TaxTMI 
TaxTMI 
2020 (12) TMI 392
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....s of appeal: "1. That the ld. CIT(A) has erred 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 h....
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...."7.3 I have carefully considered the Assessment Order and submission filed by Appellant. The Assessing Officer has made 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 c....
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....ot an eligible asset u/s 32 of the Act as held by hon'ble Bombay high court in M/s. Technoshares and Stocks Ltd. Vs. CIT 193 Taxman 248. The CIT(A) 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....
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....ch vehicles. 11. The assessee in the year under consideration has claimed depreciation and incurred expenses on interest /insurance aggregating to Rs. 29,64,082/- with respect 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 ....
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....the AR before us vehemently supported the order of the respective authorities below as favorable to them. 18. We have heard the rival contentions of both the parties and perused the materials available 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 yea....
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....j) held that where vehicle was purchased by the firm used by it for the purpose of its business but it was registered in the name of one of the partners then the firm would be entitled to depreciation on vehicle. The hon'ble Delhi 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....
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....owed the same under Section 36(1)(iii) of the Act by adding to the total income of the assessee. 28. Aggrieved assessee preferred an appeal to the Learned CIT (A) who has deleted the addition made by the AO by observing as under: " On careful consideration 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 ....
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....poses as per case law 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. 1,25,83,17,8357- 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 dismi....
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....crores (Page 27 of the paper-book). Interest expenses are found to be of Rs. 5.80 crores. This results in net interest income of Rs. 6.75 crores. There is no dispute about this factual position. We follow a co-ordinate bench decision in ITA No.l277/Kol/2011, DCIT vs. M/s Trade Apartment Ltd. decided on 30.03.2012 holding therein that when there is 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....
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....ssee are in appeal before us. The Revenue is in appeal against the deletion of the addition made by the AO for Rs. 24,75,967/- whereas the assessee is in appeal against the confirmation of the addition of Rs. 4,20,414/- The ground bearing no. 3 in an appeal of the assessee in ITA No. 268/AHD/2016 reads as under: "3. 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. 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 incom....
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....me of Rs. 6.75 crores. There is no dispute about this factual position. We follow a co-ordinate bench decision in ITA No.l277/Kol/2011, DCIT vs. M/s Trade Apartment Ltd. decided on 30.03.2012 holding therein that when there is 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." 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 v....
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....lowance 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: "2. We come to Revenue's appeal ITA No.l531/Ahd/2014. Its first ground challenges the lower appellate order deleting disallowance/addition of NSE penalty of Rs. 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 t....
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.... Revenue is dismissed. 51. The next issue raised by the Revenue is that the Learned CIT-A erred in deleting the addition made by the AO for Rs. 1,18,89,628/- on account of bad debts as the conditions specified under Section 36 (2) were not satisfied. 52. The assessee during the year under consideration has claimed bad debts amounting to Rs. 1,18,89,628/- only. As per the assessee, its client has purchased the shares through the stock exchange but failed to make the 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....
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.... 56. Being aggrieved by the order of the Learned CIT-A the Revenue is in appeal before us. 57. Both the Learned DR and the AR before us vehemently supported the order of the respective authorities below to the extent favourable to them. 58. We have heard the rival contentions of both the parties and perused the materials available on record. At the outset we note that the Tribunal in the own case of the assessee in ITA No. 1531/AHD/2011 for the Assessment Year 2008-09 vide order dated 6th November 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(....
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....rned CIT (A) submitted that the impugned loss of Rs. 38,40,074/- is inclusive of the loss of Rs. 17,02,013/- which was incurred out of future and option segment carried out through the recognized stock exchange. Therefore such loss of Rs. 17,02,013/- cannot be treated as speculative transaction as per clause (d) of sub-Section 5 to Section 43 of the Act. Therefore, to the extent of Rs. 17,02,013/- such loss cannot be treated as speculative in nature. 66. The assessee also contended that it has declared of gross brokerage income of 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 assess....
