BRICS SECURITIES LTD, MUMBAI V. DCIT 4(1), MUMBAI

ITA 1087/MUM/2014

• Counselvise Citation: [2018] 119 COUNSELVISE.COM (IT) 2884 (ITAT-MUMBAI)
• Duration Of Justice: 4 year(s) 8 month(s) 13 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 02-11-2018
• Appeal Filed By: Assessee
• Order Result: Partly Allowed
• Bench Allotted: B
• Next Hearing Date: 16-02-2017
• Assessment Year: 2010-2011
• Appeal Filed On: 18-02-2014
• Result in Favour of: Partly Allowed
• Court: TRIBUNAL
• Department Lawyers: PADMA RAM LD
• Assessee Lawyers: YOGESH A THAR FORAM BHANUSHALI; SHREEJA GANGWAL LD ARS
• Keywords: Depreciation; Earning of tax free income; Speculation loss
• Section: 143(3); 234B; 14A; 80G

Judgement Text

ITA.NOS.1087/MUM/2014 & 3682/MUM/2016 BRICS SECURITIES LIMITED ASSESSMENT YEARS-2010-11 & 2011-12 IN THE INCOME TAX APPELLATE TRIBUNAL B BENCH, MUMBAI , , BEFORE HONBLE SHRI MAHAVIR SINGH, JM AND HONBLE SHRI MANOJ KUMAR AGGARWAL, AM ./I.T.A. NO.1087/MUM/2014 ( / ASSESSMENT YEAR: 2010-11) BRICS SECURITIES LIMITED SADHANA HOUSE, 1 ST FLOOR 570, P.B. MARG BEHIND MAHINDRA TOWER WORLI, MUMBAI-400 018 / VS. DEPUTY COMMISSIONER OF INCOME TAX-4(1) AAYKAR BHAVAN MUMBAI-400 020 ./ ./PAN/GIR NO. AAACB-4908-R ( /APPELLANT ) : ( ! / RESPONDENT ) & ./I.T.A. NO.3682/MUM/2016 ( / ASSESSMENT YEAR: 2011-12) BRICS SECURITIES LIMITED SADHANA HOUSE, 1 ST FLOOR 570, P.B. MARG BEHIND MAHINDRA TOWER WORLI, MUMBAI-400 018 / VS. ADDITIONAL COMMISSIONER OF INCOME TAX-4(1) AAYKAR BHAVAN MUMBAI-400 020 ./ ./PAN/GIR NO. AAACB-4908-R ( /APPELLANT ) : ( ! / RESPONDENT ) ASSESSEE BY : YOGESH A. THAR, FORAM BHANUSHALI & SHREEJA GANGWAL, LD. ARS REVENUE BY : PADMA RAM, LD. DR / DATE OF HEARING : 09/10/2018 / DATE OF PRONOUNCEMENT : 02/11/2018 ITA.NOS.1087/MUM/2014 & 3682/MUM/2016 BRICS SECURITIES LIMITED ASSESSMENT YEARS-2010-11 & 2011-12 2 / O R D E R PER MANOJ KUMAR AGGARWAL (ACCOUNTANT MEMBER) 1. AFORESAID APPEALS BY ASSESSEE FOR ASSESSMENT YEA RS [AY] 2010- 11& 2011-12 CONTEST SEPARATE ORDER OF FIRST APPELLA TE AUTHORITY. SINCE COMMON ISSUES ARE INVOLVED, WE DISPOSE-OFF BOTH THE APPEALS BY WAY OF THIS COMMON ORDER FOR THE SAKE OF CONVENIENCE AND B REVITY. FIRST WE TAKE UP ITA.NO.1087/MUM/2014 FOR AY 2010-11 WHICH CONTES T 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 R S. 6,400,000 AND THE HONORABLE COMMISSIONER OF INCOME-TAX (APPEALS) [HER EINAFTER REFERRED TO AS CIT(A)] HAS ERRED IN CONFIRMING THE ACTION OF THE L EARNED 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 ACCORD INGLY. 2. ON THE FACTS AND IN THE CIRCUMSTANCES OF THE CAS E AND IN LAW, THE LEARNED DCIT HAS ERRED IN DISALLOWING EXPENSES U/S. 14A OF THE I NCOME TAX ACT, 1961 OF RS. 45,606 AND THE HONORABLE CIT(A) HAS ALSO ERRED IN C ONFIRMING 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 B EEN 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. ITA.NOS.1087/MUM/2014 & 3682/MUM/2016 BRICS SECURITIES LIMITED ASSESSMENT YEARS-2010-11 & 2011-12 3 2.1 DURING ASSESSMENT PROCEEDINGS, IT WAS NOTED THA T 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 MEMBER SHIP CARD AND THEREFORE, THE DEPRECIATION AGAINST THE