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TMI Blog2011 (12) TMI 349X X X X Extracts X X X X X X X X Extracts X X X X ..... lowed in the earlier 2 years. This being 3rd year there is no reason for disallowing part of amount - Ground is rejected Regarding disallowance of loss invoking the provisions of Explanation to section 73 - CIT (A) considered the facts of the claim and gave finding that the Assessing Officer lacks basic knowledge of accounting in considering the diminution in value of stock as speculation loss and further considered that there is profit in transactions, therefore, provisions of speculation loss does not arise under section 73 - As seen from the paper book placed on record, assessee has not claimed any diminution value in the year, whereas it is a negative debit to the expenditure a/c thereby increasing the profit in the Profit and Loss A/c. As seen from the details on record, there was a diminution of value in earlier year to the extent of Rs.3,57,53,239/- out of the gross value in the balance sheet - Decided in favor of the assessee - ITA No. 4267/Mum/2008, ITA No. 4808/Mum/2008, - - - Dated:- 30-12-2011 - B. Ramakotaiah, V. Durga Rao, JJ. Vijay Mehta for the Appellant A.C. Tejpal, CIT (DR) for the Respondent ORDER B. Ramakotaiah: 1. These are the ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... year when in fact assessee purchased shares on 21.11.2003 and sold them on 1.10.2004. The disallowance can only be for part of the year, if at all to be made but not for full year as calculated by the Assessing Officer and the CIT (A). The learned Counsel in the course of arguments relied on the decision of the Hon'ble Bombay High Court in the case of Reliance Utilities and Powers Ltd 313 ITR 340 and also in the Coordinate Bench decision in the case of Shoppers Stop Ltd in ITA Nos.1448 and 4475/Mum/2010 dated 30.8.2011. The learned Departmental Representative however, relied on the orders of the Revenue authorities. 5. We have considered the facts and arguments and are of the opinion that there is no need for disallowance of interest. First of all the arguments that assessee obtained controlling in interest by purchasing the shares has no validity as all the shares are held by the group companies and not listed and outside public share holders are not available. Assessee or group company is in control of the shares of the said company. Apart from the above fact, it is seen from the balance sheet that assessee has own capital more than the investment made in such shares. Anothe ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... deration. As rightly held by the CIT (A) the NCDs were issued in the financial year 2001- 02 @ 18%. Interests are being allowed in the earlier 2 years. This being 3rd year there is no reason for disallowing part of amount. The issues raised in the grounds by the Revenue may arise in the later year of assessee's own case or in the case of Mitra Fidelity which is stated to have been not offering the income but not in assessee's case in this year. Therefore, the ground is rejected. 8. Ground No.2 pertains to deletion of interest of Rs.2,05,854/- on the reason that assessee was receiving interest at 11.5% whereas it was paying interest @ 15%. Assessee deployed funds in cumulative fixed deposits with M/s Weizmann Home Ltd and received interest at 11.5%.The Assessing Officer was of the view that assessee supposed to receive 15% interest as the funds were borrowed at that rate and therefore, made an addition of Rs.2,05,854/-. The CIT (A) deleted the same on the reason that the Assessing Officer tried to charge the interest at 15% on the fixed deposits made in earlier year 2001 which was agreed at 11.5%. Further, he was of the view that the Assessing Officer has no legal mandate to cha ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... rest under section 36(1)(iii), it would have been only possible in the hands of ALFL for the AY 2002-03. 6.5 Without prejudice to the above finding, it may also be looked into that the investment in NCD cannot be said for non-business purpose by any stretch of imagination as the NCD carries premium on it, which is to be received in form of interest and such income is very much taxable on it. The appellant appears to have offered the income for the AY 2005-06. Therefore, on this account also, the Assessing Officer does not have any case for disallowance of interest. In view of foregoing discussion, I have no hesitation to delete the disallowance of Rs.16,50,000/- under section 36(1)(iii). 10. After considering the rival arguments and examining the record, we are of the opinion that no case was made out by the Revenue to disturb the findings of the CIT (A).Since the facts clearly indicate that investment was made by the Amalgamated Company and assessee has not funded the investment, the Assessing Officer's reason for disallowing the interest cannot be accepted. Since the issue is on facts and as Ld. CIT (A) correctly considered it, we uphold the order. Ground is accordingly r ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... stamp paper same did not contain the name of the parties. An agreement could be even on plan paper or oral and still could be a genuine agreement. In this case in terms of the agreement advance of Rs.2 crores had been received by assessee by cheque and therefore it could not be said that the agreement was not genuine. Agreement can also not be considered as a device to avoid payment of tax as it has been rightly pointed out by the Learned AR that assessee had substantial carried forward losses and even if the deduction on account of liquidated damages was not claimed, income could have been set off by the losses and some losses would have still to be carried forward. Moreover, WHL belonged to the high income group having pre-tax income of Rs.6.34 crores in the relevant year and had paid the tax on the income on account of liquidated damages received by it. There is no material placed on record to show that assessee has used the agreement as a colourable device to reduce the tax liability. Assessee paid liquidated damages @ 1.4% per month on the money received by it from WHL. CIT(A) has given a finding that rate of 1.4% per month matched with the market rate of interest at the rele ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... has not been examined whether the advance received by assessee had been utilized by assessee in the business or diverted for some non business purposes. We therefore set aside the order of CIT(A) and restore the matter to the file of AO for passing a fresh order after necessary examination in the light of observations made above and after allowing opportunity of hearing to assessee". 12. Respectfully following the above, we set aside the order of the CIT (A) and the Assessing Officer on this issue and restore the matter to the file of the Assessing Officer for passing fresh order after necessary examination, as directed by the ITAT in the earlier year, in the same manner in this year. Ground is partly allowed for statistical purposes. 13. Ground No.8 pertains to the issue of deletion of Rs..3,24,09,894/- made on account of disallowance of loss invoking the provisions of Explanation to section 73 of the I.T. Act. Assessing Officer while examining the return noticed that there is a claim of disallowance of loss to the extent of Rs.3,24,09,894/-. Invoking provisions of section 73, AO disallowed the same as speculation loss. The CIT (A) considered the facts of the claim and ga ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 59/- (which was closing stock as on 31.3.2003). If we draw the trading a/c in respect of purchase and sale of share separately, I find that there is profit of Rs.85,23,218/- (sale of share Rs.6,31,50,792/- + increase in stock at Rs.1,22,80,586/- purchase and sale of share Rs..6,69,08,160/-) as drawn in Para 8.5. On the other hand, I find that the Assessing Officer has drawn the trading a/c of purchase and sale of share wrongly as he has taken the figure of opening stock and closing stock, which are incomparable in term of comparability. It may be mentioned that the Assessing Officer has taken the opening stock 10,25,75,760/- after taking into account of diminution of stock at Rs.3,57,53,239/- whereas he has taken the closing stock at Rs.14,72,66,249/- without taking into account of diminution of share stock which has artificially jacked up the profit Rs.4,09,33,112/- (which has got no accounting logic at all). This appears to be a misadventure made by the Assessing Officer to draw a Profit and Loss A/c on totally erroneous fact and figure, which cannot be accepted at all. From the audited Profit and Loss A/c the first pure and simple inference is to be drawn that the appellant has ..... X X X X Extracts X X X X X X X X Extracts X X X X
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