TaxTMI 
TaxTMI 
2012 (4) TMI 392
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....ment year involved in the instant case is 2006-07 and Rule 8D is applicable only prospectively i.e. from Assessment Year 2008-09 as held by the jurisdictional Hon'ble High Court; therefore, the matter needs to go back to the file of the Assessing Officer for fresh adjudication in the light of the latest decision of the Hon'ble Jurisdictional High Court in the case of Godrej Boyce Mfg Co. Ltd. v. Dy. CIT [2010] 328 ITR 81/194 Taxman 203 (Bom.). 4.1 An identical issue was considered by the coordinate Bench of the Tribunal in assessee's own case in ITA No. 4513/Mum/2008 vide order dated 19th Nov 2010 in para 12 as under: "12. We have heard the learned representatives of the parties and perused the material on record. We find that the disallowance u/s 14A shall be calculated in the light of latest judgment of the Hon'ble jurisdictional High Court in the case of Godrej & Boyce Manufacturing Co. Ltd. vide Income Tax Appeal No. 626 of 2010 and WP. of 758 of 2010, judgment dated 12.08.2010. Therefore, we remit the matter back to the file of the AO with a direction to compute the disallowance u/s 14A in the light of the judgment of the Jurisdictional High Court in the cas....
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....h son of Mr Jayesh Parekh one of the directors of the assessee company. The assessee company has made a total payment of Rs. 28,92,198/- in this respect. The AO asked the assessee as to how this is allowable expenditure. The assessee contended before the Assessing Officer that the expenditure has been incurred in order to augment the future business as the assessee company has entered into an agreement with Mr Rishabh Parekh regarding higher studies i.e Bachelor in General Studies in economics, USA and bearing the expenses on account of all the educational, travelling and incidental cost and in turn, Mr Rishabh Parekh will join the assessee company for a minimum period of five years after completion of the education in USA. Thus, the assessee's main contention before the Assessing Officer was that the expenditure is legitimate for the purpose of business of the assessee company. The assessee has relied upon the decision of the Hon'ble jurisdictional High Court in the case of Sakal Papers (P.) Ltd. v. CIT [1978] 114 ITR 256 (Bom.). 9.2 The Assessing Officer did not agree with the contention of the assessee and was of the view that all these expenses are personal in nature. ....
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....ecause there was an agreement with the parties. Thus, the ld AR has submitted that the higher education of Mr Rishib Parekh was an advantage and an asset for the assessee company. He has relied upon the following decisions: (i) Sakal Papers (P.) Ltd. v. CIT [1978] 114 ITR 256 (Bom.) (ii) CIT v. Kohinoor Paper Products [1997] 226 ITR 220/92 Taxman 316 (MP) (iii) Krishna Fabrications Ltd. v. Jt. CIT [2010] 192 Taxman 287 (Kar.) 10.1 He has pointed out that in the case of Hindustan Hosiery Industries (supra) there was no agreement in this respect. Therefore, the Hon'ble jurisdictional High Court has held that the expenses were not allowable whereas in the assessee's case, when there is an agreement, which has been duly performed by the parties, then the expenditure is allowable. 10.2 On the other hand, the ld DR has submitted that Mr Rishib Parekh was not an employee of the assessee company when he went for USA for higher education. Therefore, the expenditure incurred by the assessee company was not as per the policy of the assessee company but only because Mr Rishib Parekh is the son of one of the Directors of the assessee company; therefore, the expenditure is not for t....
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....the assessee that the expenditure in question was incurred in relation to the business of the assessee-firm. We have no hesitation in recording our conclusion to the fact that the expenditure incurred by the assessee has no nexus with the business of the assessee. We agree with the conclusion arrived at by the Income-tax Officer and the Commissioner of Income-tax (Appeals). In the light of the above discussion, we answer the question referred to us in the negative, i.e., in favour of the Revenue and against the assessee." 13. In case in hand, the decision for sending the son of one of the director of the assessee was taken without being taken into employment of the assessee company. The education of the children is sole and exclusive responsibility of the parent and cannot be mixed up with the business of the family owned company. Therefore, having entered into alleged agreement for incurring the expenses on the higher education and thereafter putting a condition of employment with the assessee company subsequent to the completion of the education is a motivated act of shifting the education expenditure to the accounts of the assessee company as there is no policy or past practi....
