TaxTMI 
TaxTMI 
TaxTMI 
2020 (12) TMI 392
X X X X Extracts X X X X
X X X X Extracts X X X X
....d in law and on the facts by deleting addition of depreciation on membership card without appreciation the fact that condition u/s 32 of the I. T. Act, 1961 is not fulfilled on the said depreciation. (2) That the ld. CIT(A) has erred in law and on the facts by deleting addition of depreciation, interest and insurance on vehicle amounting to Rs. 29,64,082/- by ignoring the fact that the assessee failed to prove the ownership of these vehicles as well as use of those assets wholly and exclusively for the business purpose. (3) That the ld. CIT(A) has erred in law and on the facts by deleting addition of Rs. 1,12,972/- made by AO as disallowance of interest without appreciating the fact that conditions laid down in Section 36 of the I. T. Act, 1961, are not fulfilled by the assessee. (4) That the ld. CIT(A) has erred in law and on the facts by deleting addition of Rs. 24,75,967/- made by the AO u/s 14A without considering the fact that the AO has rightly disallowed the same u/s 14A after considering the provisions of Rule 8D, which is not fulfilled in the assessee's case. (5) That the ld. CIT(A0 has erred in law and on the facts by deleting addition of Rs. 1,51,201/- made by th....
X X X X Extracts X X X X
X X X X Extracts X X X X
....ade disallowance of depreciation on Ahmedabad Stock Exchange Membership Card relying on decision of Hon'ble Mumbai ITAT in the case of Sino Securities Pvt. Limited whereas Appellant has relied upon decision of Hon'ble Ahmedabad ITAT in the case of Edelweiss Stock Broking Limited for A.Y. 2006-07 which is merged with Appellant Company and Appellant's own case for A.Y. 2008-09 decided by Hon'ble Ahmedabad ITAT on 6th November, 2015. On careful consideration of entire facts, the issue raised by Assessing Officer is covered in favour of Appellant by decision of Hon'ble Ahmedabad ITAT in Appellant's own case for A.Y. 2008-09 (ITA No. 1531 and 1718/Ahd/2011) wherein Hon'ble ITAT vide its order dated 6th November, 2015 has held as under: "13. The Assessee's next ground raised in the instant appeal challenges disallowance of depreciation on Ahmedabad Stock Exchange card of Rs. 141/- made in the course of assessment and affirmed in the lower appellate proceedings. Both the lower authorities hold that stock exchange membership card is not an eligible asset u/s 32 of the Act as held by hon 'ble Bombay high court in M/s. Tech nosh 3 res and Stocks Ltd. V....
X X X X Extracts X X X X
X X X X Extracts X X X X
....observes that the hon'ble apex court has reversed the above stated decision as reported in 327 ITR 323 with a rider that the same relates to Bombay Stock Exchange card only. He reproduces relevant portion of this judgment as well. However, the Revenue fails to point out any distinction between the assessee's Ahmedabad Stock Exchange card and relevant features of Bombay Stock Exchange card. Nor such a distinction is forthcoming from hon'ble apex court decision. We find that a co-ordinate bench of the tribunal in case of assessee's sister concern's case M/s. Edelweiss Stock Broking Ltd. Vs. CIT, ITA No. 1168/Ahd/2011 decided on 11.07.2014 for AY 2006-07 grants identical depreciation relief. We also draw support therefrom for allowing the impugned depreciation claimed. This ground is accepted. 14. This leaves us with assessee's last substantive ground challenging Section 40(a)(ia) of Rs. 1,02,39,903/- arising from non-deduction of TDS qua payments made of NSE lease line charges, NSE VSAT charges and MTNL expenses. There is no dispute that the assessee has not deducted TDS on these payments. We have given our thoughtful consideration to the rival contentions. The assessee inter ali....
X X X X Extracts X X X X
X X X X Extracts X X X X
....t to certain vehicles which were not registered in its name. However, it was contended by the assessee that it is the beneficial owner of such vehicles as the loan was taken by it and accordingly the instalment of such loan was also born by it which is evident from the books of accounts. 11.1 The assessee also submitted that the provisions of Section 32 of the Act requires that the assets must be owned by the assessee which does not mean that the vehicles has to be registered in the name of the assessee under the Motors Vehicles Act. 12. However, the AO disagreed with the contention of the assessee by observing that the assessee failed to substantiate based on documentary evidence that it had dominion over the vehicles and such vehicles were used for the purpose of the business. 13. Furthermore, the AO also found that the purpose of registering the vehicles in the name of individual directors was to avoid the tax payable to the RTO. In fact, the amount of tax payable to the RTO is much lesser if the vehicles are registered in the name of the individuals instead of corporate bodies. Accordingly, the AO was of the view that the revenue authority cannot become a party by allowing ....
