The DCIT, Circle-1(3), Ahmedabad V. Edelweiss Financial Advisors Ltd., ( Formerly known Anagram Stock Broking Ltd.,), Ahmedabad

ITA 445/AHD/2016

• Counselvise Citation: [2020] 110 COUNSELVISE.COM (IT) 2111 (ITAT-AHMEDABAD)
• Duration Of Justice: 4 year(s) 9 month(s) 8 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 03-12-2020
• Appeal Filed By: Department
• Order Result: Dismissed
• Bench Allotted: A
• Next Hearing Date: 12-05-2020
• Assessment Year: 2011-2012
• Appeal Filed On: 25-02-2016
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Keywords: Capital asset; Depreciation; Business expenditure; Transactions in derivatives; Earning of tax free income; Proportionate interest; Retrospective amendment; Cost of acquisition; Initiation of penalty proceedings; Non-deduction of tax; Speculation loss; Bad and doubtful debts; Tax effect; Revised return; Revenue expenditure; Capital expenditure; Futures and options; TDS; Rule 8D; Set aside; Capital Gains
• Section: 143(3); 234B; 14A; 115JB; 40(a)(ia); 37(1); 195; 254(2); 64; 43; 48; 194J; 73; 13; 22; 32; 37; 28

Judgement Text

, IN THE INCOME TAX APPELLATE TRIBUNAL A BENCH, AHMEDABAD (THROUGH VIRTUAL COURT) BEFORE SHRI JUSTICE P.P. BHATT, HONBLE PRESIDEN T AND SHRI WASEEM AHMED, ACCOUNTANT MEMBER SL. NO(S) ITA NO(S) ASSET. YEAR(S) APPEAL(S) BY APPELLANT VS. RESPONDENT APPELLANT RESPONDENT 1. 413/AHD/2016 2010-11 DCIT CIRCLE-1(3), AHMEDABAD-380015 EDELWEISS FINANCIAL ADVISORS LTD. [FORMERLY KNOWN ANAGRAM STOCK BROKING LTD] ANAGRAM HOUSE NEAR H. L. COMMERCE COLLEGE, STADIUM ROAD, NAVRANGPURA, AHMEDABAD-380009 PAN NO. AABCA9956F 2. 445/AHD/2016 2012-13 DCIT CIRCLE-1(3), AHMEDABAD-380015 EDELWEISS FINANCIAL ADVISORS LTD. [FORMERLY KNOWN ANAGRAM STOCK BROKING LTD] ANAGRAM HOUSE NEAR H. L. COMMERCE COLLEGE, STADIUM ROAD, NAVRANGPURA, AHMEDABAD-380009 PAN NO. AABCA9956F 3. 268/AHD/2016 2010-11 EDELWEISS BROKING LTD. (ON BEHALF OF AMALGAMATING COMPANY: EDELWEISS FINANCIAL ADVISORS LTD.) 801-804, 8 TH FLOOR, ABHISHREE AVENUE, OPP. HANUMANJI TEMPLE, NEHRUNAGAR, AMBAWADI, AHMEDABAD-380015 PAN NO. AABCE9421H PAN NO. AABCA2916K JT. CIT, RANGE-3 AHMEDABD-380015 4. 318/AHD/2016 2011-12 EDELWEISS BROKING LTD. (ON BEHALF OF JT. CIT, RANGE-3 AHMEDABD-380015 2 ITA NOS. 413,445,268&318/AHD/2016 AND 446/AHD/2016 ( AY 2012-13) AYS: 2010-11, 2011-12, 2012-13 AMALGAMATING COMPANY: EDELWEISS FINANCIAL ADVISORS LTD.) 801-804, 8 TH FLOOR, ABHISHREE AVENUE, OPP. HANUMANJI TEMPLE, NEHRUNAGAR, AMBAWADI, AHMEDABAD-380015 PAN NO. AABCE9421H PAN NO. AABCA2916K 5. 446/AHD/2016 2012-13 DCIT CIRCLE-1(3) AHMEDABAD EDELWEISS BROKING LTD. (ON BEHALF OF AMALGAMATING COMPANY M/S.EDELWEISS FINANCIAL ADVISORS LTD.) PAN: AABCA 9956 F ASSESSEE(S)BY : SHRI VARTIK CHOKSHI, AR REVENUE BY : SHRI DILEEP KUMAR, SR. DR / DATE OF HEARING : 24/09/2020 / DATE OF PRONOUNCEMENT : 03/12/2020 / O R D E R PER WASEEM AHMED, ACCOUNTANT MEMBER: IN THIS BUNCH OF APPEALS TWO APPEALS HAVE BEEN FIL ED BY THE ASSESSEE AND TWO APPEALS HAVE BEEN FILED BY THE REVENUE FOR A.YS. 2010-11, 2011-12 2012-13 WHICH ARE ARISING FROM THE ORDER OF THE CIT (A)-10, AHMEDABAD ORDERS DATED 11.12.2015, IN THE ASSESSMENT PROCEEDI NGS UNDER SECTION 143(3) OF THE INCOME TAX ACT, 1961 (IN SHORT THE ACT). FIRST WE TAKE UP ITA NO. 413/AHD/2016 FOR THE A.Y. 2 010-11 (REVENUES APPEAL):- 2. THE REVENUE HAS RAISED THE FOLLOWING GROUNDS OF APPEAL: 1. THAT THE LD. CIT(A) HAS ERRED IN LAW AND ON THE FACTS BY DELETING ADDITION OF DEPRECIATION ON MEMBERSHIP CARD WITHOUT APPRECIATIO N THE FACT THAT CONDITION U/S 32 OF THE I. T. ACT, 1961 IS NOT FULFILLED ON THE SAID DEPRECIATION. 3 ITA NOS. 413,445,268&318/AHD/2016 AND 446/AHD/2016 ( AY 2012-13) AYS: 2010-11, 2011-12, 2012-13 (2) THAT THE LD. CIT(A) HAS ERRED IN LAW AND ON THE FACTS BY DELETING ADDITION OF DEPRECIATION, INTEREST AND INSURANCE ON VEHICLE AMO UNTING TO RS. 29,64,082/- BY IGNORING THE FACT THAT THE ASSESSEE FAILED TO PROVE THE OWNERSHIP OF THESE VEHICLES AS WELL AS USE OF THOSE ASSETS WHOLLY AND EXCLUSIVELY FOR THE BUSINESS PURPOSE. (3) THAT THE LD. CIT(A) HAS ERRED IN LAW AND ON THE FACTS BY DELETING ADDITION OF RS. 1,12,972/- MADE BY AO AS DISALLOWANCE OF INTERE ST WITHOUT APPRECIATING THE FACT THAT CONDITIONS LAID DOWN IN SECTION 36 OF THE I. T . ACT, 1961, ARE NOT FULFILLED BY THE ASSESSEE. (4) THAT THE LD. CIT(A) HAS ERRED IN LAW AND ON THE FACTS BY DELETING ADDITION OF RS. 24,75,967/- MADE BY THE AO U/S 14A WITHOUT CONS IDERING THE FACT THAT THE AO HAS RIGHTLY DISALLOWED THE SAME U/S 14A AFTER CONSI DERING THE PROVISIONS OF RULE 8D, WHICH IS NOT FULFILLED IN THE ASSESSEES CASE. (5) THAT THE LD. CIT(A0 HAS ERRED IN LAW AND ON THE FACTS BY DELETING ADDITION OF RS. 1,51,201/- MADE BY THE AO AS DISALLOWANCE OF EX PENDITURE FOR PAYMENT OF PENALTY WITHOUT APPRECIATING THE FACT THAT THE COND ITIONS OF PROVISIONS U/S. 37 ARE NOT FULFILLED BY THE ASSESSEE. (6) THAT THE LD. CIT(A) HAS ERRED IN LAW AND ON THE FACTS BY DELETING ADDITION OF RS. 1,18,89,628/- MADE BY THE AO AS DISALLOWANCE OF DEDUCTION OF BAD DEBTS BY IGNORING THE FACT THAT THE CONDITION OF PROVISIONS OF SECTION 36(2) ARE NOT SATISFIED IN THE ASSESSEES CASE. (7) THAT THE LD. CIT(A) HAS ERRED IN LAW AND ON THE FACTS BY ALLOWING THE CONTENTION OF ASSESSEE FOR VERIFICATION OF PART DIS ALLOWANCE OF RS. 17,02,013/- MADE BY THE AO AS DISALLOWANCE OF SAUDAFER LOS BY IGNORI NG THE FACT THAT WHOLE SAUDAFER LOSS CLAIMED BY THE ASSESSEE WAS SPECULATION LOSS W ITHIN THE MEANING OF EXPLANATION TO SECTION 73 OF THE I. T. ACT, 1961. (8) THAT THE LD. CIT(A) HAS ERRED IN LAW AND ON THE FACTS IN DIRECTING TO RE- COMPUTE THE CAPITAL GAIN BY IGNORING THE FACT THAT THE AO HAS RIGHTLY COMPUTED THE CAPITAL GAIN AS PER PROVISION OF SECTION 48 OF THE I. T. ACT, 1961 FOR INDEXING THE COST FROM F.Y. 2005-06 WHEN THE BSE SHARES WERE ALL OTTED AND FIRST HELD BY THE ASSESSEE. 3. THE FIRST ISSUE RAISED BY THE REVENUE IS THAT LE ARNED CIT(A) ERRED IN DELETING THE ADDITION MADE BY THE AO FOR RS.79/- ON ACCOUNT OF DEPRECIATION CLAIMED UNDER SECTION 32 OF THE ACT ON THE MEMBERSH IP CARD DESPITE THE CONDITIONS FOR CLAIMING THE DEPRECIATION WERE NOT S ATISFIED. 4 ITA NOS. 413,445,268&318/AHD/2016 AND 446/AHD/2016 ( AY 2012-13) AYS: 2010-11, 2011-12, 2012-13 4. THE FACTS IN BRIEF ARE THAT THE ASSESSEE IN THE PRESENT CASE IS A LIMITED COMPANY AND ENGAGED IN THE BUSINESS OF STOCK BROKIN G. THE AO DURING THE ASSESSMENT PROCEEDINGS FOUND THAT THE MEMBERSHIP CA RD OF THE STOCK EXCHANGE HELD BY THE ASSESSEE HAS BEEN DEMUTUALIZED/CORPORAT IZED INTO THE SHARES IN THE EARLIER YEAR 2005-06. AS SUCH THE ASSESSEE WAS NOT IN THE POSSESSION OF STOCK EXCHANGE CARD IN THE YEAR UNDER CONSIDERATION. ACCO RDINGLY, THE AO WAS OF THE VIEW THAT THE DEPRECIATION CLAIMED BY THE ASSES SEE ON THE INTANGIBLE ASSET BEING MEMBERSHIP CARD OF THE STOCK EXCHANGE IS NOT ALLOWABLE UNDER THE PROVISIONS OF SECTION 32 OF THE ACT. ACCORDINGLY, T HE AO DISALLOWED THE SAME AND ADDED TO THE TOTAL INCOME OF THE ASSESSEE. 5. AGGRIEVED ASSESSEE PREFERRED AN APPEAL TO THE LE ARNED CIT (A) WHO DELETED THE ADDITION MADE BY THE AO BY OBSERVING AS UNDER: 7.3 I HAVE CAREFULLY CONSIDERED THE ASSESSMENT ORD ER AND SUBMISSION FILED BY APPELLANT. THE ASSESSING OFFICER HAS MADE DISALLOWA NCE OF DEPRECIATION ON AHMEDABAD STOCK EXCHANGE MEMBERSHIP CARD RELYING ON DECISION OF HON'BLE MUMBAI ITAT IN THE CASE OF SINO SECURITIES PVT. LIMITED WHEREAS APPELLANT H AS RELIED UPON DECISION OF HON'BLE AHMEDABAD ITAT IN THE CASE OF EDELWEISS STOCK BROKI NG LIMITED FOR A.Y. 2006-07 WHICH IS MERGED WITH APPELLANT COMPANY AND APPELLANT'S OWN C ASE FOR A.Y. 2008-09 DECIDED BY HON'BLE AHMEDABAD ITAT ON 6TH NOVEMBER, 2015. ON CAREFUL CONSIDERATION OF ENTIRE FACTS, THE ISSU E RAISED BY ASSESSING OFFICER IS COVERED IN FAVOUR OF APPELLANT BY DECISION OF HON'B LE AHMEDABAD ITAT IN APPELLANT'S OWN CASE FOR A.Y. 2008-09 (ITA NO. 1531 AND 1718/AHD/20 11) WHEREIN HON'BLE ITAT VIDE ITS ORDER DATED 6TH NOVEMBER, 2015 HAS HELD AS UNDER: '13. THE ASSESSEE'S NEXT GROUND RAISED IN THE INSTA NT APPEAL CHALLENGES DISALLOWANCE OF DEPRECIATION ON AHMEDABAD STOCK EXCHANGE CARD OF RS . 141/- MADE IN THE COURSE OF ASSESSMENT AND AFFIRMED IN THE LOWER APPELLATE PR OCEEDINGS. BOTH THE LOWER AUTHORITIES HOLD THAT STOCK EXCHANGE MEMBERSHIP CARD IS NOT AN ELIGIBLE ASSET U/S 32 OF THE ACT AS HELD BY HON 'BLE BOMBAY HIGH COURT IN M/S. TECH NOSH 3 R ES AND STOCKS LTD. VS.CIT 193 TAXRNAN 248. THE CIT(A) OBSERVES THAT THE HON'BLE APEX CO URT HAS REVERSED THE ABOVE STATED DECISION AS REPORTED IN 327ITR 323 WITH A RIDER THA T THE SAME RELATES TO BOMBAY STOCK EXCHANGE CARD ONLY. HE REPRODUCES RELEVANT, PORTION OF THIS JUDGMENT AS WELL. HOWEVER, THE REVENUE FAILS TO POINT OUT ANY DISTINCTION BETWEEN THE ASSESSEE'S AHMEDABAD STOCK EXCHANGE CARD AND RELEVANT FEATURES OF BOMBAY STOCK EXCHANGE CARD. NOR SUCH A DISTINCTION IS FORTHCOMING FROM HON'HLE APEX COURT DECISION. WE FIND THAT A CO-ORDINATE BENCH OF THE TRIBUNAL IN CASE OF ASSESSEE'S SISTER CONCERN'S CASE M/S. EDELWEISS STOCK 5 ITA NOS. 413,445,268&318/AHD/2016 AND 446/AHD/2016 ( AY 2012-13) AYS: 2010-11, 2011-12, 2012-13 BROKING LTD. VS. CIT, ITA NO. 1168/AHD/2011DECIDED ON 11.07.2014 FOR AY 2006-07GRANTS IDENTICAL DEPRECIATION RELIEF. WE ALSO DRAW SUPPO RT THEREFROM FOR ALLOWING THE IMPUGNED DEPRECIATION CLAIMED. THIS GROUND IS ACCEPTED.' FOLLOWING THE DECISION OF HON'BLE AHMEDABAD 1TAT 1 APPELLANT'S OWN CASE., DISALLOWANCE OF DEPRECIATION MADE BY ASSESSING OFFI CER FOR RS.79 IS DELETED. THIS GROUND OF APPEAL IS ALLOWED . 6. BEING AGGRIEVED BY THE ORDER OF THE LEARNED CIT- A, THE REVENUE IS IN APPEAL BEFORE US. 7. THE LEARNED DR BEFORE US VEHEMENTLY SUPPORTED TH E ORDER OF THE AO WHEREAS THE LEARNED AR BEFORE US FILED A PAPER BOOK RUNNING FROM PAGES 1 TO 231 AND SUBMITTED THAT THE TRIBUNAL IN THE OWN CASE OF THE ASSESSEE HAS ALLOWED THE DEPRECIATION IN ITA NO. 1718/AHD/2011 V IDE ORDER DATED 6-11- 2015 FOR THE ASSESSMENT YEAR 2008-09. THE LEARNED A R VEHEMENTLY SUPPORTED THE ORDER OF THE LEARNED CIT (A). 8. WE HAVE HEARD THE RIVAL CONTENTIONS OF BOTH THE PARTIES AND PERUSED THE MATERIALS AVAILABLE ON RECORD. AT THE OUTSET WE NOT E THAT THE TRIBUNAL IN THE OWN CASE OF THE ASSESSEE IN ITA NO. 1718/AHD/2011 F OR THE ASSESSMENT YEAR 2008-09 VIDE ORDER DATED 6 TH NOVEMBER 2015, INVOLVING IDENTICAL ISSUE HAS DECIDED THE MATTER IN FAVOR OF THE ASSESSEE. THE RE LEVANT EXTRACT OF THE ORDER IS REPRODUCED AS UNDER: 13. THE ASSESSEES NEXT GROUND RAISED IN THE INSTA NT APPEAL CHALLENGES DISALLOWANCE OF DEPRECIATION ON AHMEDABAD STOCK EXCHANGE CARD OF RS .141/- MADE IN THE COURSE OF ASSESSMENT AND AFFIRMED IN THE LOWER APPELLATE PROC EEDINGS. BOTH THE LOWER AUTHORITIES HOLD THAT STOCK EXCHANGE MEMBERSHIP CARD IS NOT AN ELIGI BLE ASSET U/S 32 OF THE ACT AS HELD BY HONBLE BOMBAY HIGH COURT IN M/S. TECHNOSHARES AND STOCKS LTD. VS. CIT 193 TAXMAN 248. THE CIT(A) OBSERVES THAT THE HONBLE APEX COURT HAS REVERSED THE ABOVE STATED DECISION AS REPORTED IN 327 ITR 323 WITH A RIDER THAT THE SAME RELATES TO BOMBAY STOCK EXCHANGE CARD ONLY. HE REPRODUCES RELEVANT PORTION OF THIS JUDGME NT AS WELL. HOWEVER, THE REVENUE FAILS TO POINT OUT ANY DISTINCTION BETWEEN THE ASSESSEES AHMEDABAD STOCK EXCHANGE CARD AND RELEVANT FEATURES OF BOMBAY STOCK EXCHANGE CARD. NO R SUCH A DISTINCTION IS FORTHCOMING FROM HONBLE APEX COURT DECISION. WE FIND THAT A CO -ORDINATE BENCH OF THE TRIBUNAL IN CASE OF ASSESSEES SISTER CONCERNS CASE M/S. EDELWEISS STOCK BROKING LTD. VS. CIT, ITA NO. 6 ITA NOS. 413,445,268&318/AHD/2016 AND 446/AHD/2016 ( AY 2012-13) AYS: 2010-11, 2011-12, 2012-13 1168/AHD/2011 DECIDED ON 11.07.2014 FOR AY 2006-07 GRANTS IDENTICAL DEPRECIATION RELIEF. WE ALSO DRAW SUPPORT THEREFROM FOR ALLOWING THE IMP UGNED DEPRECIATION CLAIMED. THIS GROUND IS ACCEPTED. 14. THIS LEAVES US WITH ASSESSEES LAST SUBSTANTIVE GROUND CHALLENGING SECTION 40(A)(IA) OF RS.1,02,39,903/- ARISING FROM NON-DEDUCTION OF TDS QUA PAYMENTS MADE OF NSE LEASE LINE CHARGES, NSE VSAT CHARGES AND MTNL EXPENSES. THERE IS NO DISPUTE THAT THE ASSESSEE HAS NOT DEDUCTED TDS ON THESE PAYMENTS. WE HAVE GIVEN O UR THOUGHTFUL CONSIDERATION TO THE RIVAL CONTENTIONS. THE ASSESSEE INTER ALIA INVITES OUR ATTENTION TO SECTION 40(A)(IA) SECOND PROVISO INTRODUCED BY THE FINANCE ACT, 2012 W.E.F. 01.04.2013. IT REFERS TO CASE LAW OF RAJEEV KUMAR AGARWAL VS. ACIT, ITA NO.337/AGRA/2013 DECIDED ON 29.05.2013 (AUTHORED BY ONE OF US PRAMOD KUMAR, ACCOUNTANT MEMBER) AS CO NSIDERED BY A RECENT DECISION OF HONBLE DELHI HIGH COURT IN CIT VS. ANSAL LANDMARK TOWNSHIPS PVT LTD, (377 ITR 635), UPHOLDING THE SAME AFTER REPRODUCING THE OPERATIVE PART IN EXTEMPORE TO THE EFFECT THAT WHEN A DEDUCTOR-ASSESSEE IS NOT AN ASSESSEE IN DEFA ULT U/S 201(1), IT IS DEEMED THAT IT HAS DEDUCTED AND PAID THE TAX ON SUCH SUMS ON THE DATE OF FILING OF RETURN OF INCOME BY THE CONCERNED PAYEE AS REFERRED IN THE ABOVE STATED PRO VISO. THE CO-ORDINATE BENCH AS WELL AS HONBLE DELHI HIGH COURT HAVE ACCORDINGLY APPLIED T HE ABOVE STATED PROVISO WITH RETROSPECTIVE EFFECT BY HOLDING IT AS A CURATIVE ON E. THE REVENUE IS UNABLE TO DISPUTE CORRECTNESS THEREOF. WE ACCORDINGLY REMIT THIS ISSU E BACK TO THE ASSESSING OFFICER FOR CARRYING OUT NECESSARY VERIFICATION REGARDING RELAT ED PAYMENTS HAVING BEEN TAKEN INTO ACCOUNT BY THE CONCERNED PAYEES IN COMPUTING THEIR INCOME. THE ASSESSEES OTHER ARGUMENTS DISPUTING APPLICABILITY OF TDS PROVISION SHALL BE READJUDICATED AS PER LAW. THIS GROUND IS TREATED AS ALLOWED FOR STATISTICAL PURPOS ES. THIS ASSESSEES APPEAL ITA NO.1718/AHD/2011 IS PARTLY ALLOWED. 9. THE LEARNED DR AT THE TIME OF HEARING HAS NOT BR OUGHT ANYTHING ON RECORD CONTRARY TO THE FINDING OF THE ITAT, AS DISC USSED ABOVE, SUGGESTING THAT THERE WAS THE CHANGE IN THE FACTS AND CIRCUMSTANCES OR UNDER THE PROVISIONS OF LAW. HENCE, THERE BEING IS NO CHANGE IN THE FACTS A ND CIRCUMSTANCES VIZ A VIZ UNDER THE PROVISIONS OF LAW, WE CONFIRM THE ORDER O F THE LD. CIT-A IN VIEW OF THE ORDER OF THIS TRIBUNAL IN THE OWN CASE OF THE A SSESSEE (SUPRA) . ACCORDINGLY WE DIRECT THE AO TO DELETE THE ADDITION MADE BY HIM . HENCE THE GROUND OF APPEAL OF THE REVENUE IS DISMISSED. 10. THE NEXT ISSUE RAISED BY THE REVENUE IS THAT TH E LEARNED CIT-A ERRED IN DELETING THE ADDITION MADE BY THE AO AMOUNTING TO R S. 29,64,082/- BEING DEPRECIATION ALLOWANCE, INTEREST AND INSURANCE EXPE NSES RELATING TO VEHICLES THOUGH THE ASSESSEE WAS NOT THE OWNER OF SUCH VEHIC LES. 7 ITA NOS. 413,445,268&318/AHD/2016 AND 446/AHD/2016 ( AY 2012-13) AYS: 2010-11, 2011-12, 2012-13 11. THE ASSESSEE IN THE YEAR UNDER CONSIDERATION HA S CLAIMED DEPRECIATION AND INCURRED EXPENSES ON INTEREST /INSURANCE AGGREG ATING TO RS. 29,64,082/- WITH RESPECT TO CERTAIN VEHICLES WHICH WERE NOT REG ISTERED IN ITS NAME. HOWEVER, IT WAS CONTENDED BY THE ASSESSEE THAT IT I S THE BENEFICIAL OWNER OF SUCH VEHICLES AS THE LOAN WAS TAKEN BY IT AND ACCOR DINGLY THE INSTALMENT OF SUCH LOAN WAS ALSO BORN BY IT WHICH IS EVIDENT FROM THE BOOKS OF ACCOUNTS. 11.1 THE ASSESSEE ALSO SUBMITTED THAT THE PROVISION S OF SECTION 32 OF THE ACT REQUIRES THAT THE ASSETS MUST BE OWNED BY THE ASSES SEE WHICH DOES NOT MEAN THAT THE VEHICLES HAS TO BE REGISTERED IN THE NAME OF THE ASSESSEE UNDER THE MOTORS VEHICLES ACT. 12. HOWEVER, THE AO DISAGREED WITH THE CONTENTION O F THE ASSESSEE BY OBSERVING THAT THE ASSESSEE FAILED TO SUBSTANTIATE BASED ON DOCUMENTARY EVIDENCE THAT IT HAD DOMINION OVER THE VEHICLES AND SUCH VEHICLES WERE USED FOR THE PURPOSE OF THE BUSINESS. 13. FURTHERMORE, THE AO ALSO FOUND THAT THE PURPOSE OF REGISTERING THE VEHICLES IN THE NAME OF INDIVIDUAL DIRECTORS WAS TO AVOID THE TAX PAYABLE TO THE RTO. IN FACT, THE AMOUNT OF TAX PAYABLE TO THE RTO IS MUCH LESSER IF THE VEHICLES ARE REGISTERED IN THE NAME OF THE INDIVIDU ALS INSTEAD OF CORPORATE BODIES. ACCORDINGLY, THE AO WAS OF THE VIEW THAT TH E REVENUE AUTHORITY CANNOT BECOME A PARTY BY ALLOWING THE BENEFIT OF TAX PAYAB LE BY THE ASSESSEE TO THE RTO. ACCORDINGLY, THE AO DISALLOWED THE CLAIM OF TH E ASSESSEE FOR THE DEPRECIATION, INTEREST EXPENSES AND INSURANCE EXPEN SES AGGREGATING TO 29,64,082/- AND ADDED TO THE TOTAL INCOME OF THE AS SESSEE. 8 ITA NOS. 413,445,268&318/AHD/2016 AND 446/AHD/2016 ( AY 2012-13) AYS: 2010-11, 2011-12, 2012-13 14. AGGRIEVED ASSESSEE PREFERRED AN APPEAL TO THE L EARNED CIT (A). THE ASSESSEE BEFORE THE LEARNED CIT-A SUBMITTED THAT TH E PAYMENT FOR THE PURCHASE OF THE CAR WAS PAID BY IT. THE CARS WERE S HOWN IN THE BALANCE SHEET AS FIXED ASSETS. THE REPAYMENT OF THE CAR LOAN WAS MAD E BY IT. ALL THE EXPENSES SUCH AS RUNNING AND MAINTENANCE EXPENSES OF THE VEH ICLES WERE INCURRED BY IT WHICH ARE DULY REFLECTED IN THE BOOKS OF ACCOUNTS. THE ASSESSEE ALSO CONTENDED THAT IT HAS PAID WEALTH TAX ON SUCH VEHICLES IN ITS WEALTH TAX RETURNS. IN VIEW OF THE ABOVE THE ASSESSEE SUBMITTED THAT THE BENEFICIA L OWNERSHIP OF THE VEHICLES VEST WITH IT AND THESE CARS WERE USED FOR THE PURPO SE OF THE BUSINESS. ACCORDINGLY, THE DEPRECIATION ALLOWANCE, INSURANCE AND INTEREST EXPENSES CANNOT BE DENIED TO IT. 15. THE LEARNED CIT (A) AFTER CONSIDERING THE SUBMI SSION OF THE ASSESSEE FOUND THAT ASSESSEE HAS USED ITS OWN FUNDS FOR THE PURCHASE OF THE VEHICLES VIZ A VIZ THE REPAYMENT OF THE LOAN OBTAINED FOR THE PU RCHASE OF THE VEHICLES WAS MADE BY IT AND THESE VEHICLES WERE DULY REFLECTED I N THE BALANCE SHEET AS ASSETS. SIMILARLY, RUNNING AND MAINTENANCE EXPENSES ON SUCH VEHICLES WERE INCURRED BY THE ASSESSEE WHICH WERE ALSO ALLOWED BY THE REVENUE. THUS WHAT IS SUGGESTED IS THAT THE VEHICLES WERE USED FOR THE PU RPOSE OF THE BUSINESS. THE LEARNED CIT (A) ALSO FOUND THAT THE ASSESSEE IS PAY ING THE WEALTH TAX ON SUCH CARS WHICH EVIDENCES THAT THE ASSESSEE IS THE BENEF ICIAL OWNER OF THESE CARS. ACCORDINGLY, THE LEARNED CIT (A) WAS OF THE VIEW TH AT THE ASSESSEE CANNOT BE DENIED THE BENEFIT OF DEPRECIATION, INSURANCE AND I NTEREST EXPENSES INCURRED ON THE VEHICLES MERELY ON THE REASONING THAT THESE VEH ICLES WERE REGISTERED IN THE NAME OF THE INDIVIDUAL DIRECTORS. ACCORDINGLY THE L EARNED CIT (A) ALLOWED THE GROUND OF APPEAL OF THE ASSESSEE. 