APEX STOCK BROKERS P.LTD, MUMBAI V. ITO 4(1)2, MUMBAI

ITA 1976/MUM/2013

• Counselvise Citation: [2014] 140 COUNSELVISE.COM (IT) 79140 (ITAT-MUMBAI)
• Duration Of Justice: 1 year(s) 3 month(s) 6 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 18-06-2014
• Appeal Filed By: Assessee
• Order Result: Partly Allowed
• Bench Allotted: A
• Assessment Year: 2009-2010
• Appeal Filed On: 12-03-2013
• Result in Favour of: Partly Allowed
• Court: TRIBUNAL
• Department Lawyers: S SENT H IL KUMARAN
• Assessee Lawyers: ATUL MATHURIA
• Keywords: Speculation loss
• Section: 143(3); 14A

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL, MUMBAI BENCH A, MUMBAI BEFORE SHRI R.C. SHARMA, ACCOUNTANT MEMBER AND VIVEK VARMA, JUDICIAL MEMBER ITA NO.1976/M/2013 ASSESSMENT YEAR: 2009-10 M/S. APEX STOCK BROKERS P. LTD. C-103, GROUND FLOOR, RAMESHWAR PREMISES, OPP. KHIRA NAGAR, S.V. ROAD, SANTACRUZ (WEST), MUMBAI 400 054. PAN: AAACA9807A VS. ITO 4(1)(2) MUMBAI. (APPELLANT) (RESPONDENT) ASSESSEE BY : SHRI ATUL MATHURIA, A.R. REVENUE BY : SHRI S. SENTHIL KUMARAN, D.R. DATE OF HEARING : 11.06.2014 DATE OF PRONOUNCEMENT : 18.06.2014 O R D E R PER R.C. SHARMA, ACCOUNTANT MEMBER: THIS IS AN APPEAL FILED BY THE ASSESSEE AGAINST TH E ORDER OF CIT(A) DATED 09.01.13 FOR THE ASSESSMENT YEAR 2009-10, IN THE MA TTER OF ORDER PASSED UNDER SECTION 143(3) OF THE INCOME TAX ACT. 2. IN THE GROUNDS OF APPEAL, ASSESSEE IS BASICALLY AGGRIEVED BY THE ACTION OF AO FOR DISALLOWING PROPORTIONATE EXPENSES AS SPECUL ATION LOSS TO THE TUNE OF RS.13,97,724/-. ASSESSEE IS ALSO AGGRIEVED FOR DIS ALLOWANCE MADE UNDER SECTION 14A READ WITH RULE 8D TO THE TUNE OF RS.99, 580/-. IT WAS ARGUED BY LD. A.R. THAT ASSESSEE HAD ASKED FOR CARRY FORWARD OF S PECULATION LOSS AND IT HAS NOT SET OFF SUCH LOSS AGAINST THE NORMAL INCOME OF BUSINESS, THEREFORE AO WAS ITA NO. 1976/M/2013 M/S. APEX STOCK BROKERS P. LTD. 2 NOT JUSTIFIED IN DISALLOWING PROPORTIONATE EXPENSES ATTRIBUTABLE TO SUCH SPECULATION ACTIVITIES. 3. ON THE OTHER HAND, LD. D.R. CONTENDED THAT ASSES SEE HAS NOT PRESSED SUCH DISALLOWANCE BEFORE THE LD. CIT(A), THEREFORE NO FA ULT CAN BE FOUND IN THE ORDER OF LD. CIT(A) FOR CONFIRMING THE DISALLOWANCE. 