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TMI Blog2019 (11) TMI 860X X X X Extracts X X X X X X X X Extracts X X X X ..... ystem of accounting, the loss has to be accounted for, the same should be allowed. Disallowance u/s 14A read with Rule 8D(2)(iii) - HELD THAT:- In the case of Nirma Credit Capital (P) Ltd [ 2017 (9) TMI 485 - GUJARAT HIGH COURT ] it is held that for the purpose of applying factors contained in clause (ii) of sub-rule (2) of rule 8D, prior to its amendment w.e.f 02.06.2016, amount of expenditure by way of interest would be interest paid by assessee on borrowings minus taxable interest earned during financial year. Addition made to Book Profit computed u/s 115JB on account of disallowance made u/s 14A - HELD THAT:- We have heard the rival submissions and perused the material available on record. In the case of Vireet Investment (P) Ltd [ 2017 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... modities including derivative instruments and also earned rental and interest income. During the year under consideration the assessee had made provision for mark to market loss on trading in derivative instruments of ₹ 3,69,12,973/-. During the assessment proceedings, the assessee filed details of statement showing provision for mark to market loss and also submitted a detailed note on mark to market loss on outstanding position. Assessee submitted that it had made provisions for loss following accepted accounting principles as per the Guidance Note on Accounting for Equity Index Equity Stock Futures and Options issued by the Institute of Chartered Accountants of India (ICAI) and claimed the loss as deductable business expenditure. H ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... r of the AO, whereas the ld. counsel for the assessee supports the orders passed by the Ld. CIT(A). 6. We have heard the rival submissions and perused the material available on record. Similar issue arose before the ITAT D Bench, Mumbai in the case of M/s. Edel Commodities Limited v. DCIT [ITA No.3426/Mum/2016] for A.Y. 2011-12. The Tribunal vide order dated 06.04.2018, held as under: 32. When it is held that these derivatives held are stock-in-trade then there cannot be any reservation in valuation thereof as per the well settled practice of valuation of closing stock at market value or cost whichever is lower. No case has been made out by the Revenue that the valuation done is not correct or not properly explained. In these situations, th ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... s to be allowed and the same has to be computed at each balance sheet date, pending actual payment of the liability. Hence, this decision also supports the proposition that even though the loss has not finally crystallized if as per prudent and regular system of accounting, the loss has to be accounted for, the same should be allowed. Hence, in the background of the aforesaid discussion and precedent from the Hon ble Apex Court decision, we find that the aforesaid CBDT Circular is in contradiction of Hon ble Apex Court decision. Hence, we do not find any infirmity in the order of the ld. Commissioner of Income Tax (Appeals). We uphold the order of the ld. Commissioner of Income Tax (Appeals) that the mark to market loss in this case is allo ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ed. Similar, principle laid down by the Hon ble Gujarat High Court in the case of CIT v. Jubiliant Enterprises Limited [ITA No. 1512/2014] has been followed by the ITAT in the case of M/s. Aditya Birla Finance Limited v. ACIT [ITA No. 5732/Mum/2011]. Following the above decisions, the ld. CIT(A) held that the net interest is an income of ₹ 2,34,28,029/- [interest expenses of ₹ 294,99,95,912/- and interest income of ₹ 297,34,23,941/-]. Observing that there would not be any disallowance under Rule 8D(2)(ii), he directed the AO to delete the disallowance made u/s.14A of the Act. 10. Before us, the ld. DR relies on the order of the AO. On the other hand, the ld. counsel submits that net interest is to be considered for making ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... made u/s 14A of the Income Tax Act, 1961, disregarding the clear provisions under Explanation (1)(f) to Section 115JB of the Income Tax Act, 1961, which does not prescribe any parameters for computing expenditure attributable to exempted income. 13. As mentioned earlier, the AO determined the disallowance u/s. 14A r.w Rule 8D at ₹ 19,58,41,069/-. While computing the book profit u/s. 115JB, The AO made an addition of ₹ 20,84,72,118/-. In appeal, the ld. CIT(A), following the order of the Special Bench of the Tribunal in ACIT v. Vireet Investment Pvt. Ltd 165 ITR 27 (Del-SB), deleted the above disallowance made by the AO. 14. Before us, the ld. DR relies on the order of the AO. On the other hand, the ld. counsel for the assessee ..... X X X X Extracts X X X X X X X X Extracts X X X X
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