SALE OF OTHER COMMODITIES IS ONLY RS.3,04,408/-. IT IS AN UNDISPUTED FACT THAT THE ASSESSEE IS ENGAGED IN TRADING OF SHARES AND SHARES HELD BY THE AS SESSEE ARE IN THE NATURE OF STOCK-IN-TRADE AND NOT INVESTMENT. 6.1 BEFORE THE INCOME FROM TRADING OF SHARE IS HELD TO BE SPECULATIVE, LET US FIRST EXAMINE, WHETHER THE ASSESSEE IS ENGAGED IN SPEC ULATIVE TRANSACTIONS/BUSINESS OF SHARES? SUB-SECTION (5) OF SECTI ON 43 DEFINES SPECULATIVE TRANSACTION WHICH READS AS UNDER: (5) SPECULATIVE TRANSACTION MEANS A TRANSACTION IN WHICH A CONTRACT FOR THE PURCHASE OR SALE OF ANY COMMODITY, INCLUDING ST OCKS AND SHARES, IS PERIODICALLY OR ULTIMATELY SETTLED OTHERWISE THAN B Y 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 MERCH ANDISE ENTERED INTO BY A PERSON IN THE COURSE OF HIS MANUFACTURING OR MERCHA NTING BUSINESS TO GUARD AGAINST LOSS THROUGH FUTURE PRICE FLUCTUATIONS IN R ESPECT OF HIS CONTRACTS FOR ACTUAL DELIVERY OF GOODS MANUFACTURED BY HIM OR MER CHANDISE SOLD BY HIM; OR (B) A CONTRACT IN RESPECT OF STOCKS AND SHARES ENTE RED INTO BY A DEALER OR INVESTOR THEREIN TO GUARD AGAINST LOSS IN HIS HOLDI NGS OF STOCKS AND SHARES THROUGH PRICE FLUCTUATIONS; OR 8 ITA NO. 1859/PN/2012, A.Y. 2008-09 (C) A CONTRACT ENTERED INTO BY A MEMBER OF A FORWAR D MARKET OR A STOCK EXCHANGE IN THE COURSE OF ANY TRANSACTION IN THE NA TURE OF JOBBING OR ARBITRAGE TO GUARD AGAINST LOSS WHICH MAY ARISE IN THE ORDINA RY COURSE OF HIS BUSINESS AS SUCH MEMBER; (D) AN ELIGIBLE TRANSACTION IN RESPECT OF TRADING I N DERIVATIVES REFERRED TO IN CLAUSE[(AC)] OF SECTION 2 OF THE SECURITIES CONTRAC TS (REGULATION) ACT, 1956 (42 OF 1956) CARRIED OUT IN A RECOGNIZED STOCK EXCHANGE . SHALL NOT BE DEEMED TO BE A SPECULATIVE TRANSACTION . 6.2 A SERIES OF SYSTEMATIC TRANSACTIONS FOR GAIN CULMINATE S INTO A BUSINESS. IN THE PRESENT CASE, IT HAS NOT BEEN ALLEGED B Y THE REVENUE THAT THE ASSESSEE IS ENGAGED IN SPECULATIVE TRANSACTIONS. THE AUTHORITIES BELOW HAVE MERELY INVOKED THE EXPLANATION TO SECTION 73 TO HO LD THAT THE ASSESSEES INCOME FROM SHARE TRADING ACTIVITY IS SPECULAT IVE INCOME. EXPLANATION TO SECTION 73 CREATES A DEEMING FICTION. THE DEEMING PRO VISIONS HAVE TO BE CONSTRUED STRICTLY. THE HON'BLE BOMBAY HIGH COURT IN THE CASE OF CIT VS. HSBC SECURITIES & CAPITAL MARKETS INDIA (P.) LTD. (S UPRA) HAS HELD THAT EXPLANATION TO SECTION 73 WOULD NOT APPLY IN TH E CASE WHERE ASSESSEE HAS SUFFERED LOSS IN SALE AND PURCHASE OF SHARES AND THE ASSESSEE IS NOT FALLING IN ONE OF THE EXCEPTIONS GIVEN IN EXPLANATION T O SECTION 73. THE HON'BLE HIGH COURT WHILE COMING TO SUCH A CONCLUSION H AS PLACED RELIANCE ON THE DECISION OF CIT VS. DARSHAN SECURITIES (P.) LT D. REPORTED AS 206 TAXMAN 68 (BOM.). 