9 ITA NOS. 413,445,268&318/AHD/2016 AND 446/AHD/2016 ( AY 2012-13) AYS: 2010-11, 2011-12, 2012-13 16. BEING AGGRIEVED BY THE ORDER OF THE LEARNED CIT (A), THE REVENUE IS IN APPEAL BEFORE US. 17. BOTH THE LEARNED DR AND THE AR BEFORE US VEHEME NTLY SUPPORTED THE ORDER OF THE RESPECTIVE AUTHORITIES BELOW AS FAVORA BLE TO THEM. 18. WE HAVE HEARD THE RIVAL CONTENTIONS OF BOTH THE PARTIES AND PERUSED THE MATERIALS AVAILABLE ON RECORD. FROM THE PRECEDING D ISCUSSION, WE NOTE THAT CLAIM OF THE ASSESSEE FOR THE DEPRECIATION ALLOWANC E, INTEREST AND INSURANCE EXPENSES ON THE VEHICLES WERE REJECTED BY THE AO FO R THE FOLLOWING REASONS: I. THE ASSESSEE WAS NOT THE OWNER OF THE VEHICLES A S THESE WERE REGISTERED IN THE NAME OF INDIVIDUAL DIRECTORS UNDE R THE REGISTRATION OF MOTOR REGISTRATION ACT. II. THE ASSESSEE FAILED TO SUBSTANTIATE BASED ON T HE DOCUMENTARY EVIDENCE THAT THESE VEHICLES WERE USED FOR THE PURP OSE OF THE BUSINESS. III. THE ASSESSEE BY WAY OF REGISTERING THE VEHICL ES IN THE NAME OF INDIVIDUAL DIRECTORS INSTEAD OF IN ITS OWN NAME HAS AVOIDED THE LEGITIMATE TAX DUE TO THE RTO UNDER THE MOTORS REGI STRATION ACT. 20. THE PROVISIONS OF SECTION 32 OF THE INCOME-TAX ACT, 1961 GRANTS DEPRECIATION ALLOWANCE TO THE ASSESSEE WHO IS OWNE R OF SPECIFIED ASSETS (BUILDING, PLANT AND MACHINERY, FURNITURE AND FIXTU RES, ETC.) AND THESE ASSETS ARE USED DURING THE RELEVANT PREVIOUS YEAR FOR THE PURP OSES OF ITS BUSINESS/PROFESSION. THEREFORE, THE OWNERSHIP OF AS SET IS ONE OF THE IMPORTANT REQUIREMENTS TO BE ENTITLED FOR DEPRECIATION ALLOWA NCE. THE SECTION, HOWEVER, DOES NOT DEFINE THE TERM OWNER AS SUCH FOR THE PU RPOSES OF GRANT OF 10 ITA NOS. 413,445,268&318/AHD/2016 AND 446/AHD/2016 ( AY 2012-13) AYS: 2010-11, 2011-12, 2012-13 DEPRECIATION ALLOWANCE. THE MOOT QUESTION THAT ARIS ES FOR CONSIDERATION FROM A PERUSAL OF SECTION 32 OF THE ACT IS AS TO WHO CAN B E SAID TO BE THE OWNER OF ASSETS FOR THE PURPOSE OF SECTION 32 OF THE ACT. TH E CONTROVERSY IN VARIOUS JUDICIAL INTERPRETATIONS IS AS TO THE TRUE MEANING OF THE WORD OWNER WITHIN THE MEANING OF SECTION 32 OF THE ACT. WHETHER SECTION 3 2 CONTEMPLATES THE REGISTERED/LEGAL OWNER AS SUCH OR IT REFERS TO A PE RSON WHO CAN EXERCISE THE RIGHTS OF OWNER IN HIS OWN RIGHT AND NOT ON BEHALF OF OTHERS. TO OUR UNDERSTANDING, THE OWNER MUST BE A PERSON WHO CAN E XERCISE RIGHTS OF THE OWNER NOT ON THE BEHALF OF THE OWNER BUT IN HIS OWN RIGHT. IN OTHER WORDS EXCLUSIVE POSSESSION, RIGHT TO EXCLUDE OTHERS FROM ENJOYMENT OF THE ASSETS, FULL CONTROL OVER THE ASSETS, RIGHT TO RETAIN POSSESSION AND DEFEND THE SAME ARE SOME OF THE BASIC AND IMPORTANT CHARACTERISTICS OF THE OWNERSHIP WHICH WOULD ENTITLE A PERSON TO CLAIM BENEFIT OF DEPRECIATION A LLOWANCE UNDER SECTION 32 OF THE ACT. ADMITTEDLY, THE ASSESSEE ENJOYS ALL SUCH B ENEFITS WITH RESPECT TO SUCH VEHICLES. IT IS BECAUSE THE ASSESSEE HAS INCURRED T HE COST FOR THE PURCHASE OF THE VEHICLES, IT IS PAYING THE INSTALMENTS OF THE CAR L OANS, REGULARLY PAYING THE WEALTH TAX ON SUCH VEHICLES, BEARING THE RUNNING AN D MAINTENANCE EXPENSES. THUS IN OUR CONSIDERED VIEW THE ASSESSEE CANNOT BE DENIED THE BENEFIT OF DEPRECIATION MERELY ON THE REASONING THAT IT IS NOT THE LEGAL OWNER OF SUCH VEHICLES. IN HOLDING SO WE DRAW SUPPORT AND GUIDANC E FROM THE ORDER OF THIS TRIBUNAL IN CASE ITO VS. ELECTRO FERRO ALLOYS LTD. REPORTED IN 25 TAXMANN.COM 458 WHERE IT WAS HELD AS UNDER:- 22. 2 IN THE PRESENT CASE IT IS NOT DISPUTED THAT INVESTMENT WAS MADE BY THE ASSESSEE IN PURCHASE OF THE MOTOR CAR. IT IS SHOWN AS ASSET IN THE BALANCE-SHEET OF THE COMPANY. IF EXPENDITURE FOR RUNNING THE VEHICLE WAS INCURRED BY THE ASSESSEE, THE ASSESSEE IS DE FACTO OWNER OF THE VEHICLE. IT IS NOT DISPUTED THAT IT WA S USED FOR THE PURPOSE OF BUSINESS OF THE ASSESSEE COMPANY. THE HON'BLE RAJASTHAN HIGH COURT IN THE CASE OF CIT V. MOHD. BUX SHOKAT ALI (NO. 2) [2002] 256 ITR 357 (RAJ) HELD TH AT WHERE VEHICLE WAS PURCHASED BY THE FIRM USED BY IT FOR THE PURPOSE OF ITS BUSINESS BUT IT WAS REGISTERED IN THE NAME OF ONE OF THE 11 ITA NOS. 413,445,268&318/AHD/2016 AND 446/AHD/2016 ( AY 2012-13) AYS: 2010-11, 2011-12, 2012-13 PARTNERS THEN THE FIRM WOULD BE ENTITLED TO DEPRECI ATION ON VEHICLE. THE HON'BLE DELHI HIGH COURT IN THE CASE OF CIT V. BASTI SUGAR MILLS CO. L TD. [2002] 257 ITR 88 (DELHI) HELD THAT WHERE VEHICLE WAS OWNED AND USED BY THE ASSESSEE BU T NO REGISTRATION WAS DONE IN ITS NAME THEN THE ASSESSEE WOULD STILL BE ENTITLED TO DEPREC IATION ON SUCH VEHICLE. THEREFORE, THE ASSESSEE HAS RIGHT TO CLAIM DEPRECIATION THEREON. T HIS GROUND OF THE REVENUE IS ACCORDINGLY REJECTED. 21. REGARDING THE 2ND QUESTION AS DISCUSSED ABOVE, WE NOTE THAT THE ASSESSEE HAS CLAIMED REPAIR AND MAINTENANCE EXPENSE S WITH RESPECT TO SUCH VEHICLES WHICH WERE ALSO ALLOWED BY THE REVENUE. TH US IT IS INFERRED THAT SUCH VEHICLES WERE USED FOR THE PURPOSE OF THE BUSINESS OF THE ASSESSEE. ACCORDINGLY WE ARE OF THE VIEW THAT THE ASSESSEE IS ELIGIBLE FOR INTEREST AND INSURANCE EXPENSES INCURRED BY IT WITH RESPECT TO S UCH VEHICLES. 22. MOVING TO QUESTION NO. 3 WHEREIN IT WAS ALLEGED THAT THE ASSESSEE HAS MINIMIZED THE TAX PAYABLE TO THE RTO BY REGISTERING THE VEHICLES IN THE NAME OF THE INDIVIDUAL DIRECTORS. IN THIS REGARD, WE NOT E THAT THERE IS NO DENIAL UNDER THE MOTORS REGISTRATION ACT TO REGISTER THE VEHICLE S IN THE NAME OF THE INDIVIDUAL DIRECTORS. THE ACTION TAKEN BY THE ASSES SEE FOR REGISTRY THE VEHICLES IN THE NAME OF INDIVIDUAL DIRECTORS WAS WITHIN THE FRAMEWORK OF THE PROVISIONS OF LAW. ACCORDINGLY, WE ARE OF THE VIEW THAT THIS C ANNOT BE A GROUND TO REJECT THE CLAIM OF THE ASSESSEE. IN VIEW OF THE ABOVE AND AFTER CONSIDERING THE FACTS IN TOTALITY, WE DO NOT FIND ANY INFIRMITY IN THE OR DER OF THE LEARNED CIT (A). HENCE THE GROUND OF APPEAL OF THE REVENUE IS DISMIS SED. 23. THE THIRD ISSUE RAISED BY THE REVENUE IS THAT T HE LEARNED CIT-A ERRED IN DELETING THE ADDITION MADE BY THE AO FOR RS. 1,12,9 72/- ON ACCOUNT OF INTEREST EXPENSES UNDER THE PROVISIONS OF SECTION 36(1)(III) OF THE ACT. 12 ITA NOS. 413,445,268&318/AHD/2016 AND 446/AHD/2016 ( AY 2012-13) AYS: 2010-11, 2011-12, 2012-13 24. THE AO DURING THE ASSESSMENT PROCEEDINGS FOUND THAT THE ASSESSEE ON ONE HAND HAS BEEN INCURRING INTEREST EXPENSES ON TH E BORROWED FUND AND ON THE OTHER HAND IT HAS ADVANCED MONEY TO ITS SISTER CONC ERN WITHOUT CHARGING ANY INTEREST ON SUCH ADVANCES. ACCORDINGLY, THE AO PROP OSED TO MAKE THE DISALLOWANCE ATTRIBUTABLE TO SUCH LOANS AND ADVANCE S. 25. THE ASSESSEE IN RESPONSE TO SHOW CAUSE NOTICE V IDE LETTER DATED 22 ND MARCH 2013 SUBMITTED THAT THE LOANS AND ADVANCES WE RE GIVEN TO THE SISTER CONCERNS IN THE COURSE OF THE BUSINESS. SIMILARLY I N SOME OF THE CASES, THERE WAS NO ADVANCE PROVIDED TO THE SISTER CONCERN IN TH E YEAR UNDER CONSIDERATION. THE ASSESSEE, WITHOUT PREJUDICE TO THE ABOVE, ALSO SUBMITTED THAT ITS OWN FUND AS ON 31 ST MARCH 2010 EXCEEDS THE AMOUNT OF LOANS AND ADVANCE S. THEREFORE, IT CAN BE PRESUMED THAT THE ASSESSEE HAS PROVIDED INTE REST FREE LOANS AND ADVANCES TO THE SISTER CONCERN OUT OF ITS OWN FUND WITHOUT USING ANY INTEREST- BEARING FUND. 26. IN VIEW OF THE ABOVE THE ASSESSEE CONTENDED THA T THERE CANNOT BE ANY DISALLOWANCE ON THE AMOUNT OF LOANS AND ADVANCES PR OVIDED TO THE SISTER CONCERNS WITHOUT CHARGING ANY INTEREST THEREON. 27. HOWEVER, THE AO DISREGARDED THE CONTENTION OF T HE ASSESSEE BY OBSERVING THAT THE ASSESSEE FAILED TO SUBSTANTIATE THE FACT THAT IT HAS PROVIDED LOANS AND ADVANCES FOR THE PURPOSE OF ITS BUSINESS ACTIVITIES. ACCORDINGLY, THE AO WORKED OUT THE PROPORTIONATE AMOUNT OF INTEREST EXPENSES ATTRIBUTABLE TO SUCH INTEREST-FREE LOANS AND ADVANCES AMOUNTING TO RS.1,12,972/- AND DISALLOWED THE SAME UNDER SECTION 36(1)(III) OF THE ACT BY ADDING TO THE TOTAL INCOME OF THE ASSESSEE. 13 ITA NOS. 413,445,268&318/AHD/2016 AND 446/AHD/2016 ( AY 2012-13) AYS: 2010-11, 2011-12, 2012-13 28. AGGRIEVED ASSESSEE PREFERRED AN APPEAL TO THE L EARNED CIT (A) WHO HAS DELETED THE ADDITION MADE BY THE AO BY OBSERVING AS UNDER: ON CAREFUL CONSIDERATION OF ENTIRE FACTS IT IS OB SERVED THAT ISSUE REGARDING DISALLOWANCE OF PROPORTIONATE INTEREST IS COVERED I N FAVOUR OF APPELLANT BY DECISION OF HONBLE AHMEDABAD ITAT IN APPELLANT'S OWN CASE FOR A.Y. 2008-09 (ITA NO. 1531/AHD/2011) WHEREIN HONBLE ITAT VIDE ITS ORDER DATED 6TH NOVEMBER, 2015 HAS HELD AS UNDER: 3. WE COME TO THE LOWER APPELLATE PROCEEDINGS NOW. THE CIT(A) PREPARES A PARTY- WISE TABULATION QUA LOANS IN QUESTION OF RS.32,03,1 47/- AS INCURRED IN REIMBURSEMENT OF EXPENSES. HE FINDS THE SAME TO HAV E BEEN INCURRED IN BUSINESS PURPOSES AS PER CASE LA W OF S A BUILDERS VS. CIT, 288 ITR 01 (SC) AS HAVING BUSINESS EXPEDIENCY ELEMENT EMBEDDED THEREIN. THE R EVENUE'S ARGUMENTS STRONGLY SUPPORT ASSESSING OFFICER'S ACTION. IT TRANSPIRES F ROM THE CASE FILE THAT ASSESSEE'S INTEREST FREE FUNDS AS ON 31.03.2008 READ A FIGURE OF RS, 1,25,83,17,835/- IN THE NATURE OF SHARE CAPITAL, RESERVES AND SURPLUS ETC. IT FILES TRIBUNAL'S ORDER IN ITS OWN CASE FOR AY 2004-05 IN ITA NO.1890/AHD/2007 DECIDED ON 19.12.2008 DECIDING THE VERY ISSUE IN ITS FAVOUR IN IDENTICAL CIRCUMSTANCES . WE FOLLOW SUIT IN THESE FACTS AND REJECT THIS REVENUE'S GROUND AS WELL. IT IS PERTINENT TO NOTE THAT HON'BLE SUPREME COURT IN CASE OF HERO CYCLES (P.) LTD VS. COMMISSIONER OF INCOME-TAX (CENTRAL), LUDHIANA [VIDE CIVIL APPEAL NO.: 514 OF 2008] DATED 05/11/2015, HELD AS UNDER: INSOFAR AS THE LOANS TO DIRECTORS ARE CONCERNED, IT COULD NOT BE DISPUTED BY THE REVENUE THAT THE ASSESSEE HAD A CREDIT BALANCE IN T HE BANK ACCOUNT WHEN THE SAID ADVANCE OF RS. 34 LAKHS WAS GIVEN. REMARKABLY, AS O BSERVED BY THE COMMISSIONER OF INCOME-TAX (APPEAL) IN HIS ORDER, THE COMPANY HA D RESERVE/SURPLUS TO THE TUNE OF ALMOST 15 CRORES AND, THEREFORE, THE ASSESSEE CO MPANY COULD IN ANY CASE, UTILISE THOSE FUNDS FOR GIVING ADVANCE TO ITS DIRECTORS. ON THE BASIS OF AFORESAID DISCUSSION, THE PRESENT A PPEAL IS ALLOWED, THEREBY SETTING ASIDE THE ORDER OF THE HIGH COURT AND RESTORING THA T OF THE INCOME TAX APPELLATE TRIBUNAL. IT IS OBSERVED THAT DURING THE YEAR UNDER CONSIDER ATION THE APPELLANT HAS OWN FUNDS OF RS. 81,80,68,508 AS AGAINST INTEREST FREE ADVANC ES OF RS 36,63,056 HENCE FOLLOWING THE DECISION OF HON'BLE AHMEDABAD ITAT AND DECISION OF HON'BLE SUPREME COURT REFERRED SUPRA, DISALLOWANCE MADE BY ASSESSING OFFICER UNDER SECTION 36(1)(III) FOR RS.1,12,972 IS DELETED. THIS GROUND OF APPEAL IS ALLOWED. 29. BEING AGGRIEVED BY THE ORDER OF THE LD. CIT-A, THE REVENUE IS IN APPEAL BEFORE US. 14 ITA NOS. 413,445,268&318/AHD/2016 AND 446/AHD/2016 ( AY 2012-13) AYS: 2010-11, 2011-12, 2012-13 30. BEFORE US, BOTH THE LEARNED DR AND THE AR VEHEM ENTLY SUPPORTED THE ORDER OF THE AUTHORITIES BELOW AS FAVOURABLE TO THE M. 31. WE HAVE HEARD THE RIVAL CONTENTIONS OF BOTH THE PARTIES AND PERUSED THE MATERIALS AVAILABLE ON RECORD. AT THE OUTSET WE NOT E THAT THE TRIBUNAL IN THE OWN CASE OF THE ASSESSEE IN ITA NO. 1718/AHD/2011 F OR THE ASSESSMENT YEAR 2008-09 VIDE ORDER DATED 6 TH NOVEMBER 2015, INVOLVING IDENTICAL ISSUE HAS DECIDED THE MATTER IN FAVOR OF THE ASSESSEE. THE RE LEVANT EXTRACT OF THE ORDER IS REPRODUCED AS UNDER: 3. WE COME TO THE LOWER APPELLATE PROCEEDINGS NOW. THE CIT (A) PREPARES A PARTY-WISE TABULATION QUA LOANS IN QUESTION OF RS.32,03,147/-A S INCURRED IN REIMBURSEMENT OF EXPENSES. HE FINDS THE SAME TO HAVE BEEN INCURRED I N BUSINESS PURPOSES AS PER CASE LAW OF S A BUILDERS VS. CIT, 288 ITR 01 (SC) AS HAVING BUSIN ESS EXPEDIENCY ELEMENT EMBEDDED THEREIN. THE REVENUE'S ARGUMENTS STRONGLY SUPPORT A SSESSING OFFICER'S ACTION. IT TRANSPIRES FROM THE CASE FILE THAT ASSESSEE'S INTEREST FREE FU NDS AS ON 31.03.2008 READ A FIGURE OF RS. 1,25,83,17,8357- IN THE NATURE OF SHARE CAPITAL, RE SERVES AND SURPLUS ETC. IT FILES TRIBUNAL'S ORDER IN ITS OWN CASE FOR AY 2004-05 IN ITA NO.L890 /AHD/2007 DECIDED ON 19.12.2008 DECIDING THE VERY ISSUE IN ITS FAVOUR IN IDENTICAL CIRCUMSTANCES. WE FOLLOW SUIT IN THESE FACTS AND REJECT THIS REVENUE'S GROUND AS WELL. 32. THE LEARNED DR AT THE TIME OF HEARING HAS NOT B ROUGHT ANYTHING ON RECORD CONTRARY TO THE FINDING OF THE ITAT AS DISCU SSED ABOVE SUGGESTING THAT THERE WAS ANY CHANGE IN THE FACTS AND CIRCUMSTANCES OR UNDER THE PROVISIONS OF LAW. HENCE, THERE BEING NO CHANGE IN THE FACTS AND CIRCUMSTANCES VIZ A VIZ UNDER THE PROVISIONS OF LAW, WE CONFIRM THE ORDER O F THE LD. CIT-A IN VIEW OF THE ORDER OF THIS TRIBUNAL IN THE OWN CASE OF THE A SSESSEE (SUPRA). ACCORDINGLY, WE DIRECT THE AO TO DELETE THE ADDITION MADE BY HIM . HENCE, THE GROUND OF APPEAL OF THE REVENUE IS DISMISSED. 33. THE NEXT ISSUE RAISED BY THE REVENUE IS THAT TH E LEARNED CIT-A ERRED IN DELETING THE ADDITION MADE BY THE AO UNDER THE PROV ISIONS OF SECTION 14-A READ WITH RULE 8D OF INCOME TAX RULE AMOUNTING TO R S. 24,75,967/- ONLY. 15 ITA NOS. 413,445,268&318/AHD/2016 AND 446/AHD/2016 ( AY 2012-13) AYS: 2010-11, 2011-12, 2012-13 34. THE ASSESSEE DURING THE ASSESSMENT PROCEEDINGS CONTENDED THAT IT HAS NOT INCURRED ANY EXPENSE AGAINST THE DIVIDEND INCOM E OF RS. 10,52,162/- IN THE YEAR UNDER CONSIDERATION. AS PER THE ASSESSEE, ITS OWN FUNDS EXCEEDS THE AMOUNT OF INVESTMENT WHICH EVIDENCES THAT NO BORROW ED FUND WAS UTILIZED FOR THE PURPOSE OF THE INVESTMENT. ACCORDINGLY, THE QUE STION OF DISALLOWING ANY INTEREST EXPENSE DOES NOT ARISE UNDER RULE 8D OF IN COME TAX RULE. 35. ASSESSEE SIMILARLY FURTHER CONTENDED THAT THE D IVIDEND HAS BEEN DIRECTLY CREDITED IN THE BANK ACCOUNT AND THEREFORE IT HAS N OT INCURRED ANY ADMINISTRATIVE EXPENSES FOR THE EARNING OF SUCH DIV IDEND INCOME. 36. HOWEVER, THE AO DISREGARDED THE CONTENTION OF T HE ASSESSEE BY OBSERVING THAT THE ASSESSEE HAS NOT FURNISHED ANY D AY TO DAY FUND FLOW STATEMENT SUGGESTING THAT THE BORROWED FUND HAS NOT BEEN UTILIZED IN THE IMPUGNED INVESTMENTS. ACCORDINGLY, THE AO INVOKED T HE PROVISIONS OF SECTION 14A READ WITH RULE 8D OF INCOME TAX RULE AN D MADE THE DISALLOWANCE AS UNDER: DIRECT EXPENSES NIL INTEREST EXPENSES RS.18,16,250/- ADMINISTRATIVE EXPENSES RS. 10,80,131/- TOTAL RS. 28, 96381/- 36.1 THUS, THE AO DISALLOWED A SUM OF RS. 28,96,381 /- AND ADDED TO THE TOTAL INCOME OF THE ASSESSEE. 37. AGGRIEVED ASSESSEE PREFERRED AN APPEAL TO THE L EARNED CIT-A WHO ALLOWED THE APPEAL OF THE ASSESSEE IN PART BY OBSER VING AS UNDER: 16 ITA NOS. 413,445,268&318/AHD/2016 AND 446/AHD/2016 ( AY 2012-13) AYS: 2010-11, 2011-12, 2012-13 11.4 ON CAREFUL CONSIDERATION OF ENTIRE FACTS IT I S OBSERVED THAT ISSUE REGARDING DISALLOWANCE OF PROPORTIONATE INTEREST IS COVERED I N FAVOUR OF APPELLANT BY DECISION OF HONBLE AHMEDABAD ITAT IN APPELLANTS OWN CASE FOR A.Y. 2008-09 (ITA NO. 1531/AHD/2011) WHEREIN HONBLE ITAT VIDE ITS ORDER DATED 6 TH NOVEMBER, 2015 HAS HELD AS UNDER: 10. THE ASSESSES STATES IN THE COURSE OF HEARING TH AT ITS INTEREST FREE FUNDS AS ON 31.03.2008 ARE OF RS. 1,25,83,17,836/- IN THE NATUR E OF SHARE CAPITAL, RESERVES AND SURPLUS ETC. CORRESPONDING INVESTMENTS GIVING RAISE TO THE IMPUGNED EXEMPT INCOME ARE OF RS. 3,37,75,313/-. MUCH LESS THAN THE INTEREST FREE FUNDS. IT IS EVIDENT THAT ASSESSEE'S EXEMPT INCOME IN RELEVANT PREVIOUS YEAR IS OF RS. 12.56 CRORES (PAGE 27 OF THE PAPER-BOOK). INTEREST EXPENSES ARE FOUND TO BE OF RS.5.80 CRORES. THIS RESULTS IN NET INTEREST INCOME OF RS.6.75 CROR ES. THERE IS NO DISPUTE ABOUT THIS FACTUAL POSITION. WE FOLLOW A CO-ORDINATE BENCH DEC ISION IN ITA NO.L277/KOL/2011, DCIT VS. M/S TRADE APARTMENT LTD. DECIDED ON 30.03. 