The ACIT,Ahmedabad Circle-3, Ahmedabad V. Anagram Stock Broking Ltd., Ahmedabad

ITA 1924/AHD/2011

• Counselvise Citation: [2016] 133 COUNSELVISE.COM (IT) 9807 (ITAT-AHMEDABAD)
• Duration Of Justice: 4 year(s) 5 month(s) 6 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 08-01-2016
• Appeal Filed By: Department
• Order Result: Dismissed
• Bench Allotted: C
• Next Hearing Date: 23-12-2015
• Assessment Year: 2008-2009
• Appeal Filed On: 02-08-2011
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Assessee Lawyers: VIJAY RANJAN
• Keywords: Depreciation; Earning of tax free income; Tax effect; Commercial expediency; Revenue expenditure
• Section: 14A

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL AHMEDABAD C BENCH AHMEDABAD BEFORE SHRI SHAILENDRA KUMAR YADAV , JUDICIAL MEMBER AND SHRI ANIL CHATURVEDI, ACCOUNTANT MEMBER ITA NO. 1924 & 2065/AHD/2011 ASSESSMENT YEAR :2008-09 ASSTT. COMMISSIONER OF INCOME TAX, CIRCLE-3, 1 ST FLOOR, PRATYAKSHYAKAR BHAVAN, PANJRAPOLE, AMBAWADI, AHMEDABAD EDELWEISS STOCK BROKING LTD. (FORMERLY KNOWN AS ANAGRAM STOCK BROKING LTD.) ANAGRAM HOUSE, NR. COMMERCE SIX ROAD, STADIUM ROAD, NAVRANGPURA, AHMEDABAD V/S . & ANAGRAM STOCK BROKING LTD. ANAGRAM HOUSE, DARSHAN SOCIETY, NR. H. L. COMMERCE SIX ROAD, NAVRANGPURA, AHMEDABAD ASSTT. COMMISSIONER OF INCOME TAX, CIRCLE-3, INSURANCE BUILDING, ASHRAM ROAD, AHMEDABAD PAN NO. AA B C A9956F (APPELLANT) .. (RESPONDENT) ! ' / BY REVENUE SMT. SMITI SAMANT, SR. D.R. ' /BY ASSESSEE SHRI VIJAY RANJAN, A.R. % ' /DATE OF HEARING 23.12.2015 &'() ' /DATE OF PRONOUNCEMENT 08.01.2016 O R D E R PER : SHRI ANIL CHATURVEDI, ACCOUNTANT MEMBER THESE TWO APPEALS OF WHICH ONE IS FILED BY REVENUE AND THE OTHER BY ASSESSEE ARE AGAINST THE ORDER OF CIT(A)-XVI, AHMED ABAD, DATED JUNE 10, 2011 FOR THE ASSESSMENT YEAR 2008-09. ITA NOS. 1924 & 2065/AHD/2011 A.Y. 08-09 PAGE 2 2. THE RELEVANT FACTS AS CULLED OUT FROM THE MATERI ALS ON RECORD ARE AS UNDER: 3. THE ASSESSEE IS A COMPANY STATED TO BE ENGAGED I N THE BUSINESS OF STOCK BROKING, DEPOSITORY PARTICIPANT AND DISTRIBUT ION OF FINANCIAL PRODUCTS. THE ASSESSEE FILED ITS RETURN OF INCOME FOR A.Y. 08 -09 ON 31.09.2008 DECLARING TOTAL INCOME OF RS.18,43,55,180/-. THE CASE WAS SE LECTED FOR SCRUTINY AND THEREAFTER ASSESSMENT WAS FRAMED U/S.143(3) VIDE OR DER DATED 30.12.2010 AND THE TOTAL INCOME WAS DETERMINED AT RS.18,43,55, 180/-. 4. AGGRIEVED BY THE ORDER OF ASSESSING OFFICER, ASS ESSEE CARRIED THE MATTER BEFORE THE LD. CIT(A) WHO VIDE ORDER DATED 1 0 TH JUNE, 2011 GRANTED PARTIAL RELIEF TO THE ASSESSEE. 5. AGGRIEVED BY THE ORDER OF LD. CIT(A), REVENUE AN D ASSESSEE BOTH ARE IN APPEAL BEFORE US. THE GROUNDS RAISED BY THE REVENU E IN ITS APPEAL I.E. ITA NO.1924/AHD/2011 READ AS UNDER: 1 THE LD. CIT(A) ERRED IN LAW AND ON FACTS IN PART LY DELETING THE ADDITION ON ACCOUNT OF DISALLOWANCE OF BAD DEBT TO RS.27,35, 991/- AS THE CONDITIONS LAID DOWN U/S.36(1)(VII) OF THE ACT ARE NOT SATISFIED. 2 THE LD. CIT(A) ERRED IN LAW AND ON FACTS IN PARTL Y DELETING THE DISALLOWANCE OF NSE PENALTY AMOUNT OF RS.17,027/- H OLDING THAT DELAYED SUBMISSION OF COMPLIANCE REPORT TO NSE IS N OT INFRACTION OF LAW. 5.1 ON THE OTHER HAND, THE GROUNDS RAISED BY THE AS SESSEE IN ITS APPEAL I.E. ITA NO.2065/AHD/2011 READ AS UNDER: 1. ON THE FACTS AND IN THE CIRCUMSTANCES OF THE CA SE, THE DEPARTMENTAL AUTHORITIES HAVE ERRED IN REJECTING ASSESSEES CLAI M FOR DEPRECIATION ON STOCK EXCHANGE CARD IN A SUM OF RS.41,36,396/-. ITA NOS. 1924 & 2065/AHD/2011 A.Y. 08-09 PAGE 3 2. ON THE FACTS AND IN THE CIRCUMSTANCES OF THE CAS E, THE DEPARTMENTAL AUTHORITIES HAVE ERRED IN CONSIDERING IT A CASE FIT FOR ANY DISALLOWANCE IN PURSUANCE OF SECTION 14A AND HAVE FURTHER ERRED IN QUANTIFYING THAT DISALLOWANCE IN A SUM OF RS.4,86,456/-. 