X X X X Extracts X X X X
X X X X Extracts X X X X
....lable on record. From the preceding discussion, we note that claim of the assessee for the depreciation allowance, interest and insurance expenses on the vehicles were rejected by the AO for the following reasons: i. The assessee was not the owner of the vehicles as these were registered in the name of individual directors under the registration of Motor Registration Act. ii. The assessee failed to substantiate based on the documentary evidence that these vehicles were used for the purpose of the business. iii. The assessee by way of registering the vehicles in the name of individual directors instead of in its own name has avoided the legitimate tax due to the RTO under the Motors Registration Act. 20. The provisions of Section 32 of the Income-tax Act, 1961 grants depreciation allowance to the assessee who is 'owner' of specified assets (building, plant and machinery, furniture and fixtures, etc.) and these assets are used during the relevant previous year for the purposes of its business/profession. Therefore, the ownership of asset is one of the important requirements to be entitled for depreciation allowance. The Section, however, does not define the term 'owner' as suc....
X X X X Extracts X X X X
X X X X Extracts X X X X
....lhi High Court in the case of CIT v. Basti Sugar Mills Co. Ltd. [2002] 257 ITR 88 (Delhi) held that where vehicle was owned and used by the assessee but no registration was done in its name then the assessee would still be entitled to depreciation on such vehicle. Therefore, the assessee has right to claim depreciation thereon. This ground of the Revenue is accordingly rejected." 21. Regarding the 2nd question as discussed above, we note that the assessee has claimed repair and maintenance expenses with respect to such vehicles which were also allowed by the Revenue. Thus it is inferred that such vehicles were used for the purpose of the business of the assessee. Accordingly we are of the view that the assessee is eligible for interest and insurance expenses incurred by it with respect to such vehicles. 22. Moving to question No. 3 wherein it was alleged that the assessee has minimized the tax payable to the RTO by registering the vehicles in the name of the individual directors. In this regard, we note that there is no denial under the Motors Registration Act to register the vehicles in the name of the individual directors. The action taken by the assessee for registry the vehi....
X X X X Extracts X X X X
X X X X Extracts X X X X
....deration of entire facts it is observed that issue regarding disallowance of proportionate interest is covered in favour of Appellant by decision of Hon'ble Ahmedabad ITAT in Appellant's own case for A.Y. 2008-09 (ITA No. 1531/Ahd/2011) wherein Hon'ble ITAT vide its order dated 6th November, 2015 has held as under: 3. We come to the lower appellate proceedings now. The CIT(A) prepares a partywise tabulation qua loans in question of Rs. 32,03,147/- as incurred in reimbursement of expenses. He finds the same to have been incurred in business purposes as per case la w of S A Builders vs. CIT, 288 ITR 01 (SC) as having business expediency element embedded therein. The Revenue's arguments strongly support Assessing Officer's action. It transpires from the case file that Assessee's interest free funds as on 31.03.2008 read a figure of Rs, 1,25,83,17,835/- in the nature of share capital, reserves and surplus etc. It files tribunal's order in its own case for AY 2004-05 in ITA No.1890/Ahd/2007 decided on 19.12.2008 deciding the very issue in its favour in identical circumstances. We follow suit in these facts and reject this Revenue's ground as well." It is pert....
X X X X Extracts X X X X
X X X X Extracts X X X X
....,25,83,17,8357- in the nature of share capital, reserves and surplus etc. It files tribunal's order in its own case for AY 2004-05 in ITA No.l890/Ahd/2007 decided on 19.12.2008 deciding the very issue in its favour in identical circumstances. We follow suit in these facts and reject this Revenue's ground as well." 32. The Learned DR at the time of hearing has not brought anything on record contrary to the finding of the ITAT as discussed above suggesting that there was any change in the facts and circumstances or under the provisions of law. Hence, there being no change in the facts and circumstances viz a viz under the provisions of law, we confirm the order of the Ld. CIT-A in view of the order of this tribunal in the own case of the assessee (supra). Accordingly, we direct the AO to delete the addition made by him. Hence, the ground of appeal of the Revenue is dismissed. 33. The next issue raised by the Revenue is that the Learned CIT-A erred in deleting the addition made by the AO under the provisions of Section 14-A read with rule 8D of Income Tax Rule amounting to Rs. 24,75,967/- only. 34. The assessee during the assessment proceedings contended that it has not inc....
X X X X Extracts X X X X
X X X X Extracts X X X X
....no net interest expenditure upon setting off interest credited to P&L account, no part of interest debited is to be disallowed as attributable to earning of exempt income. The Revenue does not point out any exception thereto. We accordingly delete the interest disallowance under Rule 8D(2)(ii) of Rs. 13,81,198/- (supra). Coming to administrative expenses disallowance of Rs. 1,68,877/- under Rule 8D(2)(iii), the assessee fails to dispute correctness thereof since the impugned Assessment Year is 2008-09. This latter disallowance figure is confirmed. This ground is partly allowed. It is pertinent to note that during the year under consideration Appellant is having interest free funds in the form of share capital and reserves & surplus for Rs. 81.81 crores which is higher than investment resulting into tax-free income. It is also observed that Appellant has earned taxable income of Rs. 10.96 crores in comparison of interest expenditure of Rs. 2.54 crores which means that net interest income of Rs. 8.42 crores is earned. Following the decision of Hon'ble Ahmedabad ITAT in Appellant's own case referred herein above, disallowance of interest expenditure under Rule 8D(2)(iii) for....