6.3 IN THE CASE OF CIT VS. DARSHAN SECURITIES (P.) LTD. (SU PRA) THE QUESTION BEFORE THE HON'BLE COURT WAS; WHETHER ON THE FACTS AND IN THE CIRCUMSTANCES OF T HE CASE AND IN LAW THE ITAT WAS JUSTIFIED IN HOLDING THAT THE CASE OF T HE RESPONDENT IS NOT COVERED BY EXPLANATION TO SECTION 73 AS IT FALLS WITHIN THE FIRST LIMB OF 9 ITA NO. 1859/PN/2012, A.Y. 2008-09 EXCEPTION TO THE EXPLANATION AND THEREFORE THE ASSE SSEES LOSS SHOULD NOT BE TREATED AS SPECULATIVE LOSS? IN ORDER TO APPRECIATE THE JUDGMENT OF THE HON'BLE BO MBAY HIGH COURT IN THE CASE OF CIT VS. DARSHAN SECURITIES (P.) LTD. (SU PRA) IT WOULD BE ESSENTIAL TO KNOW THE FACTS OF THE CASE AS WELL. THE RELE VANT EXTRACT OF THE JUDGMENT IS REPRODUCED AS UNDER: 4. IN ORDER TO APPRECIATE THE ISSUE, WHICH ARISES IN THE APPEAL, A REFERENCE BRIEFLY TO THE RELEVANT FACTS WOULD BE IN ORDER. D URING THE ASSESSMENT YEAR, THE ASSESSEE RETURNED AN INCOME OF RS.2,25,04,588 F ROM SERVICE CHARGES. THE ASSESSEE HAD A LOSS OF RS.02,23,32,127 IN SHARE TRA DING. THE ASSESSEE HAD A DIVIDEND INCOME OF RS.4,79,325/. THE ASSESSEE CLAI MED THAT IN COMPUTING THE GROSS TOTAL INCOME FOR THE PURPOSE OF THE EXPLANATI ON TO SECTION 73, THE INCOME FROM SERVICE CHARGES HAD TO BE ADJUSTED AGAINST THE LOSS IN SHARE TRADING. THIS CONTENTION OF THE ASSESSEE HAS FOUND ACCEPTANC E BY THE COMMISSIONER (APPEALS) AND THE TRIBUNAL. THE PROVISION OF THE EX PLANATION TO SECTION 73 FALLS FOR DETERMINATION IN THE APPEAL. 5. UNDER SECTION 28, INCOME WHICH IS CHARGEABLE TO INCOME TAX UNDER THE HEAD OF PROFITS AND GAINS OF BUSINESS OR PROFESSION INCL UDES THE PROFITS AND GAINS OF ANY BUSINESS OR PROFESSION, WHICH WAS CARRIED ON BY THE ASSESSEE AT ANY TIME DURING THE PREVIOUS YEAR. EXPLANATION (2) TO SECTIO N 28 PROVIDES THAT WHERE SPECULATIVE TRANSACTIONS CARRIED ON BY AN ASSESSEE ARE OF SUCH A NATURE AS TO CONSTITUTE A BUSINESS, THE BUSINESS SHALL BE DEEMED TO BE DISTINCT AND SEPARATE FROM ANY OTHER BUSINESS. SECTION 43 WHICH CONTAINS A STATUTORY DICTIONARY OF DEFINITIONS OF CERTAIN TERMS RELEVANT TO INCOME FROM PROFITS AND GAINS OF BUSINESS OR PROFESSION DEFINES THE EXPRESS ION SPECULATIVE TRANSACTION IN SUB SECTION (5). THAT EXPRESSION IS DEFINED TO MEAN A TRANSACTION IN WHICH A CONTRACT FOR THE PURCHASE OR SALE OF ANY COMMODITY, INCLUDING STOCKS AND SHARES, IS PERIODICALLY OR ULT IMATELY SETTLED, OTHERWISE THAN BY THE ACTUAL DELIVERY OR TRANSFER OF THE COMM ODITY OR SCRIPS. CONSEQUENTLY, WHERE A CONTRACT FOR PURCHASE