TaxTMI 
TaxTMI 
2012 (7) TMI 133
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....0(a)(ib) inserted by the finance act, 2004. He also observed that there was a separate provision under section 88E to allow rebate on account of STT payments. He, therefore, disallowed the claim made by the assessee. The assessee disputed the decision of AO and submitted before CIT(A) that the assessee was a broker and, had paid STT on behalf of clients which had been included in the brokerage income and therefore, assessee was entitled to claim deduction on account of STT. CIT(A), however, did not accept the contentions raised. He agreed with the AO that there was a specific provision for disallowance of STT under section 40(a)(ib). Further, rebate under section 88E was allowable only in case of traders and not in case of investors and, therefore, no deduction was allowable in case of assessee. CIT(A) accordingly confirmed the disallowance made by the AO, aggrieved by which the assessee is in appeal before the Tribunal. 2.1.1 Before us, the ld. AR for the assessee submitted that the assessee was only a broker who was undertaking transaction on behalf of clients. It was pointed out that, under the provisions of section 98 of STT Act, STT was payable by buyer and seller of shares a....
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....et aside the order of CIT(A) and delete the addition made. 3. The second dispute is regarding disallowance of loss of Rs. 26,09,000/- on account of error trade. The assessee had incurred loss on account of certain share transactions. The AO, therefore, asked the assessee to explain as to why loss should not be treated as speculation loss under provisions of Explanation to section 73. The assessee explained that the provisions of the said Explanation were applicable only in cases where tax avoidance was intended and not applicable to genuine transactions. It was also submitted that in its own case in assessment year 1997-98, the Tribunal has held that the provisions of Explanation to section 73 could not be applied in case of the assessee. The AO however observed that the said decision of the Tribunal was based on the proposition that Explanation to section 73 could be applied only in case of colourable transactions which is no longer a correct view in view of the decision of the Special Bench of the Tribunal in case of AMP SPG. & WVG. MILL (P) Ltd. (100 ITD 142) as per which the provisions of Explanation to section 73 would apply to all transactions of purchase and sale of shares.....
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....ccurred on those transactions undertaken on behalf of the clients in which there were errors and transactions were not as per orders booked by the clients. These purchases/sales executed on behalf of the clients are therefore, owned up by the assessee and these are squared up which has resulted into loss. CIT(A) has observed that the assessee had not made any claim of error trades before the AO. The perusal of record shows that the finding of the CIT(A) is not correct. The assessee vide letter dated 28.09.2007, copy of which is placed at page -42 of the paper book had given details of error trade before the AO as per annexure-VI placed at page 45 of the paper book. The assessee had also enclosed details of error trades before CIT(A). The claim of the assessee has not been controverted by the Ld. D.R by producing any material. Therefore, claim of the assessee that it had made claim of error trades before the AO as well as CIT(A) has to be accepted. However, it is also a fact that the claim of error trade has not been examined either by AO or CIT(A). The Ld. A.R had no objection if the matter is restored to the file of AO for necessary verification. In our view the matter requires fr....
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....ce of expenses relating to exempt income. The AO had disallowed the expenses @ 5% of dividend income whereas the CIT(A) has directed the AO to compute the disallowance as per Rule 8D. The order of CIT(A) can not be sustained in view of the judgment of Hon'ble High Court of Bombay in case of Godrej and Boyce Mfg. Co. vs. DCIT (328 ITR 81), in which it has been held that Rule 8D is applicable only from assessment year 2008-09 and that, in respect of prior years, the disallowance has to be made on a reasonable basis. In this case, the same issue had been considered by the Tribunal in assessment year 2004-05 and the Tribunal has reduced the disallowance to Rs. 2.00 lacs. The facts in this year are almost identical as no major distinguishing factors have been brought to our notice by the ld. Departmental Representative. However, considering the inflation, in our view, it would be appropriate to disallow expenses relating to dividend income at Rs. 2,20,000/-. We hold accordingly. 5. ITA No.133/M/2009 (Appeal of the Revenue): Though the revenue has raised several grounds of appeal, effectively there are three grounds which relate to disallowance of VSAT, lease line and transaction charge....
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....rovider. These were therefore not fees for technical services. As regards the transaction charges, CIT(A) referred to the decision of the Tribunal in case of M/s. Kotak Securities Ltd. Vs. Addl. CIT in ITA No.1955/Mum/2008 dated 26-8- 2008 in which it was held that the stock exchange neither provided any managerial services nor any technical services. CIT(A) accordingly deleted the addition made by AO aggrieved by which revenue is in appeal before the Tribunal. 5.1.2 Before us, the ld. DR appearing for the revenue assailed the order of CIT(A) and placed reliance on the findings given by AO. The ld. AR on the other hand pointed out that the issue was covered by the judgment of Hon'ble High Court of Bombay in the case of CIT vs. Kotak Securities (15 Taxmann.com77) in so far as the transaction charges were concerned. The issue of VSAT charges and lease line charges were also covered by the decision of the Tribunal in case of CIT vs. Angel Broking Ltd. (35 SOT 457). It was thus urged that the order of CIT(A) should be upheld. 5.1.3 We have perused the records and considered the rival contentions carefully. The dispute is regarding disallowance of VSAT, leaseline charges and transacti....
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....ubmitted that the stock exchanges are not statutory authorities and, therefore, violation of their bye-laws could not be considered as violation of law. The payment made by the assessee was only for breach of contractual obligation and therefore claim was allowable as deduction. The AO however had not accepted the explanation given. It was observed by him that under the provisions of Explanation to section 37(1), any expenditure incurred by the assessee for any purpose which is prohibited by law can not be considered as expenditure incurred for the purpose of business or profession. He, therefore, disallowed the claim. In appeal CIT(A) observed that stock exchanges were not government or semi government bodies but were only companies and, therefore, the payment made for violation of their regulations could not be considered as payment prohibited by law or in connection with an offence. He, therefore allowed the claim aggrieved by which, the revenue is in appeal before the Tribunal. 5.2.1 Before us, the ld. Departmental Representative placed reliance on the order of AO whereas the ld. AR submitted that the issue was covered in favour of the assessee by the decision of the Tribunal ....
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....n relation to Out of Pocket Expenses (OPE), it was submitted that the same were incurred during course of carrying on of corporate and advisory services. These expenses were required to be reimbursed by the clients which was not done mainly because the transaction for which the assessee had been appointed had not gone through. The expenses had been incurred on long distance communication calls and traveling expenses incurred by the assessee. These expenses have to be allowed as business loss. The AO however did not accept the contentions raised. It was observed by him that the assessee had not produced any evidence to show that the debt had become irrecoverable. It was also observed by him that OPE could not be considered as bad debt. Claim of business loss could not be allowed as the burden was on the assessee to prove that the loss had crystallized during the year which had not been done. The AO accordingly disallowed the claim. 5.3.2 In appeal, CIT(A) observed that in case of Reckitt Benckiser Plc and Crompton Greaves Ltd. the assessee had offered the amount for tax in the earlier year and in the current year the amount had been written off as bad debt. The assessee was not req....