2012 (3) TMI 494 - AT - Income Tax

Claim of setting off of short-term capital gains against loss in speculation business allowed Addition u/s 14A - Held that - We restrict the disallowance u/s. 14A of the Act to 1% of total exempt income and direct the Assessing Officer to work out the quantum of disallowance accordingly

Summary

Issues:
1. Delayed appeals by revenue.
2. Setting off short-term capital gains against loss in speculation business.
3. Deletion of disallowance under section 14A of the Income Tax Act.

Analysis:

Issue 1: Delayed appeals by revenue
The appeals by revenue were delayed by 72 days and 71 days. The counsel for the assessee had no objection to condone the delay, and based on the reasons in the condonation petition, the delay was condoned, and the appeals were admitted.

Issue 2: Setting off short-term capital gains against loss in speculation business
The main contention was regarding the setting off of business loss under short-term capital gains. The CIT(A) allowed the claim of the assessee for both assessment years. The assessee's main business involved dealing in shares and commodities, which was considered speculative business. The revenue's appeals were dismissed based on the facts presented and the decision of the Hon'ble Bombay High Court.

Issue 3: Deletion of disallowance under section 14A
The disallowance made by the AO under section 14A was restricted by the CIT(A) in both assessment years. The Hon'ble Bombay High Court held that Rule 8D of the IT Rules applies prospectively from 2008-09. The disallowance under section 14A was restricted to 1% of total exempt income based on previous tribunal decisions. The appeals of revenue were partly allowed in this regard.

In conclusion, the ITAT Kolkata partially allowed the revenue's appeals concerning the setting off of short-term capital gains and the deletion of disallowance under section 14A. The decision was based on the specific facts of the case, relevant legal provisions, and precedents set by higher courts and tribunals.