OR SALE OF SHARES IS SETTLED BY ACTUAL DELIVERY, IT DOES NOT FALL WITHIN THE DEFINI TION OF THE EXPRESSION. SECTION 70(1) PROVIDES FOR A SETTING OFF OF LOSS FROM ONE S OURCE AGAINST INCOME FROM ANOTHER SOURCE UNDER THE SAME HEAD. SECTION 72 MAKE S PROVISION FOR CARRY FORWARD AND SET OFF OF BUSINESS LOSSES, UNDER THE H EAD OF PROFITS AND GAINS OF BUSINESS OR PROFESSION OTHER THAN A LOSS SUSTAINED IN A SPECULATION BUSINESS. SUB SECTION (1) OF SECTION 73 PROVIDES THAT ANY LOS S, COMPUTED IN RESPECT OF A SPECULATION BUSINESS CARRIED ON BY THE ASSESSEE, SH ALL NOT BE SET OFF EXCEPT AGAINST PROFITS AND GAINS, IF ANY, OF ANOTHER SPECU LATION BUSINESS. AS A RESULT 10 ITA NO. 1859/PN/2012, A.Y. 2008-09 OF THE PROVISION OF SUB SECTION (1) OF SECTION 73, A BAR IS INTRODUCED AGAINST THE SETTING OFF OF A LOSS WHICH HAS ARISEN IN RESPE CT OF SPECULATION BUSINESS CARRIED ON BY THE ASSESSEE SAVE AND ACCEPT AGAINST THE PROFITS AND GAINS OF ANOTHER SPECULATION BUSINESS. THE EXPLANATION TO SE CTION 73 PROVIDES AS FOLLOWS : WHERE ANY PART OF THE BUSINESS OF A COMPANY ([OTHE R 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 PRIN CIPAL BUSINESS OF WHICH IS THE BUSINESS OF BANKING OR THE GRANTING OF LOANS AN D ADVANCES) CONSISTS IN THE PURCHASE AND SALE OF SHARES OF OTHER COMPANIES, SUC H COMPANY SHALL, FOR THE PURPOSE OF THIS SECTION, BE DEEMED TO BE CARRYING O N A SPECULATION BUSINESS TO THE EXTENT TO WHICH THE BUSINESS CONSISTS OF THE PU RCHASE AND SALE OF SUCH SHARES. 6. THE EXPLANATION TO SECTION 73 INTRODUCES A DEEMI NG FICTION. THE DEEMING FICTION STIPULATES THAT WHERE ANY PART OF THE BUSIN ESS OF A COMPANY CONSISTS IN THE PURCHASE AND SALE OF SHARES OF OTHER COMPANIES, SUCH COMPANY SHALL, FOR THE PURPOSES OF THE SECTION BE DEEMED TO BE CARRYIN G ON A SPECULATION BUSINESS TO THE EXTENT TO WHICH THE BUSINESS CONSIS TS OF THE PURCHASE AND SALES OF SUCH SHARES. THE DEEMING FICTION APPLIES O NLY TO A COMPANY AND THE PROVISION MAKES IT CLEAR THAT THE DEEMING FIXATION EXTENDS ONLY FOR THE PURPOSES OF THE SECTION. THE BRACKETED PORTION OF T HE EXPLANATION, HOWEVER CARVES OUT AN EXCEPTION. THE EXCEPTION IS THAT THE PROVISION OF THE EXPLANATION SHALL NOT APPLY TO A COMPANY WHOSE GROSS TOTAL INCO ME CONSISTS MAINLY OF INCOME WHICH IS CHARGEABLE UNDER THE HEADS INTERES T ON SECURITIES, INCOME FROM HOUSE PROPERTY, CAPITAL GAINS AND INCOME F ROM OTHER SOURCES OR A COMPANY WHOSE PRINCIPAL BUSINESS IS OF BANKING OR T HE GRANTING OF LOANS AND ADVANCES. 