Case Law Details
Brics Securities Ltd. Vs DCIT (ITAT Mumbai)
So far as disallowance u/s 14A read with Rule 8D is concerned, as per Ld. AR’s submissions, additional disallowance of Rs.45,606/- arises only on account of the fact that the assessee has excluded those investments which have yielded no exempt income during impugned AY or which were not capable of yielding any exempt income while arriving at the disallowance u/r 8D whereas Ld. AO has considered the Gross Investments whether or not the same has yielded any exempt income. We find that the action of the assessee is in line with the judgment of Delhi Tribunal (Special Bench) rendered in ACIT Vs. Vireet Investment (P.) Ltd. [82 com415] whereas it has been held that for the purpose of computing disallowance, only those investments which yielded exempt income during impugned AY were to be considered. Therefore, finding strength the argument of Ld. AR, the matter stand remitted back to the file of Ld. AO to verify the computations made by the assessee in this regard. The Ld. AO is directed to consider only those investments which have yielded exempt income during the year.
FULL TEXT OF THE ITAT JUDGMENT
1. Aforesaid appeals by assessee for Assessment Years [AY] 2010-11 & 2011-12 contest separate order of first appellate authority. Since common issues are involved, we dispose-off both the appeals by way of this common order for the sake of convenience and brevity. First we take up ITA. No. 1087/Mum/2014 for AY 2010-11 which contest the order of Ld. Commissioner of Income-Tax (Appeals)-8 [CIT(A)], Mumbai, Appeal No.CIT(A)-8/Cir.4/252/2012-13 dated 03/01/2014 by raising following grounds of appeal:-
1. On the facts and in the circumstances of the cae and in law, the learned Deputy Commissioner of Income tax (hereinafter referred as “DCIT”) has erred in disallowing depreciation on BSE Trading rights of Rs. 6,400,000 and the Honorable Commissioner of Income-Tax (Appeals) [hereinafter referred to as CIT(A)] has erred in confirming the action of the learned DCIT. The learned DCIT be directed to allow Depreciation claim on BSE Trading Rights amounting to Rs. 6,400,000 and reduce the total income accordingly.
2. On the facts and in the circumstances of the case and in law, the learned DCIT has erred in disallowing expenses u/s. 14A of the Income Tax Act, 1961 of Rs. 45,606 and the honorable CIT(A) has also erred in confirming the action of the learned DCIT. The learned DCIT be directed to allow expenses of Rs.45,606 and reduce the total income accordingly.
The assessment for impugned AY was framed by Ld. Deputy Commissioner of Income Tax, Circle 4(1), Mumbai [AO] u/s 143(3) on 29/01/2013 wherein the income of the assessee has been assessed at Rs.227 Lacs after certain disallowances as against returned income of Rs.160.17 Lacs e-filed by the assessee on 13/10/2010. During impugned AY, the assessee being resident corporate entity was engaged in the business of share broking, trading in securities and depository participants etc.
2.1 During assessment proceedings, it was noted that the assessee claimed depreciation @25% on BSE Trading Right valued at Rs.2.56 Crores treating the same as an intangible asset. However, consequent to demutualization and corporatization Scheme of BSE, 2005, the shares were allotted to the assessee in lieu of the membership card and therefore, the depreciation against the same, in the opinion of Ld. AO, could not be allowed to the assessee. Disregarding the assessee’s submissions made in this regard, depreciation on the same amounting to Rs.64 Lacs was disallowed in the quantum assessment.
2.2 The second addition pertains to disallowance u/s 14A. It was noted that the assessee earned exempt dividend income u/s 10(34) for Rs.31 .01 Lacs and against the same, offered suo-moto disallowance of Rs.3.05 Lacs. However, not convinced, Ld. AO applying Rule 8D, computed aggregate disallowance of Rs.3.50 Lacs which comprised-off of interest disallowance u/r 8D(2)(ii) for Rs.0.46 Lacs and expense disallowance u/r 8D(2)(iii) for Rs.3.03 Lacs. After adjusting the suo-moto disallowance of Rs.3.05 Lacs as offered by the assessee, the net disallowance thus worked out to Rs.0.45 Lacs, which was added to the income of the assessee. Both the additions / disallowances, upon confirmation by first appellate authority, are under appeal before us.
3. So far as the Ground Number-1 qua depreciation on BSE membership right is concerned, Ld. Authorized Representative for the Assessee [AR], Shri Yogesh Thar, fairly submitted that the issue, at present, stood covered against the assessee by the decision of this Tribunal rendered in Sino Securities (P.) Ltd. Vs ITO [16 Taxmann.com 354]. The copy of the judgment has been placed on record. In view of the admitted position, this ground stand dismissed.
4. So far as disallowance u/s 14A read with Rule 8D is concerned, as per Ld. AR’s submissions, additional disallowance of Rs.45,606/- arises only on account of the fact that the assessee has excluded those investments which have yielded no exempt income during impugned AY or which were not capable of yielding any exempt income while arriving at the disallowance u/r 8D whereas Ld. AO has considered the Gross Investments whether or not the same has yielded any exempt income. We find that the action of the assessee is in line with the judgment of Delhi Tribunal (Special Bench) rendered in ACIT Vs. Vireet Investment (P.) Ltd. [82 com415] whereas it has been held that for the purpose of computing disallowance, only those investments which yielded exempt income during impugned AY were to be considered. Therefore, finding strength the argument of Ld. AR, the matter stand remitted back to the file of Ld. AO to verify the computations made by the assessee in this regard. The Ld. AO is directed to consider only those investments which have yielded exempt income during the year. The assessee, in turn, is directed to provide necessary computations in this regard. This ground stand allowed for statistical purposes. The appeal stand partly allowed for statistical purposes.
