TaxTMI 
TaxTMI 
2010 (11) TMI 663
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....sp; 4. The facts of the case in brief are that the assessee is a company engaged in the business of share broking, trading, arbitrage and investment in share and securities. During the previous year the assessee earned tax free dividend income of Rs.5,21,445/- and Long Term capital gains of Rs.47,75,259/- which was claimed as exempt. The A.O. noticed that the assessee has not allocated any expenses incurred for earning such tax free income in accordance with section 14A of the Act. The assessee explained that it did not incur any expenditure to earn income which was not taxable to tax. The A.O. however, relying on Rule 8D of the Income-tax Rules, 1962 read with section 14A of the Act, made a disallowance of Rs.12,43,824/- as expenses incurred in earning exempt income and added the same to the total income of the assessee. 5. On appeal by the assessee, the learned CIT(A) confirmed the order of the A.O. giving raise to ground No.1 by the assessee before the Tribunal. 6. We have heard the rival submissions. The Hon'ble Bombay High Court in INCOME TAX APPEAL NO.626 OF 2010 in the case of Godrej and Boyce Mfg.Co.Ltd. Mumbai. vs. Dy. Commissioner of Income Tax, Range 10(....
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.... under the Act. The Assessing Officer must adopt a reasonable basis or method consistent with all the relevant facts and circumstances after furnishing a reasonable opportunity to the assessee to place all germane material on the record; vii) The proceedings for Assessment Year 2002-03 shall stand remanded back to the Assessing Officer. The Assessing Officer shall determine as to whether the assessee has incurred any expenditure (direct or indirect) in relation to dividend income/income from mutual funds which does not form part of the total income as contemplated under Section 14A. The Assessing Officer can adopt a reasonable basis for effecting the apportionment. While making that determination, the Assessing Officer shall provide a reasonable opportunity to the assessee of producing its accounts and relevant or germane material having a bearing on the facts and circumstances of the case. 7. In view of the decision of the Hon'ble Bombay High Court, holding that the provisions of Rule 8D of the Income Tax Rules which have been notified with effect from 24 March 2008 shall apply with effect from Assessment Year 2008-09 and that in respect of disallowance u/s.14-A of....
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.... discussed anything about the nature of penalty which is disputed before us. We are, therefore, of the view that unless the nature of penalty is spelt out, it cannot be concluded as to whether the payment in question is for infraction of law or compensatory in nature. If the payment in question is compensatory, then the assessee would be entitled to claim deduction. We, therefore, set aside the order of the CIT(A) and remand the issue to the A.O. for fresh consideration. The assessee will explain the correct the nature of the penalty with supporting documents and A.O. will decide the issue in accordance with law after affording the assessee an opportunity of being heard. 13. In the result, appeal of the assessee is allowed for statistical purposes. ITA No. 6646/Mum/2009 - filed by the Revenue. 14. The grievance projected in ground No.1 by the revenue is with regard to the action of the learned CIT(A) in deleting the disallowance of Rs.1,53,236/- in respect of Leaseline and Transaction charges of Rs.14,25,509/-. The A.O. made disallowance on the ground that the aforesaid charges were paid by the assessee to the Stock Exchange for rendering professional and te....
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....n ground no.3, the Revenue has challenged the order of CIT(A) in holding the relationship between member/broker and jobber as a principal to principal relationship and therefore not eligible for tax deduction u/s.194C of the I.T. Act. The facts of the case, in brief, are that the assessee has debited an amount of Rs.43,89,541/- on account of payment made to jobbers/arbitragers. The AO noted that these payments have been booked in the books of account as commission payment. Since the assessee has not deducted any TDS on this amount, the AO confronted the same to the assessee. Not being satisfied with the explanation given by the assessee and referring to the provisions of sec. 194(1), the AO held that the company has enlisted the services of jobbers for carrying out the work which primarily belongs to the company. The payments made are in lieu of services rendered for carrying out certain work and the payments made therein fall within the purview of sec. 194C of the I.T. Act since it is the assessee who has to carry out the work of jobbing through one set of jobbers or another year after year. The work can only be said to be belonging to the assessee in whose proprietary acc....