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.... perused the materials available on record. The first issue that arises for our consideration is whether the impugned loss incurred by the assessee relates to the sale and purchase activities carried out by the assessee for itself or it relates to the other clients of the assessee. It is a question of fact which can verified based on the documentary evidence. Indeed, the assessee has not furnished the sufficient documentary evidence in support of his contention. But looking at the amount of impugned loss in comparison to the volume of the brokerage business carried 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....
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....ion are - (i) nature of assessee's business in general, (ii) the purpose behind the particular transaction, and (iii) the effect of the transaction etc. In the instant case, the nature of the assessee's business in general was to earn income as a broker of stock exchange and the purpose behind the transactions in regard to which the assessee had incurred loss was the purchase for and on behalf of certain clients to earn brokerage income therefrom. It was only an eventuality that some of the clients disowned only part of the transactions which under compulsion were to be 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 c....
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....t: 27501000/- Indexed cost Cost x CII of FY 2009-10 CII of FY 2005-06 27501000 x 632/497 34971090 Cost : 9306442 Indexed cost Cost X CII of FY 2009-10 CII of FY 2005-06 9306442 X 632/497 11734348 46805438 Long term Capital gain/loss 7278910 30415652 37694562 17.9 From the above it can be seen that the assessee has earned total Long term capital gain from sale of BSE of Rs. 37694562/-. The assessee has computed the total Long term capital loss in the return of income as under. Arvind Ltd. (-) 33970829/- BSE Shares (-) 19602783/- Arvind Ltd. (-) 14083776/- BSE Shares 27763125/- Total Long term 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 to....
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....embership card. 88. On the other hand, the AR before us submitted that the provisions of Section 55(2)(ab) and Explanation 1(ha) to Section 2(42A) of the Act are unambiguous and clear. Therefore, the assessee should be allowed the original cost of acquisition of the membership card while computing the capital gain as per the provisions of Section 55(2)(ab) of the Act. Similarly, the assessee should also be allowed the benefit of indexation from the year of acquisition of respective membership cards as per the provisions of Explanation 1(ha) to Section 2(42A) of the Act. 89. Both the Learned DR and the AR relied on the order of the respective authorities to the extent favourable to them. 90. We have heard the rival contentions of both the parties and perused the materials available 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 co....
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....on of capital gain in case of depreciable assets. It is because such membership card was not depreciable assets. Thus, the original cost incurred by the assessee on the acquisition of such membership card shall be taken as the cost of acquisition as defined under Section 55(2)(ab) of the Act. 94. Regarding the second membership card of the BSE acquired in the year 2000-01, we note that the assessee has claimed depreciation thereon. Therefore, it appears that the same is subject to the provision of Section 50 of the Act i.e. special provision for computation of capital gain in case of depreciable assets which provides that written down value of the block of assets at the beginning of the previous year shall be reduced from the sale consideration. However, we note that what has been sold in the year under consideration 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 ass....
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....he validity of the assessment order impugned before him and, accordingly, he ought to have adjudicated upon the same on merits. 2. In law and in the facts and circumstances of the appellant's case, the learned CIT(A) has grossly erred in upholding addition of Rs. 8,678 [out of Rs. 6,94,288 added by the Ld. AO. on this account] made on the ground that income to that extent shown by ITS/26AS as having been paid by some parties to the appellant had not been included in the appellant's return. 3. 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. 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....
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....her, that payment of brokerage to him was in violation of the SEBI Rules/ guidelines, that could not entitle the Ld. A.O. to disallow deduction for what was a genuine business expenditure, actually incurred by the appellant, especially when the Explanation below section 37(1) could not be applied thereto. 9. In law and in the facts and circumstances of the appellant's case, the learned CIT(A) has grossly erred in upholding the learned A.O.'s action of holding that the appellant's long term gain/loss on the sale of shares of the Bombay Stock Exchange Ltd. allotted to it in financial year 2005-06 have to be computed on the basis of the cost inflation index pertaining to the financial year 2005-06 instead of on the basis of the cost inflation index pertaining to the financial years 1995-96 and 2000-01 during which the appellant had acquired the respective Membership Cards 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) ....