7. THE SUBMISSION WHICH HAS BEEN URGED ON BEHALF OF THE REVENUE IS THAT IN COMPUTING THE GROSS TOTAL INCOME FOR THE PURPOSE OF THE EXPLANATION TO SECTION 73, INCOME UNDER THE HEADS OF PROFITS AND GAINS OF BUSINESS OR PROFESSION MUST BE IGNORED. ALTERNATIVELY, IT HAS BEEN URGED THAT WHERE THE INCOME FROM BUSINESS INCLUDES A LOSS IN THE TRADING OF SHARES, SUCH A LOSS SHOULD NOT BE ALLOWED TO BE SET OFF AGAINST THE INCOME FROM ANY O THER SOURCE UNDER THE HEAD OF PROFITS AND GAINS OF BUSINESS OR PROFESSION. 8. IN OUR VIEW, THE SUBMISSION WHICH HAS BEEN URGED ON BEHALF OF THE REVENUE CANNOT BE ACCEPTED. LEAVING ASIDE FOR A MOMENT, THE EXCEPTION, WHICH IS CARVED OUT BY THE EXPLANATION TO SECTION 73, THE EX PLANATION CREATES A DEEMING FICTION BY WHICH A COMPANY IS DEEMED TO BE CARRYING ON A SPECULATION BUSINESS WHERE ANY PART OF ITS BUSINESS CONSISTS IN THE PURCHASE 11 ITA NO. 1859/PN/2012, A.Y. 2008-09 AND SALE OF SHARES OF OTHER COMPANIES. NOW, THE EXC EPTION WHICH IS CARVED OUT APPLIES TO A SITUATION WHERE THE GROSS TOTAL INCOME OF A COMPANY CONSISTS MAINLY OF INCOME WHICH IS CHARGEABLE UNDER THE HEAD S INTEREST ON SECURITIES, INCOME FROM HOUSE PROPERTY, CAPITAL GAINS AND INCOME FROM OTHER SOURCES. NOW, ORDINARILY INCOME WHICH ARISES FROM ONE SOURCE WHICH FALLS UNDER THE HEAD OF PROFITS AND GAINS OF BUSINESS OR PROFESSION CAN BE SET OFF AGAINST THE LOSS WHICH ARISES FROM ANOTHER SOURCE U NDER THE SAME HEAD. SUB SECTION (1) OF SECTION 73 HOWEVER SETS UP A BAR TO THE SETTING OFF OF A LOSS WHICH ARISES IN RESPECT OF SPECULATION BUSINESS AGA INST THE PROFITS AND GAINS OF ANY OTHER BUSINESS. CONSEQUENTLY, A LOSS WHICH H AS ARISEN ON ACCOUNT OF SPECULATION BUSINESS CAN BE SET OFF ONLY AGAINST TH E PROFITS AND GAINS OF ANOTHER SPECULATION BUSINESS. HOWEVER, FOR SUB SECT ION (1) OF SECTION 73 TO APPLY THE LOSS MUST ARISE IN RELATION TO A SPECULAT ION BUSINESS. THE EXPLANATION PROVIDES A DEEMING DEFINITION OF WHEN A COMPANY IS DEEMED TO BE CARRYING ON A SPECULATION BUSINESS. IF, THE SUBMISS ION OF THE REVENUE IS ACCEPTED, IT WOULD LEAD TO AN INCONGRUOUS SITUATION , WHERE IN DETERMINING AS TO WHETHER A COMPANY IS CARRYING ON A SPECULATION B USINESS WITHIN THE MEANING OF THE EXPLANATION, SUB SECTION (1) OF SECT ION 73 IS APPLIED IN THE FIRST INSTANCE. THIS WOULD IN OUR VIEW NOT BE PERMISSIBLE AS A MATTER OF STATUTORY INTERPRETATION, BECAUSE THE EXPLANATION IS DESIGNED TO DEFINE A SITUATION WHERE A COMPANY IS DEEMED TO CARRY ON SPECULATION BUSINES S. IT IS ONLY THEREAFTER THAT SUB SECTION (1) OF SECTION 73 CAN APPLY. APPLY ING THE PROVISIONS OF SECTION 73(1) TO DETERMINE WHETHER A COMPANY IS CARRYING ON SPECULATION BUSINESS WOULD REVERSE THE ORDER OF APPLICATION. THAT