2012 HOLDING THEREIN THAT WHEN THERE IS NO NET INTEREST EXPENDITURE UPON SETT ING OFF INTEREST CREDITED TO P&L ACCOUNT, NO PART OF INTEREST DEBITED IS TO BE DISAL LOWED AS ATTRIBUTABLE TO EARNING OF EXEMPT INCOME. THE REVENUE DOES NOT POINT OUT ANY E XCEPTION THERETO. WE ACCORDINGLY DELETE THE INTEREST DISALLOWANCE UNDER RULE 8D(2)(II) OF RS.13,81,198/- (SUPRA). COMING TO ADMINISTRATIVE EXPENSES DISALLOW ANCE OF RS.1,68,877/- UNDER RULE 8D(2)(III), THE ASSESSEE FAILS TO DISPUTE CORR ECTNESS THEREOF SINCE THE IMPUGNED ASSESSMENT YEAR IS 2008-09. THIS LATTER DISALLOWANC E FIGURE IS CONFIRMED. THIS GROUND IS PARTLY ALLOWED. IT IS PERTINENT TO NOTE THAT DURING THE YEAR UNDER CONSIDERATION APPELLANT IS HAVING INTEREST FREE FUNDS IN THE FORM OF SHARE CAPITAL AN D RESERVES & SURPLUS FOR RS.81.81 CRORES WHICH IS HIGHER THAN INVESTMENT RESULTING INTO TAX- FREE INCOME. IT IS ALSO OBSERVED THAT APPELLANT HAS EARNED TAXABLE INCOME OF RS.10.96 CRO RES IN COMPARISON OF INTEREST EXPENDITURE OF RS.2.54 CRORES WHICH MEANS THAT NET INTEREST INCOME OF RS.8.42 CRORES IS EARNED. FOLLOWING THE DECISION OF HON'BLE AHMEDABAD ITAT IN APPELLANT'S OWN CASE REFERRED HEREIN ABOVE, DISALLOWANCE OF INTEREST EXP ENDITURE UNDER RULE 8D(2)(III) FOR RS. 18,16,250 IS DELETED. SO FAR AS DISALLOWANCE OF ADM INISTRATIVE EXPENDITURE UNDER RULE 8D(2)(III), THE HON'BLE ITAT HAS CONFIRMED SIMILAR DISALLOWANCE. HOWEVER, IT IS OBSERVED THAT WHILE COMPUTING SUCH DISALLOWANCE. ASSESSING O FFICER HAS CONSIDERED INVESTMENT MADE IN SUBSIDIARY COMPANY BEING ANAGRAM STOCK BROKING P VT. LTD., FOR RS. 13.19 CRORES AND SUCH INVESTMENT CANNOT BE CONSIDERED AS PART OF AVERAGE INVESTMENT AS SAID COMPANY HAS BEEN AMALGAMATED WITH APPELLANT COMPANY FROM 1-1-20 08 BY ORDER OF HON'BLE GUJARAT HIGH COURT. IT IS ALSO OBSERVED THAT DUE TO THIS AM ALGAMATION APPELLANT HAS FILED REVISED RETURN OF INCOME ON 10TH SEPTEMBER, 2012 AND SAME I S CONSIDERED WHILE ASSESSING TOTAL INCOME BY THE ASSESSING OFFICER. AS SUBSIDIARY COMP ANY IS MERGED WITH APPELLANT COMPANY AND REVISED ANNUAL ACCOUNTS NULLIFIES THE EFFECT OF INVESTMENT MADE IN SUCH COMPANY, AMOUNT OF RS. 13.19 CRORES CANNOT BE CONSIDERED AS PART OF AVERAGE INVESTMENT WHILE COMPUTING PROPORTIONATE DISALLOWANCE UNDER RULE 8D( 2)(III). CONSIDERING THESE FACTS, INVESTMENT AS ON 1ST APRIL, 2010 IS CONSIDERED AT R S.10.75 CRORES AND INVESTMENT AS ON 31ST MARCH, 2010 AT RS.6.06 CRORES HENCE AVERAGE INVESTM ENT IS WORKED OUT AT RS. 8.41 CRORES. THE DISALLOWANCE OF ADMINISTRATIVE EXPENDITURE UNDE R RULE 8D(2)(III) IS REWORKED AT RS.4,20,414 BEING 0.5% OF AVERAGE INVESTMENT AS AGA INST DISALLOWANCE MADE BY ASSESSING OFFICER FOR RS. 10,80,131. IN NUTSHELL, AGGREGATE D ISALLOWANCE UNDER SECTION 14A IS RESTRICTED AT RS.4,20,414. IT IS ALSO OBSERVED THAT SIMILAR DISALLOWANCE HAS BEEN MADE BY 17 ITA NOS. 413,445,268&318/AHD/2016 AND 446/AHD/2016 ( AY 2012-13) AYS: 2010-11, 2011-12, 2012-13 ASSESSING OFFICER WHILE COMPUTING BOOK PROFIT UNDER SECTION 115JB OF THE ACT AND AS ASSESSED INCOME AS WELL AS RETURNED INCOME IN APPEL LANT'S CASE IS COMPUTED AS PER NORMAL PROVISIONS OF THE ACT, DISALLOWANCE MADE WHILE COMP UTING BOOK PROFIT HAS BECOME INFRUCTUOUS AND SAME IS NOT ADJUDICATED HEREIN. THU S, THE RELATED GROUNDS OF APPEAL ARE PARTLY ALLOWED. 38. BEING AGGRIEVED BY THE ORDER OF THE LEARNED CIT -A, BOTH REVENUE AND THE ASSESSEE ARE IN APPEAL BEFORE US. THE REVENUE I S IN APPEAL AGAINST THE DELETION OF THE ADDITION MADE BY THE AO FOR RS. 24, 75,967/- WHEREAS THE ASSESSEE IS IN APPEAL AGAINST THE CONFIRMATION OF T HE ADDITION OF RS. 4,20,414/- THE GROUND BEARING NO. 3 IN AN APPEAL OF THE ASSESS EE IN ITA NO. 268/AHD/2016 READS AS UNDER: 3. IN LAW AND IN THE FACTS AND CIRCUMSTANCES OF TH E APPELLANTS CASE, THE LEARNED CIT(A) HAS GROSSLY ERRED IN SUSTAINING DISALLOWANCE OF RS. 4,20,414/- MADE U/S. 14A READ WITH RULE 8D(2)(III) ON ACCOUNT OF ADMINISTRATIVE E XPENSES [EVEN AS HE HAD DIRECTED THE QUANTUM OF THE DISALLOWANCE ON THIS ACCOUNT TO BE R EDUCED FROM RS. 10,80,131 TO RS. 4,20,414 AFTER APPRECIATING THAT THE APPLICANTS IN VESTMENTS IN SHARES OF ITS SUBSIDIARY WHICH HAD BEEN AMALGAMATED WITH THE APPELLANT, CANN OT BE TAKEN INTO ACCOUNT FOR THE PURPOSES OF ARRIVING AT THE QUANTUM OF DISALLOWANCE UNDER THE SAID RULE]. HE OUGHT TO HAVE APPRECIATED, INTER-ALIA, THAT IN THE PECULIAR AND E MINENT FACTS OF THE APPELLANTS CASE, THE LD. A.O. HAD GOT TO BE SATISFIED WITH THE APPELLANT S CLAIM THAT IT HAD NOT INCURRED ANY ADMINISTRATIVE EXPENDITURE IN RELATION TO INCOME NO T FORMING PART OF ITS TOTAL INCOME AND THAT THEREFORE, THE LD. A.O. COULD NOT HAVE ASSUMED JURISDICTION U/S. 14A(2) TO MAKE ANY DISALLOWANCE ON THIS ACCOUNT. 39. BOTH THE LEARNED DR AND THE AR BEFORE US VEHEME NTLY SUPPORTED THE ORDER OF THE RESPECTIVE AUTHORITIES BELOW TO THE EX TENT FAVOURABLE TO THEM. 40. WE HAVE HEARD THE RIVAL CONTENTIONS OF BOTH THE PARTIES AND PERUSED THE MATERIALS AVAILABLE ON RECORD. THE FIRST ISSUE THAT ARISES FROM THE PRESENT GROUND OF APPEAL IS THAT WHETHER THE ASSESSEE HAS U TILIZED THE BORROWED FUND IN THE INVESTMENTS GENERATING EXEMPTED INCOME TO IT (T HE ASSESSEE). IN THIS CONNECTION WE NOTE THAT THE OWNED FUND OF THE ASSES SEE EXCEEDS THE INVESTMENTS WHICH HAS BEEN REPRODUCED IN THE FINDIN G OF THE LEARNED CIT (A). 18 ITA NOS. 413,445,268&318/AHD/2016 AND 446/AHD/2016 ( AY 2012-13) AYS: 2010-11, 2011-12, 2012-13 AS PER THE LEARNED CIT (A) THE OWN FUND OF THE ASSE SSEE STANDS AT RS. 81.81 CRORES, WHICH IS MUCH MORE THAN THE AMOUNT OF INVES TMENTS AS ON 31 ST MARCH 2010 AT RS. 10.75 CRORES. THUS, IN SUCH A SITUATION , A PRESUMPTION CAN BE DRAWN THAT THE ASSESSEE HAD UTILIZED ITS OWN FUND I N SUCH INVESTMENTS. ACCORDINGLY, WE HOLD THAT THE DISALLOWANCE OF INTER EST EXPENSES IS NOT WARRANTED UNDER THE GIVEN FACTS AND CIRCUMSTANCES. 40.1 COMING TO THE ADMINISTRATIVE EXPENSES, WE FIND THAT THE DISALLOWANCE HAS BEEN CORRECTLY MADE UNDER THE PROVISIONS OF RUL E 8D(2)(III) OF THE INCOME TAX RULE AFTER CONSIDERING THE AVERAGE INVESTMENTS. FURTHERMORE, BOTH THE LEARNED AR AND THE DR HAVE NOT BROUGHT ANYTHING ON RECORD CONTRARY TO THE FINDING OF THE LEARNED CIT (A). HENCE, WE DO NOT FI ND ANY INFIRMITY IN THE ORDER OF THE LEARNED CIT (A). 41. WE ALSO NOTE THAT THE TRIBUNAL IN THE OWN CASE OF THE ASSESSEE IN ITA NO. 1531/AHD/2011 FOR THE ASSESSMENT YEAR 2008-09 V IDE ORDER DATED 6 TH NOVEMBER 2015, INVOLVING IDENTICAL ISSUE HAS DECIDE D THE MATTER PARTLY IN FAVOR OF THE ASSESSEE. THE RELEVANT EXTRACT OF THE ORDER IS REPRODUCED AS UNDER: 10. THE ASSESSEE STATES IN THE COURSE OF HEARING T HAT ITS INTEREST FREE FUNDS AS ON 31.03,2008 ARE OF RS.1,25,83,17,836/- IN THE NATURE OF SHARE CAPITAL RESERVES AND SURPLUS ETC. CORRESPONDING INVESTMENTS GIVING RAISE TO THE IMPUGNED EXEMPT INCOME ARE OF RS. 3,37,75,3137-. MUCH LESS THAN THE INTEREST FREE FUN DS. IT IS EVIDENT THAT ASSESSEE'S EXEMPT INCOME IN RELEVANT PREVIOUS YEAR IS OF RS.12.56 CRO RES (PAGE 27 OF THE PAPER-BOOK). INTEREST EXPENSES ARE FOUND TO BE OF RS.5.80 CRORES. THIS RE SULTS IN NET INTEREST INCOME OF RS.6.75 CRORES. THERE IS NO DISPUTE ABOUT THIS FACTUAL POSI TION. WE FOLLOW A CO-ORDINATE BENCH DECISION IN ITA NO.L277/KOL/2011, DCIT VS. M/S TRAD E APARTMENT LTD. DECIDED ON 30.03.2012 HOLDING THEREIN THAT WHEN THERE IS NO NE T INTEREST EXPENDITURE UPON SETTING OFF INTEREST CREDITED TO P&L ACCOUNT, NO PART OF INTERE ST DEBITED IS TO BE DISALLOWED AS ATTRIBUTABLE TO EARNING OF EXEMPT INCOME. THE REVEN UE DOES NOT POINT OUT ANY EXCEPTION THERETO. WE ACCORDINGLY DELETE THE INTEREST DISALLO WANCE UNDER RULE 8D(2)(II) OF RS.13,81,198/- (SUPRA). COMING TO ADMINISTRATIVE EX PENSES DISALLOWANCE OF RS.1,68,877/- UNDER RULE 8D(2)(III), THE ASSESSEE FAILS TO DISPUT E CORRECTNESS THEREOF SINCE THE IMPUGNED ASSESSMENT YEAR IS 2008-09. THIS LATTER DISALLOWANC E FIGURE IS CONFIRMED. THIS GROUND IS PARTLY ALLOWED. 19 ITA NOS. 413,445,268&318/AHD/2016 AND 446/AHD/2016 ( AY 2012-13) AYS: 2010-11, 2011-12, 2012-13 42. THE LEARNED DR AND THE AR AT THE TIME OF HEARIN G HAS NOT BROUGHT ANYTHING ON RECORD CONTRARY TO THE FINDING OF THE I TAT AS DISCUSSED ABOVE SUGGESTING THAT THERE WAS ANY CHANGE IN THE FACTS A ND CIRCUMSTANCES OR UNDER THE PROVISIONS OF LAW. HENCE, THERE BEING NO CHANGE IN THE FACTS AND CIRCUMSTANCES VIZ-A-VIZ UNDER THE PROVISIONS OF LAW , WE CONFIRM THE ORDER OF THE LD. CIT-A IN VIEW OF THE ORDER OF THIS TRIBUNAL IN THE OWN CASE OF THE ASSESSEE (SUPRA) . HENCE, THE GROUNDS OF APPEAL OF THE REVENUE AND T HE ASSESSEE ARE DISMISSED. 43. THE NEXT ISSUE RAISED BY THE REVENUE IS THAT LE ARNED CIT-A ERRED IN DELETING THE ADDITION MADE BY THE AO FOR RS. 1,51,2 01/- BY DISALLOWING THE EXPENDITURE REPRESENTING THE PENALTY. 44. THE ASSESSEE DURING THE YEAR UNDER CONSIDERATIO N CLAIMED THAT IT HAS NOT COMPLIED CERTAIN BYLAWS OF THE NATIONAL STOCK EXCHA NGE AND BOMBAY STOCK EXCHANGE WITHIN THE ALLOTTED TIME. ACCORDINGLY, THE PENALTIES WERE LEVIED BY BOTH THE STOCK EXCHANGES AMOUNTING TO RS.1,43,232/- AND RS.7,969/- RESPECTIVELY. HOWEVER THESE PENALTIES WERE NOT IN T HE NATURE OF ANY OFFENCE OR INFRINGEMENT OF ANY LAW. AS SUCH THESE PENALTIES WE RE LEVIED ON ACCOUNT OF DELAY IN COMPLYING THE PROCEDURES OF THE BOMBAY STO CK EXCHANGE AND NATIONAL STOCK EXCHANGE. ACCORDINGLY, THE ASSESSEE CLAIMED THAT SUCH EXPENSES WERE INCURRED IN THE COURSE OF THE BUSINES S AND THEREFORE THE SAME ARE ALLOWABLE AS DEDUCTION UNDER SECTION 37 OF THE ACT. 20 ITA NOS. 413,445,268&318/AHD/2016 AND 446/AHD/2016 ( AY 2012-13) AYS: 2010-11, 2011-12, 2012-13 45. HOWEVER, THE AO FOUND THAT SIMILAR PENALTIES WE RE DISALLOWED BY HIS PREDECESSOR FOR THE ASSESSMENT YEAR 2006-07. ACCORD INGLY THE AO DISALLOWED THE SAME AND ADDED TO THE TOTAL INCOME OF THE ASSES SEE. 46. AGGRIEVED ASSESSEE PREFERRED AN APPEAL TO THE L EARNED CIT (A) WHO DELETED THE ADDITION MADE BY THE AO BY OBSERVING AS UNDER: 12.3 I HAVE CAREFULLY CONSIDERED THE ASSESSMENT ORD ER AND SUBMISSION FILED BY APPELLANT. THE ASSESSING OFFICER HAS OBSERVED THAT APPELLANT HAS PAID PENALTY OF RS. 1,43,232 TO NSE AND RS. 7,969 TO NSDL WHICH HAS BEE N LEVIED BY THE EXCHANGE FOR VIOLATION OF ITS BY-LAWS. THE ASSESSING OFFICER HAS RELIED UPON ASSESSMENT ORDER FOR A.Y. 2006-07 AND HELD THAT SUCH EXPENDITURE CANNOT BE AL LOWED AS DEDUCTION AS PER EXPLANATION - 1 TO SECTION 37 OF THE ACT. ON THE OTHER HAND, AP PELLANT HAS ARGUED THAT PENALTY LEVIED BY NSE OR NSDL DOES NOT TANTAMOUNT TO INFRACTION OF LA W HENCE SUCH EXPENDITURE CANNOT BE DISALLOWED IN LIGHT OF EXPLANATION - 1 TO SECTION 3 7 OF THE ACT. THE APPELLANT HAS ALSO ARGUED THAT SIMILAR DISALLOWANCE IS DELETED BY CIT (APPEALS) IN A.Y. 2006-07 TO 2008-09 AND HON'BLE AHMEDABAD ITAT HAS ALSO DELETED SIMILAR DISALLOWANCE IN A.Y. 2008-09 VIDE ITS ORDER DATED 6TH NOVEMBER, 2015. ON CAREFUL CONSIDERATION OF ENTIRE FACTS IT IS OBS ERVED THAT ISSUE REGARDING DISALLOWANCE OF PROPORTIONATE INTEREST IS COVERED I N FAVOUR OF APPELLANT BY DECISION OF HON'BLE AHMEDABAD ITAT IN APPELLANT'S OWN CASE FOR A.Y, 2008-09 (ITA NO. 1531/AHD/2011) WHEREIN HON'BLE ITAT VIDE ITS ORDER DATED 6TH NOVEMBER, 2015 HAS HELD AS UNDER: '2. WE COME TO REVENUE'S APPEAL ITA NO.L531/AHD/201 4. ITS FIRST GROUND CHALLENGES THE LOWER APPELLATE ORDER DELETING DISALLOWANCE/ADD ITION OF NSE PENALTY OF RS.74,515/-. THE ASSESSEE IS A LIMITED COMPANY IN S TOCK BROKING BUSINESS. IT PAID THE IMPUGNED SUM TO THE NATIONAL STOCK EXCHANGE FOR NON-COMPLIANCE OF ITS BYE- LAWS. THE ASSESSEE'S CASE WAS THAT THIS PENALTY SUM PERTAINED TO PROCEDURAL DELAY IN FILING COMPLIANCE REPORT TO THE EXCHANGE. AND TH E DELAY CAUSED WAS IN PAYMENT OF DUES AND OTHER OBLIGATIONS. THE ASSESSING OFFICE R DISALLOWED THIS CLAIM AS A BUSINESS DEDUCTION BY FOLLOWING AN IDENTICAL FINDIN G IN PRECEDING ASSESSMENT YEAR 2007-08. THE CIT(A) FOLLOWS CASE LAW 88 TTJ 352 (KO L), ITO VS. GDB SHARE AND STOCK BROKING SERVICES LTD., IN DECIDING THE VERY I SSUE IN ASSESSEE'S FAVOUR. THE REVENUE FAILS TO POINT OUT ANY DISTINCTION ON FACTS OR LAW BEFORE US. IT DOES NOT QUOTE ANY CASE LAW TO THE CONTRARY. THIS FIRST GROU ND ACCORDINGLY FAILS.' FOLLOWING THE ABOVE DECISION OF AHMEDABAD ITAT I N APPELLANT'S OWN CASE, DISALLOWANCE OF RS. 1,51,201 IS DELETED- THIS GROUN D OF APPEAL IS ALLOWED. 21 ITA NOS. 413,445,268&318/AHD/2016 AND 446/AHD/2016 ( AY 2012-13) AYS: 2010-11, 2011-12, 2012-13 47. BEING AGGRIEVED BY THE ORDER OF THE LEARNED CIT -A THE REVENUE IS IN APPEAL BEFORE US. 48. BOTH THE LEARNED DR AND THE AR BEFORE US VEHEME NTLY SUPPORTED THE ORDER OF THE RESPECTIVE AUTHORITIES BELOW TO THE EX TENT FAVOURABLE TO THEM. 49. WE HAVE HEARD THE RIVAL CONTENTIONS OF BOTH THE PARTIES AND PERUSED THE MATERIALS AVAILABLE ON RECORD. AT THE OUTSET WE NOT E THAT THE TRIBUNAL IN THE OWN CASE OF THE ASSESSEE IN ITA NO. 1531/AHD/2011 F OR THE ASSESSMENT YEAR 2008-09 VIDE ORDER DATED 6 TH NOVEMBER 2015, INVOLVING IDENTICAL ISSUE HAS DECIDED THE MATTER IN FAVOR OF THE ASSESSEE. THE RE LEVANT EXTRACT OF THE ORDER IS REPRODUCED AS UNDER: 2. WE COME TO REVENUE'S APPEAL ITA NO.L531/AHD/201 4. ITS FIRST GROUND CHALLENGES THE LOWER APPELLATE ORDER DELETING DISALLOWANCE/ADD ITION OF NSE PENALTY OF RS.74,515/-. THE ASSESSEE IS A LIMITED COMPANY IN STOCK BROKING BUSI NESS. IT PAID THE IMPUGNED SUM TO THE NATIONAL STOCK EXCHANGE FOR NON-COMPLIANCE OF ITS B YE-LAWS. THE ASSESSEE'S CASE WAS THAT THIS PENALTY SUM PERTAINED TO PROCEDURAL DELAY IN F ILING COMPLIANCE REPORT TO THE EXCHANGE. AND THE DELAY CAUSED WAS IN PAYMENT OF DUES AND OTH ER OBLIGATIONS. THE ASSESSING OFFICER DISALLOWED THIS CLAIM AS A BUSINESS DEDUCTION BY FO LLOWING AN IDENTICAL FINDING IN PRECEDING ASSESSMENT YEAR 2007-08. THE CIT(A) FOLLOWS CASE-LA W 88 TTJ 352 (KOL), ITO VS. GDB SHARE AND STOCK BROKING SERVICES LTD., IN DECIDING THE VERY ISSUE IN ASSESSEE'S FAVOUR. THE REVENUE FAILS TO POINT OUT ANY DISTINCTION ON FACTS OR LAW BEFORE US. IT DOES NOT QUOTE ANY CASE LAW TO THE CONTRARY. THIS FIRST GROUND ACCORDI NGLY FAILS. 50. THE LEARNED DR AT THE TIME OF HEARING HAS NOT B ROUGHT ANYTHING ON RECORD CONTRARY TO THE FINDING OF THE ITAT AS DISCU SSED ABOVE SUGGESTING THAT THERE WAS ANY CHANGE IN THE FACTS AND CIRCUMSTANCES OR UNDER THE PROVISIONS OF LAW. HENCE, THERE BEING NO CHANGE IN THE FACTS AND CIRCUMSTANCES VIZ A VIZ UNDER THE PROVISIONS OF LAW, WE CONFIRM THE ORDER O F THE LD. CIT-A IN VIEW OF THE ORDER OF THIS TRIBUNAL IN THE OWN CASE OF THE A SSESSEE (SUPRA) . ACCORDINGLY WE DIRECT THE AO TO DELETE THE ADDITION MADE BY HIM . HENCE, THE GROUND OF APPEAL OF THE REVENUE IS DISMISSED. 22 ITA NOS. 413,445,268&318/AHD/2016 AND 446/AHD/2016 ( AY 2012-13) AYS: 2010-11, 2011-12, 2012-13 51. THE NEXT ISSUE RAISED BY THE REVENUE IS THAT TH E LEARNED CIT-A ERRED IN DELETING THE ADDITION MADE BY THE AO FOR RS. 1,18,8 9,628/- ON ACCOUNT OF BAD DEBTS AS THE CONDITIONS SPECIFIED UNDER SECTION 36 (2) WERE NOT SATISFIED. 52. THE ASSESSEE DURING THE YEAR UNDER CONSIDERATIO N HAS CLAIMED BAD DEBTS AMOUNTING TO RS. 1,18,89,628/- ONLY. AS PER THE ASS ESSEE, ITS CLIENT HAS PURCHASED THE SHARES THROUGH THE STOCK EXCHANGE BUT FAILED TO MAKE THE PAYMENT TO IT (THE ASSESSEE). ACCORDINGLY, THE ASSE SSEE AFTER MAKING THE SALE OF SUCH SHARES, HAS WRITTEN OFF THE LOSS IN THE BOOKS OF ACCOUNTS AS BAD DEBTS AS THE RECOVERY FOR THE SAME WAS NOT CERTAIN. THE ASSE SSEE ALSO CLAIMED THAT THE BROKERAGE ON ACCOUNT OF PURCHASE AND SALE OF SHARES ON BEHALF OF THE CLIENT WAS OFFERED TO TAX BY CREDITING THE PROFIT AND LOSS ACCOUNT. HOWEVER, THE PRINCIPAL AMOUNT OF PURCHASE AND SALE WAS NOT SHOWN IN THE PROFIT AND LOSS ACCOUNT BUT THE DIFFERENCE EITHER AS LOSS OR GAIN W AS REFLECTED IN THE PROFIT AND LOSS ACCOUNT AS BAD DEBT OR GAIN AS THE CASE MAY BE . IT WAS DONE SO, WITH RESPECT TO THE TRANSACTIONS CARRIED OUT BY IT ON BE HALF OF THE CLIENTS BUT WHO FAILED TO MAKE THE PAYMENT. IN MOST OF THE TRANSACT IONS LOSS WAS INCURRED WHICH WAS CLAIMED AS BAD DEBTS. 53. THE ASSESSEE ALTERNATIVELY CONTENDED THAT SUCH LOSS HAS BEEN INCURRED IN THE COURSE OF THE BUSINESS AND THEREFORE THE SAME S HOULD BE ALLOWED AS DEDUCTION EITHER UNDER SECTION 28 OR 37 OF THE ACT IF THE SAME IS DISALLOWED UNDER THE PROVISIONS OF SECTION 36(2) OF THE ACT. 23 ITA NOS. 413,445,268&318/AHD/2016 AND 446/AHD/2016 ( AY 2012-13) AYS: 2010-11, 2011-12, 2012-13 54. HOWEVER, THE AO DISREGARDED THE CONTENTION OF T HE ASSESSEE BY OBSERVING THAT THE DEDUCTION ON ACCOUNT OF BAD DEBT S CAN BE ADMITTED ONLY UPON THE FULFILMENT OF THE CONDITION SPECIFIED UNDE R SECTION 36(1) (VII) R.W.S 36(2) OF THE ACT. IN THE CASE ON HAND, THE SPECIFIE D CONDITIONS HAVE NOT BEEN COMPLIED WITH THEREFORE THE SAME CANNOT BE ALLOWED AS DEDUCTION UNDER SECTION 36 (1)(VII)/36 (2), 37 OR 28 OF THE ACT. 55. AGGRIEVED ASSESSEE PREFERRED AN APPEAL TO THE L EARNED CIT-A, WHO DELETED THE ADDITION MADE BY THE AO BY OBSERVING AS UNDER:- ON CAREFUL CONSIDERATION OF ENTIRE FACTS IT IS OB SERVED THAT ISSUE REGARDING DISALLOWANCE OF PROPORTIONATE INTEREST IS COVERED I N FAVOUR OF APPELLANT BY DECISION OF HON'BLE AHMEDABAD ITAT IN APPELLANT'S OWN CASE FOR A.Y. 2008-09 (ITA NO. 1531/AHD/2011) WHEREIN HON'BLE ITAT VIDE ITS ORDER DATED 6TH NOVEMBER, 2015 HAS HELD AS UNDER: '5. THE CIT(A) DELETES THIS BAD DEBTS DISALLOWANCE AFTER QUOTING CASE LAW OF TRF LTD. VS. CIT, 323 ITR 397 (SC) TO THE FACT THAT IT IS NOT NECESSARY TO PROVE THE SAME TO HAVE ACTUALLY BECOME BAD AS PER THE RELEVANT LAW AMENDED FROM 01.04.1989. THE CIT(A) COMES TO LATTER ASPECT (SUPRA). THE ASSESSEE SUBMITTED IN THE LOWER APPELLATE PROCEEDINGS THAT IT HAD ALREADY CREDITED ITS BROKERAGE INCOME IN PROFIT AND LOSS ACCOUNT THEREBY OFFERING IT FOR TAXATION. IT CLARIFIED THAT SALE/PURCHASE PRICE OF SHARES HAD BEEN CREDITED IN THE RESPECTIVE ACCOUNTS. THE CIT(A) FOLLOWS SPECIAL BENCH DECISION OF THE TRIBUNAL (2010) 5 ITR (TRIB) 1 (BOM.) DCIT VS. SHREYAS S. MORAKHIA AS UPHELD IN (2012) 342 ITR 285 (BOM.) CIT VS. SHREYAS S. MORAKHIA THAT VALUE OF THE SHARE TRANSACTED BY A BR OKER-ASSESSEE ON BEHALF OF THE CONCERNED CLIENT IS VERY MUCH ALLOWABLE AS BAD DEBT S. THE REVENUE FAILS TO REBUT THIS LEGAL POSITION. WE REJECT THIS THIRD SUBSTANTI VE GROUND ACCORDINGLY.' FOLLOWING THE ABOVE DECISION OF AHMEDABAD ITAT IN APPELLANT'S OWN CASE, DISALLOWANCE OF RS. 1,18,89,628 IS DELETED. THIS GR OUND OF APPEAL IS ALLOWED . 