TaxTMI 
TaxTMI 
2015 (11) TMI 177
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.... (AO) considering the business loss suffered by the appellant amounting to Rs. 1,46,03,171/as the speculation loss as per the provisions of Explanation to section 73. 2) The appellant prays that your honour hold that the business loss suffered by the appellant amounting to Rs. 1,46,03,171/cannot be considered to be speculation loss as per the provisions of Explanation to section 73. B) Disallowance of sub-brokerage - Rs. 89,32,288/- 3) The learned CIT(A) erred on facts and in law in confirming the order of the AO disallowing the subbrokerage paid by the appellant to the extent of Rs. 89,32,288/on the alleged ground that the appellant had not explained the nature and genuineness of the said subbrokerage nor evidence with respect to the services rendered nor furnished the confirmations of the said parties. 4) The appellant prays that the disallowance of subbrokerage of Rs. 89,32,288/as made by the AO and as confirmed by the CIT(A) may be deleted. C) Disallowance u/s. 40A(2)(b) - Rs. 43,04,449/- 5) The learned CIT(A) erred on facts and in law in confirming the order of the AO disallowing the subbrokerage paid by the appellant to its related parties amounting to Rs. 43,04,449....
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.... 18,968/- (ii) Jaswant Shah 1,05,000/- (iii) Ramco Financial Services 1,07,125/- (iv) Jitesh Shah 37,360/- (v) C.S. First Boston 82,27,229 (vi) JMSSB 91,839/- (vii) Other Subbrokers 3,44,767 Total 89,32,288/- 8. The CIT(A) upheld the disallowance made by the AO on the ground that the assessee did not file the details of services rendered by the sub-brokers and also confirmation were not filed. 9. Aggrieved by the order of CIT(A) the assessee is in appeal before us. 10. Before us the Ld. AR submitted that detailed accounts of the subbrokers namely Jaswant Shah (Rs. 1,05,50/-) and Ramco Financial Services (Rs. 1,07,0125/-) along with confirmation were filed before the CIT(A) as additional evidence. The Ld. AR further submitted that commission to C.S. Boston (Hong Kong) Ltd of Rs. 82,27,229/- was provided in the accounts of assessee during the year. He further stated that the since the said company was a foreign company , the assessee applied to Reserve Bank of India for grant of permission to remit the sub-brokerage out of India which was denied to the assessee vide letter of RBI dated 20.11.1997 exhibited at page no 153 of the paper book filed....
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....essee's appeal is partly allowed. 13. Ground no. 3 is against disallowance of Rs. 43,04,449/- u/s 40A(2)(b). 14. The assessee made payment of Rs. 86,08,898/- to related parties namely M/s JM Share & Stock Brokers Ltd., and Mr. Ashit Kampani who are covered under section 40A(2)(b) of Income Tax Act. The AO observed that the assessee had not filed any evidence to substantiate the fact that services were rendered by these parties. The AO disallowed the 50% of Rs. 86,08,898/- paid as sub brokerage to M/s J. M. Share & Stock Brokers Ltd. and Mr. Ashit N. Kampani by holding that the same were not paid for genuine business requirements. 15. The CIT(A) upheld the disallowance made by the AO by observing as under:- "The disallowance of Rs. 43,04,449/u/ s 40A(2) on account of subbrokerage paid to two related parties, M/s JM Share & Stock Borkers Ltd. and Mr. Ashit Kampani. Services rendered are claimed to be introduction of clients only without any evidence, whereas, commission paid is 50% of the brokerage earned. In these circumstances, I also find that the subbrokerage paid is very unreasonable, hence, the disallowance is confirmed." 15. Aggrieved by the order of CIT(A) the assessee ....
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....ates for such services. We also note that 50% disallowance was made on purely adhoc basis which is not permissible under law by disregarding the fact that similar expenses were allowed in the earlier years. We are, therefore, of the considered view that the said disallowance /addition is not justified and therefore the same is ordered to be deleted. Accordingly ground no. 3 is decided in favour of the assessee. 18. The grounds raised in ITA No 3494/Mum/2013 for assessment year 1998-99 reads as under:- A) Disallowance u/s. 40A(2)(b) Rs. 22,54,117/ 1) The learned Commissioner of Income Tax (Appeals) 4, Mumbai [CIT(A)] erred on facts and in law in confirming the order of the Additional Commissioner of Income Tax, Special Range 49, Mumbai (AO) disallowing the subbrokerage paid by the appellant to its related parties amounting to Rs. 22,54,117/u/ s. 40A(2)(b) on the alleged ground that the appellant had not produced any evidence that services were rendered by the related parties. 2) The appellant prays that the disallowance made by the AO u/s. 40A(2)(b) of Rs. 22,54,117/and confirmed by the CIT(A) may be deleted. B) Disallowance of interest Rs. 23,46,450/ 3) The learned CIT(A)....
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....d by the order of CIT(A), the assessee is in appeal before us. 25. Before us the Ld. AR of the assessee submitted that the AO himself has stated that amounts were appearing under the head "Sundry Debtors" and the Auditors did not made any adverse remarks with respect to said debtors and thus these amounts were receivables by the assessee in the ordinary course of its business.. It was further submitted that these transactions were made at the market rate charging commission from these persons as per market regulations. The Ld. AR further submitted that, without prejudice, the own funds of the assessee were sufficient to take care of the amount due from directors and their family members and where the assessee had own funds as well as borrowed funds , in that the event the presumption is that the money/advances are given out of own funds by placed reliance on the Judgment of Hon'ble Bombay High Court in the case of CIT Vs. Reliance Utilities and Power Ltd. (2009) 313 ITR 340 (Bom.)(HC) submitting thereby that the assessee had its own fund in excess for the loan outstanding meaning thereby that the assessee has purchased the shares to the related parties out of its own net worth and....