TaxTMI 
TaxTMI 
2022 (10) TMI 162
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....ed to as "the CIT(A)"] for the Assessment Years 2012-13, whereby the CIT(A) had partly allowed the appeal filed by the Appellant/Assessee against the Assessment Order, dated 25.02.2015 passed under Section 143(3) of the Income Tax Act, 1961 (hereinafter referred to as "the Act"). 3. The Appellant has raised the following grounds of appeal in ITA No. 3550/Mum/2016: "1. The Ld CIT (A) has erred in confirming the addition of Rs. 9,77,10,205/- made by Assessing Officer to the income of your petitioner 2. The Ld CIT (A) has erred in retaining and confirming the addition of Rs. 31,14,289/- being 15% of various expenses disallowed and added by the Assessing Officer. 3. The Ld CIT (A) has erred in retaining and not giving full relief to your petitioner to the extent of Rs. 11,55,403/- added by the Ld Assessing Officer u/s 14A of Income Tax Act, 1961. 4. The Ld CIT (A) has erred in confirming the addition of Rs. 95,74,500/- mad on account of disallowance of interest expenditure made by the Assessing Officer. 5. Both the Ld CIT (A) and Assessing Officer have erred in ignoring the volumes evidence produced and put on record by your petitioner from time to time. 6. The order a....
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....ate expenses 9,77,10,205/- made by the Assessing Officer and confirmed by the CIT(A). 9. The Learned Authorised Representative for the Appellant appearing before us submitted that the Appellant is engaged in the business of trading in stock and shares. During the relevant previous year, the Appellant had around 263 sub-brokers/business associates located across India and each of such sub-broker/business associate was registered with Securities & Exchange Board of India (SEBI) and held a valid registration certificate. From the inception of the Appellant-Company in the year 1995-96 till Assessment Year 2011-12 all the payments made to such sub-brokers/business associates were allowed as deduction. Explaining the business of the Appellant, the Learned Authorised Representative for the Appellant submitted that the Appellant gets bulk the brokerage business from various clients situated in cities across India requiring purchase/sale of shares, securities etc. which is generated with the help of its sub-brokers/business associates and therefore, a part of the commission received is shared by the Appellant with the sub-brokers/business associates which is claimed as deduction. The clien....
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....cord. It is admitted position that the Appellant is engaged in share/broking business wherein it is normal business practice to have sub-brokers/business associates. The Appellant had filed list of its sub-brokers/business associates containing office addresses, permanent account numbers, and NSE/BSE registration numbers. The details of "Business Associate Expenses" furnished by the Appellant contained Ledger Number and name. We note that out of total Business Associate Expenses of INR.9,77,10,205/-, expenses of INR.8,94,31,461/- claimed by the Appellant pertained to Ledger No. 908124 - "Ba : Commission - Equity & Derivative" details of which were furnished by the Appellant (placed at page 113-117 of the paper-book). A perusal of the aforesaid documents/details shows that deduction for INR for 43,45,279/- has been claimed for the payments to a business associate with name Varanasi [Satyam Share] which is claimed to have resulted in generation of the corresponding income are INR.81,06,777/- as reflected in the details of income generated from the top 13 sub-brokers/business associates. The name, address, registration number and permanent account number of the aforesaid sub- brokers/....
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.... was not disturbed by the Tribunal in appeal filed by the Revenue. In response, the Learned Departmental Representative referring to the assessment order submitted that the Assessing Officer had made the disallowance in view of the fact that the tax auditor had reported that the possibility of personal expenses which were not allowable as deduction under Section 37 of the Act having debited to profit and loss account could not be ruled out. Further, as noted by the CIT(A) in paragraph 4.3 of the order impugned, the Assessing Officer had disallowed the deduction for entire expenses as the expenses were incurred in cash and were not fully supported by bill or vouchers. Even the ledger accounts furnished by the Appellant were bulky and Appellant could not substantiate the claim. 15. We have considered the rival contentions and perused the material on record. Some ledgers relating to travelling expenses have been placed before us and the same are bulky. Even the tax auditor has expressed opinion that the possibility of some expenses being of personal nature being debited to the Profit & Loss Account cannot be ruled out. We note that in the immediately preceding assessment year 2010-11....
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....d by the Appellant is partly allowed in terms of our directions in paragraph 17 and 18 above. Ground No. 4 20. Ground No. 4 pertains to disallowance of interest expenditure of INR 95,74,500/- made by the Assessing Officer and confirmed by the CIT(A). 21. During the assessment proceedings, the Assessing Officer that the Appellant had given interest free deposit of INR 6.5 Crores to related parties in terms of Leave & License Agreements. Interest free deposit of INR 1 Crore each were given to Asit C. Mehta Commodities Services Pvt. Ltd. and Asit C. Mehta Financial Services Ltd. Similarly, interest free deposit of INR 2.75 Crores and 1.75 Crores were given to Ms. Deena Asit Mehta and to Asit C. Mehta, respectively. The Assessing Officer also noted that the Appellant had claimed deduction of interest of INR 3.40 Crores on borrowed funds of INR 23.08 Crores. The Assessing Officer concluded that the borrowed funds were used for the purpose of making the aforesaid interest free deposit. Therefore, taking average interest rate of 14.73%, the Assessing Officer disallowed INR 95,74,500/- (6.5 Crores x 14.73%) under Section 36(1)(iii) of the Act. Being aggrieved the Appellant carried the ....
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....r, the Ld. Authorised Representative for the Appellant submitted that it is admitted position that the interest free deposits made with the Directors of the Appellant-Company (namely Asit C. Mehta and Ms. Deena Asit Mehta) were received back during the relevant previous year as the aforesaid Directors had subscribed and paid for 9% cumulative preference shares of INR 4.5 Crores. 23. We have heard the rival contention and perused the material on record including the judicial precedents/decisions cited during the course of hearing. We note that out of INR 6.5 Crores given as interest free deposits INR 4.5 Crores were received back as subscription amount for 9% cumulative preference shares during the relevant previous year and were available for utilization for the business of the Appellant. As regards balance amount of INR 2 Crores, a perusal of the balance-sheet as on 31.03.2012 shows that the Appellant had sufficient owned/interest free funds to make deposits as well as interest bearing funds, and therefore, as per the judgment of the Hon"ble Bombay High Court in the case of Reliance Utilities & Power Ltd. (supra) it can be presumed that the interest free deposits were made out of....