1.   ELEGANT MARBLES & GRANITE INDUSTRIES LTD Vs. DCIT, ITA NO.1601/MUM/2010, A.Y.: 2006-2007, DATED: JANUARY 21, 2011, ITAT – MUMBAI

In view of the aforesaid decision of the Bombay High Court the issue with regard to disallowance under section 14A has to be made in accordance with the principle laid down by the High Court. Rule 8D cannot be applied because the assessment in question is prior to A.Y.08-09. The AO has to adopt a reasonable basis or method consistent with all relevant facts and circumstances and after affording reasonable opportunity to the assessee to place all germane material on the record, has to decide on the quantum of amount to be disallowed. Issue is remanded to the A.O for fresh consideration; the Kolkata Special Bench in Shree Capital Services Ltd. vs. ACIT  dealt with two issues. Firstly, whether loss from transactions in share derivatives was a speculation loss within the meaning of section 43 [5] of the Income Tax Act, 1961, more particularly because there was apparently no delivery observed. Secondly, whether the Finance Act 2005 amendment to section 43 [5], by insertion of new clause [d] in the proviso with effect from 1-4-2006, was clarificatory in nature; the Special Bench has firstly ruled that the derivative was very much a 'commodity' within the meaning of section 43 [5] and that since there is no delivery of this commodity involved, the transaction was essentially speculative in terms of this section.

The Special Bench has further held that the amendment in clause [d] was prospective and not clarificatory in nature; it is clear that the loss in Futures incurred by the assessee for A.Y 2005-06 would be a speculative loss. The short term capital gain against which the Assessee seeks to set off the brought forward speculation loss is not a speculation income. The brought forward speculation loss could not be set off against short term capital gain as it was not a speculation income. In view of the provisions of section 73(2) of the Act the speculation loss carried forward could be set off only against the profits of speculation business. We, therefore, do not find any merits in the case of the Assessee on this issue. For the reasons stated above we uphold the order of the CIT(A).

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2.   GIVAUDAN FLAVOURS INDIA PVT LTD Vs. DEPUTY COMMISSIONER OF INCOME TAX, ITA No. 2672/ Mum/ 2009, Assessment Year: 2002-2003, ITAT – Mumbai, Dated: March 7, 2011

That the additional ground raised regarding the jurisdiction u/s 147 is a pure question of law challenging the very assumption of jurisdiction to pass impugned order and merely because the assessee did not raise this grievance earlier the assessee cannot be prevented from raising this grievance. that as regards the question of interest disallowance, all the relevant facts were before the Assessing Officer, specific issued were raised during the original assessment proceedings and the submissions made by the assessee placed on record, and yet the Assessing Officer decided not to make any disallowance. There were no new facts before the Assessing Officer which could justify the reopening. On these facts, it was nothing more than change of mind by the Assessing Officer, and a reopening of assessment on the basis of change of opinion is not permissible in law. That as regards the CENVAT credit, it is tax neutral and, unless the condition of satisfaction about income having escaped assessment is satisfied, there cannot be any reopening of assessment. The finding of income having escaped assessment is a precondition for reopening the assessment. Hence, reassessment proceedings were quashed.

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