WOULD BE IMPERMISSIBLE, NOR, IS IT CONTEMPLATED BY PARLIAMENT. FOR, THE AMBIT OF SUB SECTION (1) OF SECTION 73 I S ONLY TO PROHIBIT THE SETTING OFF OF A LOSS WHICH HA S RESULTED FROM A SPECULATION BUSINESS, SAVE AND ACCEPT AGAINST THE PROFITS AND G AINS OF ANOTHER SPECULATION BUSINESS. IN ORDER TO DETERMINE WHETHER THE EXCEPTION THAT IS CARVED OUT BY THE EXPLANATION APPLIES, THE LEGISLAT URE HAS FIRST MANDATED A COMPUTATION OF THE GROSS TOTAL INCOME OF THE COMPAN Y. THE WORDS CONSISTS MAINLY ARE INDICATIVE OF THE FACT THAT THE LEGISLA TURE HAD IN ITS CONTEMPLATION THAT THE GROSS TOTAL INCOME CONSISTS PREDOMINANTLY OF INCOME FROM THE FOUR HEADS THAT ARE REFERRED TO THEREIN. OBVIOUSLY, IN C OMPUTING THE GROSS TOTAL INCOME THE NORMAL PROVISIONS OF THE ACT MUST BE APP LIED AND IT IS ONLY THEREAFTER, THAT IT HAS TO BE DETERMINED AS TO WHET HER THE GROSS TOTAL INCOME SO COMPUTED CONSISTS MAINLY OF INCOME WHICH IS CHARGEA BLE UNDER THE HEADS REFERRED TO IN THE EXPLANATION. [EMPHASIS ADDED BY US] 9. CONSEQUENTLY, IN THE PRESENT CASE THE GROSS TOTA L INCOME OF THE ASSESSEE WAS REQUIRED TO BE COMPUTED INTER ALIA BY COMPUTING THE INCOME UNDER THE HEAD OF PROFITS AND GAINS OF BUSINESS OR PROFESSION AS WELL. BOTH THE INCOME FROM SERVICE CHARGES IN THE AMOUNT OF RS.2.25 CRORE S AND THE LOSS IN SHARE 12 ITA NO. 1859/PN/2012, A.Y. 2008-09 TRADING OF RS.2.23 CRORES, WOULD HAVE TO BE TAKEN I NTO ACCOUNT IN COMPUTING THE INCOME UNDER THAT HEAD, BOTH BEING SOURCES UNDE R THE SAME HEAD. THE ASSESSEE HAD A DIVIDEND INCOME OF RS.4.7 LACS (INCO ME FROM OTHER SOURCES). THE TRIBUNAL WAS JUSTIFIED, IN COMING TO THE CONCLU SION THAT THE ASSESSEE FELL WITHIN THE PURVIEW OF THE EXCEPTION CARVED OUT IN T HE EXPLANATION TO SECTION 73 AND THAT CONSEQUENTLY THE ASSESSEE WOULD NOT BE DEE MED TO BE CARRYING ON A SPECULATION BUSINESS FOR THE PURPOSE OF SEC. 73(1). 10. THE VIEW, WHICH WE HAVE TAKEN, ALSO ACCORDS WIT H THE JUDGMENTS OF THIS COURT IN C.I.T. V/S. M/S. HERO TEXTILES AND TRADING LTD. (INCOME TAX APPEAL NO. 296 OF 2001 DECIDED ON 29 JANUARY, 2008) AND IN C.I.T. V/S. MAANSI TRADING PVT. LTD. (INCOME TAX APPEAL NO.47 OF 2001, DECIDED ON 29 JANUARY, 2008). THE TRIBUNAL HAS RELIED UPON ITS EA RLIER DECISION IN THE CASE OF CONCORD COMMERCIAL PVT. LTD. OF 18 MARCH 2008. A DIVISION BENCH OF THIS COURT HAD DISMISSED NOTICE OF MOTION NO. 1921 OF 20 07 IN INCOME TAX APPEAL (LODGING) NO.852 OF 2007 FOR CONDONATION OF DELAY A GAINST THE DECISION OF CONCORD COMMERCIAL PVT. LTD . HOLDING THAT EVEN OTHERWISE ON MERITS, THE ISSUE WAS COVERED BY THE DECISION RENDERED BY THE D IVISION BENCH IN HERO TEXTILES AND TRADING LTD . 