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TMI Blog2012 (4) TMI 584X X X X Extracts X X X X X X X X Extracts X X X X ..... s other sources :Rs.5,46,854 c) Allocation of common exps. : ₹ 13,76,995 2.3 That in the facts and circumstances of the case as well as in law, the ld.CIT(A) ought not to have upheld the above additions/disallowances. 3.1 The ld.CIT(A) has erred in law and on facts in upholding that interest income was assessable as other sources as against business income. 4.1 The ld.CIT(A) has erred in law and on facts in upholding that Explanation to Sec.73 was attracted and as such, it was speculative business and loss cannot be set off. 2. Brief facts of the case are that the case of the assessee was selected for scrutiny and assessment under Section 143(3) of IT Act was concluded by order dated 27.11.2009. The AO made disallowance under Section 14A of the Act by applying Rule 8D of the Income Tax Rules, business loss treated as speculative loss, dual deduction of depreciation and interest income treated as income from other sources. The AO further allocated expenses between the speculative and non-speculative income. Against this order, the assessee approached the CIT(A) in first appeal, and the ld.CIT(A) after considering the submi ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... s that considering the quantum of dividend income, it could not be a substantial amount and even administrative expenses would not be required to be incurred for the same. It is wholly unbelievable that the expenses of ₹ 74,898 would be incurred for earning exempt income of ₹ 31,417. In view of the above, the disallowance of ₹ 74,898 should be deleted. 4.0 Interest income as Other Sources (Rs.5,46,854) 4.1 The next ground of appeal relates to the interest income of ₹ 5,46,854 treated as income from other sources as against business income by AO. It is observed by AO that the appellant had failed to file details of interest income so that it could not be ascertained that the same was part of the business process. 4.2 The appellant submits that it was pointed out in his submission dt. 27.7.2009 that interest was part of the business. It was not required to file details but given show cause to treat as income from other sources. Secondly, the appellant had offered net interest as income. It will be appreciated that the interest income was earned from advance to Kalpesh Gadhacha and Bharatbhai Gadhacha ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ncome because in case of speculative transaction, the element of income would be uncertain and erratic so that it cannot be compared with normal business income (which also depend on many factors) Therefore the bifurcation made by AO is unrealistic and unreasonable. On the contrary, the learned DR has supported the order of the AO and also the impugned order. 4. We have heard rival submissions and perused the material on record and judgments cited by the parties. The assessee has challenged disallowance under Section 14A of the Act of ₹ 74,898/-. The AO has applied Rule 8D while computing the expenditure. The authorized representative has relied on the decisions in the case of Wolfort Shares Stock Brokers Ltd., 326 ITR 1 (SC) and Hero Cycles Ltd., 323 ITR 518 (P H). In support of this contention that the burden is on the department to prove the nexus between the expenditure and exempt income. We find that ld. CIT(A) has confirmed the disallowance merely on the ground of reasonableness of the expenditure. The CIT(A) has not given any finding as to why the case law as relied on by ld. AR are not applicable on the facts of the present case. As per the recent ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... to speculation loss out of total common expenses of ₹ 13,76,995/-. In addition to this, there is one more grievance of the assessee regarding computation of speculation loss. This grievance is as per ground No.4.1 of the appeal as per which, it is contended by the assessee that Explanation to Section 73(1) was wrongly invoked. 7. It was submitted by the Ld. A.R. that the assessee company is carrying on trading business in commodity and also in shares as composite and indivisible business and, therefore, apportionment of expenses among these two activities is not required. He also submitted that even if allocation is to be made, the ratio adopted by the A.O. is not proper. Regarding the Explanation to Section 73(1), he placed reliance on the judgment of Hon ble Bombay High Court rendered in the case of CIT Vs Darshan Securities Pvt. Ltd. in I.T.A.No.2886/2009 dated 02.02.2012. He submitted a copy of this unreported judgment of Hon ble Bombay High Court. 8. As against this, Ld. D.R. supported the orders of authorities below. He also placed reliance on the judgment of Hon ble Allahabad High Court rendered in the case of Makhanlal Ram Swarup Vs CIT 61 ITR 214 wherein ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ₹ 17,37,44,57 Less: purchasese of shares ₹ 17,37,34,13 Less DMAT charges ₹ 95,496 Less: Service Tax ₹ 2,361 Less Share trading Exp. ₹ 1,70,958 Less expenses allocated Rs.13,08,145 Rs.17,53,11,096 Net loss: ₹ 15,66,518 B Profit Loss on speculative Transaction in commodity: Net loss as per P L Account ₹ 21,40,013 Add: Allocation of expenses as above ₹ 20,655 Total Loss Rs.21,60,668 C Income/loss from derivative Transaction of shares: Income as credited in P L A/c ₹ 50,43,318 Less : Future trading expenses ₹ 16,22,141 Less: Expenses allocated as above ₹ 48,195 Total expenses Rs.16,70,336 Net income Rs.33,72,982 10. Now, we consider the third aspect as to whether the loss in the business of share trading by delivery should be considered as speculation loss by invoking the provisions of Explanation to Section 73(1). For this issue, reliance was placed by the Ld. A.R. on the judgement of Hon ble Bombay High Court rendered in the case of CIT Vs Darshan Securities Pvt. Ltd. (supra). In that case, ..... X X X X Extracts X X X X X X X X Extracts X X X X
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