56. BEING AGGRIEVED BY THE ORDER OF THE LEARNED CIT -A THE REVENUE IS IN APPEAL BEFORE US. 57. BOTH THE LEARNED DR AND THE AR BEFORE US VEHEME NTLY SUPPORTED THE ORDER OF THE RESPECTIVE AUTHORITIES BELOW TO THE EX TENT FAVOURABLE TO THEM. 24 ITA NOS. 413,445,268&318/AHD/2016 AND 446/AHD/2016 ( AY 2012-13) AYS: 2010-11, 2011-12, 2012-13 58. WE HAVE HEARD THE RIVAL CONTENTIONS OF BOTH THE PARTIES AND PERUSED THE MATERIALS AVAILABLE ON RECORD. AT THE OUTSET WE NOT E THAT THE TRIBUNAL IN THE OWN CASE OF THE ASSESSEE IN ITA NO. 1531/AHD/2011 F OR THE ASSESSMENT YEAR 2008-09 VIDE ORDER DATED 6 TH NOVEMBER 2015, INVOLVING IDENTICAL ISSUE HAS DECIDED THE MATTER IN FAVOR OF THE ASSESSEE. THE RE LEVANT EXTRACT OF THE ORDER IS REPRODUCED AS UNDER: THE REVENUE'S THIRD SUBSTANTIVE GROUND ASSAILS COR RECTNESS OF THE CIT(A) ACTION IN DELETING BAD DEBT DISALLOWANCE OF RS.27,35,991/-COM PRISING OF DEBIT BALANCE WRITTEN OFF OF RS.25,60,148/- AND BAD DEBT OF RS.1,75,843/-. THESE ENTRIES ARE MAINLY IN THE NATURE OF VATAV KASAR. SOME OF THEM ARE LESS THAN OF RS.10,00 0/- EVEN. THE ASSESSING OFFICER OBSERVED THAT THERE WAS NO MATERIAL ON RECORD TO PROVE THE S AME TO HAVE BEEN ACTUALLY BECOME BAD. AND ALSO THAT THE ASSESSEE HAD OFFERED ONLY BROKERA GE SUMS AS ITS INCOME U/S 36(2) OF THE ACT IN PROFIT AND LOSS ACCOUNT. HE ACCORDINGLY MADE THE IMPUGNED DISALLOWANCE OF THIS BAD DEBTS CLAIM. 59. THE LEARNED DR AT THE TIME OF HEARING HAS NOT B ROUGHT ANYTHING ON RECORD CONTRARY TO THE FINDING OF THE ITAT AS DISCU SSED ABOVE SUGGESTING THAT THERE WAS ANY CHANGE IN THE FACTS AND CIRCUMSTANCES OR UNDER THE PROVISIONS OF LAW. HENCE, THERE BEING NO CHANGE IN THE FACTS AND CIRCUMSTANCES VIZ A VIZ UNDER THE PROVISIONS OF LAW, WE CONFIRM THE ORDER O F THE LD. CIT-A IN VIEW OF THE ORDER OF THIS TRIBUNAL IN THE OWN CASE OF THE A SSESSEE (SUPRA). ACCORDINGLY, WE DIRECT THE AO TO DELETE THE ADDITION MADE BY HIM . HENCE, THE GROUND OF APPEAL OF THE REVENUE IS DISMISSED. 60. THE NEXT ISSUE RAISED BY THE REVENUE IS THAT TH E LEARNED CIT (A) ERRED IN DELETING THE ADDITION MADE BY THE AO FOR RS.17,0 2,013/- ON ACCOUNT OF SAUDAFER LOSS. 25 ITA NOS. 413,445,268&318/AHD/2016 AND 446/AHD/2016 ( AY 2012-13) AYS: 2010-11, 2011-12, 2012-13 61. THE ASSESSEE DURING THE ASSESSMENT PROCEEDINGS SUBMITTED THAT IT HAS MADE CERTAIN MISTAKES WHILE CARRYING OUT TRANSACTIO NS OF PURCHASES AND SALES OF SECURITIES ON BEHALF OF THE CLIENTS WHICH HAS RE SULTED LOSS OF RS. 38,40,074/- ONLY. AS PER THE ASSESSEE SUCH LOSS SHOULD BE ALLOW ED AS DEDUCTION UNDER SECTION 28 (1) OF THE ACT AS IT DID NOT OCCUR IN IT S OWN ACCOUNT AND THE SAME SHOULD NOT BE TREATED AS SPECULATIVE LOSS UNDER EXP LANATION TO SECTION 73 OF THE ACT. 62. THE ASSESSEE FURTHER CONTENDED THAT HAD SUCH LO SS BEEN DEBITED IN THE ACCOUNT OF THE CLIENTS, BUT SUCH CLIENTS WOULD NOT HAVE PAID FOR SUCH LOSSES AS THE LOSS WAS INCURRED DUE TO THE MISTAKE OF THE ASS ESSEE. IN SUCH A SITUATION, THE LOSS WAS ALLOWABLE AS DEDUCTION EITHER UNDER SECTIO N 36(1) AS BAD DEBTS OR AS A BUSINESS LOSS UNDER SECTION 28(1) OF THE ACT. 63. HOWEVER, THE AO DISAGREED WITH THE CONTENTION O F THE ASSESSEE BY OBSERVING THAT THE ASSESSEE HAS NOT FURNISHED THE D ETAILS OF THE MISTAKE COMMITTED BY IT, SUCH AS CLIENTS IN WHOSE ACCOUNTS THE TRANSACTION WAS ENTERED, NON-DELIVERY OF THE SHARES TO THE EXCHANGE AND INCO RRECT EXECUTION OF ORDERS. THE AO ALSO OBSERVED THAT THERE WAS DISALLOWANCE MA DE BY HIS PREDECESSOR IN THE OWN CASE OF THE ASSESSEE FOR THE ASSESSMENT YEA R 2006-07 TREATING SUCH LOSS AS SPECULATIVE IN NATURE. ACCORDINGLY, THE AO ADDED THE SAME TO THE TOTAL INCOME OF THE ASSESSEE AND ALLOWED THE SAME TO BE C ARRIED FORWARD. 26 ITA NOS. 413,445,268&318/AHD/2016 AND 446/AHD/2016 ( AY 2012-13) AYS: 2010-11, 2011-12, 2012-13 64. AGGRIEVED ASSESSEE PREFERRED AN APPEAL TO THE L EARNED CIT (A). 65. THE ASSESSEE BEFORE THE LEARNED CIT (A) SUBMITT ED THAT THE IMPUGNED LOSS OF RS. 38,40,074/- IS INCLUSIVE OF THE LOSS OF RS.17,02,013/- WHICH WAS INCURRED OUT OF FUTURE AND OPTION SEGMENT CARRIED O UT THROUGH THE RECOGNIZED STOCK EXCHANGE. THEREFORE SUCH LOSS OF RS. 17,02,01 3/- CANNOT BE TREATED AS SPECULATIVE TRANSACTION AS PER CLAUSE (D) OF SUB-SE CTION 5 TO SECTION 43 OF THE ACT. THEREFORE, TO THE EXTENT OF RS.17,02,013/- SUC H LOSS CANNOT BE TREATED AS SPECULATIVE IN NATURE. 66. THE ASSESSEE ALSO CONTENDED THAT IT HAS DECLARE D OF GROSS BROKERAGE INCOME OF RS. 60,34,33,815/- ONLY AND THE AMOUNT OF IMPUGNED LOSS DEBITED STANDS AT RS. 38,40,074/- WHICH IS LESS THAN 0.6% O F THE TOTAL TURNOVER. THEREFORE, THERE IS NO JUSTIFICATION ON THE PART OF THE AO TO DISBELIEVE ITS (ASSESSEE) VERSION. 67. HOWEVER, THE LEARNED CIT (A) FOUND THAT THE ASS ESSEE HAS NOT FURNISHED NECESSARY DETAILS ABOUT THE PARTIES ON WHOSE CASE T HE MISTAKE WAS COMMITTED BY IT. THUS, IN THE ABSENCE OF SUCH INFORMATION, IT HAS TO BE PRESUMED THAT THE IMPUGNED LOSS WAS INCURRED ON ASSESSEES ACCOUNT. 68. NEVERTHELESS, THE LEARNED CIT (A) DELETED THE A DDITION MADE BY THE AO FOR THE ASSESSMENT YEAR 2006-07 FOR THE REASON THAT THE ASSESSEE HAS FURNISHED THE NECESSARY EVIDENCE TO JUSTIFY THAT THE LOSS WAS NOT ON ITS ACCOUNT. RATHER SUCH LOSS WAS INCURRED BY THE ASSESSEE ON BEHALF OF ITS CLIENT. BUT IN THE CASE ON HAND THE ASSESSEE HAS NOT FURNISHED THE NECESSAR Y DETAILS. THUS, THE LEARNED 27 ITA NOS. 413,445,268&318/AHD/2016 AND 446/AHD/2016 ( AY 2012-13) AYS: 2010-11, 2011-12, 2012-13 CIT (A) IN THE ABSENCE OF SUFFICIENT DOCUMENTARY EV IDENCE CONCLUDED THAT SUCH LOSS RELATES TO THE ASSESSEES ACCOUNT. 69. HOWEVER, THE LEARNED CIT (A) HELD THAT THE LOSS TO THE EXTENT OF RS. 17,02,013/- RELATES TO THE FUTURE AND OPTION SE GMENT WHICH WAS CARRIED OUT THROUGH THE RECOGNIZED STOCK EXCHANGE. THEREFORE, S UCH LOSS OF RS. 17,02,013/- CANNOT BE TREATED AS SPECULATIVE TRANSA CTION AS PER CLAUSE (D) OF SUB SECTION 5 TO SECTION 43 THE ACT AND UNDER THE E XPLANATION TO SECTION 73 OF THE ACT. ACCORDINGLY, THE LEARNED CIT (A) DELETED T HE ADDITION MADE BY THE AO FOR SUCH LOSS OF RS. 17,02,013.00. THUS, THE LEA RNED CIT (A) ALLOWED THE GROUND OF APPEAL OF THE ASSESSEE IN PART. 70. BEING AGGRIEVED BY THE ORDER OF THE LEARNED CIT (A) BOTH THE REVENUE AND THE ASSESSEE ARE IN APPEAL BEFORE US. THE REVEN UE IS IN APPEAL AGAINST THE DELETION OF THE ADDITION MADE BY THE AO FOR RS.17,0 2,013/- TREATING SUCH LOSS RELATING TO FUTURE OPTION SEGMENT WHICH WAS CARRIED OUT THROUGH THE RECOGNIZED STOCK EXCHANGE WHEREAS THE ASSESSEE IS IN APPEAL AG AINST THE CONFIRMATION OF THE ADDITION OF RS. 21,38,061/- WHICH WAS TREATED B Y THE LEARNED CIT (A) AS SPECULATIVE IN NATURE IN PURSUANCE TO THE EXPLANATI ON TO SECTION 73 OF THE ACT. THE GROUND NO. 4 OF APPEAL FILED BY THE ASSESSEE IN ITA NO. 268/AHD/2016 READS AS UNDER: 4. IN LAW AND IN THE FACTS AND CIRCUMSTANCES OF TH E APPELLANTS CASE, THE LEARNED CIT(A) HAS GROSSLY ERRED IN SUSTAINING THE LD. AOS ACTION OF TREATING WHAT WAS NORMAL BUSINESS LOS [SAUDAFER LOSS] AS SPECULATION LOSS TO THE EXTENT OF RS. 21,38,061 [OUT OF RS. 38,40,074 SO TREATED BY THE LD. A.O.]. 28 ITA NOS. 413,445,268&318/AHD/2016 AND 446/AHD/2016 ( AY 2012-13) AYS: 2010-11, 2011-12, 2012-13 71. THE LEARNED DR BEFORE US SUBMITTED THAT THE LOS S CLAIMED BY THE ASSESSEE FOR RS. 17,02,013/- IS DEEMED TO BE SPECUL ATIVE LOSS UNDER EXPLANATION TO SECTION 73 OF THE ACT. 72. ON THE OTHER HAND, THE LEARNED AR BEFORE US REI TERATED THE CONTENTION OF THE ASSESSEE AS RAISED BEFORE THE AUTHORITIES BE LOW. 73. BOTH THE LEARNED DR AND THE AR BEFORE US VEHEME NTLY SUPPORTED THE ORDER OF THE AUTHORITIES BELOW TO THE EXTENT FAVOUR ABLE TO THEM. 74. WE HEARD THE RIVAL CONTENTIONS OF BOTH THE PART IES AND PERUSED THE MATERIALS AVAILABLE ON RECORD. THE FIRST ISSUE THAT ARISES FOR OUR CONSIDERATION IS WHETHER THE IMPUGNED LOSS INCURRED BY THE ASSESSEE RELATES TO THE SALE AND PURCHASE ACTIVITIES CARRIED OUT BY THE ASSESSEE FOR ITSELF OR IT RELATES TO THE OTHER CLIENTS OF THE ASSESSEE. IT IS A QUESTION OF FACT W HICH CAN VERIFIED BASED ON THE DOCUMENTARY EVIDENCE. INDEED, THE ASSESSEE HAS NOT FURNISHED THE SUFFICIENT DOCUMENTARY EVIDENCE IN SUPPORT OF HIS CONTENTION. BUT LOOKING AT THE AMOUNT OF IMPUGNED LOSS IN COMPARISON TO THE VOLUME OF THE BROKERAGE BUSINESS CARRIED OUT BY THE ASSESSEE, WE FIND THAT SUCH LOSS IS OF NEGLIGIBLE VALUE. FURTHERMORE, THE TAX AUDIT REPORT IN FORM 3CD SUGGE STS THAT THE ASSESSEE IS ENGAGED IN THE ACTIVITY OF STOCKBROKING ONLY AND NO T IN THE ACTIVITY OF SALE PURCHASE OF SECURITIES. THE COPY OF FORM 3 CD IS PL ACED ON PAGES 133 TO 165 OF THE PAPER BOOK. SIMILARLY, THE AO HAS ALSO RECO RDED IN HIS ORDER THE NATURE OF BUSINESS OF THE ASSESSEE I.E. STOCKBROKING. EVEN IN THE EARLIER ASSESSMENT YEAR 2006-07, THE IMPUGNED LOSS WAS ALSO TREATED AS SPECULATIVE IN NATURE BUT THE LEARNED CIT (A) DELETED THE SAME AS THE ASSESSE E WAS ABLE TO JUSTIFY HIS CONTENTION BASED ON THE DOCUMENTARY EVIDENCE THAT S UCH LOSS RELATES TO ITS CLIENTS. THIS FINDING OF THE LD. CIT-A, IF ANALYZED IN AGGREGATION OF OTHER FACTS 29 ITA NOS. 413,445,268&318/AHD/2016 AND 446/AHD/2016 ( AY 2012-13) AYS: 2010-11, 2011-12, 2012-13 I.E. FORM 3CD REPORT, PROFIT & LOSS ACCOUNT, NATURE OF THE BUSINESS AS RECORDED BY THE AO, THE FACT EMERGES THAT THAT THE ASSESSEE IS NOT CARRYING OUT SHARE TRADING ACTIVITIES IN ITS ACCOUNTS. 75. ON PERUSAL OF THE FINANCIAL STATEMENTS PLACED O N PAGES 59 TO 132 OF THE PAPER BOOK, IT WAS OBSERVED THAT THERE WAS NO TRANS ACTION SHOWN BY THE ASSESSEE AS PURCHASE AND SALE OF THE SHARES. IN VIE W OF THE ABOVE AND AFTER CONSIDERING THE DETAILS AS DISCUSSED ABOVE WE HOLD THAT THE IMPUGNED LOSS INCURRED BY THE ASSESSEE DOES NOT PERTAIN TO ITS AC COUNTS RATHER IT RELATES TO THE ACCOUNTS OF ITS CLIENTS. ACCORDINGLY, WE CONCLUDE T HAT THE PROVISIONS OF EXPLANATION TO SECTION 73 OF THE ACT CANNOT BE APPL IED TO THE CASE ON HAND. IN HOLDING SO WE FIND SUPPORT AND GUIDANCE FROM THE OR DER OF THIS TRIBUNAL IN THE CASE OF PARKER SECURITIES LTD VERSUS DCIT REPORTED IN 102 TTJ 235 WHEREIN IT WAS HELD AS UNDER: EXPLANATION TO SECTION 73 PROVIDES THAT WHERE ANY PART OF THE BUSINESS OF A COMPANY (OTHER THAN CERTAIN SPECIFIED COMPANIES AS MENTIONE D IN THE EXPLANATION) CONSISTS IN THE PURCHASE AND SALE OF SHARES OF OTHER COMPANIES, SUC H COMPANY SHALL, FOR THE PURPOSES OF THIS SECTION, BE DEEMED TO BE CARRYING ON A SPECULA TION BUSINESS TO THE EXTENT TO WHICH THE BUSINESS CONSISTS OF THE PURCHASE AND SALE OF SUCH SHARES. IT IS CLEAR FROM THE SAID PROVISION THAT SALE AND PURCHASE OF SHARES OF OTHER COMPANIES , WITHIN THE AMBIT OF THE EXPLANATION, MUST BE CARRIED OUT AS AN ACTIVITY OF BUSINESS. THE TERM BUSINESS HAS BEEN DEFINED IN SECTION 2(13). NOTING THE DEFINITION OF BUSINESS FROM THE VIEW POINT OF EXPLANATION TO SECTION 73, IT HAS BEEN OBSERVED BY THE KARNATAKA H IGH COURT IN THE CASE OF MYSORE ROLLING MILLS (P.) LTD. V. CIT [1992] 195 ITR 404/ 63 TAXMA N 416 THAT ANY KIND OF VENTURE WOULD NOT FALL WITHIN THIS INCLUSIVE DEFINITION. THE VENT URE OR THE ADVENTURE WILL HAVE TO BE IN THE NATURE OF TRADE, COMMERCE OR MANUFACTURE. BASICALLY , THE CONCEPT OF BUSINESS INVOLVES A FREQUENT ACTIVITY OF A PARTICULAR NATURE. THEREFORE , TO FIND OUT THAT THE ASSESSEE CARRIED ON PURCHASE AND SALE OF SHARES OF OTHER COMPANIES AS I TS BUSINESS IN A GIVEN CASE, THE FACTS OF THAT CASE WILL HAVE TO BE EXAMINED AND THE TESTS WH ICH COULD DETERMINE SUCH SITUATION ARE - (I) NATURE OF ASSESSEES BUSINESS IN GENERAL, (II) THE PURPOSE BEHIND THE PARTICULAR TRANSACTION, AND (III) THE EFFECT OF THE TRANSACTIO N ETC. IN THE INSTANT CASE, THE NATURE OF THE ASSESSEES BUSINESS IN GENERAL WAS TO EARN INCOME A S A BROKER OF STOCK EXCHANGE AND THE PURPOSE BEHIND THE TRANSACTIONS IN REGARD TO WHICH THE ASSESSEE HAD INCURRED LOSS WAS THE PURCHASE FOR AND ON BEHALF OF CERTAIN CLIENTS TO EA RN BROKERAGE INCOME THEREFROM. IT WAS ONLY AN EVENTUALITY THAT SOME OF THE CLIENTS DISOWN ED ONLY PART OF THE TRANSACTIONS WHICH UNDER COMPULSION WERE TO BE TAKEN BY THE ASSESSEE A S ITS OWN. [PARA 28] 30 ITA NOS. 413,445,268&318/AHD/2016 AND 446/AHD/2016 ( AY 2012-13) AYS: 2010-11, 2011-12, 2012-13 75.1 IN VIEW OF THE ABOVE, ONCE IT HAS BEEN HELD TH AT LOSS DOES NOT RELATE TO THE ACTIVITY OF SALE/PURCHASE OF SHARES BY THE ASSE SSEE FOR ITSELF, THEN THE PROVISIONS OF EXPLANATION TO SECTION 73 OF THE ACT CANNOT BE APPLIED. HENCE, THE GROUND OF APPEAL OF THE REVENUE IS DISMISSED WH EREAS THE GROUND OF APPEAL OF THE ASSESSEE IS ALLOWED. 76. THE NEXT ISSUE RAISED BY THE REVENUE IS THAT TH E LEARNED CIT (A) ERRED IN DIRECTING TO RE-COMPUTE THE CAPITAL GAIN WITH IN DEXATION FROM THE FY 2005- 06. 77. THE ASSESSEE ACQUIRED OLD BSE MEMBERSHIP CARD I N THE YEAR 1995-96 AT COST OF RS.2,75,01,000/- AND NOT CLAIMED ANY DEPREC IATION ON SUCH MEMBERSHIP CARD AS IT WAS ACQUIRED PRIOR TO 1 ST APRIL 1998. THE OLD BSE MEMBERSHIP CARD WAS DEMUTUALISED IN THE FINANCIAL Y EAR 2005-06. IN OTHER WORDS, THE MEMBERSHIP CARD WAS CONVERTED INTO THE S HARES OF BOMBAY STOCK EXCHANGE IN THE YEARS 2005-06. THE ASSESSEE SOLD SU CH SHARES IN THE YEAR UNDER CONSIDERATION AND CLAIMED LONG-TERM CAPITAL LOSS AT RS. 1,96,02,783/-. IT WAS WORKED OUT AS UNDER: NO OF SHARES PURCHASE DATE SALE DATE SALES VALUE (RS.) COST OF ACQUISITION (RS.) INDEXED COST (RS.) LTCG (RS.) 1,30,000 31-03-1996 27-01-2010 4,22,50,000 2,75,01, 000 6,18,52,784 (1,96,02,783) 78. THE ASSESSEE HAS WORKED OUT THE INDEX COST OF A CQUISITION FROM THE YEAR 1995-96 WHILE WORKING OUT THE LONG-TERM CAPITAL GAI N. 31 ITA NOS. 413,445,268&318/AHD/2016 AND 446/AHD/2016 ( AY 2012-13) AYS: 2010-11, 2011-12, 2012-13 79. SIMILARLY, THE ASSESSEE ALSO ACQUIRED ANOTHER B SE MEMBERSHIP CARD IN THE YEAR 2000-01 AT RS. 2,52,11,102/- AND CLAIMED D EPRECIATION TILL THE ASSESSMENT YEAR 2009-10. AS SUCH THE ASSESSEE HAS S HOWN OPENING WRITTEN DOWN VALUE OF SUCH CARD AT RS. 93,06,442/-IN ITS BA LANCE SHEET AS ON 1 ST APRIL 2009. SUCH BSE MEMBERSHIP CARD WAS ALSO DEMUTUALISE D IN THE FINANCIAL YEAR 2005-06. IN OTHER WORDS, THE MEMBERSHIP CARD W AS CONVERTED INTO THE SHARES OF BOMBAY STOCK EXCHANGE IN THE YEAR 2005-06 . THE ASSESSEE SOLD SUCH SHARES IN THE YEAR UNDER CONSIDERATION AND CLAIMED LONG-TERM CAPITAL GAIN AT RS. 2,77,63,125/-. IT WAS WORKED OUT AS UNDER: NO OF SHARES PURCHASE DATE SALE DATE SALES VALUE (RS.) COST OF ACQUISITION (RS.) INDEXED COST (RS.) LTCG (RS.) 1,30,000 31-03-2001 27-01-2010 4,22,50,000 93,06,44 2 1,44,86,875 2,77,63,125 80. THE ASSESSEE HAS WORKED OUT THE INDEX COST OF A CQUISITION FROM THE YEAR 2000-01 WHILE WORKING OUT THE LONG-TERM CAPITAL GAI N. 81. HOWEVER, THE AO FOUND THAT THE SHARES OF THE BO MBAY STOCK EXCHANGE WERE ACQUIRED BY THE ASSESSEE IN THE FINANCIAL 2005 -06 THEREFORE HE WAS OF THE VIEW THAT THE BENEFIT OF COST INDEXATION TO THE ASS ESSEE SHOULD BE GIVEN FROM THE FINANCIAL YEAR 2005-06 AND NOT FROM THE YEAR IN WHICH BOMBAY STOCK EXCHANGE MEMBERSHIP CARD WERE ACQUIRED BY THE ASSESSEE. ACCORDINGLY, THE AO WORKED OUT THE LONG-TERM CAPITAL GAIN IN THE MANNER AS GIVEN BELOW: 32 ITA NOS. 413,445,268&318/AHD/2016 AND 446/AHD/2016 ( AY 2012-13) AYS: 2010-11, 2011-12, 2012-13 PARTICULARS OLD BSE CARD NEW BSE CARD TOTAL SALE CONSIDERATION 42250000 42250000 84500000 COST: 27501000/- INDEXED COST COST X CII OF FY 2009-10 CII OF FY 2005-06 27501000 X 632/497 34971090 COST : 9306442 INDEXED COST COST X CII OF FY 2009-10 CII OF FY 2005-06 9306442 X 632/497 11734348 46805438 LONG TERM CAPITAL GAIN/LOSS 7278910 30415652 37694562 17.9 FROM THE ABOVE IT CAN BE SEEN THAT THE ASSES SEE HAS EARNED TOTAL LONG TERM CAPITAL GAIN FROM SALE OF BSE OF RS.37694562/- . THE ASSESSEE HAS COMPUTED THE TOTAL LONG TERM CAPITAL LOSS IN THE RE TURN OF INCOME AS UNDER. ARVIND LTD. (-) 33970829/- BSE SHARES (-) 19602783/- ARVIND LTD. (-) 14083776/- BSE SHARES 27763125/- TOTAL LONG TERM CAPITAL LOSS (-) RS.3989 4263/- IN VIEW OF THE LONG TERM CAPITAL GAIN/LOSS IS RECO MPUTED AS UNDER. A. LONG TERM CAPITAL GAIN ON SALE OF BSE SHARES RS.37694562/- B. LESS LONG TERM CAPITAL LOSS ON SALE OF ARVIND SHARE S (-)RS.48054605/- ALLOWABLE LONG TERM CAPITAL LOSS RS.10360043/- 82. IN VIEW OF THE ABOVE THE AO WORKED OUT THE EXCE SSIVE LONG-TERM CAPITAL LOSS AT RS. 2,95,34,220/- AND DISALLOWED THE SAME B Y ADDING TO THE TOTAL INCOME OF THE ASSESSEE. 33 ITA NOS. 413,445,268&318/AHD/2016 AND 446/AHD/2016 ( AY 2012-13) AYS: 2010-11, 2011-12, 2012-13 83. AGGRIEVED ASSESSEE PREFERRED AN APPEAL TO THE L EARNED CIT (A), AND SUBMITTED THAT THE PROVISIONS OF EXPLANATION-1 (HA ) OF SECTION 2(42A) REQUIRES THAT THE PERIOD PRIOR TO DEMUTUALISATION OF SHARES SHALL BE INCLUDED IN THE PERIOD OF HOLDING. THUS, THE INDEXATION BENEFIT SHO ULD BE GRANTED FROM THE YEAR OF ACQUISITION. 