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TMI Blog2019 (3) TMI 1060X X X X Extracts X X X X X X X X Extracts X X X X ..... . 349.82 Lacs. 2.2 The assessee being resident corporate entity, stated to be engaged in the business of trading & arbitrage of commodities, securities & derivative instruments, was assessed for impugned AY u/s 143(3) on 30/03/2015 wherein the income of the assessee was determined at Rs. 766.55 Lacs under normal provisions after certain disallowances / adjustments as against revised returned income of Rs. 233.82 Lacs filed by the assessee on 31/10/2012. 2.3 During assessment proceedings, it transpired that the assessee claimed deduction on account of provision for loss on currency futures, commodities futures, equity stock / index future and equity stock / index option amounting to Rs. 353.28 Lacs, the details of which have already been extracted in para 4.1 of the quantum assessment order. The Ld. AO viewing the same as contingent liability proceeded to disallow the same. The assessee, vide reply dated 12/02/2015, defended the same by submitting that the unrealized gain of Rs. 317.73 Lacs were credited to Profit & Loss Account and therefore, corresponding unrealized loss was allowable to the assessee. It was submitted that the aforesaid accounting treatment was in accordance wit ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... provision for amount on derivative instrument which was disallowed by the AO. In appeal, the CIT(A) allowed the claim of the assessee on the ground of the decision of the Hon'ble ITAT in several cases. The CIT(A) has relied upon the following cases:- 1. Edelweiss Capital Limited Vs. ITO (ITA. No.5324/M/2007) 2. Edelweiss Securities ITA No. 4263/mum/2016 A.Y. 2011-12 3. DCIT Vs. Edelweiss Securities Limited(ITA 7792/M/2012) 4. DCIT Vs. ECL Finance Limited (ITA 7656/M/2011) 5. DCIT Vs. Kotak Mahindra Investment Limited(ITA 1502/M/2012 6. Shri Ramesh Kumar Damani Vs. Addll. CIT (ITA 809/M/2009) 7. M/s Ekansha Enterprises P. Ltd. Vs. DCIT (ITA 809/M/2012) 8. ACIT Vs. Suryakant D. Nissar (ITA 2750/M/2010) 9. DCIT Vs. Edelweiss Securities Limited (ITA 5939/M/2011) 5. The finding of the CIT(A) is hereby to reproduce as under:- "5.1.1 these grounds pertains to disallowance of provision on Mark to Market on trading of derivative instrument of Rs. 5,20,75,140/- by treating it as notional loss. This issue has been dealt with under para 4 of assessing officers order. Essential he has treated the same as notional loss for which liability has not crystallized and has held i ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ggest such nexus. Therefore, interest disallowance u/r 8D(2)(ii) could not be held to be justified. We order so. 4.3 So far as the expense disallowance is concerned, Ld. AR has placed on record the details of investments which have actually yielded the exempt income during the impugned AY. The average of these investments works out to Rs. 340.60 Lacs & 0.5% of the same comes to Rs. 1,70,301/- which is less than suo-moto disallowance of Rs. 2,32,758/- already offered by the assessee. This computation is in line with the decision of Delhi Tribunal (Special Bench) rendered in ACIT Vs. Vireet Investment (P.) Ltd. [82 Taxmann.com 415] wherein it has been held that only exempt income yielding investments were to be considered to arrive at the said disallowance. Therefore, the additional expense disallowance, as computed by Ld. AO could not be sustained. Therefore, we find no infirmity in the stand of Ld. first appellate authority. 4.4 The appeal of the revenue stands dismissed. 2. ITA 6458/Mum/2017 : AY 2012-13, M/s EC Commodities Ltd. 5.1 Similarly aggrieved by deletion of disallowance u/s 14A as well as deletion of MTM losses, the revenue has challenged the order of first appellate ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... exempt income of Rs. 36,360/-. The assessee's submissions as extracted in the quantum assessment order reveal that assessee's own funds far exceeded the investment and therefore, no interest disallowance was justified in the absence of nexus of borrowed funds with the investments. So far expenses disallowance is concerned, it is found that the assessee had already disallowed a sum of Rs. 7.52 Lacs against exempt income of Rs. 0.36 Lacs and therefore, no further addition, in this regard was justified. Hence, we confirm the stand of first appellate authority. 6.3 The appeal stands dismissed. 4. ITA 6459/Mum/2017 : AY 2011-12, M/s ECL Finance Ltd. 7.1 Similarly aggrieved, the revenue is in further appeal before us against the stand of first appellate authority in deleting disallowance u/s 14A as well as MTM losses. The Ld. CIT (A) has deleted both the additions by relying upon its stand in assessee's group companies, the details of which has already been given in the impugned order. Facts and circumstances being pari-materia the same, respectfully following the binding decision of this Tribunal in assessee's group concerns, we confirm the stand of first appellate authority in dele ..... X X X X Extracts X X X X X X X X Extracts X X X X
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