3. ON THE FACTS AND IN THE CIRCUMSTANCES OF THE CAS E, THE DEPARTMENTAL AUTHORITIES HAVE ERRED IN DISALLOWING ASSESSEES CL AIM FOR BROKERAGE REFUND IN A SUM OF RS.8,57,229. 6. WE FIRST TAKE UP REVENUES APPEAL IN ITA NO.1924 /AHD/20101. 6.1 BEFORE US, AT THE OUTSET, LD. A.R. SUBMITTED TH AT THE PRESENT APPEAL OF THE REVENUE NEEDS TO BE DISMISSED ON ACCOUNT OF LOW TAX EFFECT IN VIEW OF THE CBDT CIRCULAR NO. 21 OF 2015 DATED 10.12.2015. THE LD. D.R. FAIRLY ADMITTED THAT THE TAX EFFECT IS LESS THAN THE LIMIT PRESCRIB ED BY THE AFORESAID CBDT CIRCULAR. 6.2 WE HAVE HEARD THE RIVAL SUBMISSIONS AND PERUSED THE MATERIAL ON RECORD. ON PERUSING THE GROUNDS OF APPEAL RAISED BY THE REVENUE, WE FIND THAT REVENUE IS AGGRIEVED BY DELETION OF AGGREGATE ADDITIONS OF RS. 27,53,018/-, THE TAX EFFECT OF WHICH IS BELOW RS. 1 0 LACS. AS PER THE ANNOUNCEMENT OF CENTRAL BOARD OF DIRECT TAXES (CBDT ) DATED 10.12.2015 (CIRCULAR NO. 21 OF 2015), NO DEPARTMENT APPEALS AR E TO BE FILED AGAINST RELIEF GIVEN BY LD. CIT(A) BEFORE THE INCOME TAX TRIBUNAL UNLESS THE TAX EFFECT, EXCLUDING INTEREST EXCEEDS RS. 10 LACS AND IT FURTH ER STATES THAT THE INSTRUCTIONS WILL APPLY RETROSPECTIVELY TO THE PEND ING APPEALS. IN THE PRESENT CASE, SINCE IT IS AN UNDISPUTED FACT THAT ON THE AD DITIONS WHICH ARE IN DISPUTE THE TAX EFFECT IS LESS THAN RS. 10 LACS, WE ARE OF THE VIEW THAT THE MONETARY LIMIT PRESCRIBED BY THE INSTRUCTIONS OF THE AFORESA ID CBDT CIRCULAR WOULD BE ITA NOS. 1924 & 2065/AHD/2011 A.Y. 08-09 PAGE 4 APPLICABLE TO THE PRESENT APPEAL OF THE DEPARTMENT AND THEREFORE THE PRESENT APPEAL IS NOT MAINTAINABLE ON ACCOUNT OF LOW TAX EF FECT. IN SUCH CIRCUMSTANCES, WE DISMISS THE APPEAL OF REVENUE WIT HOUT EXPRESSING ANY OPINION ON MERITS OF THE CASE. 6.3 IN THE RESULT, THE APPEAL OF REVENUE IS DISMISS ED. 7. NOW, WE TAKE UP ASSESSEES APPEAL IN ITA NO.2065 /AHD/2011. 7.1 FIRST GROUND IS WITH RESPECT TO CLAIM OF DEPREC IATION ON STOCK EXCHANGE CARD. ASSESSING OFFICER ON PERUSING THE DETAILS FU RNISHED BY THE ASSESSEE NOTICED THAT ASSESSEE HAS CLAIMED DEPRECIATION OF R S.41,36,396/- ON STOCK EXCHANGE CARD. ASSESSING OFFICER WAS OF THE VIEW T HAT AFTER THE IMPLEMENTATION OF CORPORATIZATION AND DEMUTUALIZATI ON SCHEME, 2005, THE MEMBERSHIP CARD DOES NOT EXIST AS THE SAME STANDS C ANCELLED AND THEREFORE, NO DEPRECIATION CAN BE ALLOWED ON THE SAME. HE, AC CORDINGLY, DISALLOWED THE CLAIM OF DEPRECIATION. 7.2 AGGRIEVED BY THE ORDER OF ASSESSING OFFICER, AS SESSEE CARRIED THE MATTER BEFORE THE CIT(A) WHO FOLLOWING THE ORDER OF ITS PREDECESSORS FOR A.Y. 2006-07 UPHELD THE DISALLOWANCE MADE BY THE ASSESSI NG OFFICER BY HOLDING AS UNDER: 3.3 I AGREE WITH THE AFORESAID FINDING OF THE CIT( A), GANDHINAGAR GIVEN IN APPELLANT'S OWN CASE FOR THE A.Y. 2006-07. NO DEPRE CIATION ON THE BSE MEMBERSHIP-CARD IS AVAILABLE TO THE APPELLANT AFTER THE BSE (CORPORATISATION AND DEMUTUALIZATION) SCHEME 2005. THE SHARES OF BSE LTD. HAVE BEEN ALLOTTED ON A CONCESSIONAL PRICE ON BSE MEMBERSHIP CARD. THE TRADING RIGHTS WHICH HAVE BEEN CONFERRED UPON THE ERSTWHILE CARD H OLDERS OF BSE AFTER ITS CORPORATISATION AND DEMUTUALIZATION HAS NO VALUE AS IS EVIDENT FROM THE PROVISO TO SECTION 55(2)(AB) OF THE ACT AS HAS BEEN BROUGHT ON STATUTE BY THE ITA NOS. 1924 & 2065/AHD/2011 A.Y. 08-09 PAGE 5 FINANCE ACT 2003 W.E.F. 01-04-2004. IN VIEW OF THE 1 FINDING GIVEN IN APPELLANT'S OWN CASE .IN THE APPELLATE ORDER DATED 31 01.2011 FOR THE A.Y. 2006-07, IT IS HELD THAT THE ASSESSING OFFICER WAS JUSTIFIED IN DISALLOWING THE DEPRECIATION OF RS. 41,36,396/-. HIS AFORESAID FIND ING IS SUSTAINED AND THE ADDITION MADE ON ACCOUNT OF DISALLOWANCE OF DEPRECI ATION IS CONFIRMED, THE SECOND GROUND OF APPEAL IS ACCORDINGLY DISMISSED. 