TaxTMI 
TaxTMI 
2015 (6) TMI 879
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..... c) Addition of retention money retained from sub-brokerage d) Disallowance of difference in Service Tax. 3. Facts of the case are stated in brief. The assessee is engaged in Securities Broking business. The first issue relates to disallowance of made under section 14A of the Act. The assessee had received tax free dividend income of Rs. 2,00,745/- and it had made a disallowance of Rs. 1,50,696/- u/s 14A of the Act. The AO noticed that the assessee, while computing the "average value of the investment" for the purpose of computing disallowance under Rule 8D, did not include the value of shares held as stock-in-trade. Hence, the AO recomputed the disallowance as per Rule 8D of the IT Rules by including the value of stock-in-trade also al....
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....However, in the instant case, shares, which yield the tax exempt dividend income, interest qua which is to be disallowed, being held as stock-in-trade, also yield share trading income, which is taxable. Therefore, to say that the entire interest relatable to the average share holding is to be attributed to the tax exempt dividend income would be patently incorrect on facts. That, in fact, the shares are bought and held primarily for share trading income, further accentuates the apparent incongruity of the situation arising on the mechanical application of r. 8D(2)(ii). Clearly, therefore, the amount as per r. 8D(2)(ii) would need to be scaled down, bifurcating the expenditure so arrived at between these two incomes. As regards the ratio of ....
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.... 8D(2)(ii) itself provides the mandate inasmuch as it prescribes or authorizes a disallowance only qua investment, income from which is not taxable, so that in limiting the amount worked out with reference to the total investment; the same also yielding taxable income, we have only sought to operationalize and implement the said rule. It would also be appreciated that not doing so would also violate the principle of only the net income (from any source) being subject to tax inasmuch as disallowance of the total interest as per r. 8D(2)(ii) would in effect bring the share trading income to tax without deduction of the interest expenditure allocable or attributable thereto. Needless to add that no adjustment would arise in respect of shares h....
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....posit. However, the AO took the view that the loss of rental deposit represents loss of capital and accordingly disallowed the claim by holding the same as capital loss. The Ld CIT(A) also confirmed the same. 6. Before us, the Ld A.R placed reliance on the order dated 28-02-2007 passed by the co-ordinate bench in the case of Kanoria Securities & Financial Services (P) Ltd in ITA No.6292/Mum/2003 to contend that the claim of the assessee is allowable. From the perusal of the submissions made by the assessee, it appears that there was a dispute between the assessee and land lord with regard to the quantum of rent. When the quantum of rent was finally settled between the parties, the arrear rent was deducted by the Land lord against the Rent ....
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....erred above. The Ld CIT(A) also confirmed the same. 8. We have heard the parties on this issue and perused the record. It is a fact that the assessee has claimed a sum of Rs. 1,61,41,616/- as subbrokerage/ commission income. The liability is determined on the basis of contract between the assessee and the sub-brokers and accordingly, the assessee seems to have claimed the above said amount as expenditure. However, while making actual payment, the assessee has retained a part of liability as contingency fund in order to cover up possible bad debts. Thus, it is seen that the assessee has retained a part of liability that has already accrued to it. Hence, in our view, the tax authorities are not justified in holding that the liability to the ....