ITA No.3672/Mum/2016, AY 2011-12
5. The effective grounds raised under the appeal read as under:-
1. On the facts and in the circumstances of the case and in law, the learned Additional Commissioner of Income tax (hereinafter referred as “ACIT”) has erred in disallowing depreciation on BSE Trading rights of Rs.48,00,000 and the Honorable Commissioner of Income-Tax (Appeals) [hereinafter referred to as CIT(A)] has erred in confirming the action of the learned A CIT. The learned ACIT be directed to allow Depreciation claim on BSE Trading Rights of Rs.48,00,000 and reduce the total income accordingly.
2. On the facts and in the circumstances of the case and in law, the learned ACIT has erred in disallowing expenses u/s. 14A read with Rule 8D of the Income Tax Act, 1961 of Rs. 11,50,488 and the Honorable CIT(A) has erred in partially allowing the relief. The learned ACIT be directed to delete the entire disallowance of Rs. 11,50,488 and reduce the total income accordingly.
3. On the facts and in the circumstances of the case and in law, the learned ACIT has erred in disallowing loss on account of dealing error of Rs. 1,05,355 treating the same as speculation loss and the Honorable CIT(A) has erred in confirming the action of A CIT. The learned ACIT be directed to allow dealing error loss of Rs. 1,05,355 as business loss and reduce the total income
4. On the facts and in the circumstances of the case and in law, the learned ACIT has erred in allowing TDS credit of Rs.73,24,978 as against 76,77,809 claimed in the Return of Income i.e. short TDS credit of Rs.3,52,831. The Honorable CIT(A) has directed the AO to verify the TDS claim and allow it accordingly. The learned ACIT be directed to allow the TDS credit of Rs.3,52,831 and increase the refund accordingly.
5. On the facts and in the circumstances of the case and in law, the learned ACIT has erred in not granting deduction under Chapter VIA for Rs. 25,500 u/s. 80G. The Honorable CIT(A) has directed the AO to verify the claim and allow deduction of 50% accordingly. The learned ACIT be directed to allow deduction u/s 80G of Rs. 25,500 and reduce the total income accordingly.
6. That on the facts and in the circumstances of the case and in law, the learned ACIT has erred in charging excess interest u/s/ 234B and interest u/s. 234C of the Income Tax Act, 1961. The Honorable CIT(A) has directed the AO to re-compute the interest and charge accordingly. The learned ACIT be directed to charge interest u/s.234B and interest u/s. 234C as per law thereby reduce the total income tax demand accordingly.
6.1 Ground Number-1, being similar as in AY 2010-11, stands dismissed in view of the admission made by Ld. AR that the issue stood covered against the assessee by the cited order of this Tribunal.
6.2 Ground Number-2 is related with disallowance u/s 14A. The assessee has suffered additional disallowance of Rs.1 1 .50 Lacs in the quantum assessment order. The facts being largely the same, the matter stand remitted back to the file of Ld. AO on similar lines to verify the computations made by assessee and consider only those investments which have yielded any exempt income during the impugned AY. The ground stand allowed for statistical purposes.
6.3 Ground number-3 is related with disallowance of dealing error for Rs.1 .05 Lacs. As per Ld. AR’s submissions, the same represent loss arising out of punching errors while executing trades / orders on NEAT / BOLT system of stock exchange and therefore, the same represent inherent risks associated with the brokerage business being carried out by the assessee. The Ld. AO has disallowed the same invoking the explanation to Section 73 treating the same as speculation business loss. The Ld. CIT(A) has confirmed the same. After due consideration, we find that both the lower authorities have proceeded on wrong footing in view of the fact that these were mere punching errors which arose in the normal course of brokerage business. The complete details of these transactions have already been placed in the paper-book. Viewing from any angle, these transactions cannot be said to have arisen out of speculation business as being concluded by the lower authorities. These losses have arisen on account of the fact that these are punching errors while executing the trades and considering the volume of overall business being carried out by the assessee, the proportion of these losses was very miniscule in nature. Therefore, by deleting the same, we allow this ground of appeal.
6.4 In the remaining grounds, the Ld. AR is merely seeking endorsement of directions as already given by first appellate authority. In ground no.5, the assessee is aggrieved by short grant of TDS credit. The Ld. CIT(A) has directed Ld. AO to verify the TDS and allow the same as per law. In ground no.6, the assessee is aggrieved by denial of deduction u/s 80G. The Ld. CIT(A) has directed Ld. AO to verify the claim and allow exemption @50% as per law. Similarly, in ground no.7, the assessee is aggrieved by charging of excess interest u/s 234B & 234C. The Ld. CIT(A) has already directed the Ld. AO to re-compute the same. Therefore, Ld. AO is directed to comply with the directions of Ld. CIT(A) forthwith. All these grounds stands allowed for statistical purposes.
7. The appeal stand partly allowed in terms of our above order