7.3 AGGRIEVED BY THE ORDER OF CIT(A), ASSESSEE IS N OW IN APPEAL BEFORE US. LD. A.R. AT THE OUTSET SUBMITTED THAT IDENTICAL ISS UE AROSE IN THE CASE OF ASSESSEE IN A.Y.2005-06. THE HONBLE TRIBUNAL WHIL E DECIDING THE ISSUE IN ITA NO.1168/AHD/2011, ORDER DATED 11.07.2014 AND AF TER FOLLOWING THE DECISION OF CO-ORDINATE BENCH IN THE CASE OF M/S. G RISHMA SECURITIES PVT. LTD. VS. ITO IN ITA NO.6098/M/2010 DECIDED THE ISSUE IN FAVOUR OF ASSESSEE. HE PLACED ON RECORD A COPY OF THE AFORESAID DECISION. HE, THEREFORE, SUBMITTED THAT SINCE THE ISSUE IN THE PRESENT CASE IS IDENTIC AL TO THE FACTS OF THE CASE IN A.Y. 2006-07 AND SINCE IN A.Y. 2006-07 THE ISSUE HA S BEEN DECIDED IN FAVOUR OF ASSESSEE BY THE CO-ORDINATE BENCH OF TRIBUNAL, T HE PRESENT GROUND OF THE ASSESSEE NEEDS TO BE ALLOWED. LD. D.R., ON THE OTH ER HAND, SUPPORTED THE ORDER OF ASSESSING OFFICER AND CIT(A). 7.4 WE HAVE HEARD THE RIVAL SUBMISSIONS AND PERUSED THE MATERIAL ON RECORD. WE FIND THAT ISSUE OF DEPRECIATION OF STOC K EXCHANGE CARD WAS BEFORE THE CO-ORDINATE BENCH IN ASSESSEES OWN CASE IN A.Y . 2006-07 WAS DECIDED IN FAVOUR OF ASSESSEE BY HOLDING AS UNDER: 6. GROUND NO.2 IS AGAINST DISALLOWANCE OF DEPRECIA TION ON THE MEMBERSHIP OF THE STOCK EXCHANGE CARD. THE LD.COUNSEL FOR THE ASS ESSEE REITERATED THE SUBMISSIONS AS WERE MADE IN THE STATEMENT OF FACTS- CUM- SYNOPSIS. THE LD.COUNSEL FOR THE ASSESSEE SUBMITTED THAT THE ISSU E IS SQUARELY COVERED BY THE JUDGEMENT OF COORDINATE BENCH (ITAT MUMBAI 'G' BENCH AHMEDABAD) RENDERED IN THE CASE OF M/S.GRISHMA SECURITIES PVT. LTD. VS. ITO IN ITA NO.6098/M/2010 FOR AY 2007-08, DATED 29/03/2011. ITA NOS. 1924 & 2065/AHD/2011 A.Y. 08-09 PAGE 6 6.1. ON THE CONTRARY, LD.SR.DR SUPPORTED THE ORDERS OF THE AUTHORITIES BELOW. 7. WE HAVE HEARD THE RIVAL SUBMISSIONS, PERUSED THE MATERIAL AVAILABLE ON RECORD AND GONE THROUGH THE ORDERS OF THE AUTHORITI ES BELOW AS WELL AS THE DECISION RELIED UPON BY THE LD.COUNSEL FOR THE ASSE SSEE. ITA NO.1168/AHD/2011 EDELWEISS STOCK BROKING LTD. V S. ADDL.CIT ASST.YEAR - 2006-07 THE LD.CIT(A) HAS DECIDED THIS ISSUE IN PAR A-8 OF HIS ORDER BY OBSERVING AS UNDER:- '8. THE TRADING RIGHTS WHICH HAVE BEEN CONFERRED UP ON THE ERSTWHILE CARD HOLD OF BSE AFTER ITS CORPORATIZATION AND DEMU TUALIZATION HAS NO VALUE IS EVIDENT FROM THE PROVISIONS OF PROVISO TO SECTION 55(2)(AB) OF THE ACT WHICH HAS BEEN BROUGHT ON A STATUE BY THE F INANCE ACT 2003 W.E.F. 01/04/2004. IN PRESENT CASE UNDER CONSIDERAT ION, IT IS ADMITTED FACT THAT THE ASSESSEE HAS BEEN ALLOTTED EQUITY SHA RES UNDER THE BSE CORPORATIZATION AND DEMUTULIZATION SCHEME 2005 AND SAME IS EVIDENT FROM THE BALANCE SHEET WHERE UNDER THE HEAD INVESTM ENT OF RS.10000 EQUITY SHARES OF BSE LIMITED HAS BEEN REFLECTED. ON CE THE ASSESSEE HAS BEEN ALLOTTED EQUITY SHARES OF BSE LIMITED UNDE R SCHEME THEN AS PER PROVISIONS OF SECTION 55(2)(AB), THE COST OF AC QUISITION OF TRADING AND CLEARING RIGHT SHALL BE DEEMED TO BE NIL HENCE DEPRECIATION CANNOT BE ALLOWED. CONSIDERING THE SAME, DISALLOWAN CE MADE BY AO IS UPHELD AND RELATED GROUND OF APPEAL IS DISMISSED.' 