11. FOR THE AFORESAID REASONS, WE ANSWER THE QUESTI ON OF LAW IN THE AFFIRMATIVE. THE APPEAL IS ACCORDINGLY DISPOSED OF . THERE SHALL BE NO ORDERS AS TO COSTS. 6.4 THUS, FROM THE PERUSAL OF THE AFORESAID JUDGMENT, IT IS EVIDENT THAT EXPLANATION TO SECTION 73 CANNOT BE INVOKED ONLY FOR THE REASON THAT THE ASSESSEE IS ENGAGED IN THE SHARE TRADING ACTIVITY AND DO ES NOT FALL WITHIN THE EXCEPTIONS LAID DOWN THEREIN. BEFORE APPLYING DEEMING PRO VISIONS AND EXPLANATIONS TO THE SECTIONS, IT IS ESSENTIAL TO REFER TO SU BSTANTIVE PROVISIONS OF THE ACT. THUS, WE ARE OF THE CONSIDERED VIEW THAT THE CASE OF THE ASSESSEE IS SQUARELY COVERED BY THE JUDGMENT OF HON'BLE BOMBAY HIGH COURT. ACCORDINGLY, THIS GROUND OF APPEAL OF THE ASSESSEE IS ACCEPTED. 7. THE SECOND GROUND RAISED BY THE ASSESSEE IN APPEAL IS WITH REGARD TO DISALLOWANCE OF RS.3,81,863/-. THE ASSESSEE HAS OFFERED THE AMOUNT TO TAX IN ASSESSMENT YEAR 2009-10. THE ASSESSEE HAD RECEIVED INTEREST INCOME. TAX AT SOURCE HAS BEEN DEDUCTED THEREON IN THE ASSES SMENT YEAR 13 ITA NO. 1859/PN/2012, A.Y. 2008-09 2009-10. THE ASSESSEE HAS NOT DISPUTED THAT THE AMOU NT IN FACT HAS ACCRUED IN ASSESSMENT YEAR 2008-09. THE ONLY REASON GIVEN BY THE ASSESSEE TO OFFER INTEREST INCOME TO TAX IN ASSESSMENT YEAR 2009- 10 IS THAT TDS CERTIFICATES WERE ISSUED FOR ASSESSMENT YEAR 2009-10. T HERE WOULD BE MISMATCH OF TDS IN CASE THE INTEREST INCOME IS OFFERED TO T AX IN ASSESSMENT YEAR 2008-09. 7.1 THE ASSESSEE IS FOLLOWING MERCANTILE SYSTEM OF ACCOUNTING AND RECOGNIZING THE REVENUE ON ACCRUAL BASIS. SINCE, THE INT EREST HAS ACCRUED TO THE ASSESSEE IN THE PERIOD RELEVANT TO ASSESSMENT YEAR 2008-09, THE SAME HAS TO BE TAXED IN THE RELEVANT ASSESSMENT YEAR. HOWE VER, WE FIND FORCE IN THE SUBMISSIONS OF THE ASSESSEE THAT ONCE INCOME HAS BE EN OFFERED TO TAX IN ASSESSMENT YEAR 2009-10 AND THE TAX HAS BEEN PAID TH EREON THE SAME INCOME SHOULD NOT BE TAXED TWICE. THE ADDITION OF RS.3,81 ,863/- WITH REGARD TO THE INTEREST INCOME RECEIVED BY THE ASSESSEE IN THE IMPUGNED ASSESSMENT YEAR IS SUSTAINED. THE ASSESSING OFFICER IS DIRE CTED TO DELETE THE INTEREST INCOME THAT HAS BEEN ADDED IN ASSESSMENT YEAR 2008-09 FROM THE INCOME OF ASSESSEE IN ASSESSMENT YEAR 2009-10. THIS GRO UND OF APPEAL OF THE ASSESSEE IS PARTLY ACCEPTED. 