84. THE ASSESSEE BY WAY OF FILING THE ADDITIONAL GR OUND OF APPEAL ALSO CONTENDED THAT THE COST OF ACQUISITION OF THE MEMBE RSHIP CARD OF BSE ACQUIRED IN THE FY 2000-01 SHOULD BE TAKEN THE ORIGINAL COST INSTEAD OF WDV AS ON 1 ST APRIL 2005 AS MANDATED UNDER SECTION 55(2)(AB) OF T HE ACT. THE ASSESSEE IN THIS CONNECTION FURTHER SUBMITTED THAT IT HAS INADV ERTENTLY TAKEN THE WDV AS ON 1 ST APRIL 2009 WHILE COMPUTING THE LONG TERM CAPITAL G AIN. 85. HOWEVER, THE ASSESSEE AGREED THAT THE INDEXATIO N COST OF THE SHARES WITH RESPECT TO BOTH THE MEMBERSHIP CARD CAN BE TAKEN FR OM THE FY 2005-06 CORRESPONDING TO AY 2006-07. THE ASSESSEE IN SUPPOR T OF HIS CONTENTION FILED THE REVISED COMPUTATION OF INCOME AS DETAILED UNDER : NO OF SHARES PURCHASE DATE SALE DATE SALE VALUE COST INDEXED COST LONG TERM CAPITAL GAIN 1,20,000 31-03- 1996 27-01- 2010 4,22,50,000 2,75,01,000 3,49,71,090 72,78,910 1,30,000 31-03- 2001 22-01- 2010 4,22,50,000 2,52,11,102 3,20,59,188 1,01,90,812 TOTAL 1,74,69,722 86. THE LD. CIT-A AFTER CONSIDERING THE SUBMISSION HELD THAT THE ASSESSEE IS ENTITLED FOR THE INDEXATION BENEFIT AT THE ORIGINAL COST OF THE MEMBERSHIP CARD AFTER TAKING THE COST INFLATION INDEX OF THE AY 200 6-07. THUS, THE GROUND OF APPEAL OF THE ASSESSEE WAS PARTLY ALLOWED. 34 ITA NOS. 413,445,268&318/AHD/2016 AND 446/AHD/2016 ( AY 2012-13) AYS: 2010-11, 2011-12, 2012-13 87. BEING AGGRIEVED BY THE ORDER OF THE LEARNED CIT (A), BOTH THE REVENUE AND THE ASSESSEE CAME IN APPEAL BEFORE US. THE REVE NUE IS IN APPEAL AGAINST THE DIRECTION OF THE LEARNED CIT(A) FOR COMPUTING T HE CAPITAL GAIN CONSIDERING THE ORIGINAL COST OF MEMBERSHIP CARDS WHEREAS THE A SSESSEE IS IN APPEAL BEFORE US AGAINST THE DIRECTION OF THE LEARNED CIT(A) FOR PROVIDING THE INDEXATION BENEFIT FROM THE YEAR 2005-06 WHEN THE ASSETS WERE 1 ST HELD BY THE ASSESSEE. 87.1 THE LEARNED DR BEFORE US CONTENDED THAT THE AS SESSEE ON ONE HAND HAS CLAIMED THE BENEFIT OF DEPRECIATION AND ON THE OTHE R HAND IS ALSO CLAIMING THE DEDUCTION WHILE COMPUTING THE CAPITAL GAIN BY TAKIN G THE ORIGINAL COST OF ACQUISITION OF THE MEMBERSHIP CARD. 88. ON THE OTHER HAND, THE AR BEFORE US SUBMITTED T HAT THE PROVISIONS OF SECTION 55(2)(AB) AND EXPLANATION 1(HA) TO SECTION 2(42A) OF THE ACT ARE UNAMBIGUOUS AND CLEAR. THEREFORE, THE ASSESSEE SHOU LD BE ALLOWED THE ORIGINAL COST OF ACQUISITION OF THE MEMBERSHIP CARD WHILE CO MPUTING THE CAPITAL GAIN AS PER THE PROVISIONS OF SECTION 55(2)(AB) OF THE ACT. SIMILARLY, THE ASSESSEE SHOULD ALSO BE ALLOWED THE BENEFIT OF INDEXATION FR OM THE YEAR OF ACQUISITION OF RESPECTIVE MEMBERSHIP CARDS AS PER THE PROVISIONS O F EXPLANATION 1(HA) TO SECTION 2(42A) OF THE ACT. 89. BOTH THE LEARNED DR AND THE AR RELIED ON THE OR DER OF THE RESPECTIVE AUTHORITIES TO THE EXTENT FAVOURABLE TO THEM. 90. WE HAVE HEARD THE RIVAL CONTENTIONS OF BOTH THE PARTIES AND PERUSED THE MATERIALS AVAILABLE ON RECORD. THE FACTS OF THE CAS E ARE NOT IN DISPUTE WHICH HAVE BEEN ELABORATED IN THE PRECEDING PARAGRAPH. TH EREFORE, WE ARE NOT 35 ITA NOS. 413,445,268&318/AHD/2016 AND 446/AHD/2016 ( AY 2012-13) AYS: 2010-11, 2011-12, 2012-13 INCLINED TO REPEAT THE SAME FOR THE SAKE OF BREVITY AND CONVENIENCE. FROM THE PRECEDING DISCUSSION THE FOLLOWING QUESTION ARISES FOR OUR CONSIDERATION. (A) WHETHER THE COST OF ACQUISITION OF THE BSE SHA RES SHOULD BE CALCULATED IN ACCORDANCE WITH THE ORIGINAL COST OF ACQUISITION OF THE BSE MEMBERSHIP CARD UNDER SECTION 55(2)(AB) OR THE WRIT TEN DOWN VALUE BE ADOPTED UNDER SECTION 50 OF THE ACT ? (B) WHETHER THE RELEVANT YEAR FOR CALCULATING INDE XED COST OF ACQUISITION SHOULD BE THE YEAR OF ORIGINAL ACQUISITION OF THE B SE MEMBERSHIP, I.E., YEAR 1995-96/2000-01 OR THE YEAR OF ALLOTMENT OF SHARES IN THE BSE IN LIEU OF MEMBERSHIP, I.E., YEAR 2005-06? 91. THE ACT COMPRISES OF SEVERAL PROVISIONS PERTAIN ING TO THE COMPUTATION OF CAPITAL GAINS WHEN EQUITY SHARES OF A RECOGNIZED STOCK EXCHANGE ARE ALLOTTED TO A SHAREHOLDER UNDER A SCHEME OF DEMUTUALIZATION AND CORPORATIZATION APPROVED BY THE SEBI. 91.1 UNDER SECTION 47(XIIIA) OF THE ACT, ANY TRANSF ER OF A MEMBERSHIP RIGHT IN A RECOGNIZED STOCK EXCHANGE IN INDIA FOR ACQUISITIO N OF SHARES AND TRADING OR CLEARING RIGHTS IN ACCORDANCE WITH SCHEME OF DEMUTU ALIZATION OR CORPORATIZATION WHICH IS APPROVED BY THE SEBI, IS N OT REGARDED AS TRANSFER. 91.2 SECTION 55(2)(AB) STIPULATES THAT THE COST OF ACQUISITION FOR SUCH SHARES SHALL BE COST OF ACQUISITION OF ORIGINAL MEMBERSHIP OF THE EXCHANGE. EXPLANATION 1(HA) TO SECTION 2(42A) PROVIDES THAT P ERIOD OF HOLDING OF SUCH SHARES SHALL INCLUDE THE PERIOD OF MEMBERSHIP OF TH E RECOGNIZED STOCK 36 ITA NOS. 413,445,268&318/AHD/2016 AND 446/AHD/2016 ( AY 2012-13) AYS: 2010-11, 2011-12, 2012-13 EXCHANGE IN INDIA IMMEDIATELY PRIOR TO SUCH DEMUTUA LIZATION OR CORPORATIZATION. 92. MOVING FORWARD, WE ALSO NOTE THAT SECTION 50 OF THE ACT IS A SPECIAL PROVISION FOR COMPUTING CAPITAL GAINS IN CASE OF DE PRECIABLE ASSETS. IT BEGINS WITH A NON-OBSTANTE CLAUSE TO SECTION 2(42A) OF THE ACT. THE PROVISION OF SECTION 50 OF THE ACT PROVIDES THAT NOTWITHSTANDING ANYTHING CONTAINED IN CLAUSE (42A) OF SECTION 2 OF THE ACT, WHERE THE CAP ITAL ASSET IN RESPECT OF WHICH DEPRECIATION IS PROVIDED UNDER THE ACT, THE C OST OF ACQUISITION OF ASSET, INTER ALIA, SHALL BE DEEMED TO BE WRITTEN DOWN VALU E OF THE ASSET AS AT THE BEGINNING OF THE PREVIOUS YEAR. FURTHER, THE CAPITA L GAIN SHALL BE DEEMED TO ARISE FROM THE TRANSFER OF SHORT-TERM CAPITAL ASSET S. 93. IN THE BACKDROP OF THE STATED DISCUSSION, FIRST WE DEAL WITH QUESTION NO. 1 WITH RESPECT TO BOTH THE MEMBERSHIP CARD IN SERIA TIM. REGARDING THE FIRST MEMBERSHIP CARD OF THE BSE ACQUIRED IN THE YEAR 199 5-96, WE NOTE THAT THE ASSESSEE HAS NOT CLAIMED ANY DEPRECIATION THEREON. THEREFORE, THE SAME IS OUTSIDE THE PURVIEW OF THE PROVISION OF SECTION 50 OF THE ACT I.E. SPECIAL PROVISION FOR COMPUTATION OF CAPITAL GAIN IN CASE O F DEPRECIABLE ASSETS. IT IS BECAUSE SUCH MEMBERSHIP CARD WAS NOT DEPRECIABLE AS SETS. THUS, THE ORIGINAL COST INCURRED BY THE ASSESSEE ON THE ACQUISITION OF SUCH MEMBERSHIP CARD SHALL BE TAKEN AS THE COST OF ACQUISITION AS DEFINED UNDE R SECTION 55(2)(AB) OF THE ACT. 94. REGARDING THE SECOND MEMBERSHIP CARD OF THE BSE ACQUIRED IN THE YEAR 2000-01, WE NOTE THAT THE ASSESSEE HAS CLAIMED DEPR ECIATION THEREON. THEREFORE, IT APPEARS THAT THE SAME IS SUBJECT TO T HE PROVISION OF SECTION 50 OF THE ACT I.E. SPECIAL PROVISION FOR COMPUTATION OF C APITAL GAIN IN CASE OF 37 ITA NOS. 413,445,268&318/AHD/2016 AND 446/AHD/2016 ( AY 2012-13) AYS: 2010-11, 2011-12, 2012-13 DEPRECIABLE ASSETS WHICH PROVIDES THAT WRITTEN DOWN VALUE OF THE BLOCK OF ASSETS AT THE BEGINNING OF THE PREVIOUS YEAR SHALL BE REDUCED FROM THE SALE CONSIDERATION. HOWEVER, WE NOTE THAT WHAT HAS BEEN SOLD IN THE YEAR UNDER CONSIDERATION ARE THE SHARES OF BSE WHICH WERE NOT DEPRECIABLE ASSETS UPON THE CONVERSION MEMBERSHIP CARD AS SHARES IN THE YEA R 2005-06. THUS, THE PRESENT MEMBERSHIP CARD IN THE YEAR UNDER CONSIDERA TION WAS NO LONGER DEPRECIABLE ASSETS. THEREFORE, WE ARE OF THE VIEW T HAT THE PROVISIONS OF SECTION 50 OF THE ACT CANNOT BE APPLIED FOR THE YEAR UNDER CONSIDERATION. INDEED, THE ASSESSEE IS AVAILING DOUBLE BENEFIT, FIRSTLY, BY WA Y OF DEPRECIATION AND SECONDLY BY WAY OF CLAIMING THE DEDUCTION OF THE OR IGINAL COST OF ACQUISITION OF THE MEMBERSHIP CARD UNDER SECTION 55(2)(AB) OF T HE ACT. BUT THE ISSUE BEFORE US IS LIMITED TO THE COST OF ACQUISITION OF THE MEMBERSHIP CARD AS PROVIDED UNDER SECTION 55(2)(AB) OF THE ACT. AS PER THIS SECTION, THE ORIGINAL COST SHOULD BE TAKES AS THE COST OF ACQUISITION WHI LE DETERMINING THE INCOME UNDER THE HEAD CAPITAL GAIN. 95. NOW COMING TO THE 2 ND QUESTION ARISING FOR OUR CONSIDERATION, WHAT SHOULD BE THE PERIOD OF HOLDING FOR COMPUTING THE C APITAL GAIN WITH RESPECT TO SHARES ACQUIRED BY THE ASSESSEE UPON THE CONVERSION OF BOTH MEMBERSHIP CARDS OF THE BSE. IN THIS REGARD WE NOTE THAT THE ASSESSE E ITSELF HAS AGREED BEFORE THE LD. CIT-A FOR ALLOWING THE BENEFIT OF INDEXATION FR OM THE AY 2006-07 AND ACCORDINGLY, THE LD. CIT-A DECIDED THE ISSUE AFTER CONSIDERING THE PLEA OF THE ASSESSEE. THE RELEVANT SUBMISSION OF THE ASSESSEE B EFORE THE LD. CIT-A HAS ALREADY BEEN RECORDED IN THE PRECEDING PARAGRAPH. 38 ITA NOS. 413,445,268&318/AHD/2016 AND 446/AHD/2016 ( AY 2012-13) AYS: 2010-11, 2011-12, 2012-13 95.1 NOW, THE ASSESSEE BEFORE US CONTENDS FOR ALLOW ING THE BENEFIT OF INDEXATION FOR BOTH THE MEMBERSHIP CARDS FROM THE Y EAR OF ACQUISITION. IN OUR CONSIDERED VIEW THIS PLEA OF THE ASSESSEE IS NOT DE SIRABLE FOR THE REASON IT HAS ACCEPTED BEFORE THE LD. CIT-A TO PROVIDE THE INDEXA TION BENEFIT FROM THE AY 2006-07. MOREOVER, THE LD. AR HAS NOT BROUGHT ANYTH ING ON RECORD SUGGESTING THAT THE ASSESSEE HAS ACCEPT THE INDEXATION BENEFIT FROM AY 2006-07 ON ACCOUNT OF MISUNDERSTANDING OF THE PROVISIONS OF LA W OR WRONG ADVICE OF THE CONSULTANT OR IT WAS AGAINST THE SPIRIT OF THE PROV ISIONS OF LAW. ACCORDINGLY, WE DECLINE TO INTERFERE IN THE ORDER OF THE LD. CIT -A. HENCE, THE GROUNDS OF APPEAL OF THE REVENUE AND THE ASSESSEE ARE DISMISSE D. 96. IN THE RESULT, THE APPEAL FILED BY THE REVENUE IS DISMISSED. COMING TO ITA NO.268/AHD/2016(A.Y.2010-11) ASSESSEE S APPEAL:- 97. THE ASSESSEE HAS RAISED THE FOLLOWING CONCISE G ROUNDS OF APPEAL: 1. IN LAW AND IN THE FACTS AND CIRCUMSTANCES OF TH E APPELLANT'S CASE, THE LEARNED CIT(A) HAS GROSSLY ERRED IN DISMISSING GROUND NO. 1 OF THE APPELLANT'S APPEAL AS BEING GENERAL IN NATURE, NOT REQUIRING ANY CONSIDERATION BY HIM. HE OUGHT TO HAVE APPRECIATED, INTER ALIA, THAT ONLY A BARE READING OF THAT GROUND SHOWED THE REASON FOR THE APPELLANT'S CHALLENGE TO THE VALIDITY OF THE ASSESSMENT ORDER I MPUGNED BEFORE HIM AND, ACCORDINGLY, HE OUGHT TO HAVE ADJUDICATED UPON THE SAME ON MERITS. 2. IN LAW AND IN THE FACTS AND CIRCUMSTANCES OF THE APPELLANT'S CASE, THE LEARNED CIT(A) HAS GROSSLY ERRED IN UPHOLDING ADDITION OF R S. 8,678 [OUT OF RS. 6,94,288 ADDED BY THE LD. AO. ON THIS ACCOUNT] MADE ON THE GROUND THA T INCOME TO THAT EXTENT SHOWN BY ITS/26AS AS HAVING BEEN PAID BY SOME PARTIES TO THE APPELLANT HAD NOT BEEN INCLUDED IN THE APPELLANT'S RETURN. 3. IN LAW AND IN THE FACTS AND CIRCUMSTANCES OF THE APPELLANT'S CASE, THE LEARNED CIT(A) HAS GROSSLY ERRED IN SUSTAINING DISALLOWANCE OF RS. 4,20,414 MADE U/S. 14A READ WITH RULE 8D(2)(III) ON ACCOUNT OF ADMINISTRATIVE E XPENSES [EVEN AS HE HAD DIRECTED THE QUANTUM OF THE DISALLOWANCE ON THIS ACCOUNT TO BE R EDUCED FROM RS. 10,80,131 TO RS. 4,20,414 AFTER APPRECIATING THAT THE APPLICANT'S IN VESTMENTS IN SHARES OF ITS SUBSIDIARY 39 ITA NOS. 413,445,268&318/AHD/2016 AND 446/AHD/2016 ( AY 2012-13) AYS: 2010-11, 2011-12, 2012-13 WHICH HAD BEEN AMALGAMATED WITH THE APPELLANT, CANN OT BE TAKEN INTO ACCOUNT FOR THE PURPOSES OF ARRIVING AT THE QUANTUM OF DISALLOWANCE UNDER THE SAID RULE]. HE OUGHT TO HAVE APPRECIATED, INTER-ALIA, THAT IN THE PECULIAR AND E MINENT FACTS OF THE APPELLANT'S CASE, THE LD. A.O. HAD GOT TO BE SATISFIED WITH THE APPELLANT'S C LAIM THAT IT HAD NOT INCURRED ANY ADMINISTRATIVE EXPENDITURE IN RELATION TO INCOME NO T FORMING PART OF ITS TOTAL INCOME AND THAT THEREFORE, THE LD. A.O. COULD NOT HAVE ASSUMED JURISDICTION U/S. 14A(2) TO MAKE ANY DISALLOWANCE ON THIS ACCOUNT. 4. IN LAW AND IN THE FACTS AND CIRCUMSTANCES OF THE APPELLANT'S CASE, THE LEARNED CIT(A) HAS GROSSLY ERRED IN SUSTAINING THE ACTION OF TREATING WHAT WAS NORMAL BUSINESS LOSS [SAUDAFER LOSS] AS SPECULATION LOSS TO THE EXT ENT OF RS. 21,38,061 [OUT OF RS. 38,40,074 SO TREATED BY THE LD. A.O.]. 5. IN LAW AND IN THE FACTS AND CIRCUMSTANCES OF TH E APPELLANT'S CASE, THE LEARNED CIT(A) HAS GROSSLY ERRED IN UPHOLDING THE DISALLOWA NCE OF DEDUCTION FOR RS. 2,76,213 (ACTUAL FIGURE OF DISALLOWANCE MADE BY LEARNED A.O IS RS. 2,72,613/-) ON THE GROUND THAT, THE EXPENDITURE HAVING BEEN INCURRED ON THE PURCHAS E OF MOBILE PHONES, WAS CAPITAL IN NATURE. 6. IN LAW AND IN THE FACTS AND CIRCUMSTANCES OF THE APPELLANT'S CASE, THE LEARNED CIT(A) HAS GROSSLY ERRED IN UPHOLDING THE LEARNED A . O.'S ACTION OF HOLDING THAT THE APPELLANT WAS REQUIRED TO DEDUCT TAX AT SOURCE U/S. 194J FROM MEMBERSHIP FEE AND OTHER CHARGES OF RS.2,29,9327-/ PAID TO RECOGNIZED STOCK EXCHANGES AND OF MAKING A DISALLOWANCE OF THE SAME U/S. 40(A)(IA) ON THE GROU ND THAT THE APPELLANT HAD NOT DEDUCTED TDS THEREFROM. 7. IN LAW AND IN THE FACTS AND CIRCUMSTANCES OF THE APPELLANT'S CASE, THE LEARNED CIT(A) HAS GROSSLY ERRED IN UPHOLDING THE LEARNED A . O.'S ACTION OF HOLDING THAT THE APPELLANT WAS REQUIRED TO DEDUCT TAX AT SOURCE U/S. 194-1 FROM VSAT AND LEASE LINE CHARGES PAID TO RECOGNIZED STOCK EXCHANGES AND IN SUSTAININ G A DISALLOWANCE OF RS. 9,14,6197- U/S. 40(A)(IA) ON THE GROUND THAT THE APPELLANT HAD NOT DEDUCTED TDS THEREFROM (OUT OF RS. 37,46,013 DISALLOWED BY THE A. O. ON THIS ACCOUNT). 8. IN LAW AND IN THE FACTS AND CIRCUMSTANCES OF THE APPELLANT'S CASE, THE LEARNED CIT(A) HAS GROSSLY ERRED IN UPHOLDING THE DISALLOWA NCE OF DEDUCTION FOR RS. 26,910 ON ACCOUNT OF BROKERAGE ON THE GROUND THAT IT HAD BEEN PAID TO A SUB BROKER WHOSE REGISTRATION NUMBER COULD NOT BE PRODUCED BEFORE TH E LD. A.O. HE OUGHT TO HAVE APPRECIATED THAT EVEN IF IT WERE ASSUMED THAT THE S UB BROKER WAS NOT A REGISTERED SUB BROKER, AND FURTHER, THAT PAYMENT OF BROKERAGE TO H IM WAS IN VIOLATION OF THE SEBI RULES/ GUIDELINES, THAT COULD NOT ENTITLE THE LD. A.O. TO DISALLOW DEDUCTION FOR WHAT WAS A GENUINE BUSINESS EXPENDITURE, ACTUALLY INCURRED BY THE APPE LLANT, ESPECIALLY WHEN THE EXPLANATION BELOW SECTION 37(1) COULD NOT BE APPLIED THERETO. 9. IN LAW AND IN THE FACTS AND CIRCUMSTANCES OF THE APPELLANT'S CASE, THE LEARNED CIT(A) HAS GROSSLY ERRED IN UPHOLDING THE LEARNED A .O.'S ACTION OF HOLDING THAT THE APPELLANT'S LONG TERM GAIN/LOSS ON THE SALE OF SHAR ES OF THE BOMBAY STOCK EXCHANGE LTD. ALLOTTED TO IT IN FINANCIAL YEAR 2005-06 HAVE TO BE COMPUTED ON THE BASIS OF THE COST INFLATION INDEX PERTAINING TO THE FINANCIAL YEAR 2005-06 INST EAD OF ON THE BASIS OF THE COST INFLATION INDEX PERTAINING TO THE FINANCIAL YEARS 1995-96 AND 2000-01 DURING WHICH THE APPELLANT HAD ACQUIRED THE RESPECTIVE MEMBERSHIP CARDS OF THE BOMBAY STOCK EXCHANGE IN LIEU 40 ITA NOS. 413,445,268&318/AHD/2016 AND 446/AHD/2016 ( AY 2012-13) AYS: 2010-11, 2011-12, 2012-13 WHEREOF THE SHARES OF THE BOMBAY STOCK EXCHANGE LTD . IN QUESTION HAD BEEN ALLOTTED TO IT UPON DEMUTUALIZATION/CORPORATIZATION OF THE BOMBAY STOCK EXCHANGE. 10.1 IN LAW AND IN THE FACTS AND CIRCUMSTANCES OF T HE APPELLANT'S CASE, THE LEARNED CIT(A) HAS GROSSLY ERRED IN SUMMARILY DISMISSING TH E GROUND NO. 20 OF THE APPELLANT'S APPEAL READING AS UNDER:- '20.1 IN LAW AND IN THE FACTS AND CIRCUMSTANCES OF THE APPELLANT'S CASE, THE LEARNED ASSESSING OFFICER HAS GROSSLY ERRED IN LEVY ING INTEREST AMOUNTING TO RS.98,15,678 U/S. 234B. HE OUGHT TO HAVE APPRECIATE D, INTER ALIA, THAT QUITE APART FROM THE FACT THAT ALL THE ADDITIONS/DISALLOWANCES IN THE IMPUGNED ORDER WERE UNWARRANTED/UNJUSTIFIED, THEY WERE SUCH IN NATURE A S TO ATTRACT THE RATIO OF THE DECISION OF THE GUJARAT HIGH COURT IN BHARAT MACHIN ERY AND HARDWARE MART'S CASE (136 ITR 875) AND OF THE DECISION OF THE ITAT, DELH I BENCH IN HARYANA WAREHOUSING CORPORATION V. DCIT [252 ITR (A.T.) 34] WAS ATTRACTED AND IT WAS NOT OPEN TO HIM TO LEVY THE IMPUGNED INTEREST. THE APPELLANT CHALLENGES THE VERY LEVY OF THIS INTEREST ARISING FROM THOSE ADDITIONS/ DISALLOWANCES. 20.2 WITHOUT PREJUDICE TO THE FOREGOING, IN LAW AND IN THE FACTS AND CIRCUMSTANCES OF THE APPELLANT'S CASE, THE LEARNED ASSESSING OFFICER HAS GROSSLY ERRED IN FAILING TO APPRECIATE THAT EVEN ON HIS OWN UNTENABLE STAND, THE QUANTUM OF INTEREST U/S. 234B WAS REQUIRED TO BE ONLY RS.32,66 ,431 (AS AGAINST RS. 98,15,678 ERRONEOUSLY COMPUTED BY HIM, INTER ALIA, WITHOUT CO NSIDERING CREDIT FOR HUGE AMOUNT OF TDS AND ADVANCE TAX).' 10.2 HE OUGHT TO HAVE APPRECIATED, INTER-ALIA,: A) THAT THE APPELLANT HAVING CHALLENGED THE VERY L EVY OF INTEREST ON SUBSTANTIVE GROUNDS, ITS GROUND DESERVED TO BE CON SIDERED ON MERITS; B) THAT, WITHOUT PREJUDICE AND IN ANY CASE, HE OUG HT TO HAVE ISSUED APPROPRIATE DIRECTION TO THE LD. A.O. AS PRAYED FO R BY THE APPELLANT VIDE GROUND NO. 20.2. 11. IN LAW AND IN THE FACTS AND CIRCUMSTANCES OF TH E APPELLANT'S CASE, THE LEARNED CIT(A) HAS GROSSLY ERRED IN DISMISSING GROUND NO. 2 1 OF THE APPELLANT'S APPEAL BEFORE HIM CHALLENGING THE INITIATION OF PENALTY PROCEEDINGS U /S. 271(1)(C). HE OUGHT TO HAVE APPRECIATED, INTER ALIA, THAT IN THE PECULIAR FACTS AND CIRCUMSTANCES OF THE APPELLANT'S CASE, INITIATION OF PENALTY PROCEEDINGS FOR CONCEALMENT O F INCOME WAS NOT AT ALL WARRANTED AND THAT, THEREFORE, HE OUGHT TO HAVE ORDERED FOR THE C ANCELLATION OF THOSE PROCEEDINGS, THEREBY SAVING THE APPELLANT AS WELL AS THE DEPARTMENT FROM HAVING TO UNDERGO AVOIDABLE LITIGATION. 12. THE APPELLANT CRAVES LEAVE TO ADD, ALTER, AMEND AND/OR WITHDRAW ANY GROUND OR GROUNDS OF APPEAL EITHER BEFORE OR DURING THE COURS E OF HEARING OF THE APPEAL. 