7.1. WE FIND THAT THE COORDINATE BENCH IN ITA NO.60 98/M/2010 FOR AY 2007- 08 IN THE CASE OF M/S.GRISHMA SECURITIES PVT.LTD. V S. ITO (SUPRA), HAS HELD AS UNDER:- '2. WE HAVE HEARD BOTH THE PARTIES, PERUSED THE REC ORDS AND CONSIDERED THE MATTER CAREFULLY. THE DISPUTE IS REG ARDING ALLOWABILITY OF DEPRECIATION ON A STOCK EXCHANGE CARD. UNDER THE PR OVISIONS OF SECTION 32(1)(II) DEPRECIATION IS ALLOWABLE ON CERTAIN INTA NGIBLE ASSETS SUCH AS KNOW HOW, PATENTS, COPY RIGHTS AND LICENSE ETC. EAR LIER THE HON'BLE HIGH COURT OF MUMBAI IN CASE OF TECHNO SHARES AND S TOCK LTD. (SUPRA) HAD HELD THAT STOCK EXCHANGE CARD WAS NOT COVERED U NDER SECTION 32(1)(II) AND THEREFORE DEPRECIATION WAS NOT ALLOWA BLE. HOWEVER THE SAID JUDGMENT OF THE BOMBAY HIGH COURT HAS RECENTLY BEEN CONSIDERED BY THE HON'BLE SUPREME COURT IN THE SAME CASE AND I T WAS HELD THAT STOCK EXCHANGE CARD IS AKIN TO A LICENSE AND THEREF ORE IT IS COVERED UNDER SECTION 32(1)(II) AND DEPRECIATION IS ALLOWAB LE. WE THEREFORE RESPECTFULLY FOLLOWING THE SAID JUDGMENT OF HON'BLE SUPREME COURT, SET ASIDE THE ORDER OF CIT(A) AND ALLOWED THE CLAIM OF THE ASSESSEE.' 7.2. SINCE THE FACTS ARE IDENTICAL AND NO CHANGE IN TO THE FACTS AND CIRCUMSTANCES HAS BEEN POINTED OUT BY THE LD.SR.DR, WE HAVE NO REASON ITA NO.1168/AHD/2011 EDELWEISS STOCK BROKING LTD. VS. A DDL.CIT ASST.YEAR - 2006-07 TO TAKE A DIFFERENT VIEW THAN TAKEN BY THE COORDINATE BENCH IN THE CASE OF M/S.GRISHMA SECURITIES PVT.LTD.(SUPRA). THU S, THIS GROUND OF ASSESSEE'S APPEAL IS ALLOWED. ITA NOS. 1924 & 2065/AHD/2011 A.Y. 08-09 PAGE 7 SINCE THE FACTS OF THE CASE IN YEAR UNDER APPEAL AR E IDENTICAL TO THAT OF A.Y. 2006-07 THEREFORE, WE RESPECTFULLY FOLLOWING THE DE CISION OF CO-ORDINATE BENCH IN CASE OF ASSESSEE AND FOR SIMILAR REASONS, HOLD T HAT ASSESSEE IS ELIGIBLE FOR DEPRECIATION OF STOCK EXCHANGE CARD. THUS, THIS GR OUND OF ASSESSEES APPEAL IS ALLOWED. 8. SECOND GROUND IS WITH RESPECT TO DISALLOWANCE U/ S.14A. 8.1 DURING THE COURSE OF ASSESSMENT PROCEEDINGS, AS SESSING OFFICER NOTICED THAT ASSESSEE HAD MADE INVESTMENT OF RS.1.4 0 CRORES, IT HAD PAID INTEREST BY PLEDGING THE SHARES FOR SEEKING OVERDRA FT. THE ASSESSEE WAS THEREFORE ASKED TO FURNISH THE WORKING OF DISALLOWA NCE U/S.14A R.W.R. 8D OF THE ACT AND ALSO ASKED TO SHOW CAUSE AS TO WHY NO DISAL LOWANCE U/S.14A BE MADE. THE SUBMISSION OF THE ASSESSEE INTER ALIA TH AT NO BORROWED FUNDS HAVE BEEN USED FOR THE PURPOSE OF MAKING INVESTMENT AND NO EXPENDITURE HAS BEEN INCURRED TO EARN DIVIDEND WAS NOT FOUND ACCEPTABLE TO THE ASSESSING OFFICER. ASSESSING OFFICER NOTED THAT ASSESSEE HAS NOT SUPPO RTED ITS CLAIM OF AVAILABILITY OF INTEREST FREE FUNDS BEING INVESTED IN THE SHARES AND IN THE ABSENCE OF FUND FLOW STATEMENT, THE ASSESSEES CLAI M OF HAVING NOT USED INTEREST FREE FUNDS COULD NOT BE ACCEPTED. HE WAS FURTHER OF THE VIEW THAT PROVISIONS OF RULE 8D WERE APPLICABLE TO THE YEAR U NDER CONSIDERATION AND ACCORDINGLY FOLLOWING THE METHODOLOGY PRESCRIBED UN DER RULE 8D, WORKED OUT THE DISALLOWANCE U/S.14A AT RS.4,86,456/-. ITA NOS. 1924 & 2065/AHD/2011 A.Y. 08-09 PAGE 8 8.2 AGGRIEVED BY THE ORDER OF ASSESSING OFFICER, AS SESSEE CARRIED THE MATTER BEFORE THE CIT(A) WHO UPHELD THE ORDER OF AS SESSING OFFICER BY HOLDING AS UNDER: 5.2 I HAVE CAREFULLY CONSIDERED THE FACTS OF THE C ASE, THE FINDING OF THE ASSESSING OFFICER RECORDED IN PARA-7 OF THE ASSESSM ENT ORDER AND THE STATEMENT OF FACTS ON WHICH RELIANCE WAS PLACE BY T HE LD. COUNSELS. I HAVE ALSO CONSIDERED THE DECISIONS RELIED UPON BY THE LD . COUNSELS. IT IS AN ADMITTED FACT THAT NO DAY TO DAY FUND FLOW STATEMEN T HAD BEEN SUBMITTED BEFORE THE ASSESSING OFFICER AND THEREFORE, IN ABSE NCE OF SUCH FUND FLOW STATEMENT, THE ASSESSEE'S CLAIM THAT NO. INTEREST B EARING FUNDS WERE DIVERTED FOR THE INVESTMENT IN THE SAID SHARES REMAINED UNSU BSTANTIATED. IT IS ALSO THE SETTLED LEGAL POSITION THAT THE ASSESSEE HAS TO PRO VE BY DEMONSTRATIVE EVIDENCES THAT ON THE DATE' OF INVESTMENTS, THE ASS ESSEE HAD INTEREST FREE FUNDS AND THERE WAS NO DIVERSION OF INTEREST BEARIN G FUNDS FOR NON BUSINESS PURPOSES. RELIANCE WAS RIGHTLY PLACED BY THE ASSESS ING OFFICER ON THE DECISION OF HON'BLE MUMBAI TRIBUNAL IN THE CASE OF SANGHAVI SWISS REFILLS PVT. LTD VS ITO 85 ITD 59 (MUM.). I AGREE WITH THE CONTENTION OF THE ASSESSING OFFICER THAT IF, INTEREST BEARING FUNDS H AVE BEEN USED IN MAKING INVESTMENT IN SHARES ON WHICH THE INCOME IS EXEMPT, THEN THE DISALLOWANCES ARE REQUIRED TO BE MADE U/S. 14A OF THE ACT READ WI TH RULE 8D OF THE INCOME- TAX RULES, 1962 IRRESPECTIVE OF THE FACT WHETHER IN THE YEAR UNDER CONSIDERATION, THE ASSESSEE HAS DERIVED ANY EXEMPT INCOME OR NOT FROM SUCH INVESTMENT. HOWEVER, IN THE YEAR UNDER CONSIDERATIO N THE ASSESSEE HAS DISCLOSED DIVIDEND INCOME OF RS. 14,53,085/- AS EXE MPT INCOME. THE VIEW TAKEN BY THE ASSESSING OFFICER IS THE CORRECT VIEW WHICH IS SUPPORTED BY THE DECISION OF THE HON'BLE SPECIAL BENCH OF THE DELHI TRIBUNAL IN THE CASE OF CHEMINVEST LTD VS. ITO 121 ITD 318 AND THE DECISION OF THE HON'BLE SPECIAL BENCH OF MUMBAI TRIBUNAL IN THE CASE OF DAGA CAPITA L MANAGEMENT PVT LTD 117 ITD 169 (MUM)(SB). AS PER THE DECISION OF THE H ON'BLE BOMBAY HIGH COURT IN THE CASE OF GODREJ & BOYCE, THE PROVISIONS OF RULE 8D ARE APPLICABLE FROM THE ASSESSMENT YEAR 2008-09, THEREFORE, THE DI SALLOWANCE MADE U/S 14A OF THE ACT WAS JUSTIFIED. SINCE, THE APPELLANT HAD NOT DISPUTED THE CALCULATION OF DISALLOWANCE AS COMPUTED UNDER RULE-8D OF THE IN COME-TAX RULES, 1962, THE DISALLOWANCE SO MADE IS DISALLOWABLE. 5.3 I WOULD FURTHER LIKE TO SAY THAT EXACTLY SIMILA R ISSUE WAS CAME FOR CONSIDERATION BEFORE MY PREDECESSOR IN THE CASE OF THE GROUP CONCERN M/S ANAGRAM CAPITAL LTD. FOR THE A.Y 2008-09. MY PREDEC ESSOR VIDE PARA-4,3 OF HIS APPELLATE ORDER DATED 28.04,2006 IN APPEAL NO. CIT(A)- XWAC!T,CIR.3/710/10-11 HAD SUSTAINED THE DISALLOWAN CE OF INTEREST AND ADMINISTRATIVE EXPENSES MADE BY RESORTING TO THE PR OVISIONS OF SEC. 14A OF THE ACT BY HOLDING THAT AS PER THE DECISION OF THE BOMBAY HIGH COURT IN THE CASE OF GODREJ & BOYCEE, THE PROVISIONS OF RULE 8D ARE APPLICABLE FROM THE CURRENT YEAR. SINCE THE NEXUS OF INVESTMENT IS NOT SHOWN THEN IN VIEW OF THE DECISION OF THE BOMBAY HIGH COURT IN THE CASE OF GO DREJ & BOYCE, THE DISALLOWANCE CAN BE MADE FROM THIS YEAR AS PER RULE 8D. THE ASSESSING OFFICER HAS MADE THE DISALLOWANCE AS PER RULE 8D AN D THE APPELLANT HAS NOT ITA NOS. 1924 & 2065/AHD/2011 A.Y. 08-09 PAGE 9 DISPUTED THE CALCULATION PORTION. HENCE THE GROUND IS DISMISSED. FOR THE YEAR UNDER CONSIDERATION, THE COUNSELS OF THE APPELLANT HAD NOT DISPUTED THE CALCULATION OF DISALLOWANCE AS COMPUTED UNDER RULE- 8D OF THE INCOME-TAX RULES, 1962. IN VIEW OF THE DISCUSSION IN PARA-5.2 ABOVE AND FOLLOWING THE AFORESAID FINDING OF MY PREDECESSOR ON SIMILAR FACT S IN THE CASE OF GROUP CONCERN M/S ANAGRAM CAPITAL LTD. FOR THE A.Y. 2008- 09, IT IS HELD THAT THE ASSESSING OFFICER WAS JUSTIFIED IN DISALLOWING THE INTEREST AND ADMINISTRATIVE EXPENSES BY RESORTING TO THE PROVISIONS OF SEC 14A OF THE ACT R.W. RULE 8D OF THE INCOME-TAX RULES, 1962. THE FINDING OF THE ASSE SSING OFFICER IS SUSTAINED AND THE DISALLOWANCE SO MADE FOR RS. 4,86,456/- IS CONFIRMED. THE FOURTH GROUND OF APPEAL IS ACCORDINGLY DISMISSED. 