TaxTMI 
TaxTMI 
2020 (1) TMI 311
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....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 addition of Rs. 50000/- on account of disallowance of charges paid to NSE treating the same as....
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....f 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 tax payable is reduced to nil due to claiming rebate under that section. The assessee carried this issue in appeal before the learned CIT - A who held that the issue....
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....g 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, the expressions "taxable securities transaction" and "securities transaction tax" shall have the same meanings respectively assigned to them under Chapter VII of the Finance (No.2) Act, 2004." 8. As is clear from the aforesaid section....
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....s 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 "Profits and gains of business of 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. Section also provides the limit to which deductions shall be given. 16. Therefore, it is dear that, the assessee is liable to pay securities transac....
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....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 debited the profit and loss account by an expenditure of INR 1 7335086 towards the interest paid. This amount was borrowed by the assessee from ICICI bank by taking a loan of Rs. 1 crore in financial year 2006 - 07. Interest on such loan was paid of INR 1 263849 which was included in the total interest expenditure. As the assessee has utilized the above sum for the purc....
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....ing 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 authorities. During the year the assessee has made total investment of INR 4 7400000 as appearing in the balance sheet of the assessee and has made the business advances amounting to INR 1 01750000/-. The AO and let that the entire amount of 149150000 is a non-interest bearing advances not for the purposes of the business and therefore he made the addition of INR 1 6071237/-. The learned CIT - ....
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....osed 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 stock exchange for F & 0 segment of share market transaction as follows Amount received Rs. 23808000 on 29th Oct 2007 Payment made Rs. 3914000 to NSE Mumbai for F & O Dt. 31.10.07 Rs. 100000/- to NSE, F& O Dt. 31.10.07 Rs. 2500000/- to HDFC Bank, NSE settlement Account Dt.31.10.07 Rs. 7000000/- to FIDFC Bank, NSE settlement Account St.31.10.07 Rs. 2500000/- to NSE, F & 0 Dt.31.10.07 Rs. 4500000/- to transferred to HDFC Account No. 14283 Rs. 500000/....
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....peal 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 INR 8 90692/- as ineligible sum for rebate. The learned CIT - A deleted the above addition and directed the learned assessing officer to grant rebate giving a finding and relying upon the judgment of Kerala High Court in case of CIT vs Producin private limited 290 ITR 598. Therefore, assessee officer is in appeal before us. 21. The learned departmental representative vehemently supported the order of the learned assessing officer and stated that when the interest income is earned on fixed deposit wit....
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....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 Service made available by Bombay Stock Exchange [BSE Online Trading (BOLT) System] for which transaction charges are paid by members of BSE are common services that every member of Stock Exchange is necessarily required to avail of to carry out trading in securities in Stock Exchange; such services do not amount to 'technical services' provided by Stock Exchange, not being services specifically sought for by user or consumer and, therefore, no TDS would be deductible under section 194J on payments made for such se....
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....ubmitted 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 vehemently supported the orders of the lower authorities and submitted that the proper satisfaction has been recorded by the assessing officer, as assessee has not claimed that it has not incurred any expenditure. He read the para number 7.1 of the assessment order and stated that the only claim of the assessee before the assessing officer that assessee is a share broker and he has not used any separate funds in the shares to on dividend income. He further referred to the order of the learned assessing officer and stated that there is no ....