TaxTMI 
TaxTMI 
TaxTMI 
2017 (10) TMI 1260
X X X X Extracts X X X X
X X X X Extracts X X X X
....s client assistance charges. The client assistance charges comprise of: Sr. No. Particulars No. of employees/sessions Amount (Rs.) I. Deputed Staff Cost 1. Metro Locations 289 226,287,000 2. Urban Locations 241 169,182,000 3. Semi Urban Locations 120 66,960,000 4. Rural Locations 7 31,50,000 465,579,000 II. Session Cost 21,000,000 Total 486,579,000 The above client assistance charges were paid to ICICI Bank Limited (Service provider). However, the Assessing Officer (AO) has disallowed client assistance charges of Rs. 48,65,79,000/- paid to ICICI Bank Ltd. on the ground that these payments have not been laid out or expended wholly and exclusively for the purpose of business for the assessee-company. The AO has followed similar disallowance made in earlier assessment years and disallowed the amount of Rs. 48,65,79,000/-. 2.1 Aggrieved by the order of the AO, the assessee filed an appeal before the Ld. CIT(A). The Ld. CIT(A) confirmed the above disallowance made by the AO on the following reason: "The significant point to be noted is that all the customers of the appellant company are....
X X X X Extracts X X X X
X X X X Extracts X X X X
....ry Dealership Ltd. "ISECPD" of Rs. 12,00,97,937/-. The AO has disallowed the above sum reimbursed to ISECPD on account of expenses incurred by them on behalf of the assessee-company on the ground that no TDS was deducted while making such payment. 3.1 In appeal the Ld. CIT(A) has held that ISECPD was a contractor rendering professional and technical services through its employees for the assessee-company. Therefore, TDS was deductable u/s 194C and 194J of the Act. The Ld. CIT(A) has held that since TDS was not deducted by the assessee-company, the AO is fully justified in disallowing the above payment u/s 40a(ia) of the Act. 3.2 Before us, the Ld. counsel submits that: a) Various expenses are recovered by ISECPD from the assessee-company by raising a debit note on monthly basis. These expenses include salary, staff welfare, canteen expenses, electricity, printing and stationery expenses, repairs, communication expenses, etc. These expenses are incurred wholly and exclusively for the purpose of assessee-company's business. b) No TDS is deductible on payments made on account of reimbursement of expenses in light of various High Court and Tribunal decisions, where it has been h....
X X X X Extracts X X X X
X X X X Extracts X X X X
....ubmits that the assessee-company had claimed Rs. 1,38,95,564/- as bad debts for the captioned assessment year. Out of it, the IPO commission amounting to Rs. 79,88,905 was accrued as at March 31st, 2006 and was wrongly reversed to Bad debts account during the captioned assessment year. The same was offered for tax during the assessment year 2006-07. He further submits that an amount of Rs. 25,12,280/- was written off towards unrecoverable account opening charges. Normally, it represents the cases 'where cheque is not honoured by the bank due to various reasons viz. insufficient funds in account, account closed, signature differs, etc'. Also, an amount of Rs. 33,94,379/- represents write off of IPO commission, marketing fees, etc. The above amounts are written off in the books of accounts and has to be allowed as bad debts u/s 36(1)(vii) r.w.s 36(2) of the Act. The Ld. counsel relies on the decision in the case DIA vs. Oman International Bank (313 ITR 128) (Bom.) and CIT vs. Star Chemicals (Bombay) Limited (313 ITR 126) (Bom). 4.3 On the other hand, the Ld. DR supports the order passed by the Ld. CIT(A) and submits that in fact the assessee-company failed to file before the AO pa....
X X X X Extracts X X X X
X X X X Extracts X X X X
.... Ltd. (ITA No. 934 of 2011) has held the order of the Tribunal in restricting the disallowance only to the extent of 2% of the total exempt income as proper. We follow the above decision and direct the AO to restrict the disallowance only to the extent of 2% of the total exempt income. Thus the 4th ground of appeal is partly allowed. 6. In the result, the appeal of the assessee for the AY 2007-08 is partly allowed. ITA No. 2702/Mum/2011 Assessment Year: 2007-08 7. The 1st ground of Revenue's appeal is against the deletion by the Ld. CIT(A) of disallowance @ 50% of client introduction fees paid to ICICI Securities (INC) (ISI) for non-USA based entities amounting to Rs. 1,29,03,379/- u/s 40(A)(2b). During the year under consideration, the assessee-company had claimed expenditure of Rs. 2,58,06,758/- towards client introduction fees paid to ISI. However, the A.O disallowed a sum of Rs. 1,29,03,379/- being 50% of client introduction fees paid for non-USA clients on the ground that it is covered u/s 40A(2) (b). The AO disallowed 50% of payment made to ISI for introducing non-USA based clients on the ground that the assessee-company had provided evidence of ISI rendering service o....