8. THE THIRD GROUND RAISED IN THE APPEAL BY THE ASSESSE E IS WITH REGARD TO DISALLOWANCE OF RS.3,41,955/-. THE CONTENTION OF THE ASSE SSEE IS THAT THE ASSESSEE HAS DIVERTED BORROWED INTEREST BEARING FUNDS FO R NON-BUSINESS PURPOSES. ALTHOUGH, THE LD. AR HAS ARGUED THAT THE ASSE SSEE HAS SUFFICIENT OWN FUNDS BUT AT THE SAME TIME HAS ALSO CONCEDED THAT PROPORTIONATE DISALLOWANCE CAN BE MADE BY CONSIDERING THE AVAILABILITY OF OW N FUNDS. WE REMIT, THIS ISSUE BACK TO THE FILE OF THE ASSESSING OFFICER TO DECIDE THIS GROUND AFRESH AFTER TAKING INTO CONSIDERATION THE AVAILABILITY OF OWN FUNDS AND THE USE OF SAME FOR ADVANCING LOANS FOR NON-BUSINESS PURPOSES. 14 ITA NO. 1859/PN/2012, A.Y. 2008-09 9. THE FOURTH GROUND RAISED IN THE APPEAL BY THE ASSES SEE IS WITH REGARD TO DISALLOWANCE OF COMMISSION OF RS.6,95,691/-. THE CASE OF TH E ASSESSEE IS THAT THE AMOUNT HAS BEEN PAID BY THE ASSESSEE TO M/S . EAGLE KING INVESTMENTS DEVELOPMENT LTD., SINGAPORE AS COMMISSION IN R ESPECT OF SERVICES RENDERED ABROAD. HOWEVER, NOTHING HAS BEEN BR OUGHT ON RECORD TO SHOW THE NATURE OF SERVICES PROVIDED BY THE OVERSEAS CONCERN. IT IS A WELL SETTLED LAW THAT IF THE PAYMENT MADE IS COMMISSION SIMPLICITE R, FOR THE SERVICES RENDERED ABROAD TO AN OVERSEAS CONCERN HAVIN G NO PE IN INDIA, SUCH PAYMENT IS NOT TAXABLE. SINCE, THE INCOME ACCRUED T O THE OVERSEAS NON-RESIDENT CONCERN IS NOT TAXABLE, THERE IS NO QUESTION OF DEDUCTION OF TAX AT SOURCE ON THE SAID PAYMENTS. OUR VIEW IS SUPPORTE D BY THE JUDGMENT OF THE HON'BLE MADRAS HIGH COURT IN THE CASE OF CIT VS. FAIZ AN SHOES PVT. LTD. REPORTED AS 367 ITR 155 (MAD.). WE REMIT THIS ISSUE BACK TO THE ASSESSING OFFICER FOR RE-EXAMINATION. IN CASE THE ASSESSEE IS ABLE T O SHOW THAT THE PAYMENTS WERE MADE THROUGH PROPER BANKING CHANNEL FOR THE SERVICES RENDERED ABROAD, THE PAYMENTS WERE IN THE NATURE OF CO MMISSION AND THE OVERSEAS CONCERN HAS NO PE IN INDIA, THE ASSESSING OFFICER SHALL ALLOW THE SAME. THIS GROUND OF APPEAL OF THE ASSESSEE IS ALLOWED FOR THE STATISTICAL PURPOSE. 10. THE FIFTH GROUND RAISED IN THE APPEAL BY THE ASSESSEE IS WITH RES PECT TO DISALLOWANCE MADE U/S. 14A R.W. RULE 8D ON SHARES HELD AS STOCK-IN-TRADE. THE ASSESSEE HAS OFFERED DIVIDEND INCOME FROM THE SHARES HELD AS STOCK-IN- TRADE AS BUSINESS INCOME. THE TREATMENT GIVEN BY THE ASSESSEE TO THE DIVIDEND INCOME IS AGAINST THE PROVISIONS OF SECTION 10(23F). THE DIVIDEND INCOME HAS BEEN SPECIFICALLY EXCLUDED IN THE ACT, THUS, IT D OES NOT FORM PART OF TOTAL INCOME. THE QUESTION BEFORE US IS : WHETHER DISALLOWANCE U/S. 14A IS TO BE MADE ON DIVIDEND R ECEIVED ON SHARES HELD AS STOCK IN TRADE? 