X X X X Extracts X X X X
X X X X Extracts X X X X
....lant's case, the learned CIT(A) has grossly erred in sustaining disallowance of Rs. 4,20,414/- made u/s. 14A read with Rule 8D(2)(iii) on account of administrative expenses [even as he had directed the quantum of the disallowance on this account to be reduced from Rs. 10,80,131 to Rs. 4,20,414 after appreciating that the applicant's investments in shares of its subsidiary which had been amalgamated with the appellant, cannot be taken into account for the purposes of arriving at the quantum of disallowance under the said Rule]. He ought to have appreciated, inter-alia, that in the peculiar and eminent facts of the appellant's case, the Ld. A.O. had got to be satisfied with the appellant's claim that it had not incurred any administrative expenditure in relation to income not forming part of its total income and that therefore, the Ld. A.O. could not have assumed jurisdiction u/s. 14A(2) to make any disallowance on this account." 39. Both the Learned DR and the AR before us vehemently supported the order of the respective authorities below to the extent favourable to them. 40. We have heard the rival contentions of both the parties and perused the materials available on record. The....
X X X X Extracts X X X X
X X X X Extracts X X X X
....Revenue does not point out any exception thereto. We accordingly delete the interest disallowance under Rule 8D(2)(ii) of Rs. 13,81,198/- (supra). Coming to administrative expenses disallowance of Rs. 1,68,877/- under Rule 8D(2)(iii), the assessee fails to dispute correctness thereof since the impugned Assessment Year is 2008-09. This latter disallowance figure is confirmed. This ground is partly allowed." 42. The Learned DR and the AR at the time of hearing has not brought anything on record contrary to the finding of the ITAT as discussed above suggesting that there was any change in the facts and circumstances or under the provisions of law. Hence, there being no change in the facts and circumstances viz-a-viz under the provisions of law, we confirm the order of the Ld. CIT-A in view of the order of this tribunal in the own case of the assessee (supra). Hence, the grounds of appeal of the Revenue and the assessee are dismissed. 43. The next issue raised by the Revenue is that Learned CIT-A erred in deleting the addition made by the AO for Rs. 1,51,201/- by disallowing the expenditure representing the penalty. 44. The assessee during the year under consideration claimed that i....
X X X X Extracts X X X X
X X X X Extracts X X X X
....s. 74,515/-. The assessee is a limited company in stock broking business. It paid the impugned sum to the National Stock Exchange for non-compliance of its bye laws. The Assessee's case was that this penalty sum pertained to procedural delay in filing compliance report to the exchange. And the delay caused was in payment of dues and other obligations. The Assessing Officer disallowed this claim as a business deduction by following an identical finding in preceding Assessment Year 2007-08. The CIT(A) follows case law 88 TTJ 352 (Kol), ITO vs. GDB Share and Stock Broking Services Ltd., in deciding the very issue in Assessee's favour. The Revenue fails to point out any distinction on facts or law before us. It does not quote any case law to the contrary. This first ground accordingly fails." Following the above decision of Ahmedabad ITAT in Appellant's own case, disallowance of Rs. 1,51,201 is deleted- This ground of appeal is allowed." 47. Being aggrieved by the order of the Learned CIT-A the Revenue is in appeal before us. 48. Both the Learned DR and the AR before us vehemently supported the order of the respective authorities below to the extent favourable to them....
X X X X Extracts X X X X
X X X X Extracts X X X X
....e payment to it (the assessee). Accordingly, the assessee after making the sale of such shares, has written off the loss in the books of accounts as bad debts as the recovery for the same was not certain. The assessee also claimed that the brokerage on account of purchase and sale of shares on behalf of the client was offered to tax by crediting the profit and loss account. However, the principal amount of purchase and sale was not shown in the profit and loss account but the difference either as loss or gain was reflected in the profit and loss account as bad debt or gain as the case may be. It was done so, with respect to the transactions carried out by it on behalf of the clients but who failed to make the payment. In most of the transactions loss was incurred which was claimed as bad debts. 53. The assessee alternatively contended that such loss has been incurred in the course of the business and therefore the same should be allowed as deduction either under Section 28 or 37 of the Act if the same is disallowed under the provisions of Section 36(2) of the Act. 54. However, the AO disregarded the contention of the assessee by observing that the deduction on account of bad debt....
X X X X Extracts X X X X
X X X X Extracts X X X X
....ber 2015, involving identical issue has decided the matter in favor of the assessee. The relevant extract of the order is reproduced as under: "The Revenue's third substantive ground assails correctness of the CIT(A) action in deleting bad debt disallowance of Rs. 27,35,991/-comprising of debit balance written off of Rs. 25,60,148/- and bad debt of Rs. 1,75,843/-. These entries are mainly in the nature of vatav kasar. Some of them are less than of Rs. 10,000/- even. The Assessing Officer observed that there was no material on record to prove the same to have been actually become bad. And also that the assessee had offered only brokerage sums as its income u/s 36(2) of the Act in profit and loss account. He accordingly made the impugned disallowance of this bad debts claim." 59. The Learned DR at the time of hearing has not brought anything on record contrary to the finding of the ITAT as discussed above suggesting that there was any change in the facts and circumstances or under the provisions of law. Hence, there being no change in the facts and circumstances viz a viz under the provisions of law, we confirm the order of the Ld. CIT-A in view of the order of this tribunal....
