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2017 (1) TMI 49 - AT - Income TaxDisallowance of depreciation on intangible assets - depreciation on BSE/ NSE cards - Held that - We have gone through the order 28.2.2014 of the ITAT in the own case of the assessee for AY 2008-09. We notice that the Tribunal has allowed the similar claim of the assessee for depreciation on BSE/ NSE cards following the decision of the Hon ble Supreme Court in the case of Tecno Shares and Stock ltd . reported in (2010 (9) TMI 6 - SUPREME COURT OF INDIA ). Respectfully following the decision of the Co- ordinate bench of the Tribunal in the own case of the assessee, we allow this issue in favour of the assessee. Disallowance of lease rentals paid on motor vehicles - Held that - R of the assessee, before us, has submitted that the Tribunal in appeal relating to A.Y. 2007 08 vide order dated 28.06 2013 has restored the matter back to the file of the AO directing it to be decided in the light of the decision of the Hon ble Supreme Court in the case of ICDS v. CIT (2013 (1) TMI 344 - SUPREME COURT ) . Following the same line, the tribunal in assessee s appeal relating to AY -2008-09 vide order dated 28.2.2014 has again restored the matter to the file of the AO with direction to decide the same as per the directions given by the Tribunal in order dated 28. 06 2013 for AY 2007-08. Since the issue involved and the material facts relevant thereto are identical in nature, hence this issue accordingly with same directions as given by the Tribunal for AY 2007-08, is restored to the file of the AO for decision a fresh. Additional disallowance u/s. 14A - Held that - A perusal of the assessment order in the case in hand reveals that the AO has not followed the guidelines of objective satisfaction as laid down by the Hon ble Bombay high Court in the case of Godrej & Boyce (2010 (8) TMI 77 - BOMBAY HIGH COURT ) while making the disallowance. He without recording any reasoning for his dissatisfaction with regard to the working/claim of the assessee, straightway applied Rule 8D against the mandate of the provisions of section 14A of the Income Tax Act. The ld. CIT(A) also ignored the mandate of the provisions of section 14 A, while confirming the disallowance. Hence, in the light of the above referred to judicial pronouncements and respectfully following the decision of the Tribunal in the own case of the assessee for AY 2007-08, the disallowance u/s 14A for the year under consideration is restricted to that has been suo- moto offered by the assessee in the return of income. This issue is accordingly decided in favour of the assessee. Addition of deemed speculation loss under explanation to section 73 - assessee has wrongly set off a speculative loss against a non-speculative income - Held that - The nature of the business of the assessee is such that the transactions of the assessee in both segments are part of composite business of the assessee and the transactions are so managed that the resultant figure will be a profit. We, therefore, do not find any justification on the part of the lower authorities to interpret the provisions of the Income Tax Act to the disadvantage of the assessee and to segregate the transactions in cash and future segment which, in our view, will be against the spirit of the taxation laws. Delhi High Court in the case of CIT vs. DLF Commercial Developers (2013 (7) TMI 334 - DELHI HIGH COURT) held that in terms of explanation to section 73, by all accounts, derivatives are based on stocks and shares which fall squarely within explanation to section 73 and therefore loss from sale-purchase of such derivatives would be speculative loss. The Hon ble Delhi High Court has, thus, held that though under provisions of section 43(5), the transactions in derivatives at certain stock exchanges are deemed to be non-speculative, however, as per the explanation to section 73 for the purpose of computation of business loss the derivative transactions squarely fall within the scope of explanation to section 73. Under the circumstances, both the transactions i.e. the transactions in the derivative and transactions in the cash segment can be treated as speculative transactions as per explanation to section 73 and hence the profit or loss against both the segments can be adjusted or set off against each other. - Decided against revenue
Issues Involved:
1. Disallowance of depreciation on intangibles. 2. Disallowance of lease rentals paid on motor vehicles. 3. Additional disallowance under section 14A. 4. Deemed speculation loss under explanation to section 73. Detailed Analysis: 1. Disallowance of Depreciation on Intangibles: The assessee claimed depreciation on intangible assets including Goodwill, BSE Card, and NSE membership rights. The AO disallowed the claim based on earlier years. The CIT(A) allowed depreciation on ?4.25 crores out of total intangible assets of ?6 crores but disallowed it on BSE and NSE membership rights. The Tribunal noted that similar claims were allowed in previous years following the Supreme Court decision in 'Tecno Shares and Stock Ltd.' and directed the AO to allow depreciation on BSE and NSE membership rights. 2. Disallowance of Lease Rentals Paid on Motor Vehicles: The assessee paid lease rentals to Orix Infrastructure Services Pvt. Ltd. for leased cars and claimed the entire lease rentals as revenue expenditure. The AO disallowed the lease rentals and also the alternate claim for depreciation and finance charges, citing the Supreme Court decision in Goetze (India). The CIT(A) confirmed the AO's disallowance. The Tribunal restored the issue to the AO for fresh decision in light of the Supreme Court decision in 'ICDS v. CIT'. 3. Additional Disallowance Under Section 14A: The assessee earned dividend income exempt from tax and made a suo-moto disallowance under section 14A. The AO computed a higher disallowance as per Rule 8D, resulting in an additional disallowance of ?21,48,928/-. The CIT(A) upheld the AO's disallowance. The Tribunal noted that the AO did not record any dissatisfaction with the assessee's disallowance, violating the principles laid down by the Bombay High Court in 'Godrej & Boyce Mfg. Co. Ltd. v. DCIT'. The Tribunal restricted the disallowance to the amount suo-moto offered by the assessee. 4. Deemed Speculation Loss Under Explanation to Section 73: The AO treated the loss from cash segment transactions as speculative under Explanation to section 73 and disallowed the set-off against non-speculative income. The CIT(A) held that arbitrage transactions were excluded from speculation as per section 43(5) and that the AO's selective application of the law was incorrect. The Tribunal upheld the CIT(A)'s decision, noting that the assessee's business of arbitrage involved simultaneous transactions in cash and future segments, which should be treated as a composite business. The Tribunal relied on the Delhi High Court decision in 'CIT v. DLF Commercial Developers Ltd.' and other judicial precedents to conclude that both segments should be treated similarly for tax purposes. Conclusion: The Tribunal allowed the assessee's appeal on the issues of depreciation on intangibles and additional disallowance under section 14A, while restoring the issue of lease rentals to the AO for fresh consideration. The Revenue's appeal regarding deemed speculation loss was dismissed, affirming that the assessee's arbitrage transactions should be treated as a composite business.
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