NARENDRA C. SHAH, MUMBAI V. ITO WD 4(2)(), MUMBAI

ITA 963/MUM/2012

• Counselvise Citation: [2016] 132 COUNSELVISE.COM (IT) 3061 (ITAT-MUMBAI)
• Duration Of Justice: 4 year(s) 4 month(s) 4 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 14-06-2016
• Appeal Filed By: Assessee
• Bench Allotted: B
• Next Hearing Date: 11-05-2015
• Assessment Year: 2008-2009
• Appeal Filed On: 10-02-2012
• Court: TRIBUNAL
• Keywords: Transactions in derivatives
• Section: 14A

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL B BENCH, MUMBAI BEFORE S/SHRI B.R. BASKARAN (AM) & RAMLAL NEGI (JM) I.T.A. NO. 963 /MUM/ 20 12 (ASSESSMENT YEAR 200 8 - 0 9 ) NARENDRA C. SHAH 1007, STOCK EXCHANGE TOWERS, DALAL STREET MUMBAI - 400 001. VS. ITO WARD 4(2) (1) 6 TH FLOOR AAYAKAR BHAVAN M.K. ROAD MUMBAI - 400 020. ( APPELLANT ) ( RESPONDENT ) PAN NO . AAPPS5162G ASSESSEE BY NONE DEPARTMENT BY DURGA DUTT DATE OF HEARING 14 . 6. 201 6 DATE OF PRONOUNCEMENT 14 . 6 . 201 6 O R D E R PER B.R. BASKARAN, A M : - THE APPEAL FILED BY THE ASSESSEE IS DIRECTED A GAINST THE ORDER DATED 21.12.2011 PASSED BY LEARNED CIT(A) - 8 , MUMBAI AND IT RELATES TO A.Y. 200 8 - 0 9 . 2. THE ASSESSEE IS AGGRIEVED BY THE DECISION OF LEARNED CIT(A) RENDERED ON THE FOLLOWING ISSUES : - (A) DISALL OW ANCE OF MARKED TO MARKET LOSS ON SHARE DERIVATIVES CONTRACT. (B) DISALLOWANCE MADE U/S. 14A OF THE ACT. 3 . NONE APPEARED ON BEHALF OF THE ASSESSEE EVEN THOUGH THE ASSESSEE REPRESENTED ON EARLIER OCCASIONS. HENCE WE PROCEED TO DISPOSE OF THE APPEAL EX PARTE , WITHOUT PRESENCE OF THE ASSESSEE. 4. THE ASSESSEE IS A DEALER IN SHARES. THE ASSESSEE HAD CLAIMED MARKED TO MARKET LOSS ARISING IN RESPECT OF DERIVATIVES CONT RACT OUTSTANDING AS AT THE YEAR END. THE ASSESSEE TOOK SUPPORT OF THE DECISION RENDERED BY HON' BLE SUPREME NARENDRA C. SHAH 2 COURT IN THE CASE OF WOODWARD GOVERNOR INDIA P. LTD.(312 ITR 254) TO CONTEND THAT THE MARKED TO MARKET LOSS IS ALLOWABLE AS DEDUCTION. BOTH TAX AUTHORITIES TOOK THE VIEW THAT DECISION RENDERED BY HON'BLE SUPREME COURT WILL NOT APPLY TO THE FAC TS OF THE PRESENT CASE AND ACCORDINGLY DISALLOWED THE CLAIM. 5. WE HAVE HEARD LEARNED DEPARTMENTAL REPRESENTATIVE ON THIS ISSUE AND PERUSED THE RECORD. WE NOTICE THAT THE ASSESSING OFFICER HAS DISALLOWED THE CLAIM BY FOLLOWING THE DECISION RENDERED BY HO N'BLE MADRAS HIGH COURT IN THE CASE OF CIT VS. INDIAN OVERSEAS BANK (151 ITR 446), WHEREIN HON'BLE MADRAS HIGH COURT HELD THAT IN THE CASE OF DERIVATIVES, PROFIT OR LOSS CANNOT ACCRUE UNTIL AND UNLESS THE CONTRACTS ARE SETTLED. THE ASSESSING OFFICER ALSO