SAME, IN TH E OPINION OF LD. AO, COULD NOT BE ALLOWED TO THE ASSESSEE. DISREGARDING THE ASSESSEES SUBMISSIONS MADE IN THIS REGARD, DEPRECIATION ON TH E 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 APPLYI NG RULE 8D, COMPUTED AGGREGATE DISALLOWANCE OF RS.3.50 LACS WHI CH 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 ASSE SSEE, THE NET DISALLOWANCE THUS WORKED OUT TO RS.0.45 LACS, WHICH WAS ADDED TO THE INCOME OF THE ASSESSEE. BOTH THE ADDITIONS / DISALL OWANCES, UPON CONFIRMATION BY FIRST APPELLATE AUTHORITY, ARE UNDE R APPEAL BEFORE US. 3. SO FAR AS THE GROUND NUMBER-1 QUA DEPRECIATION ON BSE MEMBERSHIP RIGHT IS CONCERNED, LD. AUTHORIZED REPRE SENTATIVE 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 ITA.NOS.1087/MUM/2014 & 3682/MUM/2016 BRICS SECURITIES LIMITED ASSESSMENT YEARS-2010-11 & 2011-12 4 354]. 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. ARS SUBMISSIONS, ADDITIONAL DISALLOWANCE O F RS.45,606/- ARISES ONLY ON ACCOUNT OF THE FACT THAT THE ASSESSEE HAS E XCLUDED THOSE INVESTMENTS WHICH HAVE YIELDED NO EXEMPT INCOME DUR ING IMPUGNED AY OR WHICH WERE NOT CAPABLE OF YIELDING ANY EXEMPT IN COME WHILE ARRIVING AT THE DISALLOWANCE U/R 8D WHEREAS LD. AO HAS CONSI DERED 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 TAXMANN.COM 415] WHEREAS IT HAS BEEN HELD THAT FOR THE PURPOSE OF COMPUTING DISALLOWANCE, ONLY THOSE INVES TMENTS 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 C OMPUTATIONS 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 P URPOSES. THE APPEAL STAND PARTLY ALLOWED FOR STATISTICAL PURPOSES. ITA NO.3672/MUM/2016, AY 2011-12 5. THE EFFECTIVE GROUNDS RAISED UNDER THE APPEAL RE AD AS UNDER:- 1. ON THE FACTS AND IN THE CIRCUMSTANCES OF THE CAS E AND IN LAW, THE LEARNED ADDITIONAL COMMISSIONER OF INCOME TAX (HEREINAFTER REFERRED AS ACIT) HAS ERRED IN DISALLOWING DEPRECIATION ON BSE TRADING RI GHTS OF RS.48,00,000 AND ITA.NOS.1087/MUM/2014 & 3682/MUM/2016 BRICS SECURITIES LIMITED ASSESSMENT YEARS-2010-11 & 2011-12 5 THE HONORABLE COMMISSIONER OF INCOME-TAX (APPEALS) [HEREINAFTER REFERRED TO AS CIT(A)] HAS ERRED IN CONFIRMING THE ACTION OF THE LEARNED ACIT. THE LEARNED ACIT BE DIRECTED TO ALLOW DEPRECIATION CLAI M ON BSE TRADING RIGHTS OF RS.48,00,000 AND REDUCE THE TOTAL INCOME ACCORDI NGLY. 2. ON THE FACTS AND IN THE CIRCUMSTANCES OF THE CAS E AND IN LAW, THE LEARNED ACIT HAS ERRED IN DISALLOWING EXPENSES U/S. 14A REA D WITH RULE 8D OF THE INCOME TAX ACT, 1961 OF RS.11,50,488 AND THE HONORA BLE 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 I NCOME ACCORDINGLY. 3. ON THE FACTS AND IN THE CIRCUMSTANCES OF THE CAS E AND IN LAW, THE LEARNED ACIT HAS ERRED IN DISALLOWING LOSS ON ACCOUNT OF DE ALING ERROR OF RS.1,05,355 TREATING THE SAME AS SPECULATION LOSS AND THE HONOR ABLE CIT(A) HAS ERRED IN CONFIRMING THE ACTION OF ACIT. THE LEARNED ACIT BE DIRECTED TO ALLOW DEALING ERROR LOSS OF RS.1,05,355 AS BUSINESS LOSS AND REDU CE THE TOTAL INCOME ACCORDINGLY. 4. ON THE FACTS AND IN THE CIRCUMSTANCES OF THE CAS E AND IN LAW, THE LEARNED ACIT HAS ERRED IN ALLOWING TDS CREDIT OF RS.73,24,9 78 AS AGAINST RS.76,77,809 CLAIMED IN THE RETURN OF INCOME I.E. S HORT 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 ACCOR DINGLY. 