98. THE FIRST ISSUE RAISED BY THE ASSESSEE IN GROUN D NO. 2 IS THAT LEARNED CIT (A) ERRED IN HOLDING THE ADDITION OF RS. 8,678/ - IN PART OUT OF THE TOTAL ADDITION MADE BY THE AO ON ACCOUNT OF MISMATCH IN I TS/26AS. 41 ITA NOS. 413,445,268&318/AHD/2016 AND 446/AHD/2016 ( AY 2012-13) AYS: 2010-11, 2011-12, 2012-13 99. THE AO DURING THE ASSESSMENT PROCEEDINGS OBSERV ED CERTAIN DIFFERENCE IN THE AMOUNT OF INCOME SHOWN BETWEEN ITS/26AS VIZ- A-VIZ INCOME ACCOUNTED IN THE BOOKS OF ACCOUNTS OF THE ASSESSEE. SUCH DIFFERENCE WAS OF RS. 6,94,288/- WHICH WAS NOT SHOWN AS INCOME BY THE ASS ESSEE IN ITS BOOKS OF ACCOUNTS. ON QUESTION BY THE AO, THE ASSESSEE COULD NOT FURNISH ANY SUITABLE REPLY FOR RECONCILING SUCH DIFFERENCE. THUS THE AO IN THE ABSENCE OF ANY INFORMATION, TREATED SUCH DIFFERENCE AGGREGATING TO RS. 6,94,288/- AS INCOME AND ADDED TO THE TOTAL INCOME OF THE ASSESSEE. 100. AGGRIEVED ASSESSEE PREFERRED AN APPEAL TO THE LEARNED CIT (A) WHO DELETED THE ADDITION MADE BY THE AO IN PART BY OBSE RVING AS UNDER: THE ASSESSING OFFICER HAS MADE ADDITION ON THE GRO UND THAT APPELLANT HAS NOT OFFERED INCOME RECEIVED FROM FOLLOWING FOUR PARTIES: NAME OF TAX DEDUCTOR INCOME FROM WHICH TDS DEDUCTED MANISH KUMAR GOYEL 1,36,356 RAJYOG SHARE AND STOCK BROKERS LTD. 8,678 IL & FS SECURITIES SERVICES LTD. 45,484 INDIAN BANK 5,03,770 TOTAL 6,94,288 (II) THE ASSESSING OFFICER IN THE REMAND REPORT, AS REPRODUCED HEREIN ABOVE, HAS ACCEPTED APPELLANT'S EXPLANATION THAT INCOME FROM M ANISHKUMAR GOYEL AND IL&FS SECURITIES IS ALREADY OFFERED TO TAX HENCE ADDITION MADE BY ASSESSING OFFICER TO THE EXTENT OF RS. 1,82,240 (1,36,356 + 45,484) IS DELETED. (III) SO FAR AS ADDITION FOR RS.5,03,770 IS CONCERN ED, ASSESSING OFFICER HAS ACCEPTED THAT INCOME DISCLOSED BY APPELLANT IN RETURN OF INCOME I S MATCHING WITH PHYSICAL TDS CERTIFICATE ISSUED BY THE BANK, IT IS PERTINENT TO NOTE THAT BANK VIDE ITS DATED 10 TH APRIL, 2013 AND 11 TH APRIL, 2013 HAS ACCEPTED THE MISTAKE MADE BY THEM FOR UPLOADING DATA OF TDS TO NSDL AND EVEN CERTIFIED THAT INTEREST AS MENTIONED IN PHYSICAL TDS CERTIFICATE IS CORRECT. CONSIDERING THESE FACTS ADDITION MADE BY ASSESSING OFFICER FOR RS. 5,03,770 IS DELETED. (IV) SO FAR AS ADDITION OF RS. 8,678 IS CONCERNED. APPELLANT HAS CLAIMED THAT IT HAS NOT RECEIVED ANY INCOME FROM SUCH PARTY THOUGH IT IS RE FLECTED IN 26AS. THE APPELLANT HAS NOT SUBMITTED ANY EVIDENCES TO PROVE THIS CONTENTION HE NCE ADDITION TO THE EXTENT OF RS. 8,678 IS CONFIRMED. 42 ITA NOS. 413,445,268&318/AHD/2016 AND 446/AHD/2016 ( AY 2012-13) AYS: 2010-11, 2011-12, 2012-13 IN VIEW OF- FACTS DISCUSSED HEREIN, ADDITION MADE BY ASSESSING OFFICER IS RESTRICTED TO RS. 8,678 AND RELIEF OF 6,85,610 IS GRANTED. THU S, THIS GROUND OF APPEAL IS PARTLY ALLOWED. 101. BEING AGGRIEVED BY THE ORDER OF THE LEARNED CI T (A), THE ASSESSEE IS IN APPEAL BEFORE US. 102. THE LEARNED AR BEFORE US SUBMITTED THAT IT HAS NOT RECEIVED ANY INCOME FROM THE PARTY NAMELY M/S RAJYOG SHARE AND STOCKBRO KERS LTD FOR RS. 8,678/-. THEREFORE, NO ADDITION IS WARRANTED. 103. ON THE OTHER HAND, THE LEARNED DR VEHEMENTLY S UPPORTED THE ORDER OF THE AUTHORITIES BELOW. 104. WE HAVE HEARD THE RIVAL CONTENTIONS OF BOTH TH E PARTIES AND PERUSED THE MATERIALS AVAILABLE ON RECORD. THE ONUS LIES UPON T HE ASSESSEE TO JUSTIFY BASED ON THE DOCUMENTARY EVIDENCE THAT IT HAS NOT RECEIVE D ANY INCOME FROM M/S RAJYOG SHARE AND STOCKBROKERS LTD FOR RS. 8,678/- B UT THE ASSESSEE FAILED TO DISCHARGE ITS ONUS. THUS IN THE ABSENCE OF ANY DOCU MENTARY EVIDENCE, WE DO NOT FIND ANY INFIRMITY IN THE ORDER OF THE AUTHORIT IES BELOW. HENCE, THE GROUND OF APPEAL OF THE ASSESSEE IS DISMISSED. 105. THE SECOND ISSUE RAISED BY THE ASSESSEE IS THA T THE LEARNED CIT-A ERRED IN UPHOLDING THE ADDITION IN PART AMOUNTING TO RS. 4,20,414/- UNDER THE PROVISIONS OF SECTION 14A READ WITH RULE 8D(2)(III) OF INCOME TAX RULE. 106. THE ISSUE RAISED BY THE ASSESSEE HAS ALREADY B EEN DISPOSED OF BY US ALONG WITH THE APPEAL FILED BY THE REVENUE BEARING ITA NO. 413/AHD/2016 VIDE PARAGRAPH NUMBER 40-42 OF THIS ORDER. AS SUCH, THE GROUND OF APPEAL OF THE ASSESSEE HAS ALREADY BEEN DISMISSED. FOR THE DE TAILED DISCUSSION, PLEASE 43 ITA NOS. 413,445,268&318/AHD/2016 AND 446/AHD/2016 ( AY 2012-13) AYS: 2010-11, 2011-12, 2012-13 REFER THE RELEVANT PARAGRAPH. HENCE, THE GROUND OF APPEAL OF THE ASSESSEE IS DISMISSED. 107. THE NEXT ISSUE RAISED BY THE ASSESSEE IN GROUN D NO. 4 IS THAT THE LEARNED CIT-A ERRED IN CONFIRMING THE ADDITION IN PART OF R S. 21,38,061/- OUT OF THE TOTAL ADDITION MADE BY THE AO AT RS. 38,40,074/- BY TREATING THE NORMAL BUSINESS LOSS AS SPECULATION LOSS. 108. THE ISSUE RAISED BY THE ASSESSEE HAS ALREADY B EEN DISPOSED OF BY US ALONG WITH THE APPEAL FILED BY THE REVENUE BEARING ITA NO. 413/AHD/2016 VIDE PARAGRAPH NUMBER 74 & 75 OF THIS ORDER. AS SUC H, THE GROUND OF APPEAL OF THE ASSESSEE HAS ALREADY BEEN ALLOWED. FOR THE DETA ILED DISCUSSION, PLEASE REFER THE RELEVANT PARAGRAPH. HENCE, THE GROUND OF APPEAL OF THE ASSESSEE IS ALLOWED. 109. THE NEXT ISSUE RAISED BY THE ASSESSEE IN GROUN D NO. 5 IS THAT THE LEARNED CIT (A) ERRED IN HOLDING THAT THE EXPENSES INCURRED ON THE PURCHASE OF THE MOBILES ARE IN THE NATURE OF CAPITAL EXPENDITURE. 110. THE ASSESSEE IN THE YEAR UNDER CONSIDERATION H AS CLAIMED THE EXPENSES INCURRED BY IT ON THE PURCHASE OF THE MOBILE SET AS REVENUE IN NATURE ON THE REASONING THAT THERE WAS NO ENDURING BENEFIT ACCRUI NG TO IT OUT OF SUCH EXPENSES. HOWEVER THE AO DISREGARDED THE CONTENTION OF THE ASSESSEE BY OBSERVING THAT THE MOBILE PHONE FALLS UNDER THE CAT EGORY OF EQUIPMENT AS PROVIDED UNDER SECTION 32 OF THE ACT. ACCORDINGLY T HE AO TREATED THE SAME AS CAPITAL IN NATURE AND DISALLOWED THE SAME BY ADDING TO THE TOTAL INCOME OF THE ASSESSEE. 111. AGGRIEVED ASSESSEE PREFERRED AN APPEAL TO THE LEARNED CIT (A). 44 ITA NOS. 413,445,268&318/AHD/2016 AND 446/AHD/2016 ( AY 2012-13) AYS: 2010-11, 2011-12, 2012-13 112. THE ASSESSEE BEFORE THE LEARNED CIT (A) SUBMIT TED THAT THERE IS FAST CHANGE IN THE TECHNOLOGY IN THE FIELD OF MOBILES. T HEREFORE, THE SAME SHOULD BE TREATED AS REVENUE EXPENDITURE. HOWEVER, THE LEA RNED CIT (A) DISREGARDED THE CONTENTION OF THE ASSESSEE BY OBSERVING AS UNDE R: 15.3 I HAVE CAREFULLY CONSIDERED THE ASSESSMENT OR DER AND SUBMISSION FILED BY APPELLANT. THE ASSESSING OFFICER HAS OBSERVED THAT APPELLANT H AS CLAIMED PURCHASE OF CELL PHONES AS REVENUE EXPENDITURE BUT SUCH CLAIM CANNOT BE ALLOWE D AS IT FALLS UNDER THE CATEGORY OF EQUIPMENT AND IT DEFINITELY HAS ENDURING BENEFIT. T HUS ASSESSING OFFICER HAS MADE DISALLOWANCE OF RS 2,76,213. ON THE OTHER HAND, APP ELLANT HAS ARGUED THAT DUE TO RADICAL CHANGES IN TECHNOLOGY, CELL PHONES HAVE NO ENDURING BENEFITS AND SAME IS REQUIRED TO BE ALLOWED AS REVENUE EXPENDITURE. IT WAS ALTERNATIVEL Y ARGUED THAT DEPRECIATION ON SUCH CAPITAL EXPENDITURE NEED TO BE ALLOWED. ON CAREFUL CONSIDERATION OF ENTIRE FACTS IT IS OBS ERVED THAT CELL PHONES PURCHASED BY APPELLANT ARE HAVING ENDUING BENEFITS AND SAME FALL S UNDER THE BLOCK OF PLANT & MACHINERY WHICH COVERS ALL THE OFFICE EQUIPMENT. T HE APPELLANT HAS NOT ESTABLISHED HOW SUCH EXPENDITURE ARE ALLOWABLE AS REVENUE EXPENDITU RE U/S 37 OF THE ACT HENCE IT IS HELD THAT ASSESSING OFFICER IS JUSTIFIED IN TREATING THE EXPE NDITURE AS CAPITAL EXPENDITURE. HOWEVER, WHILE PASSING THE ASSESSMENT ORDER, ASSESSING OFFIC ER HAS NOT ALLOWED DEPRECIATION ON ABOVE EXPENDITURE TREATED AS CAPITAL EXPENDITURE HE NCE HE IS DIRECTED TO ALLOW DEPRECIATION ON CELL PHONES TREATED AS CAPITAL EXPENDITURE. THIS GROUND OF APPEAL IS PARTLY ALLOWED. 113. BEING AGGRIEVED BY THE ORDER OF THE LEARNED CI T (A) THE ASSESSEE IS IN APPEAL BEFORE US. 114. THE LEARNED AR BEFORE US REITERATED THE SUBMIS SION AS MADE BEFORE THE LEARNED CIT (A) WHEREAS THE LEARNED DR VEHEMENTLY S UPPORTED THE ORDER OF THE AUTHORITIES BELOW. 115. WE HAVE HEARD THE RIVAL CONTENTIONS AND PERUSE D THE MATERIALS AVAILABLE ON RECORD. FROM THE PRECEDING DISCUSSION, WE NOTE T HAT THE ASSESSEE HAS TREATED THE EXPENSES INCURRED BY IT ON THE PURCHASE OF MOBI LE EXPENSES AS REVENUE IN NATURE WHEREAS THE REVENUE HAS TREATED THE SAME AS CAPITAL IN NATURE. ACCORDINGLY, THE CLAIM OF THE ASSESSEE WAS DISALLOW ED BUT AFTER ALLOWING THE DEPRECIATION AT THE RATE OF 15% TREATING THE SAME A S PLANT AND MACHINERY. 45 ITA NOS. 413,445,268&318/AHD/2016 AND 446/AHD/2016 ( AY 2012-13) AYS: 2010-11, 2011-12, 2012-13 A CAPITAL EXPENDITURE REPRESENTS THE EXPENSES INCUR RED BY THE PERSON TO PURCHASE, UPGRADE, OR EXTEND THE LIFE OF AN ASSET. CAPITAL EXPENDITURES ARE DESIGNED TO BE USED TO INVEST IN THE LONG-TERM FINA NCIAL HEALTH OF THE COMPANY. CAPITAL EXPENDITURES ARE A LONG-TERM INVESTMENT, ME ANING THEREBY THE ASSETS PURCHASED HAVE A USEFUL LIFE OF MORE THAN A YEAR. T YPES OF CAPITAL EXPENDITURES CAN INCLUDE PURCHASES OF PROPERTY, EQUIPMENT, LAND, COMPUTERS, FURNITURE, AND SOFTWARE. 115.1 CAPITAL EXPENDITURES ARE OFTEN EMPLOYED TO IMPROVE OPERATIONAL EFFICIENCY, INCREASE REVENUE IN THE LONG TERM, OR M AKE IMPROVEMENTS TO THE EXISTING ASSETS OF A COMPANY. CAPITAL SPENDING IS D IFFERENT FROM OTHER TYPES OF SPENDING THAT FOCUS ON SHORT-TERM OPERATING EXPENSE S, SUCH AS OVERHEAD EXPENSES OR PAYMENTS TO SUPPLIERS AND CREDITORS. 115.2 DEPRECIATION IS USED TO EXPENSE THE FIXED A SSET OVER ITS USEFUL LIFE. DEPRECIATION HELPS TO SPREAD OUT THE COST OF AN ASS ET OVER MANY YEARS INSTEAD OF EXPENSING THE TOTAL COST IN THE YEAR IT WAS PURC HASED. DEPRECIATION ALLOWS COMPANIES TO EARN REVENUE FROM THE ASSET WHILE EXPE NSING A PORTION OF ITS COST EACH YEAR UNTIL THE ASSET'S USEFUL LIFE HAS ENDED. 115.3 FOR EXAMPLE, IF AN ASSET COSTS $10,000 AND IS EXPECTED TO BE IN USE FOR FIVE YEARS, $2,000 MAY BE CHARGED TO DEPRECIATION I N EACH YEAR OVER THE NEXT FIVE YEARS. THERE ARE SEVERAL METHODS USED TO CALCU LATE DEPRECIATION. THE FULL VALUE OF COSTS THAT ARE NOT CAPITAL EXPENDITURES MU ST BE DEDUCTED IN THE YEAR THEY ARE INCURRED. 46 ITA NOS. 413,445,268&318/AHD/2016 AND 446/AHD/2016 ( AY 2012-13) AYS: 2010-11, 2011-12, 2012-13 115.4 IN THE LIGHT OF THE ABOVE STATED DISCUSSION , WE HAVE TO SEE WHETHER THE EXPENDITURE INCURRED ON THE PURCHASE OF THE MOBILE PHONES REPRESENTS THE CAPITAL EXPENDITURE AS DISCUSSED ABOVE. IN THIS REG ARD WE NOTE THAT MOBILE OBSOLESCENCE IS A WELL-KNOWN FACT. THE MOBILE PHONE S BECOME OBSOLETE EVERY YEAR. THE OLD MODELS BECOME OUTDATED, VERY, VERY QU ICKLY. CONSIDERING THAT THE MOBILE PHONES BECOME OUTDATED SOON, AND THEIR V ALUE ERODES FAST, IT CANNOT BE TREATED AS CAPITAL EXPENDITURE. 115.5 BESIDES THE ABOVE, WE ALSO FIND THAT SECTIO N 32 OF THE ACT PROVIDES FOR DEPRECIATION IN RESPECT OF BUILDINGS, MACHINERY, PL ANT OR FURNITURE OWNED BY AN ASSESSEE AND USED FOR THE PURPOSES OF THE BUSINESS OR PROFESSION. UNDER THIS SECTION, FOR GETTING DEPRECIATION, THE FOLLOWING TW O CONDITIONS SHOULD BE SATISFIED: (I) THE ASSET IN QUESTION SHOULD BE OWNED BY THE ASSESS EE; AND (II) THE ASSET SHOULD BE USED FOR THE PURPOSES OF THE BU SINESS OR PROFESSION CARRIED ON BY THE ASSESSEE. 115.6. UPON SATISFACTION OF THE ABOVE CONDITIONS , THE NEXT STEP COMES FOR CALCULATING THE RATE OF DEPRECIATION FOR WHICH WE N EED TO REFER THE RULE 5 OF INCOME TAX RULES WHICH READS AS UNDER: 87 [ DEPRECIATION 88 . 5. (1) SUBJECT TO THE PROVISIONS OF SUB-RULE (2), THE ALLOWANCE UNDER CLAUSE (II) OF SUB- SECTION (1) OF SECTION 32 IN RESPECT OF DEPREC IATION OF ANY BLOCK OF ASSETS SHALL BE CALCULATED AT THE PERCENTAGES SPECIFIED IN THE S ECOND COLUMN OF THE TABLE IN APPENDIX I TO THESE RULES ON THE WRITTEN DOWN VALUE OF SUCH BLOCK OF ASSETS AS ARE USED FOR THE PURPOSES OF THE BUSINESS OR PROFESSION OF THE ASSESSEE AT ANY TIME DURING THE PREVIOUS YEAR: 47 ITA NOS. 413,445,268&318/AHD/2016 AND 446/AHD/2016 ( AY 2012-13) AYS: 2010-11, 2011-12, 2012-13 115.7. NOW TO DETERMINE THE RATE OF DEPRECIATION WE NEED TO REFER THE APPENDIX-1 OF THE ACT AS APPLICABLE TO THE MOBILE P HONES. HOWEVER, ON PERUSAL OF THE APPENDIX-1, WE FIND NO ENTRY FOR THE RATE AP PLICABLE TO THE MOBILE PHONES. HOWEVER, THE REVENUE HAS TREATED THE MOBILE PHONES AS PART OF THE PLANT AND MACHINERY AND ACCORDINGLY IT ALLOWED THE DEPRECIATION THEREON AT THE RATE OF 15%. NOW THE QUESTION ARISES WHETHER THE MO BILE PHONES ARE MACHINERY. THE WORD 'PLANT'' ACCORDING TO SECTION 4 3(3) INCLUDES SHIPS, VEHICLES, BOATS, SCIENTIFIC APPARATUS AND SURGICAL EQUIPMENT. NOWHERE, DOES IT SPECIFY MOBILE PHONES. OF COURSE, IT MAY BE ARGUED THAT 'PLANT' IS AN INCLUSIVE DEFINITION, NOT AN EXHAUSTIVE ONE. BUT, THEN PLANT WOULD INCLUDE ANYTHING WHICH CAN BE COMPREHENDED WITHIN IT'S ORDINARY MEAN ING. NO ONE WOULD ORDINARILY CONSIDER MOBILE PHONE TO BE A 'PLANT.' 115.8. WHEN WE COME TO THE SECOND PART, WHICH CAL LS MOBILE PHONE AS 'MACHINERY,' WHAT IS THE DEFINITION OF 'MACHINERY' IN INCOME-TAX ACT? WELL, THE WORD 'MACHINERY' ITSELF HAS NOT BEEN DEFINED IN THE ACT. SO, IT HAS NOWHERE BEEN DEFINED THAT MOBILE PHONE IS 'MACHINER Y.' ACCORDINGLY, IN THE ABSENCE OF ANY SPECIFIC ENTRY IN THE APPENDIX-1 OF THE ACT, WE ARE OF THE VIEW THE ASSESSEE IS ELIGIBLE FOR CLAIMING THE IMPUGNED EXPENSES AS REVENUE IN NATURE. HENCE, WE SET ASIDE THE FINDING OF THE LEAR NED CIT (A) AND DIRECT THE AO TO DELETE THE ADDITION MADE BY HIM. THUS THE GRO UND OF APPEAL OF THE ASSESSEE IS ALLOWED. 116. THE NEXT ISSUE RAISED BY THE ASSESSEE IN GROUN D NO. 6 IS THAT THE LEARNED CIT (A) ERRED IN UPHOLDING THE DISALLOWANCE OF RS. 2,29,932/- REPRESENTING THE 48 ITA NOS. 413,445,268&318/AHD/2016 AND 446/AHD/2016 ( AY 2012-13) AYS: 2010-11, 2011-12, 2012-13 PAYMENT MADE TO THE STOCK EXCHANGE ON ACCOUNT OF NO N-DEDUCTION OF TDS UNDER SECTION 194J OF THE ACT. 117. THE ASSESSEE DURING THE ASSESSMENT PROCEEDINGS SUBMITTED THAT IT HAS INCURRED AN EXPENSE OF RS. 2,29,932/- TOWARDS THE M EMBERSHIP FEES PAID TO THE STOCK EXCHANGES. AS PER THE ASSESSEE SUCH MEMBERSHI P SUBSCRIPTION IS NOT A PAYMENT IN THE NATURE OF TECHNICAL/PROFESSIONAL SER VICES AND THEREFORE THE SAME IS NOT SUBJECT TO THE TDS UNDER THE PROVISIONS OF S ECTION 194J OF THE ACT. 117.1 HOWEVER, THE AO OBSERVED THAT THE STOCK EXCH ANGES ARE PROVIDING A PLATFORM TO ITS MEMBERS FOR CARRYING OUT SALE PURCH ASE OF THE SECURITIES/DERIVATIVES THROUGH THE SCREEN BASED SYS TEM. UNDER THIS SYSTEM, THE BUYERS OF THE SECURITIES/DERIVATIVES ARE ABLE TO FI ND OUT THE PROSPECTIVE SELLER AND VICE VERSA. THE STOCK EXCHANGES TO PROVIDE SUCH SERVICES CHARGES VARIOUS FEES SUCH AS LISTING FEES, ADMISSION FEES, ARBITRAT ION FEES AND TRANSACTION CHARGES. ACCORDINGLY, THE AO WAS OF THE VIEW THAT S UCH MEMBERSHIP SUBSCRIPTION AND TRANSACTION CHARGES INCURRED BY TH E ASSESSEE ARE SUBJECT TO THE PROVISIONS OF TDS UNDER SECTION 194J OF THE ACT. BU T THE ASSESSEE FAILED TO DO SO, THEREFORE THE AO DISALLOWED THE SAME AND ADDED TO THE TOTAL INCOME OF THE ASSESSEE. 118. ON APPEAL, THE LEARNED CIT(A) CONFIRMED THE OR DER OF THE AO BY OBSERVING AS UNDER: (I) SO FAR AS PAYMENT FOR DEPOSITORY TRANSACTIONS ARE CONCERNED, IT IS OBSERVED THAT CENTRAL GOVERNMENT HAS ISSUED NOTIFICATION ON 31 ST DECEMBER, 2012 WHEREIN IT IS STATED THAT SUCH CHARGES ARE NOT SUBJ ECT TO PROVISIONS OF TDS BUT NOTIFICATION IS APPLICABLE FROM 1 ST JANUARY, 2013 HENCE IT CANNOT HAVE RETROSPECTIVE EFFECT. CONSIDERING THESE FACTS, IT IS HELD THAT APPELLANT HAS FAILED TO DEDUCT TDS ON PAYMENT MADE TO HDFC BANK H ENCE DISALLOWANCE UNDER SECTION 40(A)(IA) IS REQUIRED TO BE UPHELD SU BJECT TO LEGAL ISSUE REGARDING APPLICABILITY OF FINANCE ACT, 2012, AS DI SCUSSED HEREIN UNDER. 49 ITA NOS. 413,445,268&318/AHD/2016 AND 446/AHD/2016 ( AY 2012-13) AYS: 2010-11, 2011-12, 2012-13 (II) SO FAR AS SUBSCRIPTION AND MEMBERSHIP FEES PAID TO EXCHANGE ARE CONCERNED, IT IS OBSERVED THAT SAME ARE PAID FOR OBTAINING VAR IOUS FACILITIES AS PROVIDED BY EXCHANGE FOR CARRYING OUT SCREEN BASED TRADING T RANSACTIONS ON BEHALF OF CLIENTS. THE EXCHANGES HAVE PROVIDED MANAGERIAL SE RVICES WHICH ARE IN NATURE OF TECHNICAL SERVICES AS MENTIONED IN SECTIO N 194J THE DECISION OF BOMBAY HIGH COURT RELIED UPON BY APPELLANT IS ON TH E ISSUE WHETHER PAYMENT5 OF LEASE-LINE CHARGES AND VSAT CHARGES ARE SUBJECT TO TDS UNDER SECTION 194J OF THE ACT OR NOT AND THEY ARE DEALING WITH PAYMENT REFERRED HEREINABOVE HENCE SAME CANNOT BE MADE APPLICABLE WH ILE ADJUDICATING PRESENT ISSUE. THUS, NON-DEDUCTION TDS WOULD LEAD TO DISALLOWANCE UNDER SECTION 40(A)(IA) SUBJECT TO LEGAL ISSUE REGARDING APP0LICABILITY OF FINANCE ACT, 2012, AS DISCUSSED HEREIN UNDER: (III) SO FAR AS DISALLOWANCE UNDER SECTION 40(A)(IA) FOR VSAT AND LEASE-LINE CHARGES ARE CONCERNED, MY PREDECESSOR CIT(APPEALS)- XVI VIDE HIS ORDER DATED 28 TH APRIL, 2011 FOR A.Y. 2008-09 HAS UPHELD THE DISALL OWANCE AND HELD AS UNDER: 10.3.1. I HAVE CONSIDERED THE SUBMISSION MADE BY THE APPELLANT AND OBSERVATION OF THE ASSESSING OFFICER. WITH RESPECT TO NSE LEASE LINE CHARGES OF RS.5,40,372/- NSC, VSAT CHARGES OF RS.14,56,083/ - LEASE LINE EXPENSES OF RS.12,54,523/- APART FROM WHAT THE ASSESSING OFFICE R HAS STATED ABOVE, THE MOST IMPORTANT THING IS THAT THE ASSESSEE HAS BEEN MAKING PAYMENT TO THE STOCK EXCHANGE IN RESPECT OF EACH AND EVERY TRANSAC TION MADE BY THE ASSESSEE CALLED TRANSACTION CHARGES IN ADDITION TO VSAT CHARGES AND LEASE THE CHARGES WHICH ARE QUARTERLY OR ANNUAL PAYMENTS MADE FOR THE USE OF EQUIPMENT WHICH CONSISTS OF LEASE LINE, DISH, SATEL LITE LINK, IDE BOX ETC. THESE CHARGES ARE DEPENDENT UPON THE BANDWIDTH TAKE N BY THE APPELLANT AND NOT ON THE TRANSACTIONS MADE BY THE APPELLANT FOR T HE PURCHASE AND SALE OF SHARES. OVER AND ABOVE, THESE QUARTERLY/ANNUAL PAY MENTS THE APPELLANT IS MAKING PAYMENT FOR EACH AND EVERY TRANSACTION OF SH ARE PURCHASE AND ALSO OF SHARE SALE. THESE ARE TRANSACTION CHARGES. THE REFORE, THE VSAT CHARGES AND LEASE LINE CHARGES ARE DEFINITELY NOTHING BUT R ENT FOR THE VARIOUS EQUIPMENT WHICH DOES NOT BELONG TO THE ASSESSEE BUT BELONGS TO EITHER THE STOCK EXCHANGE OR THE SERVICE PROVIDER, WHO MANAGES THIS FACILITY. THESE PAYMENTS ARE EXACTLY SAME AS THOSE MADE BY THE SUBS CRIBER OF LANDLINE TELEPHONE WITH ZERO FREE CALL CHARGES. HE MAKES MO NTHLY PAYMENT OF FIXED AMOUNT AND USAGE PAYMENT FOR EVERY CALL MADE. SIMI LARLY, THE APPELLANT MAKES PAYMENT FOR EVERY TRANSACTION OF SALE AND EVE RY TRANSACTION OF PURCHASE AND ANOTHER CHARGES FIXED QUARTERLY OR ANN UAL PAYMENT WHETHER ANY PURCHASE/SALE TRANSACTION IS MADE OR NOT. THER EFORE, THESE PAYMENTS ARE NOTHING BUT RENTAL PAYMENTS ON WHICH TDS SHOULD HAVE BEEN DEDUCTED UNDER SE4CTION 194I. 50 ITA NOS. 413,445,268&318/AHD/2016 AND 446/AHD/2016 ( AY 2012-13) AYS: 2010-11, 2011-12, 2012-13 119. BEING AGGRIEVED BY THE ORDER OF THE LEARNED CI T (A), THE ASSESSEE IS IN APPEAL BEFORE US. 120. THE LEARNED AR BEFORE US SUBMITTED THAT THE ST OCK EXCHANGE IS NOT PROVIDING ANY SERVICE IN THE NATURE OF TECHNICAL SE RVICES. THEREFORE, THE PROVISIONS FOR THE TDS UNDER SECTION 194J OF THE AC T CANNOT BE APPLIED ON THE PAYMENT MADE BY THE ASSESSEE FOR THE MEMBERSHIP SUB SCRIPTION AND TRANSACTION CHARGES. 