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TMI Blog2015 (12) TMI 1117X X X X Extracts X X X X X X X X Extracts X X X X ..... re that assessee is a Private Limited Company and is registered with Reserve Bank of India as Non-Banking Finance Company (NBFC for short). The assessee's income comprises of trading in shares and derivatives, interest on loan and debentures, dividend and capital gains. During the year, assessee has incurred loss at Rs. 2,73,14,421/- on account of sale-purchase of derivatives and break-up of the loss from its derivative business stands as under :- a) loss on sale of derivatives from 01.04.2005 to 24.1.2005 at Rs. 1,47,47,937/-; b) loss of sale of derivatives from 25.01.2006 to 31-3-2006 at Rs. 1,25,66,484/-; The Assessing Officer sought clarification from assessee by issuing notice stating that why loss incurred on sale/purchase of derivative prior to 25.01.2006 should not be treated as speculation loss. Assessee submitted that as per section 43(5)(d) of the Act, trading in derivatives is not a speculative business. The relevant sub-clause (d) in Sec. 43(5) of the Act was inserted by Finance Act, 2005 which is effective from 01.04.2006 clarifying that the trade in derivatives shall not amount speculation business if it is carried out in the recognized exchange. However, claim of ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... stances under which amendment was brought into existence was not intended to provide for an obvious omission but was made in view of the changed circumstances. Hence, the amendment is prospective in nature and no inference should be drawn that it was retrospective. The ITAT, Kolkata Special Bench further explains what is prospective:- 'In view of the above, clause (d) of section 43(5) is prospective in nature and will be effective from the date from which the legislature made it effective, i.e, 1-4-2006 and will be applicable from assessment year 2006-07 onwards." Being aggrieved by this order of Ld. CIT(A) Revenue preferred appeal before us. Shri A.K. Tibrewal, Ld. Authorized Representative appearing on behalf of assessee and Shri Amitabha Choudhuri, Ld. Departmental Representative appearing on behalf of Revenue. 5. We have heard rival contentions of both the parties and perused the materials available on record. Ld. DR vehemently relied on the order of Assessing Officer whereas Ld. AR also relied on the order of Ld. CIT(A). Ld. AR submitted various case laws in support of his claim. From the aforesaid discussion we find that AO has treated the loss incurred by assessee ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... d to contend that National Stock Exchange India Ltd. could not and should not have been notified from 1st April, 2006. " We also find from the order of this Tribunal of Kolkata Bench in "C" Bench in the case of Vinod Kumar Rampuria v. ITO in ITA No.1902/Kol/2009 order dated 16.07.2010 where the issue was decided in favour of assessee. The relevant extract is mentioned below:- "4. We have heard the parties and perused the material placed before us. We find that the issue in question is covered by the decision of Tribunal in the case of G.K. Anand Bros. Buildwell (P) Ltd. (supra), wherein on identical facts and circumstances of the case and considering the Special Bench decision of ITAT in the case of Shree Capital Services Ltd. vs. ACIT, reported in 318 ITR (AT) 1 (Kol-SB), the Tribunal treated the loss incurred by the assessee on derivative transaction as business loss. The finding of the Tribunal in the said case is as under:- 'Section 43(5) defines 'speculative transaction' which means a transaction in which a contract for the purchase or sale of any commodity including stocks and shares is periodical or ultimately settled otherwise than by the actual delivery or the trans ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... Bros. Buildwell (p) Ltd. (supra), we hold that the authorities below were not justified in treating the loss of Rs. 2,22,296/- incurred upto 24/1/2006 on derivative transaction as 'speculation loss' instead of 'business loss' as claimed by the assessee. Therefore, the addition made of the said amount to the assessee's total income is deleted. We order accordingly." From the above case laws we find that the trading of derivatives for the entire assessment 2006-07 is out of the definition of speculation business if it is carried out in the recognized stock exchange. The assessee has done the trading in the recognized stock exchange. So it is clear that loss on account of derivative transaction or very much covered in clause (d) of the proviso Section 43(5) of the Act. In view of such amendment under the Act, the income/loss arrived on derivative shall be treated as non-speculative loss. Taking a consistent view and relying on the above cited case law, we confirm the order of Ld. CIT(A) and this ground of Revenue's appeal is dismissed. 