X X X X Extracts X X X X
X X X X Extracts X X X X
.... Rs. 60,34,33,815/- only and the amount of impugned loss debited stands at Rs. 38,40,074/- which is less than 0.6% of the total turnover. Therefore, there is no justification on the part of the AO to disbelieve its (assessee) version. 67. However, the Learned CIT (A) found that the assessee has not furnished necessary details about the parties on whose case the mistake was committed by it. Thus, in the absence of such information, it has to be presumed that the impugned loss was incurred on assessee's account. 68. Nevertheless, the Learned CIT (A) deleted the addition made by the AO for the Assessment Year 2006-07 for the reason that the assessee has furnished the necessary evidence to justify that the loss was not on its account. Rather such loss was incurred by the assessee on behalf of its client. But in the case on hand the assessee has not furnished the necessary details. Thus, the Learned CIT (A) in the absence of sufficient documentary evidence concluded that such loss relates to the assessee's account. 69. However, the Learned CIT (A) held that the loss to the extent of Rs. 17,02,013/- relates to the future and option segment which was carried out through the recognized....
X X X X Extracts X X X X
X X X X Extracts X X X X
....rried out by the assessee, we find that such loss is of negligible value. Furthermore, the tax audit report in form 3CD suggests that the assessee is engaged in the activity of stockbroking only and not in the activity of sale purchase of securities. The copy of form 3 CD is placed on pages 133 to 165 of the Paper Book. Similarly, the AO has also recorded in his order the nature of business of the assessee i.e. stockbroking. Even in the earlier Assessment Year 2006-07, the impugned loss was also treated as speculative in nature but the Learned CIT (A) deleted the same as the assessee was able to justify his contention based on the documentary evidence that such loss relates to its clients. This finding of the Ld. CIT-A, if analyzed in aggregation of other facts i.e. form 3CD report, profit & loss account, nature of the business as recorded by the AO, the fact emerges that that the assessee is not carrying out share trading activities in its accounts. 75. On perusal of the financial statements placed on pages 59 to 132 of the Paper Book, it was observed that there was no transaction shown by the assessee as purchase and sale of the shares. In view of the above and after considerin....
X X X X Extracts X X X X
X X X X Extracts X X X X
....taken by the assessee as its own. [Para 28]" 75.1 In view of the above, once it has been held that loss does not relate to the activity of sale/purchase of shares by the assessee for itself, then the provisions of explanation to Section 73 of the Act cannot be applied. Hence, the ground of appeal of the Revenue is dismissed whereas the ground of appeal of the assessee is allowed. 76. The next issue raised by the Revenue is that the Learned CIT (A) erred in directing to re-compute the capital gain with indexation from the FY 2005- 06. 77. The assessee acquired old BSE membership card in the year 1995-96 at cost of Rs. 2,75,01,000/- and not claimed any depreciation on such membership card as it was acquired prior to 1st April 1998. The old BSE membership card was demutualised in the Financial Year 2005-06. In other words, the membership card was converted into the shares of Bombay stock exchange in the years 2005-06. The assessee sold such shares in the year under consideration and claimed long-term capital loss at Rs. 1,96,02,783/-. It was worked out as under: No of shares Purchase date Sale date Sales value (Rs.) Cost of acquisition (Rs.) Indexed cost (Rs.) LTCG (Rs.) 1,....
X X X X Extracts X X X X
X X X X Extracts X X X X
....rm capital Loss (-) Rs. 39894263/- In view of the Long term capital gain/loss is recomputed as under. a. Long term capital gain on sale of BSE Shares Rs. 37694562/- b. Less Long term capital loss on sale of Arvind Shares (-)Rs. 48054605/- Allowable long term capital loss Rs. 10360043/-" 82. In view of the above the AO worked out the excessive long-term capital loss at Rs. 2,95,34,220/- and disallowed the same by adding to the total income of the assessee. 83. Aggrieved assessee preferred an appeal to the Learned CIT (A), and submitted that the provisions of Explanation-1 (ha) of Section 2(42A) requires that the period prior to demutualisation of shares shall be included in the period of holding. Thus, the indexation benefit should be granted from the year of acquisition. 84. The assessee by way of filing the additional ground of appeal also contended that the cost of acquisition of the membership card of BSE acquired in the FY 2000-01 should be taken the original cost instead of WDV as on 1st April 2005 as mandated under Section 55(2)(ab) of the Act. The assessee in this connection further submitted that it has inadvertently taken the WDV as on 1st April 200....
X X X X Extracts X X X X
X X X X Extracts X X X X
....able on record. The facts of the case are not in dispute which have been elaborated in the preceding paragraph. Therefore, we are not inclined to repeat the same for the sake of brevity and convenience. From the preceding discussion the following question arises for our consideration. (a) Whether the cost of acquisition of the BSE shares should be calculated in accordance with the original cost of acquisition of the BSE membership card under Section 55(2)(ab) or the written down value be adopted under Section 50 of the Act ? (b) Whether the relevant year for calculating indexed cost of acquisition should be the year of original acquisition of the BSE membership, i.e., year 1995-96/2000-01 or the year of allotment of shares in the BSE in lieu of membership, i.e., year 2005-06? 91. The Act comprises of several provisions pertaining to the computation of capital gains when equity shares of a recognized stock exchange are allotted to a shareholder under a scheme of demutualization and corporatization approved by the SEBI. 91.1 Under section 47(xiiia) of the Act, any transfer of a membership right in a recognized stock exchange in India for acquisition of shares and trading or cle....
