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TMI Blog2016 (12) TMI 1078X X X X Extracts X X X X X X X X Extracts X X X X ..... t of two lots of shares sold by it depending upon the period of holding. We find that the revenue having accepted the said sale price per share in the event of deriving gains ought not to have disputed the same in the event of incurring losses as stated supra. With regard to Modipan Ltd, we find that the shares of the said company are listed in BSE and the prevailing market price was ₹ 13.75 per share and the assessee had sold the share on off market basis at ₹ 14 per share . Accordingly, we hold that the long term capital loss on sale of shares of unquoted shares (Herbicure P Ltd) and sale of shares of quoted share (Modipan Ltd) which was done on off market on which STT was not suffered, would be separately eligible to be carried forward to subsequent years - Decided in favour of assessee Disallowance of interest on borrowed funds on a proportionate basis - Held that:- We find that the details in the paper book vide pages 40 to 92 were not properly examined by the ld AO. Hence in the facts and circumstances of the case, we deem it fit and appropriate in the interest of justice and fair play , to set aside this issue to the file of the ld AO, to decide the same afre ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... of the ld AO u/s 154 of the Act , the grounds raised before the ld CITA with regard to the treatment of loss as speculation loss is not pressed. But the ld CITA dismissed the entire grounds in this regard as not pressed without appreciating the contentions of the assessee. Aggrieved, the assessee is in appeal before us on the following ground:- 1. That the Ld. CIT(A) erred in dismissing Ground no. 3 of the appeal before him relating to unjustified allocation of a sum of ₹ 19,75,939/- towards speculation business deemed under Explanation below sec. 73 of the Income Tax Act, 1961. 2.2. The ld AR argued that in view of the aforesaid facts and the subsequent order passed by the ld AO u/s 154 of the Act, there is no need to disallow any expenditure in the sum of ₹ 19,75,939/-. In response to this, the ld DR vehemently relied on the order of the lower authorities. 2.3 We have heard the rival submissions and perused the materials available on record. The facts stated hereinabove remain undisputed and hence the same are not reiterated for the sake of brevity. We find that since the loss on account of sale and purchase of shares amounting to ₹ 14,10,61,738/- ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ates are not genuine losses but mere accommodation loss and accordingly disallowed the same. Hence he levied tax on the Long Term Capital Gain of ₹ 4,92,598/- at the rate of 20% in the assessment. 3.2. Before the ld CITA, the assessee submitted that the ld AO had alleged that the assessee failed to furnish the break up value of shares of M/s Herbicure (P) Ltd and M/s Modipan Ldd and on the basis of such allegation , the loss claimed thereon was disallowed. It was claimed that the allegation was incorrect in as much as the assessee had submitted the break up value of the shares of Herbicure (P) Ltd and also the relevant balance sheet of the company and that the shares of Modipan Ltd were quoted on BSE and the transaction of shares of Modipan Ltd was at prevailing market rate. It was explained that the assessee sold 613000 shares of Herbicure (P) Ltd which were held for more than 12 months and incurred a loss of ₹ 8,27,550/-. The assessee claimed the long term capital loss of ₹ 15,71,654/- on such sale after indexation . The explanation together with the break up value of the sales as well as the relevant balance sheet of the company was submitted to the ld AO on ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... bsequent years. He held that since the long term capital loss is ₹ 41,0,7607/- and after setting off the same with long term capital gain of ₹ 53,11,993/- as stated supra, there would be no loss left with the assessee for carrying it forward and hence he dismissed the ground of appeal raised by the assessee. Aggrieved, the assessee is in appeal before us on the following grounds:- 2. The Ld. CIT(A) erred in holding that the loss of ₹ 41,07,607/- incurred by the Appellant Company on sale of its long term investment in equity shares of private limited companies and not subjected to Securities Transaction Tax (STT) was liable to be adjusted against Long Term Capital Gains of shares subjected to STT and exempt under section 10(38) of the Act. 3. That the Learned Commissioner of Income Tax (Appeals) on the basis of his perverse finding as aforesaid, further erred in not allowing carry forward of loss of ₹ 41,07,607/- incurred by the Appellant Company on sale of its long term investment in equity shares of private limited companies. 