Case Law Details
Issue and facts :– The brief facts, which are simple and undisputed, are that the assessee- company is a dealer and trader in shares and securities. Its various business segments are: Futures & Options (F&O) in shares and securities, shares transactions in the cash and derivative markets, speculation business therein (the above classifications may bear some overlapping). Shares in companies and Units of Mutual Funds (MFs) are also held by way of investments, on transfer of a part of which during the year the assessee has in fact disclosed long term capital gain (LTCG) at Rs 695.91 lacs, claimed tax exempt u/s.10(38) of the Act (PB pages 18-19). The assessee having earned dividend on shares at Rs 386.10 lacs, claimed & allowed tax-exempt u/s. 10(34), the AO proceeded to disallow the expenditure incurred by the assessee in relation thereto u/s. 14A (1) in terms of rule 8D; the said rule being applicable and mandatory for the current year, at Rs 140.69 lacs. The assessee challenged it before the ld. CIT(A) on several grounds. In appellate proceedings, it was also contended that the AO had not examined the correctness of the assessee’s claim as to the amount liable for dis allowance u/s. 14A (1) at Rs 10 lacs. The assessee, in his opinion, had with facts and figures been able to show that the amount invested in shares and securities (Rs 13.44 crores) was funded by own, non-interest bearing funds, so that no dis allowance on that account would arise. As regards indirect expenditure, the assessee had been able to show that of the total expenses debited in its accounts for the year, i.e., excluding depreciation, at Rs 558.55 lacs, the amount after deducting the sums already disallowed; direct expenditure; and those to be considered separately, is only at Rs 64.19 lacs. No dis allowance toward direct expenditure having been made by AO himself, the suo motu dis allowance by the assessee at Rs 10 lacs was thus considered appropriate by the ld. CIT(A). Aggrieved, the Revenue is in appeal.
Held :- The assessee, in the instant case, has suo motu disallowed Rs. 10 lacs. Its argument for non-application of s. 14A(1) is thus even otherwise infirm, so that the only issue that obtains is qua the quantum of the dis allowance. In this regard, we may, in passing; being not germane in view of our decision detailed per the preceding paras, is that depreciation – an economic and accounting concept – statutorily recognized and provided, is only a charge on capital account, i.e., a capital expenditure. Reference in this regard be made to decisions, inter alia, in the case of CIT v. Society of Sisters of St. Anne [1984] 146 ITR 28 (Kar)] and CIT v. P. K. Badiani [1970] 76 ITR 369 (Bom). The dis allowance by the Revenue, per r. 8D, works to Rs. 140.69 lacs, a part of which would, as indicated above, stand to be deleted and the balance confirmed. Under the circumstances, the assessee gets part relief. We decide accordingly.
INCOME TAX APPELLATE TRIBUNAL “D” BENCH, MUMBAI
BEFORE SHRI SANJAY ARORA, A. M. AND SHRI AMIT SHUKLA, J. M.
I.T.A. No. 3029/Mum/2012 – (Assessment Year: 2008- 09)
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