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TMI Blog2014 (1) TMI 1382X X X X Extracts X X X X X X X X Extracts X X X X ..... s contingent loss – Held that:- The decision in DEPUTY COMMISSIONER OF INCOME TAX. Versus KOTAK MAHINDRA INVESTMENT LTD. [2013 (7) TMI 355 - ITAT MUMBAI] followed - the stock future is one of the types of forward contract, which is traded on exchanges. This can be traded in BSE as well as in NSE. In such type of contracts the stock is not actually purchased rather the profit or loss is calculated on the book value in comparison to the actual market rate of the stocks on the date which has been agreed by the parties for the performance of the contract - it is not only the actual stock but derivatives can also be held as stock in trade and the principle “cost or market price whichever is lower” has been rightly followed by the assessee in val ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... he addition of Rs.18,09,124/- into the income of the appellant. Before the ld. CIT(A) the contention of the appellant was that it had not made any investment in shares for the purpose of earning dividend. The dividend received, therefore, were incidental receipts as the appellant had purchased shares for the purpose of selling the same. It was further contended that it could not be said that appellant was dealing in transactions which were exempt from taxes and that the AO had invoked the provision of Rule 8D without giving any reason and without identifying any expenses which could have been incurred to earn tax free dividend income. The provisions of section 14A/Rule 8D were not applicable in the case of the appellant as no expenditure ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... uch method as has been prescribed. Such method as mentioned in sub-section (2) of section 14A has been prescribed as per Rule 8D. He further observed that in the absence of cash flow statement and merely, on the basis of balance of own fund and borrowed fund as on the date of the balance sheet, it cannot be presumed that borrowed fund had not been utilized for earning of exempt income. 4. We have heard the ld. representative of the parties and have also gone through the records. It may be observed that under section 14A of the Income Tax Act resort can be made to Rule 8D (2) of the Income Tax Rules for determining the amount of expenditure in relation to exempt income, if, the AO is not satisfied with the correctness of the claim made by ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... AO does not agree with the computation made by the assessee, and in that event he will have to record his dissatisfaction with reasoning for the same by way of a speaking order. Then he will be at liberty to resort to the provisions of Rule 8D. Needless to say that the assessee will co-operate and promptly supply the necessary details etc. to the AO for deciding the issue under consideration. 8. Ground No.2 of the appeal relates to the confirmation of disallowance of mark-to-market loss of Rs.83,655/- treating it as contingent in nature. 9. The issue is squarely covered in favour of the assessee by the judgment of the co-ordinate bench of this Tribunal dated 03.05.13 passed in ITA No.1502/M/12 (assessment year 2008-09) in the case of K ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... settled accordingly. Such type of contracts are not purely contingent in nature rather loss or profit is somewhat ascertainable in view of constant watch on daily market value and even the quantum of profit or loss though not actually ascertainable, can be anticipated in view of the trends of the market. The difference between the predetermined price and market price is settled daily on mark-to-market basis. In such type of contracts, it is not the stock value which is subject matter of the contract rather the contract itself is the stock in trade which is purchased by paying/depositing the initial margins on percentage basis to the broker taking into consideration maximum anticipated rise or fall in the price of the stock in future. The d ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... usiness are not brought to the charge as a matter of practice, though, as stated above, loss due to fall in the price below cost is allowed even though such loss has not been realized actually. Accounts regularly maintained in the course of business are to be taken as correct unless there are strong and sufficient reasons to indicate that they are unreliable. . The co-ordinate bench of this Tribunal further relying upon the judgment of another co-ordinate bench of the Tribunal dated 10.11.10 passed in ITA No.5324/Mum/2007 for A.Y. 2004-05 in the case of Edelweiss Capital Ltd. further held that it is not only the actual stock but derivatives can also be held as stock in trade and the principle cost or market price whichever is lower has be ..... X X X X Extracts X X X X X X X X Extracts X X X X
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