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....d, alter, amend and/or withdraw any ground or grounds of appeal either before or during the course of hearing of the appeal." 98. The first issue raised by the assessee in ground No. 2 is that Learned CIT (A) erred in holding the addition of Rs. 8,678/- in part out of the total addition made by the AO on account of mismatch in ITS/26AS. 99. The AO during the assessment proceedings observed certain difference in the amount of income shown between ITS/26AS viz-a-viz income accounted in the books of accounts of the assessee. Such difference was of Rs. 6,94,288/- which was not shown as income by the assessee in its books of accounts. On question by the AO, the assessee could not furnish any suitable reply for reconciling such difference. Thus the AO in the absence of any information, treated such difference aggregating to Rs. 6,94,288/- as income and added to the total income of the assessee. 100. Aggrieved assessee preferred an appeal to the 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 ....
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....ities below. Hence, the ground of appeal of the assessee is dismissed. 105. The second issue raised by the assessee is that the Learned CIT-A erred in upholding the addition in part amounting to Rs. 4,20,414/- under the provisions of Section 14A read with Rule 8D(2)(iii) of Income Tax Rule. 106. 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 40-42 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. 107. The next issue raised by the assessee in ground No. 4 is that the Learned CIT-A erred in confirming the addition in part of Rs. 21,38,061/- out of the total addition made by the AO at Rs. 38,40,074/- by treating the normal business loss as speculation loss. 108. 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 74 & 75 of this order. As such, the ground of appeal of the assessee has already....
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....g Officer has not allowed depreciation on above expenditure treated as capital expenditure hence he is directed to allow depreciation on cell phones treated as capital expenditure. This ground of appeal is partly allowed." 113. Being aggrieved by the order of the Learned CIT (A) the assessee is in appeal before us. 114. The Learned AR before us reiterated the submission as made before the Learned CIT (A) whereas the Learned DR vehemently supported the order of the authorities below. 115. We have heard the rival contentions and perused the materials available on record. From the preceding discussion, we note that the assessee has treated the expenses incurred by it on the purchase of mobile expenses as revenue in nature whereas the revenue has treated the same as capital in nature. Accordingly, the claim of the assessee was disallowed but after allowing the depreciation at the rate of 15% treating the same as plant and machinery. A capital expenditure represents the expenses incurred by the person to purchase, upgrade, or extend the life of an asset. Capital expenditures are designed to be used to invest in the long-term financial health of the company. Capital exp....
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....or which we need to refer the rule 5 of Income Tax Rules which reads as under: ^87[Depreciation^88. 5. (1) Subject to the provisions of sub-rule (2), the allowance under clause (ii) of sub- section (1) of section 32 in respect of depreciation of any block of assets shall be calculated at the percentages specified in the second column of the Table in Appendix I to these rules on the written down value of such block of assets as are used for the purposes of the business or profession of the assessee at any time during the previous year: 115.7. Now to determine the rate of depreciation we need to refer the appendix-1 of the Act as applicable to the mobile phones. However, on perusal of the appendix-1, we find no entry for the rate applicable to the mobile phones. However, the revenue has treated the mobile phones as part of the plant and machinery and accordingly it allowed the depreciation thereon at the rate of 15%. Now the question arises whether the mobile phones are machinery. The word "plant'" according to section 43(3) includes ships, vehicles, boats, scientific apparatus and surgical equipment. Nowhere, does it specify mobile phones. Of course, it may ....