121. ON THE OTHER HAND, THE LEARNED DR VEHEMENTLY S UPPORTED THE ORDER OF THE AUTHORITIES BELOW. 122. WE HAVE HEARD THE RIVAL CONTENTIONS OF BOTH TH E PARTIES AND PERUSED THE MATERIALS AVAILABLE ON RECORD. FOR ATTRACTING THE P ROVISIONS OF TDS UNDER SECTION 194J OF THE ACT, THE PAYMENT AS 'FEES FOR T ECHNICAL SERVICES' SHOULD HAVE BEEN PAID IN CONSIDERATION OF RENDERING BY THE RECIPIENT OF PAYMENT OF ANY (A ) MANAGERIAL SERVICE, (B) TECHNICAL OR CONSU LTANCY SERVICES. THE STOCK EXCHANGES MERELY PROVIDE FACILITY TO ITS MEMBERS TO PURCHASE AND SELL SHARES, SECURITIES, ETC., WITHIN THE FRAMEWORK OF ITS BYE L AWS. IN THE EVENT OF DISPUTE IT PROVIDES FOR MECHANISM FOR SETTLEMENT OF DISPUTE. I T REGULATES CONDITIONS SUBJECT TO WHICH A PERSON CAN BE A MEMBER AND AS TO WHEN AND IN WHAT CIRCUMSTANCES MEMBERSHIP CAN BE TRANSFERRED, CANCEL LED, SUSPENDED, ETC. THE EXCHANGE PROVIDES A PLACE WHERE THE MEMBERS CAN MEE T AND TRANSACT BUSINESS. THE MEMBERSHIP SUBSCRIPTION /TRANSACTION FEE PAID I S ON THE BASIS OF VOLUME OF TRANSACTION EFFECTED BY A MEMBER. THE STOCK EXCHANG ES NEITHER RENDER ANY MANAGERIAL SERVICE NOR ANY TECHNICAL CONSULTANCY SE RVICE. THE TRANSACTION FEE 51 ITA NOS. 413,445,268&318/AHD/2016 AND 446/AHD/2016 ( AY 2012-13) AYS: 2010-11, 2011-12, 2012-13 IS NOT PAID IN CONSIDERATION OF ANY SERVICE PROVIDE D BY THE STOCK EXCHANGE. IT IS A PAYMENT FOR USE OF FACILITIES PROVIDED BY THE STO CK EXCHANGE AND SUCH FACILITIES ARE AVAILABLE FOR USE BY ANY MEMBER. THE PROVISIONS OF SECTION 194J WHICH CAST A BURDEN ON A PERSON TO DEDUCT TAX AT SO URCE AND TREAT HIM AS A DEFAULTER ON HIS FAILURE TO DEDUCT TAX AT SOURCE, N EED TO BE INTERPRETED STRICTLY AND IN THE ABSENCE OF A CLEAR OBLIGATION ON THE PAR T OF A PERSON, SPELT OUT IN UNAMBIGUOUS TERMS BY THE PROVISIONS OF SECTION 194J , READ WITH EXPLANATION 2 TO SECTION 9(1)(VII), SUCH OBLIGATION CANNOT BE I MPLIED OR LEFT TO THE IPSI DIXIT OF THE REVENUE AUTHORITIES. THEREFORE, TRANSA CTION FEE PAID COULD NOT BE SAID TO BE A FEE PAID IN CONSIDERATION OF THE STOCK EXCHANGE RENDERING ANY TECHNICAL SERVICES TO THE ASSESSEE. THE PROVISIONS OF SECTION 194J WERE, THUS, NOT ATTRACTED. IN HOLDING SO WE DRAW SUPPORT AND GU IDANCE FROM THE JUDGMENT HONBLE SUPREME COURT IN THE CASE OF CIT VERSUS KOT AK SECURITIES LTD REPORTED IN 67 TAXMANN.COM 356 WHEREIN IT WAS HELD AS UNDER: 9. THERE IS YET ANOTHER ASPECT OF THE MATTER WHICH , IN OUR CONSIDERED VIEW, WOULD REQUIRE A SPECIFIC NOTICE. THE SERVICE MADE AVAILABLE BY THE BOMBAY STOCK EXCHANGE [BSE ONLINE TRADING (BOLT) SYSTEM] FOR WHICH THE CHARGES IN QUE STION HAD BEEN PAID BY THE APPELLANT ASSESSEE ARE COMMON SERVICES THAT EVERY MEMBER OF T HE STOCK EXCHANGE IS NECESSARILY REQUIRED TO AVAIL OF TO CARRY OUT TRADING IN SECURI TIES IN THE STOCK EXCHANGE. THE VIEW TAKEN BY THE HIGH COURT THAT A MEMBER OF THE STOCK EXCHAN GE HAS AN OPTION OF TRADING THROUGH AN ALTERNATIVE MODE IS NOT CORRECT. A MEMBER WHO WANTS TO CONDUCT HIS DAILY BUSINESS IN THE STOCK EXCHANGE HAS NO OPTION BUT TO AVAIL OF SUCH S ERVICES. EACH AND EVERY TRANSACTION BY A MEMBER INVOLVES THE USE OF THE SERVICES PROVIDED BY THE STOCK EXCHANGE FOR WHICH A MEMBER IS COMPULSORILY REQUIRED TO PAY AN ADDITIONA L CHARGE (BASED ON THE TRANSACTION VALUE) OVER AND ABOVE THE CHARGES FOR THE MEMBERSHI P IN THE STOCK EXCHANGE. THE ABOVE FEATURES OF THE SERVICES PROVIDED BY THE STOCK EXCH ANGE WOULD MAKE THE SAME A KIND OF A FACILITY PROVIDED BY THE STOCK EXCHANGE FOR TRANSAC TING BUSINESS RATHER THAN A TECHNICAL SERVICE PROVIDED TO ONE OR A SECTION OF THE MEMBERS OF THE STOCK EXCHANGE TO DEAL WITH SPECIAL SITUATIONS FACED BY SUCH A MEMBER(S) OR THE SPECIAL NEEDS OF SUCH MEMBER(S) IN THE CONDUCT OF BUSINESS IN THE STOCK EXCHANGE. IN OTHER WORDS, THERE IS NO EXCLUSIVITY TO THE SERVICES RENDERED BY THE STOCK EXCHANGE AND EACH AN D EVERY MEMBER HAS TO NECESSARILY AVAIL OF SUCH SERVICES IN THE NORMAL COURSE OF TRAD ING IN SECURITIES IN THE STOCK EXCHANGE. SUCH SERVICES, THEREFORE, WOULD UNDOUBTEDLY BE APPR OPRIATE TO BE TERMED AS FACILITIES PROVIDED BY THE STOCK EXCHANGE ON PAYMENT AND DOES NOT AMOUNT TO TECHNICAL SERVICES PROVIDED BY THE STOCK EXCHANGE, NOT BEING SERVICES SPECIFICALLY SOUGHT FOR BY THE USER OR THE CONSUMER. IT IS THE AFORESAID LATTER FEATURE OF A S ERVICE RENDERED WHICH IS THE ESSENTIAL 52 ITA NOS. 413,445,268&318/AHD/2016 AND 446/AHD/2016 ( AY 2012-13) AYS: 2010-11, 2011-12, 2012-13 HALLMARK OF THE EXPRESSION TECHNICAL SERVICES AS APPEARING IN EXPLANATION 2 TO SECTION 9(1)(VII) OF THE ACT. 10. FOR THE AFORESAID REASONS, WE HOLD THAT THE VIE W TAKEN BY THE BOMBAY HIGH COURT THAT THE TRANSACTION CHARGES PAID TO THE BOMBAY STOCK EX CHANGE BY ITS MEMBERS ARE FOR 'TECHNICAL SERVICES' RENDERED IS NOT AN APPROPRIATE VIEW. SUCH CHARGES, REALLY, ARE IN THE NATURE OF PAYMENTS MADE FOR FACILITIES PROVIDED BY THE STOCK EXCHANGE. NO TDS ON SUCH PAYMENTS WOULD, THEREFORE, BE DEDUCTIBLE UNDER SECT ION 194J OF THE ACT. IN VIEW OF THE ABOVE WE HOLD THAT THERE WAS NO OBL IGATION ON THE PART OF THE ASSESSEE TO DEDUCT TAX AT SOURCE. CONSEQUENTLY, THE PROVISIONS OF SECTION 40(A)( IA) WERE ALSO NOT ATTRACTED AND, THEREFORE, THE DISALLOWANCE MADE WAS TO BE DELETED. HENCE THE GROUND OF APPEAL OF THE ASSES SEE IS ALLOWED. 123. THE NEXT ISSUE RAISED BY THE ASSESSEE IS THAT THE LEARNED CIT-A ERRED IN PARTLY CONFIRMING THE DISALLOWANCE MADE BY THE AO O N THE PAYMENT MADE TO THE STOCK EXCHANGE FOR RS. 9,14,619/-ON ACCOUNT OF VSAT AND LEASE LINE CHARGES. 124. THE AO DURING THE YEAR UNDER CONSIDERATION FOU ND THAT THE ASSESSEE HAS PAID VSAT AND LEASE LINE CHARGES AMOUNTING TO RS. 3 7,46,013/- WITHOUT DEDUCTING THE TDS UNDER THE PROVISIONS OF SECTION 1 94-I OF THE ACT. ACCORDINGLY, THE AO DISALLOWED THE SAME AND ADDED T O THE TOTAL INCOME OF THE ASSESSEE. ON APPEAL, THE LEARNED CIT (A) PARTLY CONFIRMED TH E ORDER OF THE AO. 125. BEING AGGRIEVED BY THE ORDER OF THE LEARNED CI T-A THE ASSESSEE IS IN APPEAL BEFORE US. 126. THE LEARNED AR BEFORE US SUBMITTED THAT THE PA YMENT TO THE STOCK EXCHANGE TOWARDS THE VSAT CHARGES AND LEASE LINE CH ARGES ARE NOT SUBJECT TO 53 ITA NOS. 413,445,268&318/AHD/2016 AND 446/AHD/2016 ( AY 2012-13) AYS: 2010-11, 2011-12, 2012-13 THE PROVISIONS OF TDS UNDER SECTION 194-I OF THE AC T AS THERE IS NO ELEMENT OF INCOME RATHER IT REPRESENTS THE REIMBURSEMENT OF EX PENSES. 127. ON THE OTHER HAND, THE LEARNED DR VEHEMENTLY S UPPORTED THE ORDER OF THE AUTHORITIES BELOW. 128. WE HAVE HEARD THE RIVAL CONTENTIONS OF BOTH TH E PARTIES AND PERUSED THE MATERIALS AVAILABLE ON RECORD. THE ISSUE FOR DEDUCT ING THE TDS ON THE PAYMENT MADE TO THE STOCK EXCHANGE ON ACCOUNT OF VSAT CHARG ES AND LEASE LINE CHARGES IS NO LONGER RES INTEGRA BY VIRTUE OF THE O RDER OF THE ITAT MUMBAI IN THE CASE OF DESTIMONEY SECURITIES PRIVATE LTD VS. I TO IN ITA NO. 4106 /MUM/2014, AFTER RELYING THE JUDGMENT OF THE HONBL E BOMBAY HIGH COURT, WHEREIN IT WAS HELD AS UNDER: 12. WE NOW TAKE UP THE ISSUE AS REGARDS THE LIABIL ITY OF THE ASSESSEE TO DEDUCT TAX AT SOURCE ON PAYMENTS TOWARDS LEASE LINE CHARGES. WE FIND THA T THE ISSUE INVOLVED HEREIN IS NO MORE RES INTEGRA, AS THE SAME IS SQUARELY COVERED IN FAV OUR OF THE ASSESSEE BY THE JUDGMENT OF THE HONBLE HIGH COURT OF BOMBAY IN THE CASE OF:- (I) I NCOME TAX COMMISSIONER, MUMBAI CITY-4 VS. ANGEL CAPITAL & DEBIT MARKET LTD. (ITA ( L) NO. 475 OF 2011, DATED 28.07.2011)(BOM) (II) CIT-4, VS. M/S. THE STOCK AND BOND TRADING COMPANY LTD. (ITA NO. 4177 OF 2010, DATED 14.10.2011)(BOM). WE FIND THAT THE HONBLE JURISDICTIONAL HIGH COURT IN THE AFORESAID JUDGMENTS HAD CLEARLY HELD THAT VS AT AND LEASE LINE CHARGES PAID BY THE ASSESSEE TO STOCK EXCHANGE ARE MERELY IN THE NATURE OF REIMBURSEMENT OF THE CHARGES PAID/PAYABLE BY THE STOCK EXCHANGE TO THE DEPARTMEN T OF THE TELECOMMUNICATION, AND THUS IN THE ABSENCE OF ANY ELEMENT OF INCOME INVOLVED IN TH E SAID PAYMENTS, THE ISSUE AS REGARDS DEDUCTION OF TAX AT SOURCE ON THE SAME DOES NOT ARI SE AT ALL. WE ARE OF THE CONSIDERED VIEW THAT IN THE BACKDROP OF THE AFORESAID JUDGMENT OF T HE HONBLE JURISDICTIONAL HIGH COURT, THE ORDER OF THE CIT(A) TREATING THE ASSESSEE AS BEING IN DEFAULT U/S. 201(1)/201(1A) IN RESPECT OF FAILURE TO DEDUCT TAX AT SOURCE AS REGARDS THE P AYMENTS MADE TOWARDS LEASE LINE CHARGES, CANNOT BE SUSTAINED, AND IS THUS SET ASIDE. THE GRO UND OF APPEAL NO. 2 RAISED BY THE ASSESSEE BEFORE US IS ALLOWED. 128.1 IN VIEW OF THE ABOVE, WE HOLD THAT THE ASSESS EE WAS NOT SUBJECT TO THE PROVISIONS OF TDS UNDER SECTION 194-I OF THE ACT AS ALLEGED BY THE AUTHORITIES BELOW. ACCORDINGLY NO DISALLOWANCE ON ACCOUNT OF NO N-DEDUCTION OF TDS IS WARRANTED. 54 ITA NOS. 413,445,268&318/AHD/2016 AND 446/AHD/2016 ( AY 2012-13) AYS: 2010-11, 2011-12, 2012-13 129. BEFORE PARTING, IT IS ALSO IMPORTANT TO NOTE T HAT THE ITAT IN THE OWN CASE OF THE ASSESSEE FOR THE ASSESSMENT YEAR 2008-09 IN ITA NO. 1718/AHD/2011 HAS SET ASIDE THE IDENTICAL ISSUE TO THE FILE OF TH E AO FOR FRESH ADJUDICATION AFTER VERIFYING WHETHER PAYEES HAVE INCLUDED THE AM OUNT RECEIVED FROM THE ASSESSEE IN THEIR INCOME TAX RETURN. HOWEVER IN THA T ORDER, THERE WAS NO WHISPER ABOUT THE TRIBUNAL ORDER AS DISCUSSED ABOVE IN THE CASE OF DESTIMONEY SECURITIES PRIVATE LTD VERSUS ITO IN ITA NO. 4106 / MUM/2014, WHICH WAS DECIDED IN FAVOUR OF THE ASSESSEE AFTER PLACING REL IANCE ON THE ORDER OF BOMBAY HIGH COURT AS DISCUSSED HERE IN ABOVE. THUS THE ISS UE ON HAND ON MERIT HAS BEEN DECIDED BY A HIGHER FORUM IN FAVOUR OF ASSESSE E WHICH IS BINDING ON US. ACCORDINGLY, WE ARE NOT IMPRESSED WITH THE FINDING OF THE ITAT IN THE OWN CASE OF THE ASSESSEE AND ACCORDINGLY, THE PRINCIPLE S LAID DOWN BY THE ITAT IN ITS OWN CASE IN EARLIER YEARS ARE NOT APPLICABLE. T HUS, THE GROUNDS OF APPEAL OF THE ASSESSEE IS ALLOWED. 130. THE NEXT ISSUE RAISED BY THE ASSESSEE IS THAT LEARNED CIT-A ERRED IN CONFIRMING THE ORDER OF THE AO BY SUSTAINING THE DI SALLOWANCE OF BROKERAGE EXPENSES OF RS. 26,910/- ON THE REASONING THAT THE REGISTRATION CERTIFICATE OF BROKER WAS NOT PRODUCED. 130.1 THE ASSESSEE DURING THE YEAR HAS CLAIMED BRO KERAGE EXPENSES OF RS. 26,910/- PAID TO THE BROKER NAMELY KIRIT MANSUKHLAL WHO WAS NOT REGISTERED WITH THE STOCK EXCHANGE. ACCORDINGLY, THE AO WAS OF THE VIEW THAT SUCH PAYMENT CANNOT BE ALLOWED AS DEDUCTION, MORE PARTIC ULARLY, WHEN THE ASSESSEE FAILED TO JUSTIFY THE SERVICES RENDERED BY SUCH UNR EGISTERED BROKER. THUS, THE AO DISALLOWED THE SAME AND ADDED TO THE TOTAL INCOM E OF THE ASSESSEE. 55 ITA NOS. 413,445,268&318/AHD/2016 AND 446/AHD/2016 ( AY 2012-13) AYS: 2010-11, 2011-12, 2012-13 131. AGGRIEVED ASSESSEE PREFERRED AN APPEAL TO THE LEARNED CIT (A). 132. THE ASSESSEE BEFORE THE LEARNED CIT (A) SUBMIT TED THAT IT HAS PROVIDED THE REGISTRATION NUMBERS OF ALL THE BROKERS EXCEPT IN ONE CASE ONLY WHO WAS PAID BROKERAGE BASED ON THE VOLUME OF THE BUSINESS CARRIED OUT THROUGH HIM. 132.1 HOWEVER, THE LEARNED CIT-A DISREGARDED THE C ONTENTION OF THE ASSESSEE BY OBSERVING THAT THE PAYMENT TO THE SUB-B ROKER HAS BEEN MADE IN VIOLATION OF SEBI RULE WHICH IS NOT ALLOWABLE DEDUC TION AS PROVIDED UNDER EXPLANATION 1 TO SECTION 37 OF THE ACT. AS SUCH THE RE IS NO RELATION BETWEEN THE QUANTUM OF BUSINESS GIVEN BY THE BROKER AO VIZ A VIZ THE VIOLATION OF THE PROVISIONS OF LAW. ACCORDINGLY THE LEARNED CIT (A) CONFIRMED THE ORDER OF THE AO. 133. BEING AGGRIEVED BY THE ORDER OF THE LEARNED CI T (A), THE ASSESSEE IS IN APPEAL BEFORE US. 134. THE LEARNED AR BEFORE US REITERATED THE SUBMIS SION AS MADE BEFORE THE LEARNED CIT (A) WHEREAS THE LEARNED DR VEHEMENTLY S UPPORTED THE ORDER OF THE AUTHORITIES BELOW. 135. WE HAVE HEARD THE RIVAL CONTENTIONS OF BOTH TH E PARTIES AND PERUSED THE MATERIALS AVAILABLE ON RECORD. THE AMOUNT OF BROKER AGE EXPENSES CAN BE CLAIMED AS DEDUCTION PROVIDED IT WAS INCURRED IN TH E COURSE OF THE BUSINESS. THE LEARNED AR AT THE TIME OF HEARING HAS NOT BROUG HT ANYTHING ON RECORD SUGGESTING THE NATURE OF SERVICES RENDERED BY SUCH BROKERAGE. 56 ITA NOS. 413,445,268&318/AHD/2016 AND 446/AHD/2016 ( AY 2012-13) AYS: 2010-11, 2011-12, 2012-13 135.1 BESIDES THE ABOVE, THE PAYMENT WAS MADE AGAIN ST THE VIOLATION OF THE RULES OF THE SEBI, THEREFORE WE ARE OF THE VIEW THA T PAYMENT IS NOT ELIGIBLE FOR DEDUCTION UNDER THE PROVISIONS OF SECTION 37 OF THE ACT. ACCORDINGLY WE UPHOLD THE FINDING OF THE LD. CIT (A). HENCE, THE G ROUND OF APPEAL OF THE ASSESSEE IS DISMISSED. 136. THE NEXT ISSUE RAISED BY THE ASSESSEE IN GROUN D NO. 9 IS THAT THE LEARNED CIT-A ERRED IN DIRECTING THE AO TO COMPUTE THE CAPI TAL GAIN ON THE BASIS OF COST INFLATION INDEX PERTAINING TO THE FINANCIAL 20 05-06 INSTEAD OF THE COST INFLATION INDEX PERTAINING TO THE YEARS IN WHICH TH E ASSETS IN QUESTION WERE ACQUIRED I.E. 1995-96 AND 2000-01. 137. THE ISSUE RAISED BY THE ASSESSEE HAS ALREADY B EEN DISPOSED OF BY US ALONG WITH THE APPEAL FILED BY THE REVENUE BEARING ITA NO. 413/AHD/2016 VIDE PARAGRAPH NUMBER 90 TO 95 OF THIS ORDER. AS SU CH, THE GROUND OF APPEAL OF THE ASSESSEE HAS ALREADY BEEN DISMISSED. FOR THE DE TAILED DISCUSSION, PLEASE REFER THE RELEVANT PARAGRAPH. HENCE, THE GROUND OF APPEAL OF THE ASSESSEE IS DISMISSED. 138. THE NEXT ISSUES RAISED BY THE ASSESSEE IN GROU ND NO. 10, 11 AND 12 ARE CONSEQUENTIAL, PREMATURE TO DECIDE OR GENERAL IN NA TURE. THEREFORE, WE DO NOT FIND ANY MERIT IN THE GROUNDS OF APPEAL. THEREFORE WE DISMISS THE SAME AS INFRUCTUOUS. 139. IN THE RESULT, THE APPEAL FILED BY THE ASSESSE E IS PARTLY ALLOWED. 57 ITA NOS. 413,445,268&318/AHD/2016 AND 446/AHD/2016 ( AY 2012-13) AYS: 2010-11, 2011-12, 2012-13 COMING TO ITA NO.445/AHD/2016(A.Y.2012-13) REVENUE S APPEAL:- 141. THE FIRST ISSUE RAISED BY THE REVENUE IS THAT THE LEARNED CIT-A ERRED IN DELETING THE ADDITION MADE BY THE AO AMOUNTING TO R S. 21,07,549/- BEING DEPRECIATION ALLOWANCE, INTEREST AND INSURANCE EXPE NSES RELATING TO VEHICLES THOUGH THE ASSESSEE WAS NOT THE OWNER OF SUCH VEHIC LES. 141.1 AT THE OUTSET, WE NOTE THAT THE IDENTICAL I SSUE HAS BEEN DECIDED BY US IN THE OWN CASE OF THE ASSESSEE IN ITA NO.413/AHD/2016 VIDE PARA NO. 18 TO 22 OF THIS ORDER AGAINST THE REVENUE. FOR THE DETAILED DISCUSSION PLEASE REFER THE RELEVANT PARAGRAPHS. RESPECTFULLY, FOLLOWING THE SA ME, WE DISMISS THE GROUNDS OF APPEAL OF THE REVENUE. 142. THE SECOND ISSUE RAISED BY THE REVENUE IS THAT LEARNED CIT-A ERRED IN DELETING THE ADDITION MADE BY THE AO IN PART AMOUNT ING TO RS. 15,10,965/- ON ACCOUNT OF INTEREST AND ADMINISTRATIVE EXPENSES UND ER THE PROVISIONS OF SECTION 14A R.W.R 8D OF INCOME TAX RULES. 143. THE AO DURING THE ASSESSMENT PROCEEDINGS FOUND THAT THE ASSESSEE HAS NOT PROVIDED THE BASIS FOR THE DISALLOWANCE OF THE EXPENSES OF RS.14,284/- AGAINST THE DIVIDEND INCOME OF RS.24,324/-. AS PER THE ASSESSEE, ITS OWN FUNDS EXCEEDS THE AMOUNT OF INVESTMENT AND THEREFORE NO B ORROWED FUND WAS UTILIZED FOR THE PURPOSE OF THE INVESTMENT. ACCORDINGLY, THE QUESTION OF DISALLOWING ANY INTEREST EXPENSE DOES NOT ARISE UNDER RULE 8D O F INCOME TAX RULE. 58 ITA NOS. 413,445,268&318/AHD/2016 AND 446/AHD/2016 ( AY 2012-13) AYS: 2010-11, 2011-12, 2012-13 143.1 SIMILARLY, THE ASSESSEE FURTHER CONTENDED TH AT THE DIVIDEND HAS BEEN DIRECTLY CREDITED IN THE BANK ACCOUNT AND THEREFORE IT HAS NOT INCURRED ANY ADMINISTRATIVE EXPENSES FOR THE EARNING OF SUCH DIV IDEND INCOME. 143.2 HOWEVER, THE AO DISREGARDED THE CONTENTION OF THE ASSESSEE BY OBSERVING THAT THE ASSESSEE HAS NOT FURNISHED ANY D AY TO DAY FUND FLOW STATEMENT SUGGESTING THAT THE BORROWED FUND HAS NOT BEEN UTILIZED IN THE IMPUGNED INVESTMENTS. ACCORDINGLY, THE AO INVOKED T HE PROVISIONS OF SECTION 14A R.W.R 8D AND MADE THE DISALLOWANCE AS U NDER: DIRECT EXPENSES NIL INTEREST EXPENSES 8,51,466.00 ADMINISTRATIVE EXPENSES 9,50,183.00 TOTAL 18,01,649.00 143.3 THUS, THE AO DISALLOWED A SUM OF RS. 18,01,64 9/- AND ADDED TO THE TOTAL INCOME OF THE ASSESSEE. 