D.K. MODI SECURITIES P. LTD, MUMBAI V. DCIT RG 4(1), MUMBAI

ITA 3410/MUM/2010

• Counselvise Citation: [2011] 140 COUNSELVISE.COM (IT) 48850 (ITAT-MUMBAI)
• Duration Of Justice: 1 year(s) 26 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 26-05-2011
• Appeal Filed By: Assessee
• Order Result: Allowed
• Bench Allotted: D
• Assessment Year: 2006-2007
• Appeal Filed On: 30-04-2010
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: S K SINGH
• Keywords: Depreciation
• Section: 14A

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL 'D' BENCH, MUMBAI BEFORE SHRI D. MANMOHAN, VICE PRESIDENT AND SHRI T.R. SOOD, ACCOUNTANT MEMBER ITA NO. 3410/MUM/2010 (ASSESSMENT YEAR: 2006-07) M/S. D.K. MODI SECURITIES P LTD. DCIT, RANGE 4(1) 515, ROUTNDA BUILDING AAYAKAR BHAVAN, M.K. ROAD FORT, MUMBAI 400023 VS. MUMBAI 400020 PAN - AAACD 5552 H APPELLANT RESPONDENT APPELLANT BY: NONE RESPONDENT BY: SHRI S.K. SINGH O R D E R PER T.R. SOOD, A.M. THIS APPEAL FILED BY THE ASSESSEE IS DIRECTED AGAIN ST THE ORDER OF THE CIT(A) VII, MUMBAI DATED 10.02.2010 IN RELATION TO A.Y. 2006-07. NONE APPEARED ON BEHALF OF THE ASSESSEE DESPITE NOTICE. HOWEVER, WE HAVE PROCEEDED TO HEAR THE APPEAL ON EXPARTE BASIS BECAU SE BOTH THE GROUNDS RAISED BY THE ASSESSEE ARE COVERED BY THE DECISIONS OF THE COURTS. 2. ASSESSEE HAS RAISED THE FOLLOWING GROUNDS: - 1. THE LEARNED CIT(A) HAS ERRED IN LAW AND FACTS B Y MAKING AN ADDITION OF RS.26954/- TO THE TOTAL INCOME UNDER SE CTION 14A OF THE INCOME TAX ACT, 1961. THE LD. CIT HAS WRONGLY A PPLIED RULE 8D AND CONFIRMED THE DISALLOWANCE OF TO THE EXTENT OF RS.26954/- WHEN THIS RULE IS NOT APPLICABLE TO US S INCE THE INTEREST PAYMENT HAS NOT CONNECTION TO THE EARNING OF DIVIDEND. 2. THE LEARNED CIT(A) HAS ALSO ERRED IN LAW AND FAC TS BY MAKING AN ADDITION OF RS.175198/- TO THE TOTAL INCOME AGAI NST DEPRECIATION CLAIMED ON STOCK EXCHANGE LICENSE. 3. REVENUE WAS HEARD. 4. REGARDING GROUND NO. 1, AFTER HEARING THE LEARNED D .R. WE FIND THAT DURING THE ASSESSMENT PROCEEDINGS THE A.O. NOTICED THAT ASSESSEE HAS ITA NO. 3410/MUM/2010 M/S. D.K. MODI SECURITIES P LTD. 2 RECEIVED A SUM OF ` 1,22,330/- AS DIVIDED, WHICH WAS CLAIMED AS EXEMPT. THE A.O. NOTICED THAT ASSESSEE HAS INCURRED CERTAIN INT EREST EXPENDITURE AND THEREFORE, ACCORDINGLY INTEREST WAS DISALLOWED PROP ORTIONATELY AS PER RULE 8D AND 1% OF VALUE OF INVESTMENT WAS TREATED AS EXPEN DITURE RELATED TO EARNING OF DIVIDEND INCOME AND FURTHER SUM OF ` 26,954/- WAS DISALLOWED. 