AI Drafter 
TaxTMI 
TaxTMI 
2016 (12) TMI 302
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....e. The assessee was asked to justify its claim. The assessee filed the copy of dividend received account from which the AO noticed that there were debit and credit entries and the surplus credit of Rs. 2,41,866/- has been claimed by the assessee as dividend income and accordingly claimed the exemption. The AO was of the firm belief that since the assessee was not holding any investment, therefore, there is no question of earning any dividend income. The AO treated Rs. 2,41,866/- as income of the assessee. 2.2 The assessee carried the matter before the CIT(A) and reiterated its contention but without any success. 2.3 Before us, the Counsel for the assessee once again claimed that the amount was received as dividend and therefore should be allowed as exempt from tax. The DR strongly supported the orders of the lower authorities. 2.4 We have carefully perused the orders of the authorities below. The assessee is dealing in shares and securities, which means that it is buying and selling shares for its customers. The shares purchased, often, are kept by the assessee and such shares may have been purchased as cum dividend. The assessee is duty bound to remit the dividend as and ....
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.... Sr. No. Name of party Amount Rs. @ 24% Amount Rs. @ 18% Difference 1 J.H. Shah (HUF) 20,11,745 15,08,809 5,02,936 2 Mani Market Creators Ltd 53,24,200 39,93,150 13,31,050 3 Raj Acharya 1,03,906 77,930 25,977 Total 74,39,851 55,79,889 18,59,963 3.5 We have also the benefit of the returned income of the aforementioned payees. A perusal of the returned income of the payees shows that all the payees are assessed at the highest rate of tax. Since both, the payer and payees, are assessed at the same rate of tax, in our considered opinion, there is no basis of any Revenue leakage. Our view is also fortified by the decision of Hon'ble High Court of Gujarat in the case of PWS Engineers Limited in Tax Appeal No. 209 of 2015, wherein the Hon'ble High Court had the occasion to consider the following substantial question of law and held as under:- "(ii) Whether on the facts and in the circumstances of the case, the Tribunal was right in law and in overlooking the fact that the entire exercise was revenue neutral in nature because the company as well as the Directors were taxable at the same rate a....
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....s mandatory though consequential. We, therefore, direct the AO to levy the interest as per the provisions of the law. 5. Ground No.4 relates to the initiation of penalty u/s 271(1)(c) of the Act. This ground is premature and accordingly dismissed. 6. In the result, the appeal filed by the assessee is partly allowed. ITA No.1747/Ahd/2013 : AY 2009-10 7. The first ground relates to the disallowance of turnover charges (transaction charges) of Rs. 38,56,887/- paid to the stock exchange by invoking provisions of Section 40(a)(ia) of the Act. 7.1 While scrutinizing the return of income, the AO noticed that the assessee has paid transactions charges of Rs. 38,56,887/- to the Bombay Stock Exchange/National Stock Exchange on which no tax has been deducted at source. Drawing support from the decision of the Hon'ble High Court of Bombay in the case of CIT vs. Kotak Securities Limited, [2012] 340 ITR 333 (Bom), the AO made the disallowance. 7.2 The assessee carried the matter before the CIT(A) but without any success. 7.3 Aggrieved by this, the assessee is before us. 7.4 We find that the aforesaid decision of the Hon'ble Bombay High Court has been reversed by the Hon'b....
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....#39;technical services' rendered is not an appropriate view. Such charges, really, are in the nature of payments made for facilities provided by the Stock Exchange. No TDS on such payments would, therefore, be deductible under Section 194J of the Act. 11. In view of above conclusions, it will not be necessary for us to examine the correctness of the view taken by the Bombay High Court with regard to the issue of the disallowance under Section 40(a)(ia) of the Act. All the appeals, therefore, shall stand disposed in the light of our views and observations as indicated above." 7.5 Since the decision of Hon'ble Bombay High Court relied upon by the Revenue Authorities has been reversed by the Hon'ble Supreme Court, we set aside the findings of the CIT(A) and direct the AO to delete the addition of Rs. 38,56,887/-. Ground No.1 is accordingly allowed. 8. Ground No.2 relates to the ad-hoc disallowance @ 50% of the financial charges of Rs. 9,37,500/- by invoking provisions of Section 40A(2)(b) of the Act. 8.1 While scrutinizing the return of income, the AO noticed that the assessee has paid financial charges to the persons specified u/s 40A(2)(b) of the Act as under:- Sr....
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....e benefits derived by or accruing to the assessee-company as a result of such payments of financial charges because the basis of quantification of such payments are not clear and instances of utilization of such services do not fully justify the payment This finding of the AO was confirmed by the Id.CIT(A) on the basis that the total bank guarantee for the period 1.4.2007 to 31.3.2008 was Rs. 56,500,000/- 1% of such amount comes to Rs. 5,65,000/-. Thus, this a reasonable amount to be paid as guarantee commission to the related parties, on the basis of such payments made by the appellant itself in the earlier year. Balance amount allowed by the A.O. amounting to Rs. 4,70,000/- can be attributed to the amount paid by the appellant on account of interest free fund provided by the related parties from time to time. In page-4 of the paper-book No.2, the assessee has given the utilization of sources under LLMS guaranteed by the parties to whom the financial charges paid. Since this information was not before the authorities below, we are of the considered view that this issue is to be restored to the file of the AO to decide the same afresh in the light of the information furnished at pa....
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....ings" include electrical wiring, switches, sockets, other fittings and fans, etc. In the light of the depreciation table provided under the Income-tax Rules, we do not find any error or infirmity in the findings of the CIT(A). Ground No.4 is accordingly dismissed. 10. Ground No.5 relates the levy of interest. Levy of interest is mandatory though consequential. The AO is directed to charge as per the provisions of the law. 11. Ground No.6 relates to the initiation of penalty u/s 271(1)(c) of the Act. This ground is premature and accordingly dismissed. 12 In the result, the appeal filed by the assessee is partly allowed. ITA No.1748/Ahd/2013 : AY 2010-11 13. First ground relates to the disallowance of Rs. 19,83,919/- being turnover charges (transaction charges) paid to the stock exchanges u/s 40(a)(ia) of the Act. An identical issue has been decided by us in ITA No.1747/Ahd/2013 qua Ground No.1 of that appeal. For our detailed discussion therein, we direct the AO to delete the addition of Rs. 19,83,919/-. Ground No.1 is accordingly allowed. 14. Ground No.2 relates to the ad-hoc disallowance @ 50% of financial charges of Rs. 3,15,000/-, invoking provisions of Section....