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....y transactions are concerned, it is observed that Central Government has issued notification on 31st December, 2012 wherein it is stated that such charges are not subject to provisions of TDS but notification is applicable from 1st January, 2013 hence it cannot have retrospective effect. Considering these facts, it is held that Appellant has failed to deduct TDS on payment made to HDFC Bank hence disallowance under Section 40(a)(ia) is required to be upheld subject to legal issue regarding applicability of Finance Act, 2012, as discussed herein under. (ii) So far as subscription and membership fees paid to exchange are concerned, it is observed that same are paid for obtaining various facilities as provided by exchange for carrying out screen based trading transactions on behalf of clients. The exchanges have provided managerial services which are in nature of technical services as mentioned in Section 194J the decision of Bombay High Court relied upon by Appellant is on the issue whether payment5 of lease-line charges and VSAT charges are subject to TDS under Section 194J of the Act or not and they are dealing with payment referred hereinabove hence same cannot be made ap....
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....change is not providing any service in the nature of technical services. Therefore, the provisions for the TDS under Section 194J of the Act cannot be applied on the payment made by the assessee for the membership subscription and transaction charges. 121. On the other hand, the Learned DR vehemently supported the order of the authorities below. 122. We have heard the rival contentions of both the parties and perused the materials available on record. For attracting the provisions of TDS under Section 194J of the Act, the payment as 'fees for technical services' should have been paid in consideration of rendering by the recipient of payment of any (a) managerial service, (b) technical or consultancy services. The stock exchanges merely provide facility to its members to purchase and sell shares, securities, etc., within the framework of its bye laws. In the event of dispute it provides for mechanism for settlement of dispute. It regulates conditions subject to which a person can be a member and as to when and in what circumstances membership can be transferred, cancelled, suspended, etc. The exchange provides a place where the members can meet and transact business. ....
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....e for transacting business rather than a technical service provided to one or a Section of the members of the Stock Exchange to deal with special situations faced by such a member(s) or the special needs of such member(s) in the conduct of business in the Stock Exchange. In other words, there is no exclusivity to the services rendered by the Stock Exchange and each and every member has to necessarily avail of such services in the normal course of trading in securities in the Stock Exchange. Such services, therefore, would undoubtedly be appropriate to be termed as facilities provided by the Stock Exchange on payment and does not amount to "technical services" provided by the Stock Exchange, not being services specifically sought for by the user or the consumer. It is the aforesaid latter feature of a service rendered which is the essential hallmark of the expression "technical services" as appearing in Explanation 2 to Section 9(1)(vii) of the Act. 10. For the aforesaid reasons, we hold that the view taken by the Bombay High court that the transaction charges paid to the Bombay Stock Exchange by its members are for 'technical services' rendered is not an a....
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....e case of:- (i) Income Tax Commissioner, Mumbai City-4 Vs. Angel Capital & Debit Market Ltd. (ITA (L) No. 475 of 2011, dated 28.07.2011)(Bom) (ii) CIT-4, Vs. M/s. The Stock and Bond Trading Company Ltd. (ITA No. 4177 of 2010, dated 14.10.2011)(Bom). We find that the Hon'ble Jurisdictional high Court in the aforesaid judgments had clearly held that VSAT and lease line charges paid by the assessee to stock exchange are merely in the nature of reimbursement of the charges paid/payable by the stock exchange to the department of the telecommunication, and thus in the absence of any element of income involved in the said payments, the issue as regards deduction of tax at source on the same does not arise at all. We are of the considered view that in the backdrop of the aforesaid judgment of the Hon'ble Jurisdictional High Court, the order of the CIT(A) treating the assessee as being in default u/s. 201(1)/201(1A) in respect of failure to deduct tax at source as regards the payments made towards lease line charges, cannot be sustained, and is thus set aside. The Ground of appeal No. 2 raised by the assessee before us is allowed." 128.1 In view of the above, we hold that the assessee wa....