X X X X Extracts X X X X
X X X X Extracts X X X X
....deration are the shares of BSE which were not depreciable assets upon the conversion membership card as shares in the year 2005-06. Thus, the present membership card in the year under consideration was no longer depreciable assets. Therefore, we are of the view that the provisions of Section 50 of the Act cannot be applied for the year under consideration. Indeed, the assessee is availing double benefit, firstly, by way of depreciation and secondly by way of claiming the deduction of the original cost of acquisition of the membership card under Section 55(2)(ab) of the Act. But the issue before us is limited to the cost of acquisition of the membership card as provided under section 55(2)(ab) of the Act. As per this section, the original cost should be takes as the cost of acquisition while determining the income under the head capital gain. 95. Now coming to the 2nd question arising for our consideration, what should be the period of holding for computing the capital gain with respect to shares acquired by the assessee upon the conversion of both membership cards of the BSE. In this regard we note that the assessee itself has agreed before the ld. CIT-A for allowing the benefit o....
X X X X Extracts X X X X
X X X X Extracts X X X X
....1 to Rs. 4,20,414 after appreciating that the applicant's investments in shares of its subsidiary which had been amalgamated with the appellant, cannot be taken into account for the purposes of arriving at the quantum of disallowance under the said Rule]. He ought to have appreciated, inter-alia, that in the peculiar and eminent facts of the appellant's case, the Ld. A.O. had got to be satisfied with the appellant's claim that it had not incurred any administrative expenditure in relation to income not forming part of its total income and that therefore, the Ld. A.O. could not have assumed jurisdiction u/s. 14A(2) to make any disallowance on this account. 4. In law and in the facts and circumstances of the appellant's case, the learned CIT(A) has grossly erred in sustaining the action of treating what was normal business loss [Saudafer loss] as speculation loss to the extent of Rs. 21,38,061 [out of Rs. 38,40,074 so treated by the Ld. A.O.]. 5. In law and in the facts and circumstances of the appellant's case, the learned CIT(A) has grossly erred in upholding the disallowance of deduction for Rs. 2,76,213 (actual figure of disallowance made by learned A.O is....
X X X X Extracts X X X X
X X X X Extracts X X X X
....rds of the Bombay Stock Exchange in lieu whereof the shares of the Bombay Stock Exchange Ltd. in question had been allotted to it upon demutualization/corporatization of the Bombay Stock Exchange. 10.1 In law and in the facts and circumstances of the appellant's case, the learned CIT(A) has grossly erred in summarily dismissing the ground No. 20 of the appellant's appeal reading as under:- "20.1 In law and in the facts and circumstances of the appellant's case, the learned Assessing Officer has grossly erred in levying interest amounting to Rs. 98,15,678 u/s. 234B. He ought to have appreciated, inter alia, that quite apart from the fact that all the additions/disallowances in the impugned order were unwarranted/unjustified, they were such in nature as to attract the ratio of the decision of the Gujarat High Court in Bharat Machinery and Hardware Mart's case (136 ITR 875) and of the decision of the ITAT, Delhi Bench in Haryana Warehousing Corporation v. DCIT [252 ITR (A.T.) 34] was attracted and it was not open to him to levy the impugned interest. The appellant challenges the very levy of this interest arising from those additions/disallowances. 20.2 Without p....
X X X X Extracts X X X X
X X X X Extracts X X X X
.... Learned CIT (A) who deleted the addition made by the AO in part by observing as under: "The Assessing Officer has made addition on the ground that Appellant has not offered income received from following four parties: Name of Tax Deductor Income from which TDS deducted Manish Kumar Goyel 1,36,356 Rajyog Share and Stock Brokers ltd. 8,678 IL & FS Securities Services Ltd. 45,484 Indian Bank 5,03,770 Total 6,94,288 (ii) The Assessing Officer in the Remand Report, as reproduced herein above, has accepted Appellant's explanation that income from Manishkumar Goyel and IL&FS Securities is already offered to tax hence addition made by Assessing Officer to the extent of Rs. 1,82,240 (1,36,356 + 45,484) is deleted. (iii) So far as addition for Rs. 5,03,770 is concerned, Assessing Officer has accepted that income disclosed by Appellant in Return of Income is matching with physical TDS certificate issued by the Bank, it is pertinent to note that Bank vide its dated 10th April, 2013 and 11th April, 2013 has accepted the mistake made by them for uploading data of TDS to NSDL and even certified that interest as mentioned in physical TDS certificate is correct. Consi....