15 ITA NO. 1859/PN/2012, A.Y. 2008-09 IT IS AN UNDISPUTED FACT THAT THE SHARES ARE HELD BY T HE ASSESSEE AS STOCK-IN-TRADE. THE ASSESSEE HAS EARNED DIVIDEND INCOME ON SUCH SHARES. THE ASSESSEE HAS NOT HELD THE SHARES FOR EARNING DIVIDEND INCOME. DIV IDEND INCOME IS INCIDENTAL TO THE SHARE TRADING BUSINESS OF THE ASS ESSEE. THUS, NO DISALLOWANCE U/S. 14A IS WARRANTED ON DIVIDEND EARNED ON S HARES HELD AS STOCK-IN-TRADE. OUR VIEW IS FORTIFIED BY THE DECISION OF MUMB AI BENCH OF THE TRIBUNAL IN ITA NO. 6711/MUM/2011 IN THE CASE OF DCIT V S. M/S. INDIA ADVANTAGE SECURITIES LTD. FOR THE ASSESSMENT YEAR 2008- 09 DECIDED ON 14-09-2012. IN THE SAID CASE, THE ASSESSEE HAD RECEIVE D DIVIDEND INCOME OF RS.1,40,859/- ON SHARES SHOWN AS STOCK-IN-TRADE IN THE B OOKS OF ACCOUNT OF THE ASSESSEE. THE ASSESSEE HAD NOT MADE ANY DISALLOWAN CE OF EXPENSES RELATING TO EXEMPT INCOME. THE ASSESSING OFFICER MADE DISA LLOWANCE U/S. 14A R.W. RULE 8D. THE COMMISSIONER OF INCOME TAX (APPEALS) HELD THAT DISALLOWANCE UNDER RULE 8D COULD BE MADE ONLY WITH RESPEC T TO INVESTMENT AND NOT IN STOCK-IN-TRADE. THE REVENUE PREFERRED APPEAL BEFORE T HE TRIBUNAL AGAINST THE ORDER OF COMMISSIONER OF INCOME TAX (APPEALS). THE TRIBUNAL BY PLACING RELIANCE ON THE JUDGMENT OF HON'BLE KARNATAKA HIGH COURT IN THE CASE OF CCI LTD. VS. JCIT REPORTED AS 250 CTR 291 HELD THAT NO DISALLOWANCE U/S. 14A IS TO BE MADE IN RELATION TO SHARES H ELD AS STOCK-IN- TRADE. THE ORDER OF THE TRIBUNAL WAS CHALLENGED BY THE DEPARTM ENT BEFORE THE HON'BLE BOMBAY HIGH COURT IN INCOME TAX APPEAL NO. 1 131 OF 2013. THE HON'BLE HIGH COURT DISMISSED THE APPEAL OF THE REVENU E VIDE ORDER DATED APRIL 13, 2015 THUS, CONFIRMING THE FINDINGS OF THE TRIBU NAL. IN VIEW OF THE FACT THAT THE HON'BLE JURISDICTIONAL HIGH COURT HAS UPHELD THE VIEW TAKEN BY THE TRIBUNAL THAT PROVISIONS OF SECTION 14A R.W. RULE 8D WOULD NOT APPLY ON THE SHARES HELD AS STOCK-IN-TRADE, THE DISALLOWA NCE U/S. 14A IN THE PRESENT CASE WOULD NOT SUSTAIN. ACCORDINGLY, WE ACCEPT THIS GROUND OF 16 ITA NO. 1859/PN/2012, A.Y. 2008-09 APPEAL OF THE ASSESSEE AND DIRECT THE ASSESSING OFFICER TO DELETE DISALLOWANCE MADE U/S. 14A OF THE ACT. 11. THE GROUND NO. 6 IS GENERAL IN NATURE. THEREFORE, IT REQUIRES NO ADJUDICATION. 12. IN THE RESULT, THE APPEAL OF THE ASSESSEE IS PARTLY ACCEPTED. ORDER PRONOUNCED ON WEDNESDAY, THE 15 TH DAY OF JULY, 2015 AT PUNE SD/- SD/- ( ' ' #$ / R.K. PANDA) ( % & / VIKAS AWASTHY) ACCOUNTANT MEMBER JUDICIAL MEMBER ! PUNE; '# /DATED : 15 TH JULY, 2015 RK/PS *+,#-. / '- ! COPY OF THE ORDER FORWARDED TO : 1. / THE APPELLANT 2. / THE RESPONDENT. 3. ( ) * / THE CIT(A)-I, PUNE 4. ( /THE CIT-I, PUNE 5. %+, --./ , ./ , 0 1 23 , ! DR, ITAT, B BENCH, PUNE 6. ,$4 5 ! GUARD FILE. // % - //TRUE COPY// *% / BY ORDER, #%0 1) PRIVATE SECRETARY, ' /ITAT, PUNE