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TMI Blog2016 (11) TMI 248X X X X Extracts X X X X X X X X Extracts X X X X ..... llowances by the Assessing Officer. The CIT(A) has allowed partial relief and accordingly assessee is in appeal on the issues on which the CIT(A) did not allow relief, whereas the Revenue is in appeal challenging some of the reliefs allowed by the CIT(A). In this background we may now proceed to adjudicate respective grounds of appeal in the captioned appeals. 3. We shall first take up the appeal of the assessee . The Grounds of appeal raised by the assessee read as under:- " 1. (a) The Commissioner of Income-tax (Appeals) - XLVI, Mumbai [hereinafter referred to as the CIT(A)] erred in upholding the action of the Joint Commissioner of Income-tax, Special Range 27, Mumbai (hereinafter referred to as the JCIT) of not allowing Rs. 26,99,627 as a deduction in respect of interest paid for broken period at the time of purchase of the securities. The appellants submit that the securities were purchased by them as stock in trade and not as investments and hence the interest paid for the broken period at the time of purchase of securities should be allowed as a deduction in the year of purchase of securities. Therefore they pray that the JCIT be directed to allow the same. (b) With ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... under section 37 or under section 28. The appellants pray that the JCIT be given suitable directions in the matter. 4. a) The CIT(A) ought to have granted relief in respect of loss on account of sale of units to bank and non-bank clients amounting to Rs. 3,20,79,500. The CIT(A) erred in directing the JCIT to rework the disallowance keeping in mind the Board's guidelines and the Supreme Court's decision in the case of BOI Finance Ltd. Vs. Custodian (12 SCL 99) and Davenport's case (100 ITR 715). The CIT(A) ought to have held that the losses arose in the ordinary course of the appellant's business, and that the transactions giving rise to the loss were neither speculative nor illegal transactions and therefore the loss should be set off against the appellant's business income. b) Without prejudice and in any event, in view of the CBDT guidelines dated 28th February, 1995 the CIT(A) ought to have directed the JCIT to reduce the loss by Rs. 7,80,000 being the profit in respect of another unit transaction. c) Without prejudice to the above, it is submitted that section 28(1 )(a) of the SCRA provides that the provision of that Act will not apply inter alia to ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... copy of the said order has also been placed on record. The Tribunal notes that assessee had paid interest in excess of the guidelines of Reserve Bank of India and, therefore, such excess payment of interest was disallowable. Since facts and circumstances in the instant year are similar, following the decision of the Tribunal dated 30/11/2007(supra), the stand of the income tax authorities is hereby upheld and accordingly, assessee fails in Ground of appeal No.3. 5. The next issue raised by the assessee in Ground of appeal No.4 relates to a disallowance of Rs. 3,20,79,500/-, which represents loss on account of sale of units to bank and non-bank clients. The details of such loss has been duly noted in the orders of the Assessing Officer as well as the CIT(A) and the same is as under:- Date of sale Sale price Nos. face value in crores Name of the party to whom sold Date of purchase Cost (Rs.) Loss on the transaction 5/7/90 6,56,26,250 5 Punjab National Bank - Capital Market 21/5/90 7,35,25,000 78,96,750 20/7/90 13,19,02,500 10 Bank of Madura 21/5/90 5,15,10,000 1,63,47,000 31/5/90 9,67,39,500 20/07/90 6,61,76,25 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ,00,500/- on an overall basis, which is detailed as under:- Date of sale Sale price (Rs.) Face value in crores (Rs.) Name of the party to whom sold Date of purchase Cost (Rs.) Gain/(Loss) On the transaction (Rs.) Dividend (Rs.) Net Gain (Rs.) 5/7/90 6,56,250 5 Punjab National Bank- Capital Market 21/5/90 7,35,25,000 (78,98,750) 90,00,000 11,01,250 20/7/90 13,19,02,500 10 Bank of Madura 21/5/90 5,15,10,000 (1,63,47,000) 90,00,000 16,53,000 31/5/90 9,67,39,500 90,00,000 20/7/90 6,61,76,250 5 UCO Bank 21/5/90 7,38,00,000 (76,23,750) 90,00,000 3,76,250 23/11/90 4,17,00,000 3 HSBC Ltd. 1/11/90 4,19,10,000 (2,10,000) 2,10,000 22/6/90 63,95,000 6.50 Punjab National Bank 21/5/90 9,56,15,000 7,80,000 7,80,000 TOTAL 29.50 (3,12,99,500) 3,60,00,000 47,00,500 The CIT(A) however, has disallowed the loss for the reasons assigned by the Assessing Officer. 