2010 (9) TMI 1264 - AT - Income Tax

Summary

Issues Involved:
1. Computation of deduction u/s.80HHC without clubbing the turnover of all proprietary concerns.
2. Deletion of disallowance of short-term capital loss amounting to Rs. 63,54,210/-.

Summary:

1. Computation of Deduction u/s.80HHC:
The first issue in this appeal by the Revenue is against the order of CIT(A) directing the Assessing Officer to re-compute the deduction u/s.80HHC without clubbing the turnover of all proprietary concerns. The Tribunal had previously considered this issue in the assessee's own case for the assessment year 2000-01, where it was decided in favor of the Revenue. The Tribunal referenced the Special Bench decision in the case of International Research Laboratories Ltd. Vs. ACIT [2123 ITR 1 (AT)], which emphasized that the "business" includes both export and domestic turnover, and profits should be apportioned based on the total turnover. The Tribunal, following its earlier decision, allowed this issue in favor of the Revenue and against the assessee.

2. Deletion of Disallowance of Short-Term Capital Loss:
The second issue pertains to the deletion of disallowance of short-term capital loss amounting to Rs. 63,54,210/-. The Assessing Officer had disallowed the loss on the grounds that the assessee had purchased and sold mutual fund units within a short period, claiming a loss while earning exempt dividend income. The CIT(A) allowed the claim, stating that the transactions were genuine and within the legal framework, supported by various case laws including Union of India vs. Azadi Bachao Andolan (2003) 263 ITR 706 (SC). The Tribunal found that this issue was covered in favor of the assessee by the decision of the Hon'ble Supreme Court in CIT v. Walfort Share And Stock Brokers P. Ltd. (2010) 326 ITR 1 (SC), which held that losses pertaining to exempted income cannot be disallowed for assessment years before the insertion of section 94(7) with effect from April 1, 2002. Consequently, the Tribunal confirmed the order of CIT(A) on this issue, dismissing the Revenue's appeal.

Conclusion:
The Tribunal allowed the first issue in favor of the Revenue and dismissed the second issue, thereby partly allowing the Revenue's appeal. The order was pronounced on 17th September 2010.