Case Law Details
Hespera Realty Pvt. Ltd. Vs DCIT (ITAT Delhi)
The issue under consideration is whether upward adjustment to book profit under section 115JB of the Act, by treating the loss on purchase and redemption of mutual funds as expenditure relatable to earning exempt income is justified in law?
ITAT states that, straight reading of the provisions denotes that the loss on purchase and redemption of mutual funds cannot be treated as an expenditure relatable to earning of dividend. The provisions relating to dividends stripping and allowability of consequent loss u/s 94(7) are different from the Clause (f) of Explanation 1 to the Section 115JB. Expense is something which comes out of pocket. A loss is something different as it is not a thing which is spent or disbursed. It is a thing which comes upon him ab extra. {CIT Vs SC Kothari (82 ITR 792) (SC)}. There is a clear distinction between a business expenditure and business loss. The former is an indicative of a volition but a loss comes to as ab extra without the role of the assessee. While expenditure is voluntarily, business loss is fortuitous [CIT Vs New India Assurance Co. Ltd. (71 ITR 761. (Bom.)]. Hence, the loss cannot be equated with expenditure. The provisions u/s 115JB doesn’t envisage enhancement of taxable profits by adding the loss incurred in redemption of mutual fund for the purpose of Section 115JB. Reliance is placed on the judgment of Hon’ble High Court of Gujarat in the case of CIT Vs JK Paper Ltd. 206 Taxmann 124 wherein it was held that the loss incurred by the on account of dividend stripping dealt under sub-Section 7 of Section 97 cannot be applied for the purpose of computing business profit in terms of Section 115JB. Based on the conjoint reading of the provisions of the Act and the judgments of the Hon’ble Apex Court, the appeal of the assessee on this ground is allowed.
FULL TEXT OF THE ITAT JUDGEMENT
The present appeal has been filed by the assessee against the order of ld. CIT (A)-4, New Delhi dated 20.01.2020.
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