5. ON THE FACTS AND IN THE CIRCUMSTANCES OF THE CAS E AND IN LAW, THE LEARNED ACIT HAS ERRED IN NOT GRANTING DEDUCTION UNDER CHAP TER 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 ACI T BE DIRECTED TO ALLOW DEDUCTION U/S 80G OF RS. 25,500 AND REDUCE THE TOTA L INCOME ACCORDINGLY. 6. THAT ON THE FACTS AND IN THE CIRCUMSTANCES OF TH E CASE AND IN LAW, THE LEARNED ACIT HAS ERRED IN CHARGING EXCESS INTEREST U/S/ 234 B AND INTEREST U/S. 234C OF THE INCOME TAX ACT, 1961. THE HONORABLE CIT(A) H AS 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 T HAT 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 .11.50 LACS IN THE QUANTUM ASSESSMENT ORDER. THE FACTS BEING LARGELY T HE SAME, THE MATTER STAND REMITTED BACK TO THE FILE OF LD. AO ON SIMILA R LINES TO VERIFY THE COMPUTATIONS MADE BY ASSESSEE AND CONSIDER ONLY THO SE INVESTMENTS ITA.NOS.1087/MUM/2014 & 3682/MUM/2016 BRICS SECURITIES LIMITED ASSESSMENT YEARS-2010-11 & 2011-12 6 WHICH HAVE YIELDED ANY EXEMPT INCOME DURING THE IMP UGNED 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. ARS SUBMISSIONS, THE SAME REPRESENT LOSS ARISING OUT OF PUNCHING ERRORS WHILE EXECUTING TRAD ES / ORDERS ON NEAT / BOLT SYSTEM OF STOCK EXCHANGE AND THEREFORE, THE SAME R EPRESENT INHERENT RISKS ASSOCIATED WITH THE BROKERAGE BUSINE SS 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 PROCE EDED ON WRONG FOOTING IN VIEW OF THE FACT THAT THESE WERE MERE PUNCHING E RRORS WHICH AROSE IN THE NORMAL COURSE OF BROKERAGE BUSINESS. THE COMPLE TE DETAILS OF THESE TRANSACTIONS HAVE ALREADY BEEN PLACED IN THE PAPER-BOOK. VIEWING FROM ANY ANGLE, THESE TRANSACTIONS CANNOT BE SAID TO HAV E ARISEN OUT OF SPECULATION BUSINESS AS BEING CONCLUDED BY THE LOWER AUTHORITIES. THESE LOSSES HAVE ARISEN ON ACCOUNT OF THE FACT THAT THES E ARE PUNCHING ERRORS WHILE EXECUTING THE TRADES AND CONSIDERING THE VOLU ME OF OVERALL BUSINESS BEING CARRIED OUT BY THE ASSESSEE, THE PRO PORTION 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 GRA NT OF TDS CREDIT. THE LD. CIT(A) HAS DIRECTED LD. AO TO VERIFY THE TDS AN D ALLOW THE SAME AS PER LAW. IN GROUND NO.6, THE ASSESSEE IS AGGRIEVED BY DENIAL OF ITA.NOS.1087/MUM/2014 & 3682/MUM/2016 BRICS SECURITIES LIMITED ASSESSMENT YEARS-2010-11 & 2011-12 7 DEDUCTION U/S 80G. THE LD. CIT(A) HAS DIRECTED LD. AO TO VERIFY THE CLAIM AND ALLOW EXEMPTION @50% AS PER LAW. SIMILARL Y, IN GROUND NO.7, THE ASSESSEE IS AGGRIEVED BY CHARGING OF EXCESS INT EREST U/S 234B & 234C. THE LD. CIT(A) HAS ALREADY DIRECTED THE LD. A O 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. ORDER PRONOUNCED IN THE OPEN COURT ON 2 ND NOVEMBER, 2018. SD/- SD/- (MAHAVIR SINGH) (MANOJ K UMAR AGGARWAL) / JUDICIAL MEMBER / ACCOUNTANT MEMBER MUMBAI; DATED : 02/11/2018 SR.PS:-THIRUMALESH/JV, SR.PS ! / COPY OF THE ORDER FORWARDED TO : 1. / THE APPELLANT 2. ! / THE RESPONDENT 3. ( ( ) / THE CIT(A) 4. ( / CIT CONCERNED 5. )* #+ , + , / DR, ITAT, MUMBAI 6. *,-. / GUARD FILE / BY ORDER, / (DY./ASSTT.REGISTRAR) , / ITAT, MUMBAI