8.3 AGGRIEVED BY THE ORDER OF CIT(A), ASSESSEE IS N OW IN APPEAL BEFORE US. 8.4 BEFORE US, LD. A.R. REITERATED THE SUBMISSIONS MADE BEFORE THE ASSESSING OFFICER AND CIT(A) AND FURTHER SUBMITTED THAT INVESTMENTS OF THE ASSESSEE ARE ONLY IN ONE COMPANY AND THE SAME INVES TMENT CONTINUES FROM 31 ST MARCH 2005 ONWARDS TILL DATE. HE PLACED ON RECORD THE EXTRACT OF THE BALANCE SHEET IN SUPPORT OF ITS CLAIM THAT THERE IS NO CHANGE IN INVESTMENT BETWEEN THE PERIOD 31 ST MARCH, 2005 AND THE IMPUGNED ASSESSMENT YEAR. HE FURTHER SUBMITTED THAT THE INTEREST FREE FUNDS IN T HE FORM OF CAPITAL & RESERVES ARE FAR IN EXCESS OF THE INVESTMENTS AND THEREFORE, NO DISALLOWANCE WITH RESPECT TO INTEREST COULD BE MADE AND FOR THIS PROP OSITION HE RELIED UPON THE DECISION OF HONBLE GUJARAT HIGH COURT IN CASE OF C IT VS. GUJARAT NARMADA VALLEY FERTILIZERS CO. LTD. IN TAX APPEAL NO.1151 O F 2013, ORDER DATED 10 TH JANUARY 2014. AS FAR AS THE DISALLOWANCE OF ADMINI STRATIVE EXPENSES IS CONCERNED, HE SUBMITTED THAT NO EXPENDITURE HAS BEE N INCURRED BY THE ASSESSEE TO EARN THE INCOME. LD. D.R., ON THE OTHE R HAND, SUPPORTED THE ORDERS OF ASSESSING OFFICER AND CIT(A) AND FURTHER SUBMITTED THAT DURING THE YEAR UNDER CONSIDERATION, THE PROVISIONS OF RULE 8D ARE APPLICABLE AND ITA NOS. 1924 & 2065/AHD/2011 A.Y. 08-09 PAGE 10 THEREFORE, ASSESSING OFFICER HAS RIGHTLY MADE THE D ISALLOWANCE U/S.14A R.W.R. 8D. 8.5 WE HAVE HEARD THE RIVAL SUBMISSIONS AND PERUSED THE MATERIAL ON RECORD. WE FIND THAT IN THE PRESENT CASE, ASSESSIN G OFFICER HAS MADE DISALLOWANCE U/S.14A OF RS.4,86,456/- WHICH COMPRIS ES OF DISALLOWANCE OF INTEREST OF RS.4,16,122/- AND ADMINISTRATIVE EXPEND ITURE OF RS.70,434/-. AS FAR AS DISALLOWANCE ON ACCOUNT OF INTEREST IS CONCERNED , IT IS UNDISPUTED FACT THAT THE INTEREST FREE FUNDS IN THE FORM OF CAPITAL AND RESERVES ARE FAR IN EXCESS OF INVESTMENTS AND FURTHER IT IS ALSO A FACT THAT THER E IS NO CHANGE IN INVESTMENTS FROM 31 ST MARCH, 2005 TO 31 ST 2008. IN SUCH A SITUATION, FOLLOWING THE DECISION OF HONBLE BOMBAY HIGH COURT IN THE CASE OF CIT VS. RELIANCE UTILITIES AND POWER LTD. 313 ITR 340 (BOM), WE ARE OF THE VIEW TH AT NO DISALLOWANCE ON ACCOUNT OF INTEREST COULD BE MADE. AS FAR AS THE D ISALLOWANCE ON ACCOUNT OF ADMINISTRATIVE EXPENSES IS CONCERNED, WE ARE OF THE VIEW THAT CONSIDERING THE FACT THAT ASSESSMENT YEAR BEING 2008-09 AND THE PRO VISIONS OF RULE 8D BEING MANDATORY AND THE ASSESSEE HAVING EARNED DIVIDEND I NCOME OF RS.14.53LACS AND IN THE ABSENCE OF ANY EVIDENCE OF NOT INCURRING ADMINISTRATIVE EXPENSES, WE ARE OF THE VIEW THAT NO INTERFERENCE TO THE DISA LLOWANCE MADE ON ACCOUNT OF ADMINISTRATIVE EXPENSES OF RS.70,434/- IS CALLED FOR. THUS, THIS GROUND OF ASSESSEES APPEAL IS PARTLY ALLOWED. 9. GROUND NO.3 IS WITH RESPECT TO DISALLOWING THE A SSESSEES CLAIM FOR BROKERAGE REFUND OF RS.8,57,229/-. ITA NOS. 1924 & 2065/AHD/2011 A.Y. 08-09 PAGE 11 9.1 ON PERUSING THE DETAILS FURNISHED BY THE ASSESS EE, ASSESSING OFFICER NOTICED THAT ASSESSEE CLAIMED TO HAVE PAID BROKERAG E OF RS.8,57,229/-. THE SUBMISSION OF THE ASSESSEE WAS INTER ALIA THAT IT W AS PAID AS A MEASURE OF COMMERCIAL EXPEDIENCY AND WAS INCURRED FOR THE PURP OSE OF BUSINESS AND WAS THEREFORE, ALLOWABLE. THE AFORESAID SUBMISSIONS OF THE ASSESSEE WAS NOT FOUND ACCEPTABLE TO THE ASSESSING OFFICER AS HE NOT ED THAT ASSESSEE HAD NOT POINTED OUT THE PAYMENT OF SUCH COMPENSATION IN EAR LIER YEARS AND THERE WAS NO CONTRACTUAL LIABILITY FOR MAKING SUCH PAYMENTS. HE, ACCORDINGLY, DISALLOWED THE CLAIM OF THE ASSESSEE. 