X X X X Extracts X X X X
X X X X Extracts X X X X
....yments made to ISI, since ISI does not have any interest in the assessee-company. It is stated by him such disallowance was deleted by the Ld. CIT(A) in assessee's own case in AYs 2003-04, 2004-05, 2005-06 and 2006-07. The Ld. counsel also relies on the order dated 24.05.2016 of the ITAT 'I' Bench, Mumbai in assessee's own case for the AY 2004-05 (ITA No. 4778/Mum/2007). 7.3 On the other hand, the Ld. DR supports the order passed by the AO. 7.4 We have heard the rival submissions and perused the relevant materials on record. We find that the instant issue is covered in favour of the assessee-company by the order of the Tribunal mentioned at para 7.2 hereinabove. Facts being similar, we follow the above order of the Co-ordinate Bench and uphold the order of the Ld. CIT(A). Thus the 1st ground of appeal is dismissed. 8. The 2nd ground of Revenue's appeal is against the deletion by the Ld. CIT(A) of the addition made by the AO on account of penalty of Rs. 16,02,024/- for violation of the bye laws of the Stock Exchange. The penalties were levied by the Stock Exchange on account of bad delivery/short delivery, wrong claim of corporate benefits, late reporting, security deposit shor....
X X X X Extracts X X X X
X X X X Extracts X X X X
....ments are made are fees for technical services (FTS). Based on such observation, AO has disallowed aforesaid expenses u/s 40(ia) since assessee-company has not deducted TDS while making payments to the Exchanges. 9.1 In appeal, the Ld. CIT(A) followed the decision by ITAT in the case of M/s Kotak Securities (25 SOT 440), M/s Angel Broking Ltd. (35 SOT 457) and HDFC Securities (ITA No. 7036/Mum/2008) 19.03.2010 and deleted the addition of Rs. 8,24,83,381/- made by the AO. 9.2 Before us, the Ld. counsel supports the order passed by the Ld. CIT(A). He further submits that similar disallowance made by the AO has been deleted by the Ld. CIT(A) in assessee's own case in AY 2005-06 and AY 2006-07. Reliance is also placed by him on the decision in CIT vs. Kotak Securities Ltd. 383 ITR 1 (SC), ACIT vs. Twenty First Century Shares and Securities Ltd. (2013) 39 taxmann.com 176(Mumbai-Trib), Centrum Broking Ltd. vs. ACIT (2015) 59 taxmann.com 451 (Mumbai-Trib). 9.3 On the other hand, the Ld. DR supports the order passed by the AO. 9.4 We have heard the rival submissions and perused the relevant materials on record. In Kotak Securities Ltd. (supra), it has been held that: "Service made av....
X X X X Extracts X X X X
X X X X Extracts X X X X
....AY 2007-08. 12.2 In view of the above, we delete the disallowance of Rs. 1,92,05,859/- made by the AO on the basis of our reasons recorded at para 3.4 hereinbefore and allow the 2nd ground of appeal. 13. The 3rd ground of assessee's appeal is against the disallowance of Rs. 11,36,325/- made by the AO u/s 14A. We find that the AO has made the disallowance u/s 14A r.w. Rule 8D. In appeal, the above disallowance has been confirmed by the Ld. CIT(A). 13.1 Before us, the Ld. counsel of the assessee submits that the net worth of the assessee is much more than investments made in the shares and units and hence, applying the ratio of decision of the Hon'ble Bombay High Court in Reliance utilities (313 ITR 340), it is presumed that investment made in these equity shares and units are made out of own funds and not out of borrowed funds. Hence, no disallowance should be made on account of interest expense u/s 14A of the Act. 13.2 On the other hand, the Ld. DR supports the order passed by the Ld. CIT(A). 13.3 We have heard the rival submissions and perused the relevant materials on record. We find that during the impugned assessment year the net worth of the assessee-company is much more ....
X X X X Extracts X X X X
X X X X Extracts X X X X
....5 per cent of the portfolio value which would be inclusive of a profit element for the portfolio manager. While the fixed administrative expenses were excluded on the ground that in the case of a large corporate taxpayer they would be spread over a large number of voluminous activities, the variable expenses were computed at one-half per cent of the value of the investment." Thus we confirm the disallowance of Rs. 88,585/- made by the AO under Rule 8D(2)(iii). In view of the above, the 3rd ground of appeal is partly allowed. 14. The 4th ground of assessee's appeal is against the disallowance of loss on future and option 'marked to market margin' of Rs. 1,96,414/-. We notice that the issue is covered in favour the assessee by the order of the Tribunal in the case of Edelweiss Capital Ltd. vs. ITO (2010) 8 taxmann.com 157(Mumbai) and Centrum Broking Ltd. vs. ACIT (2015) 59 taxmann.com 451(Mumbai) wherein it has been held that 'Market to market loss on derivatives could not be treated as contingent liability and hence, same was to be allowed as deduction u/s 37(1)'. Facts being similar, we follow the above decisions and delete the disallowance of Rs. 1,96,414/- made by the AO. ....