×Latest Case Laws on Income Tax by various Income Tax Appellate Tribunals in India
These are the latest case laws decided by various Income Tax Appellate Tribunals (ITAT) of India on Income Tax which have been published recently. The case laws are open for discussion and we invite expert comments from our members on its applicability and effect on relevant issues.
1. Aforesaid appeals by revenue for different Assessment Years [AY] contest separate orders of first appellate authority. Since common issues are involved, we proceed to dispose-off the same by way of this common order for the sake of convenience and brevity.
1. ITA 6457/Mum/2017 : AY 2012-13, M/s Edelcap Securities Ltd.
2.1 Aforesaid appeal by revenue for AY 2012-13 contest the order of Ld. Commissioner of Income Tax (Appeals)-8, Mumbai [CIT(A)], Appeal No. CIT(A)-8/IT-271/15-16 dated 14/07/2017 qua deletion of disallowance u/s 14A for Rs.167.80 Lacs and deletion of provision for Mark to Market Losses [MTM] for Rs.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 with Accounting Standard-30: Financial Instruments: Recognition and measurement & Guidance note on accounting for equity index and equity stock futures and options issued by The Institute of Chartered Accountants of India [ICAI]. However, not convinced, Ld. AO, treating the same as contingent liability, disallowed the same.
2.4 The assessee was saddled with another disallowance u/s 14A in view of the fact that it earned exempt dividend income of Rs.50.02 Lacs from shares / mutual funds and offered suo-moto disallowance against the same for Rs.2.32 Lacs in the return of income. However, Ld. AO, by applying Rule 8D, worked at aggregate disallowance of Rs.167.80 Lacs which comprised-off of interest disallowance u/r 8D(2)(ii) for Rs.150.49 Lacs and expense disallowance u/r 8D(2)(iii) for Rs.17.30 Lacs. After adjusting suo-moto disallowance offered by the assessee, net disallowance thus made worked out to Rs.165.47 Lacs which was added to the income of the assessee.
3. The Ld. CIT(A) deleted both the additions by relying upon its own decision in assessee’s own case for AY 2011-12. Aggrieved the revenue is in further appeal before us.
4.1 The Ld. Authorized Representative for Assessee [AR], at the outset, submitted that the stand of first appellate authority qua deletion of provision for MTM losses in AY 2011-12 has been confirmed by the Tribunal vide ITA No. 4263/Mum/2016 order dated 09/11/2017 wherein the matter was concluded in the following manner: -
ISSUE NO. 1:-
4. Under this issue the revenue has challenged the deletion of the addition of Rs.5,20,75,140/- made by AO on account of Mark to Market Loss claimed by the assessee in derivative transaction. The Ld. Representative of the revenue ha argued that the loss claimed on the basis of the value derivative as on 31st March is merely a notional loss and the actual loss or the profit of such derivative transaction would be crystallized only at the time of settlement of such transaction, therefore, the finding of the CIT(A) on this issue is wrong against law and facts and is liable to be set aside. However, on th othe hand, the Ld. Representative of the assessee has strongly relied upon the finding of the CIT(A) in question. We have heard the argument advanced by the Ld. Representative of the parties and perused the record. We noticed that the assessee initially claimed the Mark to Market (MTM) 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