9911796707
|
Home
Forgot password New User/ Regiser ⇒ Register to get Live Demo
2017 (2) TMI 1501 - AT - Income TaxDisallowance of deduction u/s 36(1)(viii) - claim was based on the belief that the main object of the assessee is to promote Housing Finance Companies - as contented deduction u/s 36(1)(viii) is available to the assessee to the extent of amount not exceeding 20% of the profits derived from eligible business - whether refinancing activities can be considered as provision of long term finance for construction and purchase of houses in India for residential purposes or not? - HELD THAT - As our answer to this is in negative because whenever govt the legislature wanted to include refinancing activities also eligible for deduction u/s 36(1)(viii) it has amended the provisions in the similar manner in which the amendment is made by Finance (2) of the Act of 2009. As the agricultural refinance activity was not eligible for deduction u/s 36(1)(viii) prior to Finance No. (2) Act, 1971 and the eligible business inserted was industrial or agricultural development‟ by which agricultural refinance activities were made eligible for deduction. The amendment by Finance No. (2) Act of 2009 is also the similar amendment where the eligible business is included as development of Housing in India from construction or purchase of houses in India . Therefore, it is apparent that prior to this assessee was not eligible for deduction u/s 36(1)(viii) of the Act. in view of this Ground Nos. 1 and 2 of the appeal of the assessee which are against sustenance of disallowance u/s 36(1)(viii) of the Act are dismissed. Nature of loss - Loss of the security transaction - disallowing the loss with respect to securities - money been lost by assessee in Shri Harshad Mehta scam - revenue or capital loss - HELD THAT - In the present case the lower authorities have viewed it as loss arising on purchase of securities but in fact there is no information about whether the securities were at all purchases by the assessee or not. if the assessee has lost sum paid by it for purchase of security i.e. advance for security and the same has been lost then it would be business loss allowable in the year in which it is incurred. It is undoubtedly this money has been lost by assessee in Shri Harshad Mehta scam. This aspect is also required to be examined with respect to the provisions of National Housing Bank Act wherein section 14 of that act provides nature of business it can carry on. It is necessary to examine whether the assessee has incurred loss on account of securities transactions entered transaction or it is a case of loss of advances given by the assessee for purchase of securities. If the transaction of securities are backed by physical possession of security notes or securities in Demat form then only it can be considered as loss on transaction in securities. If it is advance given by the assessee for the purchase of security and lost then it may be considered as business loss provided same is incurred during the course of the business of the assessee. If the same is incurred during the course of the business of the assessee then same shall be allowable as revenue loss in the year in which it is incurred. In the present case it is not available before us that assessee was engaged in business of trading of the securities for which money was paid to the state bank of India. As the assessee itself claims that it is managing two portfolios of securities one as trader and another as investor then if the funds were given for purchase of securities which are to be held as stock in trade then it can be considered as allowable loss and if it is given for the purpose of purchase of securities to be held as investor it cannot be allowed as business loss - if the loss is held to be business loss then it can be allowed only in the year in which it is incurred. As the reason for the loss is Shri Harshad Mehta Scam it also needs to be examined whether the loss is allowable in the year it is detected or in the year in which it crystallized. All these issues needs to be examined afresh along with the year incurring of the loss - we set aside the whole issue to the file of ld Assessing Officer to reexamine the claim of allowability of the loss of the security transaction during the year. Appeal of the assessee is allowed with above direction.
Issues Involved:
1. Disallowance of claim under section 36(1)(viii) of the Income Tax Act. 2. Allowability of loss on securities transactions. Issue-wise Detailed Analysis: 1. Disallowance of Claim under Section 36(1)(viii) of the Income Tax Act: Facts: The assessee, a financial institution set up under the National Housing Bank Act, 1987, claimed deductions under section 36(1)(viii) of the Income Tax Act for various assessment years. The assessee's primary business involves providing refinance to banks and housing finance companies. Arguments by the Assessee: - The assessee contended that its business of providing long-term finance for the purchase of houses in India qualifies as "eligible business" under section 36(1)(viii). - The amendment in Finance Act 2009, which explicitly included refinancing activities, should be considered clarificatory and hence retrospective. Arguments by the Revenue: - The Revenue argued that the assessee's role is to promote housing finance institutions and not to provide long-term finance for the construction or purchase of houses directly. - The amendment in Finance Act 2009 is prospective and not retrospective. Tribunal’s Findings: - The Tribunal noted that the assessee provides refinance to housing finance companies and not direct finance for the purchase of houses, which is a primary condition for eligibility under section 36(1)(viii). - The amendment in Finance Act 2009, which included refinancing activities, is prospective and applicable from AY 2010-11 onwards. - The Tribunal upheld the disallowance of the claim for deduction under section 36(1)(viii) for the assessment years prior to AY 2010-11. Conclusion: The Tribunal dismissed the appeals for the assessment years 2003-04 to 2009-10, holding that the assessee is not entitled to deductions under section 36(1)(viii) for these years. 2. Allowability of Loss on Securities Transactions: Facts: The assessee claimed a loss of ?150,45,32,696/- on securities transactions related to the year 1991-92. The loss arose due to a fraudulent transaction involving the stockbroker Harshad Mehta. Arguments by the Assessee: - The loss should be allowed as a business loss since it arose from the normal course of business activities. - The loss was crystallized during the year under consideration due to a Supreme Court order. Arguments by the Revenue: - The Revenue contended that the loss is capital in nature as it pertains to the purchase of securities, which are capital assets. - The loss does not relate to the previous year under consideration. Tribunal’s Findings: - The Tribunal observed that the loss is related to the purchase of securities and is capital in nature. - The Tribunal noted that the assessee failed to provide concrete evidence to establish that the loss was a business loss and not a capital loss. - The Tribunal directed the Assessing Officer to re-examine whether the loss was incurred during the course of business and whether it should be allowed as a revenue loss in the year it was incurred. Conclusion: The Tribunal set aside the issue of the allowability of the loss on securities transactions to the Assessing Officer for re-examination. Final Order: - Appeals related to the disallowance under section 36(1)(viii) were dismissed. - The issue of the allowability of the loss on securities transactions was remanded back to the Assessing Officer for re-examination.
|