3.3. The ld AR argued that the ld AO disallowed the long term capital loss of ₹ 41,0,7607/- on the incorrect g ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ssee had incurred long term capital loss thereon and short term capital gains thereon in respect of two lots of shares sold by it depending upon the period of holding. We find that the revenue having accepted the said sale price per share in the event of deriving gains ought not to have disputed the same in the event of incurring losses as stated supra. With regard to Modipan Ltd, we find that the shares of the said company are listed in BSE and the prevailing market price was ₹ 13.75 per share and the assessee had sold the share on off market basis at ₹ 14 per share . Accordingly, we hold that the long term capital loss on sale of shares of unquoted shares (Herbicure P Ltd) and sale of shares of quoted share (Modipan Ltd) which was done on off market on which STT was not suffered, would be separately eligible to be carried forward to subsequent years. Hence the Grounds 2 3 raised by the assessee are allowed. 4. The next issue to be decided in this appeal is as to whether the ld CITA is justified in upholding the disallowance of interest on borrowed funds on a proportionate basis in the facts and circumstances of the case. 4.1. The brief facts of this issue is t ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... essee or any other concern whatsoever. Hence the assessee prayed for allowability of interest paid to Religare Finvest Ltd in the sum of ₹ 54,08,574/- in full as held for the purpose of business. 4.3. Similarly the second account was used for financing business transactions with India Bulls Securities Ltd. All cheques received from India Bulls Financial Services Ltd were deposited in the said bank account and immediately thereafter the amounts were given to M/s India Bulls Securities Ltd for assessee s business transactions relating to business of derivatives and dealing in securities. The assessee explained its contentions through its copy of bank statements with one to one correlation thereon. It was stated that whenever the assessee received payments from India Bulls Securities Ltd, the same was immediately refunded back to India Bulls Financial Services Ltd. The profits and losses arising from business transactions with India Bulls Securities Ltd have been treated and taxed as business income / loss of the assessee. Hence it was submitted that none of the borrowings from India Bulls Financial Services Ltd were ever used for advancing interest free loans / advances to a ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... tter had not been properly examined by the lower authorities and fairly stated that the same be examined by the ld AO for better appreciation of facts. In response to this, the ld DR vehemently relied on the orders of the lower authorities. 4.7. We have heard the rival submissions and perused the materials available on record including the relevant pages of the paper book of the assessee filed in this regard. We find that the details in the paper book vide pages 40 to 92 were not properly examined by the ld AO. Hence in the facts and circumstances of the case, we deem it fit and appropriate in the interest of justice and fair play , to set aside this issue to the file of the ld AO, to decide the same afresh, in accordance with law. Needless to mention that the assessee be given reasonable opportunity of being heard. The assessee is directed to produce necessary evidences in support of its contentions. Accordingly, the Ground No. 4 raised by the assessee is allowed for statistical purposes. 5. The next issue to be decided in this appeal is as to whether the ld CITA is justified in upholding the disallowance u/s 14A of the Act in the facts and circumstances of the case. 5.1. ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... sions and perused the materials available on record. We had already set aside the issue to the file of the ld AO to verify whether the borrowed funds from Religare Finvest Ltd and India Bulls Financial Services Ltd on which interest was paid by the assessee to verify the utilization of the said loans by the assessee in earlier Ground No. 4. The ld AO should also verify the availability of own funds with the assessee company and consider the same while deciding the aspect of disallowance u/s 14A of the Act, if any, in the facts and circumstances of the case. Hence we deem it fit and appropriate to set aside this issue also to the file of the ld AO to decide the same afresh in accordance with law. Needless to mention that the assessee be given reasonable opportunity of being heard. The assessee is directed to produce necessary evidences in support of its contentions. Accordingly, the Ground No. 5 raised by the assessee is allowed for statistical purposes. 6. The last ground to be decided in this appeal is as to whether the ld CITA is justified in upholding the disallowance of ₹ 18,50,250/- u/s 94(7) of the Act in the facts and circumstances of the case. 6.1. The brief fac ..... X X X X Extracts X X X X X X X X Extracts X X X X
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