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2016 (9) TMI 1149 - AT - Income TaxDiminution of value of shares - to be treated as business loss or not - Held that - Regular method of valuation to be followed - No doubt it is to be seen whether diminution of investment in the shares is liable to allowable or not. This matter of controversy has already been adjudicated by the Hon ble Supreme Court in case of United Commercial Bank 1999 (9) TMI 4 - SUPREME Court wherein this controversy has been decided in favour of the assessee against the revenue. - Decided in favor of assessee. Determination of cost of acquisition u/s.45(2A) - computation of LTCG - Held that - At the time of argument no distinguishable facts have been placed on record by the revenue to which it can be assume that the CIT(A) has passed the order wrongly and illegally. The specific directions has been given by the CIT(A) to determine the cost of acquisition u/s.45(2A) of the Act read with Circular No.768 dated 24.06.1998. Nothing seems unjustifiable. Since the matter of controversy has rightly been adjudicated by the CIT(A), therefore, we nowhere found any ground to interfere with this order, therefore we uphold this issue in favour of the assessee and against the revenue. Accordingly, this issue is decided in favour of the assessee and against the revenue.
Issues Involved:
1. Disallowance under Section 14A of the Income Tax Act. 2. Disallowance regarding diminution in the value of shares. 3. Levy of interest under Section 234B and 234C. 4. Computation of Long Term Capital Loss on account of sale/transfer of shares. Issue-wise Detailed Analysis: Issue No.1: Disallowance under Section 14A of the Income Tax Act The assessee challenged the disallowance of Rs. 1,35,25,433/- under Section 14A of the Income Tax Act. The assessee received dividend income of Rs. 7,33,91,985 and voluntarily disallowed interest expenses of Rs. 25,10,473/- under Section 14A. The contention was that only the expenditure incurred to earn exempt income should be considered. The Tribunal noted that the assessee had already disallowed significant expenses voluntarily and only Rs. 3,90,629/- remained. The Tribunal concluded that an additional disallowance of Rs. 25,000/- was reasonable and directed the Assessing Officer to adjust the income accordingly. This issue was decided in favor of the assessee. Issue No.2: Disallowance regarding diminution in the value of shares The assessee contested the disallowance of Rs. 52,31,313/- for diminution in the value of shares. The assessee treated the shares as stock in trade and valued them at market value or cost, whichever was lower. The Assessing Officer disallowed this on the grounds that the stock was not sold, relying on the case of Indian Overseas Bank. The Tribunal referred to the Supreme Court judgment in United Commercial Bank (240 ITR 355), which allowed such diminution as business loss. The Tribunal set aside the CIT(A)'s order and allowed the diminution in value as a business loss, deciding the issue in favor of the assessee. Issue No.3: Levy of interest under Section 234B and 234C The assessee challenged the levy of interest under Section 234B (Rs. 14,12,268/-) and Section 234C (Rs. 64,299/-). Given that Issue No.2 was decided in favor of the assessee, the Tribunal concluded that the consequential result should follow, setting aside the CIT(A)'s finding on this issue. Issue No.4: Computation of Long Term Capital Loss on account of sale/transfer of shares The revenue challenged the CIT(A)'s direction to compute the Long Term Capital Loss using the cost of acquisition under Section 45(2A) of the Act, read with Circular No.768. The CIT(A) found that the shares were held and transferred in demat form, and the FIFO method was applicable under Section 45(2A). The Tribunal upheld the CIT(A)'s decision, noting that the revenue did not provide distinguishable facts to contest it. The Tribunal found the CIT(A)'s directions justifiable and upheld the decision, deciding the issue in favor of the assessee. Conclusion: The Tribunal allowed the appeal of the assessee and dismissed the appeal of the revenue. The order was pronounced in the open court on 26th August 2016.
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