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TMI Blog2013 (1) TMI 783X X X X Extracts X X X X X X X X Extracts X X X X ..... MUM/11, - - - Dated:- 30-1-2013 - SHRI I.P.BANSAL, JUDICIAL MEMBER SHRI N.K.BILLAIYA, ACCOUNTANT MEMBER For the Assessee: Shri Ravikant S. Pathak For the Revenue: S/Shri Girija Dayal / ORDER PER I.P.BANSAL, J.M ITA Nos.6612/Mum/11 7656/Mum/11 are cross appeals and they are directed against order dated 7/7/2011 of CIT(A)-7, Mumbai for the assessment year 2007-08. ITA No.6607/Mum/11 6609/Mum/11 are directed against two separate orders dated 7/7/2011 passed by CIT(A)-7, Mumbai in the cases of captioned respective assessee s in respect of assessment year 2007-08. Grounds of appeal in each of the appeals read as under: Grounds of Appeal in ITA No.6612/Mum/11: 1. The learned Commissioner of Income Tax (Appeals) erred in not adjudicating the various contentions of the appellant in relation to the disallowance I computed u/s. 14A of the Income Tax Act, 1961 and while doing so he amongst others failed to appreciate that: a. The appellant, in the return of income filed, had computed the disallowance u/s. 14A on a reasonable and scientific basis having regard to the accounts maintained; b. The expenditure disallowed u/s. 14A by the ap ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... rect expenditure incurred which had a proximate and immediate connection to the dividend income; 2. Since common issues were involved and these appeals were represented by common representative, for the sake of convenience all these appeals are disposed of by this consolidated order. It may also be mentioned here that Bench required both the parties to inform whether there is any cross appeals in respect of ITA No.6607 6609/Mum/11. Both parties informed that there is no cross appeals in respect of those appeals. 3. The single issue involved in ITA No.6612/Mum/11, 6607/Mum/11 and 6609/Mum/11 is regarding disallowance made under section 14A. The grounds of appeal have already been reproduced. The AO while framing assessment order has resorted to Rule 8D for making the disallowance under section 14A. Before Ld. CIT(A) it was the contention of the assessees that in respect of assessment year 2007-08, Rule 8D could not be applied. Ld. CIT(A) accepted such contention of the assessee on the basis of decision of Hon ble Bombay High Court in the case of Godrej Boyce Manufacturing Co. Ltd. vs. DCIT, 328 ITR 81 (Bom). The language of the order of Ld. CIT(A) in all these appeals is ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... stent view in respect of assessment years earlier to A.Y. 2008-09 that disallowance should be made by keeping in view the decision of Hon ble Jurisdictional High Court in the case of Godrej Boyce Manufacturing Company Ltd. (supra). Therefore, we do not find any infirmity in the directions given by ld. CIT(A) to AO. We decline to interfere and the appeals field by the assessee which involve this single issue are dismissed. 5. Now we are left with the departmental appeal i.e. ITA No.7656/Mum/11. The AO had disallowed mark- to- market loss claimed on account of trading in derivative transactions of ₹ 21,21,248/-. The reason assigned by the AO was that loss on the last date of financial year was in the nature of noncrystallized loss. Before Ld. CIT(A) it was submitted that in the case of holding company namely Edelweiss Capital Ltd. Vs. ITO in ITA No.5423/M/2007 for A.Y 2004-05, vide order dated 10/11/2010 similar issue has been decided in favour of the assessee. Accordingly Ld. CIT(A) decided this issue in favour of assessee. The department is aggrieved by such deletion and has preferred the appeal as per grounds narrated above. 6. Ld. DR though not disputed that this is ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... said order is placed on our record. The issue was decided by the Tribunal in favour of assessee with the following observations. 7. We have considered the facts and the rival contentions. In the Schedule annexed to and forming part of the Balance Sheet and Profit Loss Account for the year under appeal (page 13 of the Paper Book), the assessee has made the following Note: - H. Equity Futures - Index / Stock (a) Initial Margin-Equity Derivative Instruments , representing initial margin paid, and Margin Deposits , representing additional margin over and above initial margin, for entering into contracts for Equity Index / Stock Futures, which are released on final settlement / squaring-up of underlying contracts, are disclosed under Loans and Advances. (b) Equity Index / Stock Futures are marked-to-market on a daily basis. Debit or credit balance disclosed under Loans and Advances or Current Liabilities, respectively, in the Mark-to- Market Margin - Equity Index / Stock Futures Account , represents the net amount paid or received on the basis of movement in the prices of Index / Stock Futures till the Balance Sheet date. Amount paid to brokers in addition to ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ed even if such loss has not been actually realized . Quoting from the case of Whimster Co. vs. Commissioners of Inland Revenue (1926) 12 Tax Cases 813, the Supreme Court observed that the profits that are chargeable to tax are those realized in the year and that an exception is recognized where a trader purchased and still holds goods which are fallen in value in which case though no loss has been realized nor it has occurred, nevertheless at the close of the year he is permitted to treat these goods as of their market value. This decision of the Supreme Court governs the facts of the present case. It is to the assessee s strength that the Institute of Chartered Accountants of India in its guidelines have also approved of the rule of prudence which really means that while anticipated losses can be taken note of while valuing the closing stock, anticipated profits cannot be recognized. The anticipated loss, in the light of the judgment of the Supreme Court cited above, cannot be treated as a contingent liability. 8. The learned DR pointed out that the assessee has valued each scrip of the derivatives as at the end of the year. We do not see how this can make any difference t ..... X X X X Extracts X X X X X X X X Extracts X X X X
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