X X X X Extracts X X X X
X X X X Extracts X X X X
....e appeal filed by the Revenue bearing ITA No. 413/AHD/2016 vide paragraph number 74 & 75 of this order. As such, the ground of appeal of the assessee has already been allowed. For the detailed discussion, please refer the relevant paragraph. Hence, the ground of appeal of the assessee is allowed. 109. The next issue raised by the assessee in ground No. 5 is that the Learned CIT (A) erred in holding that the expenses incurred on the purchase of the mobiles are in the nature of capital expenditure. 110. The assessee in the year under consideration has claimed the expenses incurred by it on the purchase of the mobile set as revenue in nature on the reasoning that there was no enduring benefit accruing to it out of such expenses. However the AO disregarded the contention of the assessee by observing that the mobile phone falls under the category of equipment as provided under Section 32 of the Act. Accordingly the AO treated the same as capital in nature and disallowed the same by adding to the total income of the assessee. 111. Aggrieved assessee preferred an appeal to the Learned CIT (A). 112. The assessee before the Learned CIT (A) submitted that there is fast change in the tech....
X X X X Extracts X X X X
X X X X Extracts X X X X
....t. Capital expenditures are designed to be used to invest in the long-term financial health of the company. Capital expenditures are a long-term investment, meaning thereby the assets purchased have a useful life of more than a year. Types of capital expenditures can include purchases of property, equipment, land, computers, furniture, and software. 115.1 Capital expenditures are often employed to improve operational efficiency, increase revenue in the long term, or make improvements to the existing assets of a company. Capital spending is different from other types of spending that focus on short-term operating expenses, such as overhead expenses or payments to suppliers and creditors. 115.2 Depreciation is used to expense the fixed asset over its useful life. Depreciation helps to spread out the cost of an asset over many years instead of expensing the total cost in the year it was purchased. Depreciation allows companies to earn revenue from the asset while expensing a portion of its cost each year until the asset's useful life has ended. 115.3 For example, if an asset costs $10,000 and is expected to be in use for five years, $2,000 may be charged to depreciation in eac....
X X X X Extracts X X X X
X X X X Extracts X X X X
....rgical equipment. Nowhere, does it specify mobile phones. Of course, it may be argued that "plant" is an inclusive definition, not an exhaustive one. But, then plant would include anything which can be comprehended within it's ordinary meaning. No one would ordinarily consider mobile phone to be a "plant." 115.8. When we come to the second part, which calls mobile phone as "machinery," what is the definition of "machinery" in Income-tax Act? Well, the word "machinery" itself has not been defined in the Act. So, it has nowhere been defined that mobile phone is "machinery." Accordingly, in the absence of any specific entry in the appendix-1 of the Act, we are of the view the assessee is eligible for claiming the impugned expenses as revenue in nature. Hence, we set aside the finding of the learned CIT (A) and direct the AO to delete the addition made by him. Thus the ground of appeal of the assessee is allowed. 116. The next issue raised by the assessee in ground No. 6 is that the Learned CIT (A) erred in upholding the disallowance of Rs. 2,29,932/- representing the payment made to the stock exchange on account of Non-deduction of TDS under Section 194J of the Act. 117. The as....
X X X X Extracts X X X X
X X X X Extracts X X X X
....nt referred hereinabove hence same cannot be made applicable while adjudicating present issue. Thus, non-deduction TDS would lead to disallowance under Section 40(a)(ia) subject to legal issue regarding app0licability of Finance Act, 2012, as discussed herein under: (iii) So far as disallowance under Section 40(a)(ia) for VSAT and lease-line charges are concerned, my predecessor CIT(Appeals)-XVI vide his order dated 28th April, 2011 for A.Y. 2008-09 has upheld the disallowance and held as under: "10.3.1. I have considered the submission made by the appellant and observation of the Assessing Officer. With respect to NSE lease line charges of Rs. 5,40,372/- NSC, VSAT charges of Rs. 14,56,083/- lease line expenses of Rs. 12,54,523/- apart from what the Assessing Officer has stated above, the most important thing is that the assessee has been making payment to the stock exchange in respect of each and every transaction made by the assessee called transaction charges in addition to VSAT charges and lease the charges which are quarterly or annual payments made for the use of equipment which consists of lease line, dish, satellite link, IDE box etc. These charges are dependent upon ....
X X X X Extracts X X X X
X X X X Extracts X X X X
....nd transact business. The membership subscription /transaction fee paid is on the basis of volume of transaction effected by a member. The stock exchanges neither render any managerial service nor any technical consultancy service. The transaction fee is not paid in consideration of any service provided by the stock exchange. It is a payment for use of facilities provided by the stock exchange and such facilities are available for use by any member. The provisions of Section 194J which cast a burden on a person to deduct tax at source and treat him as a defaulter on his failure to deduct tax at source, need to be interpreted strictly and in the absence of a clear obligation on the part of a person, spelt out in unambiguous terms by the provisions of Section 194J, read with Explanation 2 to Section 9(1)(vii), such obligation cannot be implied or left to the ipsi dixit of the revenue authorities. Therefore, transaction fee paid could not be said to be a fee paid in consideration of the stock exchange rendering any technical services to the assessee. The provisions of Section 194J were, thus, not attracted. In holding so we draw support and guidance from the judgment Hon'ble Supreme ....
