TaxTMI 
TaxTMI 
2020 (1) TMI 311
X X X X Extracts X X X X
X X X X Extracts X X X X
.... law. As such addition so confirmed is liable to be deleted. 2. That the ld CIT(A) has erred on the facts and law by confirming the addition of Rs. 225174/- u/s 14A read with Rule 8D which is contrary to be facts and provisions of law. Hence, the disallowance/ addition so made is liable to be deleted." 3. The revenue has raised the following grounds of appeal:- "1. That the action of the Ld. AO in calculating the tax liability of the assessee for MAT u/s 115JB of the Income Tax Act, 1961 on book profit of Rs. 20047802/- and not allowing credit of rebate u/s 88E is perverse unjustified erroneous on facts and on law with is liable to be reversed. 2. That the Ld. AO has erred and in not justified in making an addition of Rs. 1263849/- on account of disallowance of interest paid on loan, which is erroneous on facts and on law and as such liable to be deleted. 3. That the Ld. AO has erred and in not justified in making an addition of Rs. 16071237/- on account of disallowance of interest paid on loan, which is erroneous on facts and on law and as such liable to be deleted. 4. That the Ld. AO has erred and in not justified in making an addit....
X X X X Extracts X X X X
X X X X Extracts X X X X
.... ground number 5 of assessing officer 6 disallowance under section 40 (a) (ia) 1961579 deleted ground number 6 7 disallowance u/s 14 A of the act 225174 confirmed ground number 2 of the appeal of assessee and ground number 7 of AO 6. As per Ground no 1 of the AO's appeal, of granting of rebate u/s 88E while calculating the tax liability of the assessee for minimum alternative tax under section 115JB of the income tax act on the book profit of INR 20047802/-. The assessee has claimed rebate of INR 6048942/- paid securities transaction tax as rebate under that section while computing its tax liability under section 115 JB of the income tax act. The learned assessing officer disallowed the above credit holding that as per the provisions of section 115 JB of the income tax act if the income tax payable on total income is less than 10% of the book profit, the assessee is required to pay such tax as minimum tax. He further stated that provisions of section 115JB are clearly attracted because according to that section it is an overriding effect overall other provisions of the income tax act. The learned AO noted that in case of this assessee the income t....
X X X X Extracts X X X X
X X X X Extracts X X X X
....le under the head "Profits and gains of business or profession'', arising from taxable securities transactions, he shall be entitled to a deduction, from the amount of income-tax on such income arising from such transactions, computed in the manner provided in sub-section (2), of an amount equal to the securities transaction tax paid by him in respect of the taxable securities transactions entered into in the course of his business during that previous year; Provided that no deduction under this sub-section shall be allowed unless the assessee furnishes along with the return of income, evidence of payment of securities transaction tax in the prescribed form : Provided further that the amount of deduction under this sub-section shall not exceed the amount of income-tax on such income computed in the manner provided in sub-section (2). (2) For the purposes of sub-section (1), the amount of income tax on the income arising from the taxable securities transactions, referred to in that sub-section, shall be equal to the amount calculated by applying the average rate of income-tax on such income. Explanation:- For the purposes of this section, ....
X X X X Extracts X X X X
X X X X Extracts X X X X
....or rate not taken as in advance of payment, but handed back to the payer after he has paid the stipulated sum, even when such discount or deduction is equally applied to all from whom such payment is demandable," 13. The Kerala High Court in the case of Deputy Commissioner of Sales Tax v. Travancore Rayons Ltd. [1961] 12 STC 178 after considering the aforesaid definitions held as under:- "Rebate means relinquishing part of the liability by a person entitled to with a view to persuade a person liable to follow a particular conduct which such person was not otherwise compelled." 14. The Bombay High Court in the case of Someshwar Sahakari Sakhar Karkhana Ltd., v. Union of India 1988 (34) ELT 522 held as under:- "Rebate means deduction from the sum to be paid, discount, or partial refund. To give back (part of the amount), to make deduction from a bill. Therefore, in substance rebate, is a deduction from the sum to be paid or partial refund. Refund or deduction could from the amount paid or payable." 15. Under Section 88E, where the total income of an assessee in a previous year includes any income, chargeable under the head "Profit....
X X X X Extracts X X X X
X X X X Extracts X X X X
.... - A has confirmed the disallowance of interest expenditure of INR 1 263849/-. Therefore this ground of appeal is wrongly taken by the learned assessing officer as revenue could not have been aggrieved with the order of the learned CIT - A where the disallowance has been confirmed. In fact, the assessee is in appeal against that order as per ground number 1 of its appeal. Thus, Ground no 2 is dismissed. 9. Per Ground no 1 of the appeal of the assessee connected with the above ground of AO appeal, appellant has challenged the confirmation of disallowance of interest expenditure of INR 1 263849 on the ground that the certain loan amount was utilized for acquiring the property. The assessee has paid and interest on home loan utilized by the assessee to acquire the property at shop number ground floor as 3, Ansal Plaza, greater Noida which is shown in the balance sheet as investment in answer Plaza shop. The learned assessing officer noted that that same is not allowable as deduction u/s 36 (1) (iii) as assessee has not placed any document on record to establish that it was in connection with the expansion of its business in 34 -. The learned CIT - A also noted that assessee has ....
