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2018 (3) TMI 789 - AT - Income TaxTreatment of loss - business of purchase and sale of shares - Applicability of Explanation to Section 73 - assessee company contended that the loss from the business of purchase and sale of shares could not be considered in isolation for the purpose of application of Explanation to Section 73 as the activity of share broking was also the part and parcel of business of purchase and sale of shares. - Held that - In the case of DCIT vs MPC Securities Ltd 2016 (7) TMI 539 - ITAT KOLKATA held that the entire business of the assessee stock-broker constituted as one single composite indivisible business and therefore, income or loss from such business could not be artificially bifurcated for applying the provisions of Explanation to Section 73. Also as the activity of the assessee of share trading which was carried on its own account and on behalf of the client formed single composite indivisible business and the profit or loss of the same could not be artificially bifurcated for the purpose of Explanation to Section 73. Thus we uphold the impugned order of the Ld. CIT(A) allowing relief to the assessee on this issue Disallowance u/s 14A read with Rule 8D - Held that - Both the sides have agreed that this issue is squarely covered in favour of the assessee by the decision of this Tribunal in the case of REI Agro Ltd. 2013 (9) TMI 156 - ITAT KOLKATA - Revenue appeal dismissed.
Issues:
1. Applicability of Explanation to Section 73 on treating loss from share trading as speculation loss. 2. Justification of not accepting revised computation of income. 3. Treatment of interest income as business income. 4. Disallowance under section 14A and Rule 8D. Issue 1: Applicability of Explanation to Section 73: The case involved a company engaged in share trading, declaring a loss of ?50,98,090. The Assessing Officer (A.O.) treated the loss in share trading as speculation loss under Explanation to Section 73, disallowing set off against brokerage income. The Ld. CIT(A) accepted the company's contention, citing precedents, that share trading loss should be set off against brokerage income before applying Explanation to Section 73. The Tribunal upheld Ld. CIT(A)'s order, emphasizing that the business of share trading constituted a single composite business, not subject to artificial bifurcation for Explanation to Section 73. Issue 2: Revised Computation of Income: The A.O. rejected the revised computation of income by the company, citing the need for a revised return for any new claim. However, the Ld. CIT(A) disagreed, stating that changing the head of income did not constitute a new claim, citing relevant case law. The Tribunal upheld Ld. CIT(A)'s decision, noting that the interest income on FD should be assessed under the head 'income from other sources,' not business income, thus affecting the applicability of Explanation to Section 73. Issue 3: Treatment of Interest Income: The Ld. CIT(A) found that the interest income on FD should be assessed under 'income from other sources,' not business income. This finding was based on consistent judicial views, leading to the conclusion that the company's income under 'income from other sources' exceeded the business income, exempting it from the Explanation to Section 73. Issue 4: Disallowance under Section 14A and Rule 8D: The A.O. disallowed ?2,77,821 under section 14A using Rule 8D for exempt income. However, the Ld. CIT(A) restricted the disallowance to ?8,332, considering only investments generating exempt income. The Tribunal upheld this decision, relying on the REI Agro Ltd. case, which was later upheld by the Kolkata High Court. In conclusion, the Tribunal dismissed the revenue's appeal, upholding the Ld. CIT(A)'s order on all issues, including the applicability of Explanation to Section 73, treatment of interest income, and disallowance under section 14A and Rule 8D. The judgment emphasized the holistic view of the company's business activities and the correct assessment of income under different heads.
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