X X X X Extracts X X X X
X X X X Extracts X X X X
....ppropriate view. Such charges, really, are in the nature of payments made for facilities provided by the Stock Exchange. No TDS on such payments would, therefore, be deductible under Section 194J of the Act." In view of the above we hold that there was no obligation on the part of the assessee to deduct tax at source. Consequently, the provisions of Section 40(a)( ia) were also not attracted and, therefore, the disallowance made was to be deleted. Hence the ground of appeal of the assessee is allowed. 123. The next issue raised by the assessee is that the Learned CIT-A erred in partly confirming the disallowance made by the AO on the payment made to the stock exchange for Rs. 9,14,619/-on account of VSAT and lease line charges. 124. The AO during the year under consideration found that the assessee has paid VSAT and lease line charges amounting to Rs. 37,46,013/- without deducting the TDS under the provisions of Section 194-I of the Act. Accordingly, the AO disallowed the same and added to the total income of the assessee. On appeal, the Learned CIT (A) partly confirmed the order of the AO. 125. Being aggrieved by the order of the Learned CIT-A the assessee is in appeal before....
X X X X Extracts X X X X
X X X X Extracts X X X X
....isions of TDS under Section 194-I of the Act as alleged by the authorities below. Accordingly no disallowance on account of non-deduction of TDS is warranted. 129. Before parting, it is also important to note that the ITAT in the own case of the assessee for the Assessment Year 2008-09 in ITA No. 1718/AHD/2011 has set aside the identical issue to the file of the AO for fresh adjudication after verifying whether payees have included the amount received from the assessee in their income tax return. However in that order, there was no whisper about the Tribunal order as discussed above in the case of Destimoney Securities Private Ltd versus ITO in ITA No. 4106 /MUM/2014, which was decided in favour of the assessee after placing reliance on the order of Bombay High Court as discussed here in above. Thus the issue on hand on merit has been decided by a higher forum in favour of assessee which is binding on us. Accordingly, we are not impressed with the finding of the ITAT in the own case of the assessee and accordingly, the principles laid down by the ITAT in its own case in earlier years are not applicable. Thus, the grounds of appeal of the assessee is allowed. 130. The next issue ....
X X X X Extracts X X X X
X X X X Extracts X X X X
.... issue raised by the assessee in ground No. 9 is that the Learned CIT-A erred in directing the AO to compute the capital gain on the basis of cost inflation index pertaining to the financial 2005-06 instead of the cost inflation index pertaining to the years in which the assets in question were acquired i.e. 1995-96 and 2000-01. 137. The issue raised by the assessee has already been disposed of by us along with the appeal filed by the Revenue bearing ITA No. 413/AHD/2016 vide paragraph number 90 to 95 of this order. As such, the ground of appeal of the assessee has already been dismissed. For the detailed discussion, please refer the relevant paragraph. Hence, the ground of appeal of the assessee is dismissed. 138. The next issues raised by the assessee in ground No. 10, 11 and 12 are consequential, premature to decide or general in nature. Therefore, we do not find any merit in the grounds of appeal. Therefore we dismiss the same as infructuous. 139. In the result, the appeal filed by the assessee is partly allowed. Coming to ITA No.445/AHD/2016(A.Y.2012-13) Revenue's Appeal:- 141. The first issue raised by the Revenue is that the Learned CIT-A erred in deleting the addition ....
X X X X Extracts X X X X
X X X X Extracts X X X X
....tion of Rs. 2,76,400/-. The ground bearing No. 2 in an appeal of the assessee in ITA No. 318/AHD/2016 reads as under: "2.1 In law and in the facts and circumstances of the appellant's case, the learned CIT(A) has grossly erred in sustaining disallowance of Rs. 2,76,400/- u/s. 14A read with Rule 8D(2)9iii) on account of administrative expenses [even as he had directed the quantum of the disallowance on this account to be reduced from Rs. 2,90,466 to Rs. 2,76,400 after appreciating that the appellant's investments in shares of its subsidiary which had been amalgamated with the appellant, cannot be taken into account for the purposes of arriving at the quantum of disallowance under the said Rule]. He ought to have appreciated, interalia, that in the peculiar and eminent facts of the appellant's case, the learned A.O. had got to be satisfied with the appellant's claim that it had not incurred any administrative expenditure in relation to income not forming part of its total income other than expenditure of Rs. 14,284 for which it had made a suo motu disallowance and that therefore, the learned A.O. could not have assumed jurisdiction u/s. 14A(2) to make any further disallowance on th....
X X X X Extracts X X X X
X X X X Extracts X X X X
....can s. 14A or r. 8D be interpreted so as to mean that the entire tax exempt income is to be disallowed. The window for disallowance is indicated in s. 14A, and is only to the extent of disallowing expenditure "incurred by the assessee in relation to the tax exempt income". This proportion or portion of the tax exempt income surely cannot swallow the entire amount as has happened in this case." 148.1 We also note that in the identical facts and circumstances the Hon'ble jurisdictional High Court has decided that the amount of disallowance of the expenditure cannot exceed the amount of exempted income in the case of CIT versus Vision Finstock Stock Ltd. in Tax Appeal No. 486 of 2017 vide order dated 31st July 2017. The relevant extract of the order is extracted below: "1. The Revenue has challenged the judgement of the Income Tax Appellate Tribunal dated 07.07.2016 raising following questions for our consideration: "A. Whether on the facts and circumstances of the case and in low, the ITAT was justified in restricting the disallowance made of Rs. l,02,82,049/- u/s. 14A to the extent of exempt income of Rs. 55,6047- only? B. Whether on the facts and circumstances of the case an....