5.2 Against the aforesaid decision of the lower authorities, the Ld. Representative for the assessee has made varied submissions. At the threshold, the plea of the ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ve been taken or given as the case may be. Where it was convenient Units purchased from a party may have been sold to the same party instead of trying to locate a buyer in the market which may entail additional cost and administrative hassels. As the transactions have been conducted at the proximate market values, the position shown in the books represents the correct picture about the profit or loss incurred on the transactions. The transactions having been carried out in the normal course of business and at arms length the loss incurred is properly allowable as normal business loss. As regards your query pertaining to the guidelines issued by the Reserve Bank of India on buy-back transactions in securities, we submit that the relevant transactions are not buy-back transactions for the bank, as such there is no violation of the guidelines issued by the Reserve Bank of India. Even assuming that there was no violation of the guidelines as has been already submitted above this will amount to a more irregularity and will not change the character of the transaction. The fact that a loss has been suffered in the transaction would have to be considered in arriving at the total income." ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... lf, we do not find any merit to uphold the orders of the authorities below. Consequently, the order of the CIT(A) is set aside and the Assessing Officer is directed to delete the addition. As a consequence, on this issue assessee succeeds. 6. The last ground in the appeal of the assessee relates to expenditure of Rs. 39,07,409/- incurred on mobilization of deposits abroad. The Assessing Officer as well as the CIT(A) have disallowed the said expenditure following their stand for the earlier assessment years. 6.1 Before us, it was a common point between the parties that in assessment years 1992-93 to 1997-98, the Tribunal vide its order in ITA No.2297/Mum/99 & others dated 28/06/2005 has decided the issue in favour of the assessee . In this context, the relevant discussion in the order of the Tribunal is as under:- " 5. Having heard the rival contentions and having perused the material on record, we find that the objections taken to the deduction of the said expenditure are devoid of legally sustainable reasons. As far as the question of the expenses incurred abroad being hit by the provisions of section 44C is concerned, the law is now settled by the Hon'ble Bombay High Court in ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... it and proper to delete the impugned disallowance of Rs. 86,75,197...... The assessee gets relief accordingly." Following the aforesaid precedent, the claim of the assessee is allowed and accordingly assessee succeeds in Ground No.5 7. In the result, appeal of the assessee is partly allowed as above. 8. Now, we may take up the Revenue's appeal in ITA No.4077/Mum/99. In this appeal, Revenue has raised the following Grounds of appeal:- "1) On the facts and circumstances of the case and in law the C.I.T(A) has erred in accepting the claim of the assessee that in case the decision of the CIT(A) on the issue of disallowance of the broken period interest pertaining to A.Y. 1990-91(which is contested by the Department before the I.T.A.T) is reversed. The said claim should be allowed in A.Y. 1991-92 during the year in which the said securities are actually sold. 2) The above decision of the CIT(A) given in para.4 of her order dated 20.5.1999 for contradictory with respect to her own decision on this issue given in para No.3, of the said order. Therefore, the appellant prays that the decision of the CIT(A) given in para No.4 should be set aside. 3. On the facts and circumstances of ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... hould be allowed as deduction in the instant assessment year. The CIT(A) upheld the plea of the assessee and held that " that should be the favourable order of the CIT(A) for the assessment year 1990-91 be reversed in subsequent proceedings, then this amount should be allowed as a deduction in the assessment year 1991-92". Against such direction of the CIT(A), Revenue is in appeal before us. 10. At the time of hearing, it was a common point between the parties that the order of the CIT(A) for assessment year 1990-91 has not been reversed by the Tribunal and, therefore, under these circumstances we find no error in the aforesaid direction of the CIT(A), which is hereby affirmed. Thus, Grounds of appeal No.1 & 2 of the Revenue fails. 11. In Ground of appeal No.3, the issue relates to the disallowance of Rs. 61,460/- made by the Assessing Officer under section 37(2A) of the Act, which has since been deleted by the CIT(A). In this context, it is noticed that the expenditure was claimed to be incurred on assessee's employees and no outsider was involved and, thus, the same has been rightly treated by the CIT(A) as not to be in the nature of entertainment. In assessment years 1989- 90 ..... X X X X Extracts X X X X X X X X Extracts X X X X
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