9.2 AGGRIEVED BY THE ORDER OF ASSESSING OFFICER, AS SESSEE CARRIED THE MATTER BEFORE THE CIT(A) WHO UPHELD THE DISALLOWANC E MADE BY THE ASSESSING OFFICER BY HOLDING AS UNDER: 7.2 I HAVE CAREFULLY CONSIDERED THE FACTS OF THE C ASE, THE FINDING OF THE ASSESSING OFFICER RECORDED IN PARA-9 OF THE ASSESSM ENT ORDER AND THE STATEMENT OF FACTS ON WHICH RELIANCE WAS PLACE BY T HE LD. COUNSELS. I HAVE ALSO CONSIDERED THE DECISIONS RELIED UPON BY THE LD . COUNSEL. THE ASSESSING OFFICER HAD REFERRED TO REGARDING LOSS INCURRED BY THE CLIENTS AND NOT BY ASSESSEE AND REGARDING LOSS COMPENSATE RELATING TO CLIENTS. IT WAS FURTHER NOTED THAT THE ASSESSEE HAD NOT POINTED OUT THAT SU CH COMPENSATION HAVE BEEN GRANTED IN EARLIER YEARS. HOWEVER, IT IS NOT U NDERSTOOD FROM WHERE THE ASSESSING OFFICER TAKEN THE ISSUE REGARDING LOSS TO CLIENTS AND COMPENSATING LOSS OF CLIENTS BY THE APPELLANT. THE LD. COUNSEL H AS SUBMITTED BEFORE ASSESSING OFFICER AS WELL AS DURING APPELLATE PROCE EDINGS THAT THE BROKERAGE IS REFUNDED ON ACCOUNT OF THE REASONS THAT: (I) EXCESS BROKERAGE CHARGED AS AGAINST RATE O F BROKERAGE DECIDED WITH CLIENT. (II) IF CLIENT HAS ACHIEVED TURNOVER AND CONSIDERIN G HIS TURNOVER/VOLUME THROUGH APPELLANT, MANAGEMENT DECIDES TO REFUND CER TAIN PERCENTAGE OF BROKERAGE TO SUCH CLIENT. (V) REFUND OF BROKERAGE FOR TRANSACTIONS CARRIE D OUT DURING CERTAIN PERIOD WHEREIN THERE WAS CONNECTIVITY PROBLEM FROM APPELLA NT'S SIDE. ITA NOS. 1924 & 2065/AHD/2011 A.Y. 08-09 PAGE 12 7.3 APART FROM IT, IT WAS CLAIMED THAT THE ENTIRE B ROKERAGE REFUND GIVEN DURING THE YEAR IS OUT OF COMMERCIAL EXPEDIENCY AND LOOKIN G TO NATURE OF BUSINESS, SUCH EXPENDITURE IS ALLOWABLE REVENUE EXPENDITURE A GAINST TOTAL INCOME EARNED BY APPELLANT. I AGREE WITH THE CONTENTION OF THE LD. COUNSEL THAT THE BROKERAGE REBATE WAS AN INTEGRAL PART OF SHARE BROK ING BUSINESS AND SOMETIMES' IT IS GIVEN OUT OF BUSINESS COMPULSION T O ENSURE PATRONAGE OF THE HIGH NET WORTH CLIENTS. 7.4 IT WAS FURTHER BROUGHT TO MY NOTICE BY THE LD. COUNSELS THAT EXACTLY SIMILAR ISSUE WAS CAME FOR CONSIDERATION BEFORE MY PREDECES SOR IN THE CASE OF THE GROUP CONCERN M/S ANAGRAM CAPITAL LTD. FOR THE A.Y. 2008-09. MY PREDECESSOR VIDE PARA-7.3.7 OF HIS APPELLATE ORDER DATED 28.04.2006 IN APPEAL NO. CIT(A)-XVI/ACIT.CIR.3/710/10-11 HAD ALLOWED THE CLAIM OF THE APPELLANT BY HOLDING THAT THE APPELLANT HAS GIVEN THE LIST OF PARTIES TO WHOM BROKERAGE REBATE HAS GIVEN. IT WAS FURTHER STATED THAT BROKER AGE REBATE IS GIVEN EFFECT IN CLIENT'S LEDGER ACCOUNT AND TO THAT EXTENT LEDGER B ALANCE OF CLIENT WAS DECREASED. I AGREE WITH THE APPELLANT THAT THE CLAI M IS ALLOWABLE. FROM THE ABOVE, IT CAN BE SEEN THAT (HE APPELLANT HAS BEEN A BLE TO SHOW THAT THE REFUND OF BROKERAGE HAS BEEN GIVEN IN RESPECT OF ALL CASES . IN VIEW OF THE ABOVE DISCUSSION, THE REFUND OF BROKERAGE IS GENUINELY EX PLAINED AND THE CLAIM IS THEREFORE ALLOWED HOWEVER, FROM THE FINDING OF THE ASSESSING OFFICER, IT IS NOT COMING OUT AS TO WHETHER THE LIST OF PARTIES TO WHO M BROKERAGE REBATE WAS GIVEN, WAS FURNISHED BEFORE THE ASSESSING OFFICER O R NOT IT IS NOT ASCERTAINABLE FROM THE STATEMENT OF FACTS, ON WHICH (HE COUNSELS RELIED UPON, THAT SUCH LIST WAS ON THE RECORD OF THE ASSESSING OFFICER OR NOT. DURING THE APPELLATE PROCEEDINGS, NO SUCH ATTEMPT WAS