X X X X Extracts X X X X
X X X X Extracts X X X X
....ue has been decided by us in the own case of the assessee in ITA No. 413/AHD/2016 vide Para No. 58 to 59 of this order against the Revenue. For the detailed discussion please refer the relevant paragraphs. Respectfully, following the same, we dismiss the grounds of appeal of the Revenue. In the result, the appeal of the Revenue is dismissed. Coming to ITA No.318/AHD/2016(A.Y.2011-12) Assessee's Appeal:- 152. The assessee has raised the following grounds of appeal: "1. In law and in the facts and circumstances of the appellant's case, the learned CIT(A) has grossly erred in dismissing ground No. 1 of the appellant's appeal as being general in nature, not requiring any consideration by him. He ought to have appreciated, inter alia, that only a bare reading of that ground showed the reason for the appellant's challenge to the validity of the assessment order impugned before him and, accordingly, he ought to have adjudicated upon the same on merits. 2.1 In law and in the facts and circumstances of the appellant's case, the learned CIT(A) has grossly erred in sustaining disallowance of Rs. 2,76,400 u/s. 14A read with Rule 8D(2)(iii) on account of administrative ex....
X X X X Extracts X X X X
X X X X Extracts X X X X
.... I. T. Act, 1961. 5. In law and in the facts and circumstances of the appellant's case, the learned CIT(A) has grossly erred in upholding the disallowance of deduction for Rs. 48,796 on the ground that, the expenditure having been incurred on the purchase of mobile phones, was capital in nature. 6. In law and in the facts and circumstances of the appellant's case, the learned CIT(A) has grossly erred in upholding disallowance of the following expenses u/s. 40(a)(ia) on the ground that the appellant had failed to deduct TDS u/s. 194I/194J of the I. T. Act: a) Rs. 10,000 on account of lease line charges paid to BSNL (even though it was below the prescribed monetary limit for the applicability of the provision in question) b) Lease Line and V-Sat charges paid to recognized Stock Exchanges - Rs. 10,32,430 c) Other charges paid to recognized Stock exchanges - Rs. 3,80,401 7. In law and in the facts and circumstances of the appellant's case, the learned CIT(A) has grossly erred in not ordering for the deletion of the levy of interest u/s. 234B challenged by the appellant vide ground No. 10 of its appeal, inter alia, on the ground that the levy under that provision....
X X X X Extracts X X X X
X X X X Extracts X X X X
....ed the order of the AO. 159. Being aggrieved by the order of the Learned CIT (A), the assessee is in appeal before us. 160. At the outset, the Learned AR appearing for the assessee submitted that the assessee has not furnished the necessary evidence in support of his claim before the authorities below. Accordingly, the Learned AR prayed before us to restore the matter to the file of the AO for fresh adjudication and further assured that all the necessary documents shall be filed before the AO. 161. On the other hand the Learned DR did not raise any objection if the matter is set aside to the file of the AO for fresh adjudication as per the provisions of law. 161.1 Heard the rival contentions of both the parties and perused the materials available on record. Considering the submission of the Learned AR and the concession extended by the Learned DR by admitting prayer of the AR for restoring the issue to the file of the AO for fresh adjudication as per the provisions of law, accordingly, we set aside, the issue to the file of the AO for fresh adjudication as per the provisions of law. It is directed to the assessee to file the necessary supporting documents in support of his cont....
X X X X Extracts X X X X
X X X X Extracts X X X X
....d at the instance of the Revenue against the order of Learned Commissioner of Income Tax (Appeals)-10, Ahmedabad [in short Ld. CIT(A)], dated 21/12/2015 arising in the matter of assessment order passed u/s 143(3) of the Income-tax Act 1961, (hereinafter referred to as ''the Act'') dated 30/01/2015 relevant to Assessment Year 2012- 2013. 170. The Revenue has raised the following grounds of appeal: Appellate order of Commissioner of Income-tax(A)-10, Ahmedabad in the case of Edelweiss Broking Ltd. (On behalf of amalgamating Company Edelweiss Financial Advisors Ltd.), for AY 2012-13. I hereby direct the DCIT, Circle-1(3), Ahmedabad to file and appeal to the Appellate Tribunal against the order No.CIT(A)-10/ACIT-Cir.1(3)/654/14-15 dated 21.12.2015 in the above case on the following grounds: (1) That the ld.CIT(A) has erred in law and on the facts by deleting addition of depreciation, interest and insurance on vehicle amounting to Rs. 16,62,595/- by ignoring the fact that the assessee failed to prove the ownership of these vehicles as well as use of those assets wholly and exclusively for the business purpose. (2) That the ld.CIT(A) erred in law and on the facts by deleting add....