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....ble deduction as provided under Explanation 1 to Section 37 of the Act. As such there is no relation between the quantum of business given by the broker AO viz a viz the violation of the provisions of law. Accordingly the Learned CIT (A) confirmed the order of the AO. 133. Being aggrieved by the order of the Learned CIT (A), the assessee is in appeal before us. 134. The Learned AR before us reiterated the submission as made before the Learned CIT (A) whereas the Learned DR vehemently supported the order of the authorities below. 135. We have heard the rival contentions of both the parties and perused the materials available on record. The amount of brokerage expenses can be claimed as deduction provided it was incurred in the course of the business. The Learned AR at the time of hearing has not brought anything on record suggesting the nature of services rendered by such brokerage. 135.1 Besides the above, the payment was made against the violation of the rules of the SEBI, therefore we are of the view that payment is not eligible for deduction under the provisions of Section 37 of the Act. Accordingly we uphold the finding of the Ld. CIT (A). Hence, the ground of ap....
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....Accordingly, the question of disallowing any interest expense does not arise under Rule 8D of Income Tax Rule. 143.1 Similarly, the Assessee further contended that the dividend has been directly credited in the bank account and therefore it has not incurred any administrative expenses for the earning of such dividend income. 143.2 However, the AO disregarded the contention of the assessee by observing that the assessee has not furnished any day to day fund flow statement suggesting that the borrowed fund has not been utilized in the impugned investments. Accordingly, the AO invoked the provisions of Section 14A r.w.r 8D and made the disallowance as under: Direct expenses nil Interest expenses 8,51,466.00 Administrative expenses 9,50,183.00 Total 18,01,649.00 143.3 Thus, the AO disallowed a sum of Rs. 18,01,649/- and added to the total income of the assessee. 144. Aggrieved assessee preferred an appeal to the Learned CIT-A, who partly allowed the appeal of the assessee. 145. Being aggrieved by the order of the Learned CIT-A, both the Revenue and the assessee are in appeal before us. The Revenue is in appeal against the deletion made by the AO f....
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....ible in total income. 14A. For the purposes of computing the total income under this Chapter, no deduction shall be allowed in respect of expenditure incurred88 by the assessee in relation to88 income which does not form part of the total income88 under this Act.] The Assessing Officer shall determine the amount of expenditure incurred in relation to such income which does not form part of the total income under this Act in accordance with such method as may be prescribed89, if the Assessing Officer, having regard to the accounts of the assessee, is not satisfied with the correctness of the claim of the assessee in respect of such expenditure in relation to income which does not form part of the total income under this Act." 147.1 The above provision requires to make the disallowance of the expenses in relation to the income which does not form part of the total income under this Act. The term used under Section 14A of the Act amount of expenditure incurred in relation to such income" implies that the expenditure cannot exceed the amount of exempted income. 148. In holding so we find support and guidance from the judgment of Hon'ble Delhi High Court in the c....
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.... therefore, dismissed. 148.2 We also note that the Hon'ble Apex court has also confirmed the principles laid down by the Hon'ble High Court as discussed above in the case of CIT vs. State Bank of Patiala reported in 99 taxmann.com 286 by dismissing the Special Leave petition. 149. In view of the above, we hold that the disallowance of the expenses under Section 14A read with rule 8D cannot exceed the amount of exempted income. Hence, the ground of appeal filed by the revenue is dismissed whereas the ground of appeal filed by the assessee is partly allowed. 150. The third issue raised by the Revenue is that Learned CIT-A erred in deleting the addition made by the AO for Rs. 42,700/- by disallowing the expenditure representing the penalty. 150.1 At the outset, we note that the identical issue has been decided by us in the own case of the assessee in ITA No. 413/AHD/2016 vide Para No. 49 to 50 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. 151. The fourth issue raised by the Revenue is that the Learned CIT-A erred in deleting the addit....