MADE BY THE LD. CO UNSELS TO JUSTIFY THAT THE LIST OF PARTIES TO WHOM BROKERAGE REBATE WAS GI VEN WAS FURNISHED BEFORE THE ASSESSING OFFICER. THOUGH, I AGREE WITH THE FIN DING RECORDED BY MY PREDECESSOR IN THE CASE OF THE GROUP CONCERN M/S AN AGRAM CAPITAL LTD, FOR THE A.Y. 2008-09 BUT THE CLAIM OF BROKERAGE REBATE CAN BE ALLOWED ONLY IF THE LIST OF PARTIES TO WHOM BROKERAGE REBATE HAS GIVEN IS PLACED ON RECORD OF THE ASSESSING OFFICER AND IT IS ESTABLISHED THAT THE BR OKERAGE REBATE IS GIVEN EFFECT IN CLIENT'S LEDGER ACCOUNT AND TO THAT EXTEN T LEDGER BALANCE OF CLIENT WAS DECREASED. SINCE, NO ATTEMPT WAS MADE TO ESTABLISH THE AFORESAID ISSUES RELEVANT FOR ALLOWING THE CLAIM OF THE APPELLANT, T HE DEDUCTION OF BROKERAGE REBATE IS NOT AVAILABLE TO THE APPELLANT. THE DISA LLOWANCE SO MADE FOR RS.8,57,229/- IS THEREBY CONFIRMED. THE SIXTH GROU ND OF APPEAL IS ACCORDINGLY DISMISSED. 9.3 AGGRIEVED BY THE ORDER OF CIT(A), ASSESSEE IS N OW IN APPEAL BEFORE US. 9.4 BEFORE US, LD. A.R. REITERATED THE SUBMISSIONS MADE BEFORE THE ASSESSING OFFICER AND CIT(A) AND FURTHER SUBMITTED THAT CIT(A) THOUGH HAS NOTED THAT THE BROKERAGE REBATE HAS BEEN SUFFICIENT LY EXPLAINED BUT HOWEVER ITA NOS. 1924 & 2065/AHD/2011 A.Y. 08-09 PAGE 13 NOTED THAT BROKERAGE REBATE COULD BE ALLOWED ONLY I F THE LIST OF PARTIES TO WHOM BROKERAGE REBATE WAS PAID WAS PLACED AND WAS ESTABL ISHED THAT THE EFFECT OF THE SAME IS GIVEN IN CLIENTS LEDGER. HE SUBMITTED THAT THE AFORESAID DETAILS COULD NOT BE PLACED BEFORE ASSESSING OFFICER AND CI T(A) BUT HOWEVER IF GIVEN AN OPPORTUNITY, THESE DETAILS CAN BE FILED BEFORE T HE CIT(A). HE, THEREFORE, SUBMITTED THAT IN THE INTEREST OF JUSTICE, THE MATT ER MAY BE REMITTED BACK TO THE FILE OF ASSESSING OFFICER /CIT(A) FOR AFRESH ADJUDI CATION. LD. D.R., ON THE OTHER HAND, SUPPORTED THE ORDER OF ASSESSING OFFICER AND CIT(A). 9.5 WE HAVE HEARD THE RIVAL SUBMISSIONS AND PERUSED THE MATERIAL ON RECORD. WE FIND THAT THE REASON OF LD. CIT(A) IN U PHOLDING THE DISALLOWANCE MADE BY THE ASSESSING OFFICER WAS THAT THE LIST OF PARTIES TO WHOM THE BROKERAGE REBATE WAS NOT PLACED BEFORE THE ASSESSIN G OFFICER AND THAT ASSESSEE HAD TO ESTABLISH THAT THE EFFECT OF BROKER AGE REBATE IS GIVEN IN CLIENTS LEDGER ACCOUNT. WE ALSO FIND THAT THE NA TURE OF EXPENSES HAS NOT BEEN DOUBTED BY LD. CIT(A). BEFORE US, LD. A.RS. CONTENTION IS THAT THE ABSENCE OF DETAILS WHICH RESULTED IN CONFIRMATION O F DISALLOWANCE IF GIVEN AN OPPORTUNITY CAN BE FURNISHED BEFORE THE AUTHORITIES . IN VIEW OF THE AFORESAID SUBMISSION OF LD. A.R., WE ARE OF THE VIEW THAT IN THE INTEREST OF JUSTICE, ONE MORE OPPORTUNITY BE GRANTED TO ASSESSEE TO FURNISH THE REQUIRED DETAILS. WE, THEREFORE, REMIT THE ISSUE TO THE FILE OF ASSESSING OFFICER TO DECIDE THE ISSUE AFRESH MORESO IN THE LIGHT OF THE OBSERVATIONS MAD E BY THE CIT(A). NEEDLESS TO STATE THAT ASSESSING OFFICER SHALL GRANT ADEQUAT E OPPORTUNITY OF HEARING TO ITA NOS. 1924 & 2065/AHD/2011 A.Y. 08-09 PAGE 14 THE ASSESSEE. THUS, THIS GROUND OF ASSESSEE IS ALL OWED FOR STATISTICAL PURPOSES. 9. IN THE RESULT, THE APPEAL OF REVENUE IS DISMIS SED AND THE APPEAL OF ASSESSEE IS PARTLY ALLOWED. THIS ORDER PRONOUNCED IN OPEN COURT ON 08.01.2016 SD/- SD/- ( SHAILENDRA KUMAR YADAV ) (ANIL CHATURVEDI) JUDICIAL MEMBER ACCOUNTANT MEMBER TRUE COPY S.K.SINHA / COPY OF ORDER FORWARDED TO:- *+ , -. / APPELLANT /+ 01-. / RESPONDENT 2+ 345 6 / CONCERNED CIT 4+ 6- , / CIT (A) 9+ :; < 045 , 45) = 3 / DR, ITAT, AHMEDABAD 6+ < ?@ A B / GUARD FILE. BY ORDER/ ,/= ,! , 45) = 3