2020 (10) TMI 1388 - AT - Income Tax

Disallowance u/s 14A r.w.r. 8D - no exempt income has been actually earned - HELD THAT - Hon ble Calcutta High Court in the case of M/s. Ashika Global Securities Limited 2018 (7) TMI 1425 - CALCUTTA HIGH COURT wherein it was held that no disallowance u/s 14A is warranted when no exempt income has been actually earned by the assessee during the relevant year. Since no exempt income was actually earned by the assessee in the present case during the year under consideration, we respectfully follow the said decision of the Hon ble Jurisdictional High Court and uphold the impugned order of the CIT(Appeals) deleting the disallowance made by the Assessing Officer under section 14A read with Rule 8D. Depreciation on software - HELD THAT - As rightly submitted in assessee in this regard, when the depreciation was allowed by the AO himself on software in question for the immediately preceding year, i.e. A.Y. 2013- 14, the said software had entered into the concerned Block of Assets and the utilization of said software for the purpose of assessee s business had become irrelevant for the purpose of allowing depreciation. Moreover as noted by the CIT(Appeals) in his impugned order, there was nothing brought on record by the AO to show that the said software was not used by the assessee-company for the purpose of its business. We, therefore, find no infirmity in the impugned order of the ld. CIT(Appeals) deleting the disallowance made by the Assessing Officer on account of depreciation on certain software in question and upholding the same, we dismiss Ground No. 2 of the Revenue s appeal. Treating the share trading loss and commodity derivative trading loss as speculative in nature - HELD THAT - As regards the issue relating to the claim of the assessee regarding the loss in commodity transactions being the normal business loss, it is observed that the same is squarely covered in favour of the assessee by the decision of Asian Financial Services Limited 2016 (3) TMI 685 - CALCUTTA HIGH COURT wherein it was held that Explanation to Section 73 will not be applicable to the commodity trading loss. As regards the share trading loss is concerned, it is observed that Explanation to Section 73 is held to be not applicable by the ld. CIT(Appeals) after having found that the income of the assessee from other sources was much more than its income from business. At the time of hearing before us, nothing has been brought on record on behalf of the Revenue to rebut or controvert this finding recorded by the ld. CIT(Appeals). We, therefore, find no justifiable reason to interfere with the impugned order of the ld. CIT(Appeals) treating the loss from transaction in commodities and shares as normal business loss not being covered by Explanation to Section 73 and upholding the same, we dismiss Ground No. 3 of the Revenue s appeal.

Summary

Issues Involved: The judgment involves challenges to the disallowance of expenses u/s 14A, disallowance of depreciation on software, and treatment of share trading loss and commodity derivative trading loss as speculative.

Disallowance of Expenses u/s 14A:
The Revenue challenged the deletion of disallowance of Rs.1,38,48,506/- made by the Assessing Officer under section 14A of the Income Tax Act, 1961. The assessee, a Company engaged in trading of computer software and mobile phones, had substantial investments in shares with exempt income. The ld. CIT(Appeals) deleted the disallowance citing no exempt income earned during the year. The Tribunal upheld this decision, citing precedents and the absence of exempt income, dismissing the Revenue's appeal.

Disallowance of Depreciation on Software:
The Revenue challenged the deletion of Rs.46,05,806/- disallowance made by the Assessing Officer on depreciation of certain software. The ld. CIT(Appeals) allowed the depreciation, noting the software's business use and previous allowance in A.Y. 2013-14. The Tribunal upheld this decision, emphasizing the absence of contrary evidence and the software's business utility, dismissing the Revenue's appeal.

Treatment of Share Trading Loss and Commodity Derivative Trading Loss:
The Revenue challenged the deletion of Rs.1,42,28,624/- addition made by the Assessing Officer, treating share trading loss and commodity derivative trading loss as speculative. The ld. CIT(Appeals) directed treating the losses as normal business loss based on legal interpretations. The Tribunal upheld this decision, relying on precedents and the absence of evidence to counter the ld. CIT(Appeals)'s findings, ultimately dismissing the Revenue's appeal.