H ELD THAT THE DECISION RENDERED IN THE CASE OF WOODWARD GOVERNOR INDIA P. LTD. (SUPRA) RELATED TO THE LIABILITIES ARISING OUT OF FLUCTUATION OF FOREIGN EXCHANGE AND THE RATIO OF THE SAID DECISION CAN NOT BE APPL IED TO THE DERIVATIVES HELD BY THE ASSESSEE. LEARNED CIT(A) FURTHER HELD THAT HON'BLE SUPREME COURT IN THE ABOVE SAID CASE HAS PRESCRIBED SIX CONDITIONS AND SOME OF THE CONDITIONS WERE NOT FULFI LLED BY THE ASSESSEE. WE NOTICE THAT THE DECISION RENDERED BY HON'BLE MADRAS HIGH COURT IN THE CASE OF IN DIAN OVERSEAS BANK (SUPRA) SQUARELY APPLIES TO THE FACTS OF THE INSTANT CASE AND ACCORDINGLY WE ARE OF THE VIEW THAT LEARNED CIT(A) WAS JUSTIFIED IN CONFIRMING THIS DISALLOWANCE. 6. NEXT ISSUE RELATES TO THE DISALLOWANCE MADE U/S. 14A OF THE ACT. THE ASS ESSEE RECEIVED DIVIDEND INCOME OF ` 2,94,944/ - AND CLAIMED THE SAME AS EXEMPT. HOWEVER, THE ASSESSEE CONTENDED BEFORE THE AO THAT NO DISALLOWANCE U/S 14A IS CALLED FOR, ON THE REASONING THAT EARNING OF DIVIDEND IS INCIDENTAL TO THE ACTIVITY OF CARRYING ON TRADING IN SHARES. THE ASSESSING OFFICER DID NOT AGREE WITH THE SAID CONTENTION S AND WORKED OUT THE DISALLOWANCE U/S. 14A OF THE ACT IN ACCORDANCE WITH RULE 8D OF THE I.T. RULES AND ACCORDINGLY DISALLOWED ` 2,80,354. LEARNED CIT(A) ALSO CONFIRMED THE SAM E. 7. WE HAVE HEARD THE LEARNED DEPARTMENTAL REPRESENTATIVE AND PERUSED THE RECORD. W E NOTICE FROM THE ASSESSMENT ORDER THAT THE ASSESSING OFFICER HAS NARENDRA C. SHAH 3 GIVEN A FINDING THAT THE ASSESSEE HAS ALSO H E LD A PART OF THE SHARES AS INVESTMENT. FURTHER THE ASSESSEE HIMSELF HAS DISALLOWED A SUM OF ` 70,048/ - ON ACCOUNT OF INTEREST PAID TO THE BANK AND FURTHER AMOUNT TOWARDS TRANSACTION CHARGES, DEMAT CHARGES AND STT PAID ON INVESTMENT. HENCE THE DISALLOWANCE MADE BY THE AO TO THE EXTENT OF THE AMOUNT VOLUNTARILY DISA LLOWED BY THE ASSESSEE IS REQUIRED TO BE UPHELD. THOUGH THE ASSESSEE HAS CONTENDED THAT THE DISALLOWANCE U/S. 14A SHALL NOT APPLY IN RESPECT OF SHARES HELD AS STOCK IN TRADE, NO DETAILS RELATING TO THE SAME WERE FURNISHED BEFORE US. HENCE WE HAVE NO OTHE R OPTION BUT TO CONFIRM THE ORDER PASSED BY LEARNED CIT(A) ON THIS ISSUE. 8. IN THE RESULT, APPEAL FILED BY THE ASSESSEE IS DISMISSED. ORDER HAS BEEN PRONOU NCED IN THE OPEN COURT ON 14 . 6 .2016 . SD / - SD/ - (RAMLAL NEGI ) (B.R.BASKAR AN ) JUDICIAL MEMBER ACCOUNTANT MEMBER MUMBAI ; DATED : 14 / 6/ 20 1 6 COPY OF THE ORDER FORWARDED TO : 1. THE APPELLANT 2. THE RESPONDENT 3. THE CIT(A) 4. CIT 5. DR, ITAT, MUMBAI 6. GUARD FILE. BY ORDER, //TRUE COPY// ( DY./ASSTT. REGISTRAR) ITAT, MUMBAI PS