4. WE HAVE CONSIDERED RIVAL CONTENTION AND FOUND TH AT ASSESSEE IS A PVT. LTD. COMPANY MEMBER OF STOCK EXCHANGE AND IS ENGAGE D IN THE BUSINESS OF BROKING AND TRADING IN CSN SECURITIES. DURING THE COURSE OF SCRUTINY ASSESSMENT THE AO FOUND THAT LOSS ON SECURITY TRADI NG ACTIVITY OF ASSESSEE HAS RESULTED INTO ACTUAL SHARE TRADING LOSS OF RS.40,25 ,025/- IN PLACE OF LOSS OF RS.26,27,301/- SHOWN BY THE ASSESSEE. THUS LOSS SH OWN BY THE ASSESSEE WAS INCREASED BY THE PROPORTIONATE EXPENDITURE INCURRED FOR SUCH SPECULATIVE ACTIVITIES. IT WAS OBSERVED THAT THE ASSESSEE HAS NOT ALLOCATED ANY EXPENSE TOWARDS THIS LOSS. ACCORDINGLY, VIDE NOTICE U/S. 1 42(1) OF THE ACT DATED 28.09.2011, THE ASSESSEE WAS REQUESTED TO GIVE ITS REASON FOR NOT ALLOCATING ANY EXPENSE TOWARDS THIS SPECULATION LOSS. IN RESPONSE TO THAT, THE ASSESSEE VIDE ITS LETTER DATED 12.10.11, HAS SUBMITTED ITS CONTENTION , THE RELEVANT CONTEXT OF THE SAME IS REPRODUCED AS UNDER: THE COMPANY WAS HOLDING SOME SHARES AS STOCK-IN-T RADE, SOME OF THEM FOR MANY YEARS. THE SAME WERE SOLD DURING THE YEAR. AS PER EXPLANATION TO SECTION 73, ANY PROFIT OR LOSS ON PU RCHASE OR SALE OF SHARES OF OTHER COMPANIES ARE DEEMED TO BE SPECULA TIVE AND AS PER THE EXPLANATION HAS TO BE CONSIDERED AS ARISING OUT OF SPECULATION BUSINESS. THEREFORE, THE SAME IS SHOWN AS SPECUL ATION LOSS. SINCE IT IS AS THE DEEMING PROVISIONS OF SECTION 73, AS WELL SETTLED LAW, THE DEEMING FICTION IS TO BE RESTRICTED ONLY FOR THE PU RPOSE FOR WHICH IT IS CREATED I.E. FOR THE PURPOSES OF CARRY FORWARD AND SET OFF. QUESTION OF INCURRING SEPARATE EXPENSES OR DISALLOWING TOWARDS THE SAME DOES NOT ARISE. ITA NO. 1976/M/2013 M/S. APEX STOCK BROKERS P. LTD. 3 6. HOWEVER, AO DID NOT AGREE WITH THE ASSESSEES CO NTENTION AND HELD THAT LOSS ON SECURITY TRADING ACTIVITY OF ASSESSEE HAS R ESULTED INTO ACTUAL SHARE TRADING LOSS OF RS.40,25,025/- IN PLACE OF LOSS OF RS.26,27,301/- SHOWN BY THE ASSESSEE. THUS SPECULATION LOSS SHOWN BY THE ASSES SEE WAS INCREASED BY THE PROPORTIONATE EXPENDITURE INCURRED FOR SUCH SPECULA TIVE ACTIVITIES. 7. FROM THE RECORD, WE FOUND THAT A CLEAR FINDING H AS BEEN RECORDED BY THE AO TO THE EFFECT THAT ASSESSEE WAS HOLDING SHARES A S STOCK IN TRADE, SOME OF THEM WERE MANY YEARS OLD. THE SAME WERE SOLD DURIN G THE YEAR. AS PER OUR CONSIDERED VIEW, EXPLANATION TO SECTION 73 IS ATTRA CTED WHERE ANY PART OF BUSINESS OF COMPANY CONSISTS IN THE PURCHASE AND SA LE OF SHARES OF OTHER COMPANIES, SUCH COMPANY SHALL, FOR THE PURPOSE OF T HIS SECTION, BE DEEMED TO BE CARRYING ON SPECULATION LOSS TO THE EXTENT TO WH ICH THE BUSINESS CONSISTS OF PURCHASE AND SALE OF SHARES. SUCH LOSS CANNOT BE A LLOWED TO BE SET OFF AGAINST THE NORMAL BUSINESS PROFIT. IN THE INSTANT CASE, I T IS NOT CLEAR AS TO WHETHER SUCH SPECULATION LOSS COMPUTED BY THE ASSESSEE WAS AFTER CLAIM OF DEDUCTION OF EXPENSES, THEN FURTHER DISALLOWANCE OF EXPENSES WIL