TaxTMI 
TaxTMI 
2018 (2) TMI 304
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....no allowance of the said claim of service charges can be given in the light of specific noting of the AO in the order of assessment. 2. . On the facts and circumstances of the case, the Ld. CIT(A) has erred by ignoring that the restriction of disallowance u/s.14A upto 1% of dividend income, i.e. exempt income, as made by the Hon'ble ITAT for the assessment year in question, does not mean that the said disallowance covers up all the disallowable expenditure in respect of earning of investment income also since, the investment income in question is not fully exempt income and hence, contention as made by CIT(A) on the basis of Hon'ble ITAT for allowing the expense of service charges is based on wrong appreciation of fact. 3. On the facts and circumstances of the case, the Ld. CIT(A) has erred by allowing relief to the assessee in respect of expenses of service charges without considering the fact that the assessee had enough opportunity to file Co- Objection, if any, to the appeal effect order passed by the AO dated 15.06.2009 by not giving credit of claim of service charges. 4. The appellant crave leave to modify, add or alter the grounds of appeal....
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....TC as business expenses." 4. Aggrieved by the aforesaid order of the AO the assessee preferred appeal before the CIT(A). The CIT(A)-XII, Kolkata vide an order dated 31.03.2009 held that income declared by the assessee under the head 'capital gains ' should be assessed under the head 'capital gain' and not under the head 'income from business'. The following were the relevant observations of the CIT(A) : "5.2.15 Decision In the light of the discussion held both on facts and law, I am of the opinion that the original intention of the appellant was to treat shares as investment and not stock in trade as evident from the entries made in the books of account and balance sheet. The volume of transactions, frequency of transactions, period of holding etc. would not Alter the nature of transaction from investment to trading when the initial intention of appellant was to hold the shares under investment and accordingly recorded in the books. This view has been clearly held by courts and more so the jurisdictional Kolkata Tribunal. As such the assets (shares) categorized* under the head 'investment' are to be treated as capital assets and the profit on sale of su....
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....y the assessee in the return of income. The AO however added to the total income so determined by him the service charges paid to BTC. For doing so the AO relied on the observations made by him in the order of Assessment in which he had specifically mentioned that if income declared by the assessee under the head 'capital gain' which is treated by the AO as income from business is ultimately held to be income from capital gain, then the service charges paid to BTC should be disallowed. The following was the relevant observations of the AO in the order passed u/s 251 of the Act dated 15.06.2009. "Total Income as per return Add: Disallowance u/s 14A Rs.32,21,522/- Opening balance of investment Rs.1,61,36,538/- Closing balance of investment Rs.3,00,07,426/- Rs.4,61,43,964/- Average Investment Rs. 4,61,43,964/- Rs.2,30,71,982/- 2 ½ % of average investment of Rs. 2,30,71,982/- Rs.1,15,360/- (As per Rule 8D(2)(III), ½ % of average investment In the balance sheet) Service charges paid to BTC (As per observation of the A.O. In his order that if the Income is held as investment income under the head Of Capital Gains, the assessee w....
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.... assessee was that the expenditure was wholly and exclusively in relation to the business of the assessee. 10. The AO dismissed the application of the assessee even without an opportunity of being heard to the assessee summarily without any discussion by an order dated 29.01.2010. 11. Against the aforesaid order dated 29.01.2010 passed u/s 154 of the Act the assessee preferred appeal before the CIT(A). The submission made in the application u/s 154 of the Act were reiterated by the assessee before CIT(A). The CIT(A) held that the addition of Rs. 36,12,000/- on account of service charges paid to BTC was beyond the scope of the directions of the CIT(A) in the order dated 31.03.2009 and gave rise to a mistake apparent in the face of the record. Therefore the AO ought to have deleted the said addition by allowing the application u/s 154 of the Act on the above issue. With regard to the disallowance u/s 14A of the Act the CIT(A) was of the view that in several decisions rendered by the Hon'ble ITAT 1% of the exempt income alone should be disallowed u/s 14A of the Act with reference to the assessment years prior to A.Y.2008-09. The CIT(A) was of the view that the AO therefore ought....