AI OCR 
TaxTMI 
TaxTMI 
TaxTMI 
2018 (1) TMI 731
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....ation to section 194H. 3. The ld. Commissioner of Income Tax(Appeal) also erred in holding that the Appellant could not prove the transaction to be related to the trading of shares of securities. 4. The ld. Commissioner of Income Tax(Appeals) further erred in upholding the addition u/s 14A in respect of shares held as stock by the Appellant Company. 5. That the appellant craves leave to adduce additional grounds or amend or alter any of the foregoing grounds before on at the time of the appeal." 3. The Ground Nos.1, 2 & 3 raised by the assessee relate to disallowance of Sub-brokerage payments to sub-brokers on the transactions related to shares and securities in spite of specific exclusion of the 'brokerage on shares trade' from the definition of 'Commission & Brokerage' in the Explanation to section 194H. 3.1. The brief facts apropos this ground are that the assessee filed its return of income on 29.08.2009, declaring incomeof Rs. 15,75,802/-. The assessee's return was duly processed u/s 143(1) on 07.12.2010. Later, the assessee's case was selected for scrutiny u/s 143(2) of the Act and the Assessing Officer made the addition on account of payment of sub-brokerage. During ....
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.... CIT(A) has ignored the submissions of the assessee and held that as per the Assessing Officer, assessee had made brokerage payments to some persons for doing business on behalf of the assessee company and the same was not against brokerage on securities, but for doing business on behalf of the assessee as its agents which was fixed for increasing the volume of transactions of the assessee. Thereafter, the ld. CIT(A) confirmed the addition made by the Assessing Officer u/s 40(a)(ia) of the Act at Rs. 10,67,725/-. 3.3. Not being satisfied with the order of ld. CIT(A), the assessee is in appeal before us. The ld. Counsel for the assessee submitted that assessee made the payment to sub-brokers on the transactions related to shares & securities which is especially excluded from the definition of 'commission or brokerage'. The ld Counsel drew our attention towards the explanation (i) of section 194H of the Act, wherein the definition of "commission or Brokerage" reads as follows: "Commission or Brokerage" includes any payment received or receivable, directly or indirectly, by a person acting on behalf of another person for services rendered ( not being professional services) or for a....
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....behalf of the assessee, as its agents, and the commission was fixed on the basis of volume of transactions, is not certain and is not based on any material evidence whatsoever. On same identical facts, the coordinate ITAT Bench Mumbai, in ITA No.320/Mum/2009 in the case of S.J. Investment Pvt. Limited, held that the sub- brokerge paid in connection with the services rendered in the course of business of buying and selling of units of mutual fund or in relation to transactions pertaining to mutual fund is not covered by provisions of tax at source in view of the explanation (i) to section 194H of the Act. We note that there is no material to even suggest that the commission had been paid in connection with increasing the assessee volume of transactions or for doing any other activity. Therefore, respectfully following the judgment of coordinate Bench Mumbai in the case of S.J. Investment Pvt. Limited,(supra), we hold that commission/brokerage of Rs. 10,67,725/- is not liable for deduction of tax at source (TDS). Therefore, the disallowance made U/s 40(a) (ia), is deleted. 3.6 In the result, the appeal filed by the assessee (Ground No.1 to 3), are allowed. 4. Next ground relates ....
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....sition, the CIT(A) confirmed the addition made by the Assessing Officer. 4.3. Not being satisfied with the order of the ld. CI(T)A, the assessee is in appeal before us. The ld. Counsel for the assessee has submitted before us that the issue relating to disallowance u/s 14A should be decided after taking into account the judgment of the Hon'ble ITAT Kolkata "A" Bench in the case of REI Agro Ltd. Vs. DCIT in ITA No.1331/Kol/2011 wherein it was held that not all investments become the subject-matter of consideration when computing disallowance u/s 14A r.w.r 8D. The disallowance u/s 14A r.w.r 8D is to be in relation to the income which does not form part of the total income and this can be done only by taking into consideration the investments which has given rise to this income which does not form part of the total income. The ld. Counsel for the assessee submitted before us that for the purpose of making disallowance u/s 14A r.w.r 8D only interest bearing securities should be taken into account as per the judgment of REI Agro Ltd.(supra). The ld. Counsel also further submitted before us that shares in stock in trade should be excluded while computing disallowance under Rule8D as per....
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....he factual position, we are of the view that judgment of Hon'ble Calcutta High Court in the case of CIT vs. M/s G.K.K Capital Markets (P) Ltd.(supra) does not apply to the assessee under consideration. 4.7 We also note that the assessee has shown 'Inventories of shares' under the head current assets, loans and advances, vide schedule 'F', wherein the assessee has shown "shares in stock" in A.Y. 2007-08 at Rs. 2,79,17,263/- and for A.Y. 2008-09 at Rs. 82,48,215/-.We note that main business of the assessee( as claimed by the assessee and noted by AO) is to deal in shares and securities but at the same time he is keeping the shares and securities as an 'Investments' as discussed in para 4.6, above, of this order, therefore, it is not clear whether dividends were earned by the assessee out of the shares held as 'Investments' or shares held as 'Stock -in -trade', therefore the assessee is not entitled to take the benefit of the judgment of Hon'ble Calcutta High Court in the case of CIT vs. M/s G.K.K Capital Markets (P) Ltd.(supra). 4.8 We note that ld Counsel for the assessee has placed the reliance on the judgment of Hon'ble Calcutta High Court in the case of CIT vs. M/s G.K.K Capita....