2017 (12) TMI 613 - AT - Income Tax

Disallowance u/s 14A - Held that - We find that the assessee himself has suo moto made disallowance of 58, 095/- before CIT(A). On query from the Bench the learned Sr. Departmental Representative ( DR ) could not counter the judgement of the Hon ble Delhi High Court before us or he could not brought any precedent of Hon ble jurisdictional High Court in Revenue s favour. Accordingly we are of the view that the issue is squarely covered and hence we restrict the disallowance at 1, 51, 348/- to the extent of exempt income. We direct the AO accordingly. Not allowing carry forward of speculation loss - Held that - Admittedly the assessee has claimed speculation loss in the return of income at 56, 42, 063/- but the AO himself has verified from the records that the speculation loss is at 1, 04, 65, 899/-. According to us the assessee is entitled for this loss and this has been verified by the AO from records. Accordingly we direct the AO to allow the speculation loss at 1, 04, 65, 899/-. The appeal of assessee is allowed and that of the Revenue is dismissed.

Summary

Issues:
1. Disallowance under section 14A read with Rule 8D of the Income Tax Act, 1961.
2. Carry forward of speculation loss.

Issue 1: Disallowance under section 14A read with Rule 8D of the Income Tax Act, 1961:
The appeal involved cross appeals arising from the order of the Commissioner of Income Tax (Appeals) regarding the disallowance under section 14A read with Rule 8D. The Assessing Officer (AO) had disallowed an amount under Rule 8D(2)(ii) and Rule 8D(2)(iii) of the Income Tax Rules, 1962, resulting in a total disallowance. The Commissioner directed the AO to recompute the disallowance under Rule 8D(2)(ii) and retain the disallowance under Rule 8D(2)(iii) based on the stock of investment. The Tribunal noted that the issue was covered by a decision of the Delhi High Court, limiting the disallowance to the extent of exempt income. The Tribunal restricted the disallowance to the exempt income amount, directing the AO accordingly.

Issue 2: Carry forward of speculation loss:
The second issue concerned the carry forward of speculation loss claimed by the assessee. The AO had noted the correct speculation loss amount, which was higher than what was claimed in the return of income. The Commissioner upheld the AO's decision, stating that the assessee should have filed a rectification application under section 154 of the Act. The Tribunal, after considering the contentions, ruled in favor of the assessee, allowing the higher speculation loss amount as verified by the AO. The Tribunal directed the AO to allow the speculation loss at the correct amount, dismissing the Revenue's appeal.

In conclusion, the Tribunal addressed the issues of disallowance under section 14A read with Rule 8D and the carry forward of speculation loss in a detailed manner, providing a thorough analysis of the facts and legal arguments presented by both parties. The Tribunal's decision was based on the relevant legal provisions and precedents, ensuring a fair and just outcome for the parties involved.