6. Next ground raised by Revenue is regarding that the Ld. CIT(A) erred in allowing relief of interest payment for Rs. 78,191/- relying loss on trad ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... g to the dividend income as the total sales credited in the P&L A/c were for Rs. 41.72 crores and interest income was to the extent of Rs. 23 lacs and assessee has substantial interest free funds for Rs. 13.77 crores and share worth Rs. 5.76 crores were held as stock-in-trade. Keeping in view these facts and circumstances no interest is attributable to earning tax-free income and the administrative expenses in relation to tax-free income may be taken as 1% of the total exempt income of Rs. 25,14,872/- (LTCG plus dividend) and amount disallowable u/s. 14A is quantified at [(Rs.25,148/- plus demat charges for Rs. 3,854/-) = Rs. 29,002/-]. Therefore this ground is partly allowed." Being aggrieved by this order of Ld. CIT(A) Revenue is in appeal before us. 11. We have heard rival contentions and perused the materials available on record. Before us Ld. AR submitted that disallowance u/s. 14A of the Act can be made if AO, after having regard to the accounts of the assessee is not satisfied with the correctness of the claim of the assessee in respect of such expenditure in relation to income which does form part of total income under this act. The AO in his order has not recorded the c ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... to Revenue's appeal in ITA No. 878/Kol/2013 for A.Y. 2008-09 12. First ground raised by Revenue is regarding that Ld. CIT(A) erred in giving relief to assessee by allowing for the expense of Security Transaction Tax (STT for short). 13. During the course of assessment proceeding, AO found that assessee has claimed an expenditure of Rs. 7,38,99,101/- under the head "Administrative Expenses". From the breakup of "Administrative Expenses" the AO found that the assessee has claimed an expense for an amount of Rs. 39,20,360/- towards the 'transaction, Demat and share transfer charges'. The AO called upon the assessee to explain the expenses and found that these expenses are the payment of STT. The AO disallowed the expenses of STT by virtue of section 40(a)(ib) of the Act. The expense incurred on STT is not allowable expense, therefore, AO disallowed STT expense and added it to the income of assessee. 14. Aggrieved, assessee preferred appeal before Ld. CIT(A) who deleted the addition made by AO on account of STT by observing as under:- "Next ground no.3 relates to addition of Rs. 39,20,360/- on account of STT. Assessee has debited expenditure of Rs. 39,61,222/- on account of trans ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... he STT paid while working out the tax under the provisions of Minimum Alternate Tax (MAT) as specified u/s 115JB of the Act. The AO found that there is no scope of applying the average rate of tax on the income for the adjusting the tax under the provisions of MAT under section 88E(2). So there is a clear cut violation of sub-section 2 of 88E of the Act. Hence, the AO disallowed the rebate claimed by assessee of STT paid under section 88E of the Act. 18. Aggrieved, assessee preferred appeal before Ld. CIT(A) who deleted the disallowance made by AO by observing as under:- "Next ground nos. 4&5 are relates to deduction u/s. 8E. The AO allowed rebate u/s. 88E to the extent of Rs. 39,20,360/- on account of STT paid while calculating the tax on the normal computation as per IT Act and did not allow the rebate while computing the MAT liability u/s 115JB. It was contended by the assessee that total STT paid as per Form 10DB was Rs. 1,93,73,008/- on derivatives, speculative transactions and shares transactions on account of business and the receipt on account of above heads was duly credited in P&L a/c for the financial year. The A/R further relied upon the judgment of ITAT Kolkata in G ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... tax payable by the assessee on the total income computed under regular provisions of the Act is less than 7½% of the book profit prepared in accordance with the Companies Act, the higher of the tax i.e. the book profit shall be deemed to be the total income of the assessee and tax payable by the assessee shall be the amount of income tax at the specified rate. When we look at the provisions of section 77 of the Income Tax Act, 1961, we find that the rebate is to be granted from the amount of income tax chargeable on the total income of the assessee. The income tax is computed after arriving at the total income of the assessee and section 87 of the Income Tax Act, 1961 does not differentiate between the total income computed under the regular provisions of the Act or under section 115JB starts with the nonabstante clause, "Notwithstanding anything contained in any other provision of this Act", we find that it is only for the computation of the total income and the sub-section (5) of section 115JB provides for a saving clause that the rest of the provisions of the Income Tax Act relating to deductions, rebate, etc., the other provisions of the Income Tax Act shall apply. There ..... X X X X Extracts X X X X X X X X Extracts X X X X
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