L LEAD TO INCREASE SUCH LOSS. IT APPEARS THAT AO HAS NOT PROPERLY APPRECIATED THE FACTUAL POSITION REGARDING EXPENDITURE HAVING BEEN INCURRED FOR NORMAL BUSINES S VIS--VIS SPECULATION ACTIVITY. ACCORDINGLY MATTER IS RESTORED BACK TO T HE FILE OF AO FOR DECIDING AFRESH. ASSESSEE IS DIRECTED TO FURNISH COMPLETE D ETAILS OF SUCH EXPENDITURE WHICH IS ATTRIBUTABLE TO SUCH SPECULATIVE ACTIVITY AND NORMAL BUSINESS ACTIVITY. 8. WITH REGARD TO THE DISALLOWANCE OF RS.99,580/- M ADE BY AO UNDER SECTION 14A, WE FOUND THAT AFTER PROPER APPLICATION OF RULE 8D, THE AO HAS WORKED OUT THE EXPENDITURE WHICH HAS BEEN INCURRED BY ASSESSEE OR ATTRIBUTABLE TO THE INCOME CLAIMED TO BE EXEMPT. THE LD. CIT(A) REMANDED THE DISALLOWANCE MADE BY AO UNDER SECTION 14A TO THE AO FOR HIS REMAND REPORT. THE AO IN HIS REMAND REPORT STATED AS UNDER: ITA NO. 1976/M/2013 M/S. APEX STOCK BROKERS P. LTD. 4 AS PER THE DIRECTIONS, THE COPIES OF DETAILS/ADDIT IONAL EVIDENCES HAVE BEEN VERIFIED AND IT IS FOUND THAT THE ASSESSEE HAV E SUBMITTED THE SAME COPIES OF DETAILS WHICH WERE SUBMITTED DURING THE C OURSE OF ASSESSMENT PROCEEDINGS AND WHICH THE ASSESSING OFFICER HAS ALR EADY CONSIDERED WHILE FRAMING ASSESSMENT U/S.143(3) OF THE ACT. HOWEVER, I ONCE AGAIN VERIFIED THE DETAILS FORWARDE D BY YOUR GOOD OFFICE AND FOUND THAT THE ASSESSING OFFICER HAS ALREADY CO NSIDERED ALL THE SUBMISSIONS AT THE TIME OF ASSESSMENT ORDER PASSED BY HIM. IN VIEW OF THE ABOVE, IT IS STATED THAT THERE IS NO NEED OF INTERFERENCE IN THE ASSESSMENT ORDER PASSED BY THE ASSESSING OFFICE R ON THE ISSUE OF ALLOCATION OF EXPENSES. 9. THE LD. CIT(A) HAS FORWARDED THE COPY OF REMAND REPORT TO THE ASSESSEE. HOWEVER, VIDE WRITTEN SUBMISSION ASSESSEE ALSO ACCE PTED THAT NO INTERFERENCE IS NEEDED IN THE QUANTUM OF DISALLOWANCE OF EXPENSE S MADE UNDER SECTION 14A. IN VIEW OF THESE FACTS, WE DO NOT FIND ANY REASON T O INTERFERE WITH THE ORDER OF LOWER AUTHORITIES FOR THE DISALLOWANCE MADE UNDER S ECTION 14A. ACCORDINGLY, WE UPHELD THE DISALLOWANCE OF RS.99,580/- MADE UNDE R SECTION 14A READ WITH RULE 8D. 10. IN THE RESULT, APPEAL OF THE ASSESSEE IS ALLOWE D IN PART FOR STATISTICAL PURPOSES. ORDER PRONOUNCED IN THE OPEN COURT ON 18.06.2014. SD/- SD/- (VIVEK VARMA) (R.C . SHARMA) JUDICIAL MEMBER ACCOUNTANT MEMBER MUMBAI, DATED: 18.06.2014. * KISHORE, SR.P.S. COPY TO: THE APPELLANT THE RESPONDENT ITA NO. 1976/M/2013 M/S. APEX STOCK BROKERS P. LTD. 5 THE CIT, CONCERNED, MUMBAI THE CIT (A) CONCERNED, MUMBAI THE DR C BENCH //TRUE COPY// [ BY ORD ER DY/ASSTT. REGISTRAR, ITAT, MUMBAI.