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Case Law Details

Case Name : DCIT Vs UBS Securities India Private Limited (ITAT Mumbai)
Appeal Number : ITA No. 9033/MUM/2010
Date of Judgement/Order : 16/03/2021
Related Assessment Year : 2003-04
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DCIT Vs UBS Securities India Private Limited (ITAT Mumbai)

Conclusion: Loss incurred on account of error trades in respect of dealings of clients and not on own account and the loss incurred in course of carrying on share broking business was in line with accepted market practices, therefore, disallowance of Rs. 35,82,623/- on account of loss on share trading and ad-hoc disallowance of Rs.5,00,000/-, not supported by any reasonable basis had been rightly deleted by CIT(A).

Held: Assessee-company had debited an amount of Rs.35,82,623/- on account of loss on share trading during the year. Accordingly, the proportionate expenses incurred towards incurring speculation loss was to be disallowed. As assessee had not given any expense allocation, AO had rightly disallowed on estimation basis the expenses of Rs.5,00,000/- pertaining to the share trading activity of assessee. During the financial year 2002-03, assessee incurred loss on account of dealing errors such as non-execution of minimum contract quantity/amount, dealing errors by staff etc. In such circumstances, the client disowned shares and assessee was forced to purchase/sell the shares due to such errors and in the process there had been a loss of Rs.35,82,623/-. It was stated by him that CIT(A) in assessee’s own case had held that the share trading loss was allowable as business loss. In the instant case, Explanation to section 73 referred by the AO was not applicable as assessee was not engaged in “business” of purchase/sale of shares of other companies. Further loss was incurred on account of error trades in respect of dealings of clients and not on own account and the loss incurred in course of carrying on share broking business was in line with accepted market practices. Further, dno expenditure had been incurred by assessee in respect of error trades. In such a situation, disallowance of Rs. 35,82,623/- on account of loss on share trading and ad-hoc disallowance of Rs.5,00,000/-, not supported by any reasonable basis ha been rightly deleted by the Ld. CIT(A).

FULL TEXT OF THE ORDER OF ITAT MUMBAI

The appeal filed by the Revenue and cross objection by the assessee are directed against the order of the Commissioner of Income Tax (Appeals)-15, Mumbai [in short ‘CIT(A)’] and arise out of order u/s. 143(3) of the Income Tax Act 1961, (the ‘Act’). Since common issues are involved, we are proceedings to dispose them off through a consolidated order for the sake of convenience.

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