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....siness. The expenditure permissible for deduction is expenditure that is wholly and exclusively laid out for the purposes of the business. The expenditure which a father incurs out of his natural love and affection for his children in meeting the cost of their education cannot become a business expenditure merely because he is also the owner or a director of a business in which the son or daughter subsequently takes part." 17. In view of the above decision of the Hon'ble jurisdictional High Court as well as Hon'ble Madras High Court (supra), we are of the view that the expenditure for education of the son of the director of the assessee company for a degree course, who was not employed by the assessee company at that point of time, cannot be allowed as business expenditure. 17.1 The decision relied upon by the ld AR of the assessee are not applicable in the facts and circumstances of the case because in those cases, the expenditure was incurred on the son of the director of the assessee while they were already working as an employee of the assessee or the circumstances were so strong to establish that higher education was wholly for the purpose of the business of the asse....
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....DAI membership. 20.1 We have heard the ld DR as well as the ld AR of the assessee and considered the relevant material on record. The Assessing Officer disallowed the depreciation of BSE card and Foreign Exchange Dealers Association of India (FEDAI). On appeal, the CIT(A) has allowed the depreciation by following the orders of earlier years. 20.2 Prior to assessment year under consideration the issue of depreciation on the BSE card was settled by the Hon'ble Supreme Court in the case of Techno Shares &Stocks Ltd. v. CIT [2010] 327 ITR 323/193 Taxman 248. However, it is to be noted that after corporatisation of the Bombay Stock Exchange, the Stock Exchange Membership is no more in existence and the Card Holders has been issued 10000 shares of BSE of face value of Rs. 1/- each. As per the scheme of de-mutualisation, the card ceased to exist and in lieu of Member Ship, the Card Holder has been issued 10000 shares of BSEL. As per section 55(2)(ab), the cost of the shares allotted to the card holders of a recognized Stock Exchange under a scheme of demutualization shall be the cost of acquisition of his original Membership of the exchange. As per proviso to the said clause, the co....
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.... of surrender of Membership Card before corporatisation of BSE. However, when legislation amended the statute and made it clear that the cost of acquisition of right to trade would be nil, then there is no question of any depreciation of an asset having no cost of acquisition. Moreover, this amendment has been brought with a view to avoid a conflicting situation of apportionment of cost of Membership card between the shares allotted and right to trade and clearing. Since the assessee has already claimed the depreciation on the acquisition cost of BSE card and the value of the BSE card has been shown at the written down value in the books of account; therefore, the only logical conclusion one can draw from post amendment statutory provisions is that the entire value of the BSE card as stands in the books of account of the assessee on the date of de-mutualisation/corporatisation of BSE would be assigned to 10000 shares allotted to such members. Accordingly, when the membership ceased to exist and in lieu of the card, new capital asset came into existence being 10000 shares as well as right to trade and clearing in the Stock Exchange and the acquisition cost of trade and clearing has ....
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.... directing the AO to allow the deduction of gratuity payment of Rs. 1,47,526f- Thus, this ground of appeal of the revenue is dismissed." 26.1 Accordingly, we decide this issue in favour of the assessee and against the revenue and upheld the order of the CIT(A), qua this issue. 27. Next issue is regarding penalty on violation of bye-laws of Stock Exchange. 28. We have heard the ld DR as well as the ld AR and considered the relevant material on record. At the outset we note that this issue has been considered and decided by the Tribunal in assessee's own case for the AY 2005-06 in ITA No.4513/Mum/2008 in para 23 as under: "23. The learned representatives of the parties agreed that this issue is covered by the decision of ITAT in assessee's own case for Assessment Year 2003-04 cited supra wherein the ITAT held that the Tribunal bad taken a view that penalty for short payment of margin money was a compensatory payment under rule of stock exchange which is allowable as revenue expenditure and the same is not penal in nature and for infraction of any law. The said view was taken in the following decisions: 1 ACIT v. Ramesh Damani, ITA No 5143/Mum/2006 (Mum) 2. Classic Sh....