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....'s case, the learned CIT(A) has grossly erred in failing to appreciate that in any case, the quantum of disallowance u/s. 14A could not exceed the quantum of income not forming part of the appellant's total income this year viz. Rs. 24,324. 3. In law and in the facts and circumstances of the appellant's case, the learned CIT(A) has grossly erred in sustaining disallowance of deduction of Rs. 19,38,207 in respect of deposits made by the appellant with landlords of rented properties which the appellant was unable to recover and which it had written off to its Profit & Loss Account this year and which was deductible as a business loss in any case. 4.1 In law and in the facts and circumstances of the appellant's case, the learned CIT(A) has grossly erred in sustaining the learned A.O's action of treating what was normal business loss [Saudafer loss] of Rs. 19,68,177 as speculation loss. 4.2 Without prejudice to the foregoing, in law and in the facts and circumstances of the appellant's case, the learned CIT(A) has grossly erred in omitting to consider that the impugned loss of Rs. 3,25,857/- was inclusive of loss on Futures and Options....
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....aised by the assessee in ground No. 1 is general in nature and, therefore, no separate adjudication is required. Accordingly, we dismiss the same. 154. The second issue raised by the assessee is that the Learned CIT (A) erred in upholding the order of the AO in part by sustaining the disallowance of Rs. 2,76,400/- under the provisions of Section 14A read with Rule 8D(2)(iii) of income tax rule. 155. The issue raised by the assessee has already been disposed of by us along with the appeal filed by the Revenue bearing ITA No. 445/AHD/2016 vide paragraph number 147 to 149 of this order. As such, the ground of appeal of the assessee has already been allowed in part. For the detailed discussion, please refer the relevant paragraph. Hence, the ground of appeal of the assessee is partly allowed. 156. The next issue raised by the assessee in ground No. 3 is that the Learned CIT (A) erred in confirming the order of the AO by sustaining the disallowance of Rs. 19,38,202/- with respect to the deposits made with the landlords for the rented properties. 157. The AO during the assessment proceedings found that the assessee has claimed the deduction with respect to the deposits made w....
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....re in the nature of capital expenditure. 164. At the outset, we note that the identical issue has been decided by us in the own case of the assessee in ITA No. ITA No. 268/Ahd/2016 for A.Y. 2010-11 vide Para No. 115 of this order against the Revenue and in favor of the assessee. For the detailed discussion please refer the relevant paragraph. Respectfully, following the same, the ground of appeal of the assessee is allowed. 165. The next issue raised by the assessee is that the Learned CIT-A erred in confirming the disallowance made by the AO on the payment made to the BSNL and stock exchange for Rs. 14,22,831/- on account of VSAT and lease line charges. 166. At the outset, we note that the identical issue has been decided by us in the own case of the assessee in ITA No. ITA No. 268/Ahd/2016 for A.Y. 2010-11 vide Para No. 128 to 129 of this order against the Revenue and in favor of the assessee. For the detailed discussion please refer the relevant paragraphs. Respectfully, following the same, the ground of appeal of the assessee is allowed. 167. The issues raised by the assessee in ground Nos. 7, 8 and 9 are consequential, premature to decide or general in nature. T....
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....eleting addition of Rs. 20,29,917/- made by the AO u/s.40(a)(ia) without appreciating the fact that the conditions of provisions u/s.40(a)(ia) are not fulfilled by the assessee and had upheld disallowance in assessee's own case for payment made for VSAT charges and lease line charges in AY 2007-08. 171. At the time of dictation, it was noticed that the tax effect in the impugned appeal filed by the Revenue is less than Rs.50 lakhs. Therefore, the same is not maintainable in view of the recent circular issued by the CBDT bearing No. 17/2019 dated 8th August 2019. The relevant extract of the circular issued dated 8 August 2019 reads as under: "2. As a step towards further management of litigation. it has been decided by the Board that monetary limits for filing of appeals in incometax cases be enhanced further through amendment in Para 3 of the Circular mentioned above and accordingly. the table for monetary limits specified in Para 3 of the Circular shall read as follows: S.No. Appeals/SLPs in Income-tax matters Monetary Limit (Rs.) 1 Before Appellate Tribunal 50,00,000 2 Before High Court 1,00,00,000 3 Before Supreme Court 2,00,00,000....