5. ON APPEAL THE LEARNED CIT(A) DELETED THE ADDITION O F INTEREST BECAUSE BORROWED FUNDS WERE NOT USED FOR PURCHASE OF INVEST MENT. HOWEVER, DISALLOWANCE OF EXPENDITURE AMOUNTING TO ` 26,954/- WAS CONFIRMED. 6. AFTER CONSIDERING THE SUBMISSIONS OF THE LEARNED D. R. AND RELEVANT MATERIAL ON RECORD WE FIND THAT THIS ISSUE IS SQUAR ELY COVERED BY THE DECISION OF THE HON'BLE BOMBAY HIGH COURT IN THE CASE OF GOD REJ & BOYCE MFG. CO. LTD. VS. DCIT 328 ITR 81 IN WHICH IT HAS BEEN HELD BY THE HON'BLE HIGH COURT THE ONLY REASONABLE EXPENDITURE CAN BE DISALL OWED. THEREFORE, WE SET ASIDE THE ORDER OF THE LEARNED CIT(A) AND REMIT THE MATTER TO THE FILE OF THE A.O. WITH A DIRECTION TO DISALLOW ONLY REASONABLE E XPENDITURE AS PER THE DIRECTIONS OF THE HON'BLE BOMBAY HIGH COURT IN THE CASE OF GODREJ & BOYCE MFG. CO. LTD. (SUPRA). 7. GROUND NO. 2 RELATES TO DISALLOWANCE OF DEPRECIATIO N ON STOCK EXCHANGE CARD. 8. AFTER HEARING THE LEARNED D.R. WE FIND THAT THIS IS SUE IS SQUARELY COVERED IN FAVOUR OF THE ASSESSEE BY THE DECISION O F THE HON'BLE SUPREME COURT IN THE CASE OF TECHNO SHARES AND STOCK LTD. V S. CIT 327 ITR 323 WHEREIN IT WAS HELD AS UNDER: - HELD, REVERSING THE DECISION OF THE HIGH COURT, ON A CONSIDERATION OF THE BSE RULES, THAT THE RIGHT TO MEMBERSHIP WAS A BUSINESS OR COMMERCIAL RIGHT AND COULD BE SAID TO BE OWNED BY THE ASSESSEE AND USED FOR BUSINESS PURPOSES IN TERMS OF SECTION 32(1 )(II). THE RIGHT OF MEMBERSHIP, WHICH INCLUDED THE RIGHT OF NOMINATION, WAS A LICENCE OR AKIN TO A LICENCE WHICH WAS ONE OF THE ITEMS W HICH FELL IN SECTION 32(1)(II). THE RIGHT TO PARTICIPATE IN THE MARKET H AD AN ECONOMIC AND MONEY VALUE. IT WAS AN EXPENSE INCURRED BY THE ASSE SSEE WHICH SATISFIED THE TEST OF BEING A LICENCE OR ANY OTH ER BUSINESS OR COMMERCIAL RIGHT OF SIMILAR NATURE IN TERMS OF SEC TION 32(1)(II). ITA NO. 3410/MUM/2010 M/S. D.K. MODI SECURITIES P LTD. 3 RESPECTFULLY FOLLOWING THE ABOVE DECISION WE HOLD T HAT ASSESSEE IS ENTITLED TO DEPRECIATION ON STOCK EXCHANGE CARD AND ACCORDINGLY WE DIRECT THE A.O. TO ALLOW DEPRECIATION. 9. IN THE RESULT, ASSESSEES APPEAL IS ALLOWED FOR STA TISTICAL PURPOSE. ORDER PRONOUNCED IN THE OPEN COURT ON 26 TH MAY 2011. SD/- SD/- (D. MANMOHAN) (T.R. SOOD) VICE PRESIDENT ACCOUNTANT MEMBER MUMBAI, DATED: 26 TH MAY 2011 COPY TO: 1. THE APPELLANT 2. THE RESPONDENT 3. THE CIT(A) VIII, MUMBAI 4. THE CIT IV, MUMBAI CITY 5. THE DR, D BENCH, ITAT, MUMBAI BY ORDER //TRUE COPY// ASSISTANT REGISTRAR ITAT, MUMBAI BENCHES, MUMBAI N.P.