X X X X Extracts X X X X
X X X X Extracts X X X X
....o delete the same. Accordingly, ground number 1 of the appeal of the assessee is allowed. 13. Ground number 3 of the appeal of the learned assessing officer is against the addition of INR 1 6071237/- because of disallowance of interest paid on loan deleted by the learned CIT - A. During the year it was found that assessee has given in advance to a builder for a space amounting to INR 1 01750000/- which is admittedly not related to the existing business of the assessee. The learned assessing officer noted that merely because there was a clause in the memorandum of association in the object clause of the real estate business same cannot be allowed. The learned CIT - A deleted the same. 14. The learned departmental representative vehemently supported the order of the learned assessing officer. 15. The learned authorised representative vehemently supported the order of the learned CIT - A and stated that every item of the interest expenditure have been verified by the learned CIT - A. Therefore he submitted that no fault can be found with the order of the learned CIT - A. 16. We have carefully considered the rival contention and perused the orders of the lower authoritie....
X X X X Extracts X X X X
X X X X Extracts X X X X
....ssessee. (As a proof Copy of account of ILFS and account statement enclosed at page 8-17 of paper Book II 4. 1263849/- This interest was paid ICICI bank for purchase of shop at ansa! plaza which was for the share business of the company hence it is directly related to the share business of the assessee. 5. 39024/- This interest was paid to kotak Mahindra prime ltd. For interest on car loan (loan agreement no.CF4314922 copy enclosed at page no. 120 of the paper book.) 6. 39024/- This interest was paid to kotak mahindara prime ltd. For interest on car loan, (loan agreement no. CF4314960 copy enclosed at page no. 123 of the paper book.) 7. 305017 This interest is debited to P& L Account for business overdraft account with HDFC Bank this bank account was used for normal business working of shares as a proof copy of interest bank account enclosed. So these are the funds primarily utilized for the share business of the assessee. ( at page 18-19 of Paper Book II) 8. 1449335/- This interest is paid to Kotak Mahindra bank ltd. Loan for Rs. 2.40 Crore which was received on 29th Oct 2007 and at the time of receipt was utilized for payment made to s....
X X X X Extracts X X X X
X X X X Extracts X X X X
....t hit by explanation to section 37 (1) of the income tax act. 19. On hearing both the parties we find that the above issue is squarely covered in favour of the assessee by the decision of the coordinate bench in Goldcrest capital markets Ltd vs ITO 2 ITR 355 (tribunal) and 51 taxmann.com 215 in case of ITO vs Reliance share and stockbrokers private limited. Thus, we find no infirmity in the order of the learned CIT - capital and deleting the above addition. Accordingly, ground number 4 of the appeal of the learned assessing officer is dismissed. 20. Ground number 5 of the appeal is with respect to the denial of rebate of Rs. 2 67208 u/s 88E on the interest income of INR 8 90 692. The brief fact shows that the assessee has made fixed deposits with banks pledged with National stock exchange, which is the statutory requirement as per the law for the carrying on of the business of the assessee. Therefore, same is closely linked with the business of the assessee company as a stockbroker of National stock exchange. The AO has disallowed the rebate treating the same as ineligible for rebate u/s 88E of the act. The learned assessing officer worked out 30% of the interest income of....
X X X X Extracts X X X X
X X X X Extracts X X X X
....ges any charges as and when demanded by Sebi. The assessee company debited the same to the profit and loss account. The learned CIT - A held that above issue has been squarely considered by the coordinate benches in case of DCIT vs Angel broking Ltd 35 SOT 457 and DCIT vs Sonal shares and stockbrokers private limited 38 SOT 457. Therefore, AO is in appeal before us. 25. The learned departmental representative vehemently supported the order of the learned assessing officer and submitted that the above charges are professional fees paid by the assessee and therefore the tax is required to be deducted thereon. The assessee has failed to deduct the tax and source and therefore the learned assessing officer has correctly disallowed the same. He submitted that the learned CIT - A has not considered whether this expenditure are in the nature of the professional fees or not. He therefore submitted that the order of the learned CIT - A deserves to be reversed. 26. The learned authorised representative submitted that the above issue has been squarely covered by the decision of the honourable Supreme Court in CIT vs Kotak securities Ltd 383 ITR 1, wherein it has been held that Servic....
X X X X Extracts X X X X
X X X X Extracts X X X X
....t the disallowance under the provisions of rule 8D of INR 2 25174/-. The above disallowance was contested before the learned CIT - A but he confirmed the same. 29. The learned authorised representative submitted that the learned assessing officer should have recorded the satisfaction that the claim made by the assessee that it has not incurred any expenditure for earning exempt income but he has not recorded. Therefore in absence of any such satisfaction note disallowance u/s 14 A of the act can be made. He alternatively submitted that the disallowance under rule 8D (2) (iii) can only be made in respect of those investments which have yielded the dividend income. He further stated that in the present case the exempt income is only INR 1 39200/- whereas the addition made by the learned assessing officer is INR 2 25174 which is exceedingly exempt income earned by the assessee. He further stated that in view of the decision of the honourable jurisdictional High Court in case of Joint Investments Private Limited Vs CIT , the above disallowance cannot exceed the exempt income. Thus, he contested the disallowance on 3 points. 30. The learned departmental representative vehementl....