144. AGGRIEVED ASSESSEE PREFERRED AN APPEAL TO THE LEARNED CIT-A, WHO PARTLY ALLOWED THE APPEAL OF THE ASSESSEE. 145. BEING AGGRIEVED BY THE ORDER OF THE LEARNED CI T-A, BOTH THE REVENUE AND THE ASSESSEE ARE IN APPEAL BEFORE US. THE REVEN UE IS IN APPEAL AGAINST THE DELETION MADE BY THE AO FOR RS. 15,10,965/- WHEREAS THE ASSESSEE IS IN APPEAL AGAINST THE CONFIRMATION OF THE ADDITION OF RS. 2,7 6,400/-. THE GROUND BEARING NO. 2 IN AN APPEAL OF THE ASSESSEE IN ITA NO. 318/A HD/2016 READS AS UNDER: 2.1 IN LAW AND IN THE FACTS AND CIRCUMSTANCES OF T HE APPELLANTS CASE, THE LEARNED CIT(A) HAS GROSSLY ERRED IN SUSTAINING DISALLOWANCE OF RS. 2,76,400/- U/S. 14A READ WITH 59 ITA NOS. 413,445,268&318/AHD/2016 AND 446/AHD/2016 ( AY 2012-13) AYS: 2010-11, 2011-12, 2012-13 RULE 8D(2)9III) ON ACCOUNT OF ADMINISTRATIVE EXPENS ES [EVEN AS HE HAD DIRECTED THE QUANTUM OF THE DISALLOWANCE ON THIS ACCOUNT TO BE REDUCED F ROM RS. 2,90,466 TO RS. 2,76,400 AFTER APPRECIATING THAT THE APPELLANTS INVESTMENTS IN SH ARES OF ITS SUBSIDIARY WHICH HAD BEEN AMALGAMATED WITH THE APPELLANT, CANNOT BE TAKEN INT O ACCOUNT FOR THE PURPOSES OF ARRIVING AT THE QUANTUM OF DISALLOWANCE UNDER THE SAID RULE] . HE OUGHT TO HAVE APPRECIATED, INTER- ALIA, THAT IN THE PECULIAR AND EMINENT FACTS OF THE APPELLANTS CASE, THE LEARNED A.O. HAD GOT TO BE SATISFIED WITH THE APPELLANTS CLAIM THAT IT HAD NOT INCURRED ANY ADMINISTRATIVE EXPENDITURE IN RELATION TO INCOME NOT FORMING PART OF ITS TOTAL INCOME OTHER THAN EXPENDITURE OF RS. 14,284 FOR WHICH IT HAD MADE A S UO MOTU DISALLOWANCE AND THAT THEREFORE, THE LEARNED A.O. COULD NOT HAVE ASSUMED JURISDICTION U/S. 14A(2) TO MAKE ANY FURTHER DISALLOWANCE ON THIS ACCOUNT. 2.2 WITHOUT PREJUDICE TO THE FOREGOING, IN LAW AND IN THE FACTS AND CIRCUMSTANCES OF THE APPELLANTS CASE, THE LEARNED CIT(A) HAS GROSSLY ER RED IN FAILING TO APPRECIATE THAT IN ANY CASE, THE QUANTUM OF DISALLOWANCE U/S. 14A COULD NO T EXCEED THE QUANTUM OF INCOME NOT FORMING PART OF THE APPELLANTS TOTAL INCOME THIS Y EAR VIZ. RS. 24,324. 146. BOTH THE LEARNED DR AND THE AR BEFORE US VEHEM ENTLY SUPPORTED THE ORDER OF THE RESPECTIVE AUTHORITIES BELOW TO THE EX TENT FAVOURABLE TO THEM. 147. WE HAVE HEARD THE RIVAL CONTENTIONS OF BOTH TH E PARTIES AND PERUSED THE MATERIALS AVAILABLE ON RECORD. ADMITTEDLY, THE ASSE SSEE IN THE YEAR UNDER CONSIDERATION HAS EARN EXEMPTED INCOME AMOUNTING TO RS.24324/- ONLY. NOW THE ISSUE ARISES BEFORE US FOR THE ADJUDICATION WHE THER THE DISALLOWANCES MADE UNDER SECTION 14A R.W RULE 8D CAN EXCEED THE AMOUNT OF EXEMPTED INCOME EARNED DURING THE YEAR UNDER CONSIDERATION. AT THIS JUNCTURE, WE FIND IMPORTANT TO REFER THE PROVISIONS OF SECTION 14A OF THE ACT W HICH READS AS UNDER: EXPENDITURE INCURRED IN RELATION TO INCOME NOT INC LUDIBLE IN TOTAL INCOME. 14A. FOR THE PURPOSES OF COMPUTING THE TOTAL INCOME UNDER THIS CHAPTER, NO DEDUCTION SHALL BE ALLOWED IN RESPECT OF EXPENDITURE INCURRED88 BY THE ASSESSEE IN RELATION TO88 INCOME WHICH DOES NOT FORM PART OF THE TOTAL INCOME88 UNDE R THIS ACT.] THE ASSESSING OFFICER SHALL DETERMINE THE AMOUNT OF EXPENDITURE INCURRED IN RELATION TO SUCH INCOME WHICH DOES NOT FORM PART OF THE TOTAL I NCOME UNDER THIS ACT IN ACCORDANCE WITH SUCH METHOD AS MAY BE PRESCRIBED89, IF THE ASSESSIN G OFFICER, HAVING REGARD TO THE ACCOUNTS OF THE ASSESSEE, IS NOT SATISFIED WITH THE CORRECTNESS OF THE CLAIM OF THE ASSESSEE IN RESPECT OF SUCH EXPENDITURE IN RELATION TO INCOME W HICH DOES NOT FORM PART OF THE TOTAL INCOME UNDER THIS ACT. 60 ITA NOS. 413,445,268&318/AHD/2016 AND 446/AHD/2016 ( AY 2012-13) AYS: 2010-11, 2011-12, 2012-13 147.1 THE ABOVE PROVISION REQUIRES TO MAKE THE DIS ALLOWANCE OF THE EXPENSES IN RELATION TO THE INCOME WHICH DOES NOT FORM PART OF THE TOTAL INCOME UNDER THIS ACT. THE TERM USED UNDER SECTION 14A OF THE AC T AMOUNT OF EXPENDITURE INCURRED IN RELATION TO SUCH INCOME IMPLIES THAT T HE EXPENDITURE CANNOT EXCEED THE AMOUNT OF EXEMPTED INCOME. 148. IN HOLDING SO WE FIND SUPPORT AND GUIDANCE FRO M THE JUDGMENT OF HONBLE DELHI HIGH COURT IN THE CASE OF JOINT INVES TMENTS PRIVATE LTD. VS. CIT REPORTED IN 372 ITR 694 WHEREIN IT WAS HELD AS UNDE R: BY NO STRETCH OF IMAGINATION CAN S. 14A OR R. 8D B E INTERPRETED SO AS TO MEAN THAT THE ENTIRE TAX EXEMPT INCOME IS TO BE DISALLOWED. THE W INDOW FOR DISALLOWANCE IS INDICATED IN S. 14A, AND IS ONLY TO THE EXTENT OF DISALLOWING EXPEN DITURE 'INCURRED BY THE ASSESSEE IN RELATION TO THE TAX EXEMPT INCOME'. THIS PROPORTION OR PORTION OF THE TAX EXEMPT INCOME SURELY CANNOT SWALLOW THE ENTIRE AMOUNT AS HAS HAPP ENED IN THIS CASE. 148.1 WE ALSO NOTE THAT IN THE IDENTICAL FACTS AND CIRCUMSTANCES THE HONBLE JURISDICTIONAL HIGH COURT HAS DECIDED THAT THE AMOU NT OF DISALLOWANCE OF THE EXPENDITURE CANNOT EXCEED THE AMOUNT OF EXEMPTED IN COME IN THE CASE OF CIT VERSUS VISION FINSTOCK STOCK LTD. IN TAX APPEAL NO. 486 OF 2017 VIDE ORDER DATED 31 ST JULY 2017. THE RELEVANT EXTRACT OF THE ORDER IS EX TRACTED BELOW: '1. THE REVENUE HAS CHALLENGED THE JUDGEMENT OF THE INCOME TAX APPELLATE TRIBUNAL DATED 07.07.2016 RAISING FOLLOWING QUESTIONS FOR OUR CONS IDERATION: 'A. WHETHER ON THE FACTS AND CIRCUMSTANCES OF THE C ASE AND IN LOW, THE ITAT WAS JUSTIFIED IN RESTRICTING THE DISALLOWANCE MADE OF RS. L,02,82,04 9/- U/S. 14A TO THE EXTENT OF EXEMPT INCOME OF RS. 55,6047- ONLY? B. WHETHER ON THE FACTS AND CIRCUMSTANCES OF THE CA SE AND IN LAW, THE ITAT WAS JUSTIFIED IN RESTRICTING THE DISALLOWANCE OF RS. 1,02,82,049/- M ADE U/S. 14A OF THE ACT TO THE EXTENT OF INCOME EARNED OF RS. 55,6047- WITHOUT APPRECIATING THAT THE ASSESSEE HAD PAID INTEREST OF RS.1,45,52,6327- ON BORROWED FUNDS?' 61 ITA NOS. 413,445,268&318/AHD/2016 AND 446/AHD/2016 ( AY 2012-13) AYS: 2010-11, 2011-12, 2012-13 2. FROM THE RECORD IT EMERGES THAT, DURING THE PERI OD RELEVANT TO THE ASSESSMENT YEAR 2008- 09, THE ASSESSEE HAD EARNED EXEMPT INCOME OF RS.55, 604/-. AS AGAINST THAT, THE ASSESSING OFFICER HAD WORKED OUT THE DISALLOWANCE OF EXPENDIT URE UNDER SECTION 14A OF THE ACT READ WITH RULE 8D TO RS. 1,02,82,049/-. THE TRIBUNAL, WH ILE RESTRICTING THE DISALLOWANCE TO RS. 55,604/-, RELIED ON THE DECISION OF DELHI HIGH COUR T IN CASE OF JOINT INVESTMENTS (P) LTD VS. CIT REPORTED IN 372 ITR 694 HOLDING THAT DISALLOWAN CE OF EXPENDITURE IN TERMS OF SECTION 14A READ WITH RULE 8D CANNOT EXCEED THE EXEMPT INC OME ITSELF. OUR HIGH COURT HAS ALSO ADOPTED THE SIMILAR VIEW IN CASE OF COMMISSIONER OF INCOME TAX VS. CORRTECH ENERGY PVT LTD. REPORTED IN 372 ITR 97. 3. TAX APPEAL IS, THEREFORE, DISMISSED. 148.2 WE ALSO NOTE THAT THE HONBLE APEX COURT HAS ALSO CONFIRMED THE PRINCIPLES LAID DOWN BY THE HONBLE HIGH COURT AS D ISCUSSED ABOVE IN THE CASE OF CIT VS. STATE BANK OF PATIALA REPORTED IN 99 TAX MANN.COM 286 BY DISMISSING THE SPECIAL LEAVE PETITION. 149. IN VIEW OF THE ABOVE, WE HOLD THAT THE DISALLO WANCE OF THE EXPENSES UNDER SECTION 14A READ WITH RULE 8D CANNOT EXCEED T HE AMOUNT OF EXEMPTED INCOME. HENCE, THE GROUND OF APPEAL FILED BY THE RE VENUE IS DISMISSED WHEREAS THE GROUND OF APPEAL FILED BY THE ASSESSEE IS PARTL Y ALLOWED. 150. THE THIRD ISSUE RAISED BY THE REVENUE IS THAT LEARNED CIT-A ERRED IN DELETING THE ADDITION MADE BY THE AO FOR RS. 42,700 /- BY DISALLOWING THE EXPENDITURE REPRESENTING THE PENALTY. 150.1 AT THE OUTSET, WE NOTE THAT THE IDENTICAL ISS UE HAS BEEN DECIDED BY US IN THE OWN CASE OF THE ASSESSEE IN ITA NO. 413/AHD/201 6 VIDE PARA NO. 49 TO 50 OF THIS ORDER AGAINST THE REVENUE. FOR THE DETAI LED DISCUSSION PLEASE REFER THE RELEVANT PARAGRAPHS. RESPECTFULLY, FOLLOWING TH E SAME, WE DISMISS THE GROUNDS OF APPEAL OF THE REVENUE. 62 ITA NOS. 413,445,268&318/AHD/2016 AND 446/AHD/2016 ( AY 2012-13) AYS: 2010-11, 2011-12, 2012-13 151. THE FOURTH ISSUE RAISED BY THE REVENUE IS THAT THE LEARNED CIT-A ERRED IN DELETING THE ADDITION MADE BY THE AO FOR RS. 1,4 7,79,776/- ON ACCOUNT OF BAD DEBTS AS THE CONDITIONS SPECIFIED UNDER SECTION 36 (2) WERE NOT SATISFIED. 151.1 AT THE OUTSET, WE NOTE THAT THE IDENTICAL ISS UE HAS BEEN DECIDED BY US IN THE OWN CASE OF THE ASSESSEE IN ITA NO. 413/AHD/201 6 VIDE PARA NO. 58 TO 59 OF THIS ORDER AGAINST THE REVENUE. FOR THE DETAI LED DISCUSSION PLEASE REFER THE RELEVANT PARAGRAPHS. RESPECTFULLY, FOLLOWING TH E SAME, WE DISMISS THE GROUNDS OF APPEAL OF THE REVENUE. IN THE RESULT, THE APPEAL OF THE REVENUE IS DISMISS ED. COMING TO ITA NO.318/AHD/2016(A.Y.2011-12) ASSESSEE S APPEAL:- 152. THE ASSESSEE HAS RAISED THE FOLLOWING GROUNDS OF APPEAL: 1. IN LAW AND IN THE FACTS AND CIRCUMSTANCES OF THE APPELLANT'S CASE, THE LEARNED CIT(A) HAS GROSSLY ERRED IN DISMISSING GROUND NO. 1 OF THE APPELLANT'S APPEAL AS BEING GENERAL IN NATURE, NOT REQUIRING ANY CONSIDERATION BY HIM. HE OUGHT TO HAVE APPRECIATED, INTER ALIA, THAT ONLY A BARE READING OF THAT GROUND SHOWED THE REASON FOR THE APPELLANT'S CHALLENGE TO THE VALIDITY OF THE ASSESSMENT ORDER IMPUGNED BEFOR E HIM AND, ACCORDINGLY, HE OUGHT TO HAVE ADJUDICATED UPON THE SAME ON MERITS. 2.1 IN LAW AND IN THE FACTS AND CIRCUMSTANCES O F THE APPELLANT'S CASE, THE LEARNED CIT(A) HAS GROSSLY ERRED IN SUSTAINING DISALLOWANCE OF RS. 2,76,400 U/S. 14A READ WITH RULE 8D(2)(III) ON ACCOUNT OF ADMINISTRATIVE EXPENSES [E VEN AS HE HAD DIRECTED THE QUANTUM OF THE DISALLOWANCE ON THIS ACCOUNT TO BE REDUCED FROM RS.2,90,466 TO RS. 2,76,400 AFTER APPRECIATING THAT THE APPELLANT'S INVESTMENTS IN SH ARES OF ITS SUBSIDIARY WHICH HAD BEEN AMALGAMATED WITH THE APPELLANT, CANNOT BE TAKEN INT O ACCOUNT FOR THE PURPOSES OF ARRIVING AT THE QUANTUM OF DISALLOWANCE UNDER THE SAID RULE] , HE OUGHT TO HAVE APPRECIATED, INTER- ALIA, THAT IN THE PECULIAR AND EMINENT FACTS OF THE APPELLANT'S CASE, THE LEARNED A.O. HAD GOT TO BE SATISFIED WITH THE APPELLANT'S CLAIM THAT IT HAD NOT INCURRED ANY ADMINISTRATIVE EXPENDITURE IN RELATION TO INCOME NOT FORMING PART OF ITS TOTAL INCOME OTHER THAN EXPENDITURE OF RS. 14,284 FOR WHICH IT HAD MADE A S UO MOTU DISALLOWANCE AND THAT 63 ITA NOS. 413,445,268&318/AHD/2016 AND 446/AHD/2016 ( AY 2012-13) AYS: 2010-11, 2011-12, 2012-13 THEREFORE, THE LEARNED A. O. COULD NOT HAVE ASSUMED JURISDICTION U/S. 14A(2) TO MAKE ANY FURTHER DISALLOWANCE ON THIS ACCOUNT. 2.2 WITHOUT PREJUDICE TO THE FOREGOING, IN LAW A ND IN THE FACTS AND CIRCUMSTANCES OF THE APPELLANT'S CASE, THE LEARNED CIT(A) HAS GROSSLY ER RED IN FAILING TO APPRECIATE THAT IN ANY CASE, THE QUANTUM OF DISALLOWANCE U/S. 14A COULD NO T EXCEED THE QUANTUM OF INCOME NOT FORMING PART OF THE APPELLANT'S TOTAL INCOME THIS Y EAR VIZ. RS. 24,324. 3. IN LAW AND IN THE FACTS AND CIRCUMSTANCES O F THE APPELLANT'S CASE, THE LEARNED CIT(A) HAS GROSSLY ERRED IN SUSTAINING DISALLOWANCE OF DED UCTION OF RS. 19,38,207 IN RESPECT OF DEPOSITS MADE BY THE APPELLANT WITH LANDLORDS OF RE NTED PROPERTIES WHICH THE APPELLANT WAS UNABLE TO RECOVER AND WHICH IT HAD WRITTEN OFF TO I TS PROFIT & LOSS ACCOUNT THIS YEAR AND WHICH WAS DEDUCTIBLE AS A BUSINESS LOSS IN ANY CASE . 4.1 IN LAW AND IN THE FACTS AND CIRCUMSTANCES OF THE APPELLANT'S CASE, THE LEARNED CIT(A) HAS GROSSLY ERRED IN SUSTAINING THE LEARNED A.O'S ACTION OF TREATING WHAT WAS NORMAL BUSINESS LOSS [SAUDAFER LOSS] OF RS. 19,68,177 AS S PECULATION LOSS. 4.2 WITHOUT PREJUDICE TO THE FOREGOING, IN LAW A ND IN THE FACTS AND CIRCUMSTANCES OF THE APPELLANT'S CASE, THE LEARNED CIT(A) HAS GROSSLY ERRED IN OMITTING TO CONSIDER THAT THE IMPUGNED LOSS OF RS. 3,25,857/- WAS INCLUSIVE OF LO SS ON FUTURES AND OPTIONS [F&O] TRANSACTIONS AND CURRENCY SEGMENT ON RECOGNIZED STO CK EXCHANGES [TRADING IN DERIVATIVES] WHICH WAS INCAPABLE OF BEING TREATED A S SPECULATIVE LOSS BY VIRTUE OF AN EXPRESS PROVISION IN THAT BEHALF IN CLAUSE (5) OF S ECTION 43 OF THE I. T. ACT, 1961. 5. IN LAW AND IN THE FACTS AND CIRCUMSTANCES O F THE APPELLANT'S CASE, THE LEARNED CIT(A) HAS GROSSLY ERRED IN UPHOLDING THE DISALLOWANCE OF DEDUCTION FOR RS. 48,796 ON THE GROUND THAT, THE EXPENDITURE HAVING BEEN INCURRED ON THE P URCHASE OF MOBILE PHONES, WAS CAPITAL IN NATURE. 6. IN LAW AND IN THE FACTS AND CIRCUMSTANCES OF THE APPELLANT'S CASE, THE LEARNED CIT(A) HAS GROSSLY ERRED IN UPHOLDING DISALLOWANCE OF THE FOLLOWING EXPENSES U/S. 40(A)(IA) ON THE GROUND THAT THE APPELLANT HAD FAILED TO DEDUCT TDS U/S. 194I/194J OF THE I. T. ACT: A) RS. 10,000 ON ACCOUNT OF LEASE LINE CHARGES PAID TO BSNL (EVEN THOUGH IT WAS BELOW THE PRESCRIBED MONETARY LIMIT FOR THE APPLICABILITY OF THE PROVISION IN QUESTION) B) LEASE LINE AND V-SAT CHARGES PAID TO RECOGN IZED STOCK EXCHANGES - RS. 10,32,430 C) OTHER CHARGES PAID TO RECOGNIZED STOCK EXCHA NGES - RS. 3,80,401 7. IN LAW AND IN THE FACTS AND CIRCUMSTANCES O F THE APPELLANT'S CASE, THE LEARNED CIT(A) HAS GROSSLY ERRED IN NOT ORDERING FOR THE DELETION OF THE LEVY OF INTEREST U/S. 234B CHALLENGED BY THE APPELLANT VIDE GROUND NO. 10 OF ITS APPEAL, INTER ALIA, ON THE GROUND THAT THE LEVY UNDER THAT PROVISION WAS NOT AT ALL ATTRACTED IF CO NSIDERATION WAS GIVEN TO ALL THE PREPAID EXPENSES. 8. IN LAW AND IN THE FACTS AND CIRCUMSTANCES OF THE APPELLANT'S CASE, THE LEARNED CIT(A) HAS GROSSLY ERRED IN DISMISSING GROUND NO. 12 OF TH E APPELLANT'S APPEAL BEFORE HIM CHALLENGING THE INITIATION OF PENALTY PROCEEDINGS U /S. 271(1)(C). HE OUGHT TO HAVE APPRECIATED, INTER ALIA, THAT IN THE PECULIAR FACTS AND CIRCUMSTANCES OF THE APPELLANT'S CASE, INITIATION OF PENALTY PROCEEDINGS FOR CONCEALMENT O F INCOME WAS NOT AT ALL WARRANTED AND 64 ITA NOS. 413,445,268&318/AHD/2016 AND 446/AHD/2016 ( AY 2012-13) AYS: 2010-11, 2011-12, 2012-13 THAT, THEREFORE, HE OUGHT TO HAVE ORDERED FOR THE C ANCELLATION OF THOSE PROCEEDINGS, THEREBY SAVING THE APPELLANT AS WELL AS THE DEPARTMENT FROM HAVING TO UNDERGO AVOIDABLE LITIGATION. 9. THE APPELLANT CRAVES LEAVE TO ADD, ALTER, A MEND AND/OR WITHDRAW ANY GROUND OR GROUNDS OF APPEAL EITHER BEFORE OR DURING THE COURS E OF HEARING OF THE APPEAL. 153. THE FIRST ISSUE RAISED BY THE ASSESSEE IN GROU ND NO. 1 IS GENERAL IN NATURE AND, THEREFORE, NO SEPARATE ADJUDICATION IS REQUIRED. ACCORDINGLY, WE DISMISS THE SAME. 154. THE SECOND ISSUE RAISED BY THE ASSESSEE IS THA T THE LEARNED CIT (A) ERRED IN UPHOLDING THE ORDER OF THE AO IN PART BY S USTAINING THE DISALLOWANCE OF RS.2,76,400/- UNDER THE PROVISIONS OF SECTION 14 A READ WITH RULE 8D(2)(III) OF INCOME TAX RULE. 155. THE ISSUE RAISED BY THE ASSESSEE HAS ALREADY B EEN DISPOSED OF BY US ALONG WITH THE APPEAL FILED BY THE REVENUE BEARING ITA NO. 445/AHD/2016 VIDE PARAGRAPH NUMBER 147 TO 149 OF THIS ORDER. AS SUCH, THE GROUND OF APPEAL OF THE ASSESSEE HAS ALREADY BEEN ALLOWED IN PART. F OR THE DETAILED DISCUSSION, PLEASE REFER THE RELEVANT PARAGRAPH. HENCE, THE GRO UND OF APPEAL OF THE ASSESSEE IS PARTLY ALLOWED. 156. THE NEXT ISSUE RAISED BY THE ASSESSEE IN GROUN D NO. 3 IS THAT THE LEARNED CIT (A) ERRED IN CONFIRMING THE ORDER OF THE AO BY SUSTAINING THE DISALLOWANCE OF RS. 19,38,202/- WITH RESPECT TO THE DEPOSITS MADE WITH THE LANDLORDS FOR THE RENTED PROPERTIES. 157. THE AO DURING THE ASSESSMENT PROCEEDINGS FOUND THAT THE ASSESSEE HAS CLAIMED THE DEDUCTION WITH RESPECT TO THE DEPOSITS MADE WITH THE RENTED PROPERTIES AMOUNTING TO RS. 19,38,007/- BUT FAILED TO FILE THE SUPPORTING 65 ITA NOS. 413,445,268&318/AHD/2016 AND 446/AHD/2016 ( AY 2012-13) AYS: 2010-11, 2011-12, 2012-13 EVIDENCE TO SUBSTANTIATE ITS CONTENTIONS. ACCORDING LY, THE AO DISALLOWED THE SAME AND ADDED TO THE TOTAL INCOME OF THE ASSESSEE. 158. AGGRIEVED ASSESSEE PREFERRED AN APPEAL TO THE LEARNED CIT (A) WHO ALSO CONFIRMED THE ORDER OF THE AO. 159. BEING AGGRIEVED BY THE ORDER OF THE LEARNED CI T (A), THE ASSESSEE IS IN APPEAL BEFORE US. 160. AT THE OUTSET, THE LEARNED AR APPEARING FOR TH E ASSESSEE SUBMITTED THAT THE ASSESSEE HAS NOT FURNISHED THE NECESSARY EVIDEN CE IN SUPPORT OF HIS CLAIM BEFORE THE AUTHORITIES BELOW. ACCORDINGLY, THE LEAR NED AR PRAYED BEFORE US TO RESTORE THE MATTER TO THE FILE OF THE AO FOR FRESH ADJUDICATION AND FURTHER ASSURED THAT ALL THE NECESSARY DOCUMENTS SHALL BE F ILED BEFORE THE AO. 161. ON THE OTHER HAND THE LEARNED DR DID NOT RAISE ANY OBJECTION IF THE MATTER IS SET ASIDE TO THE FILE OF THE AO FOR FRESH ADJUDICATION AS PER THE PROVISIONS OF LAW. 161.1 HEARD THE RIVAL CONTENTIONS OF BOTH THE PAR TIES AND PERUSED THE MATERIALS AVAILABLE ON RECORD. CONSIDERING THE SUBM ISSION OF THE LEARNED AR AND THE CONCESSION EXTENDED BY THE LEARNED DR BY AD MITTING PRAYER OF THE AR FOR RESTORING THE ISSUE TO THE FILE OF THE AO FOR F RESH ADJUDICATION AS PER THE PROVISIONS OF LAW, ACCORDINGLY, WE SET ASIDE, THE I SSUE TO THE FILE OF THE AO FOR FRESH ADJUDICATION AS PER THE PROVISIONS OF LAW. IT IS DIRECTED TO THE ASSESSEE TO FILE THE NECESSARY SUPPORTING DOCUMENTS IN SUPPORT OF HIS CONTENTION AND COOPERATE IN THE ASSESSMENT PROCEEDINGS. HENCE, THE GROUND OF APPEAL OF THE ASSESSEE IS ALLOWED FOR THE STATISTICAL PURPOSES. 66 ITA NOS. 413,445,268&318/AHD/2016 AND 446/AHD/2016 ( AY 2012-13) AYS: 2010-11, 2011-12, 2012-13 162. THE NEXT ISSUE RAISED BY THE ASSESSEE IN GROUN D NO. 4 IS THAT THE LEARNED CIT (A) ERRED IN CONFIRMING THE ADDITION MADE BY TH E AO FOR RS. 19,68,177.00 ON ACCOUNT OF SAUDAFER LOSS. 162.1 AT THE OUTSET, WE NOTE THAT THE IDENTICAL ISSUE HAS BEEN DECIDED BY US IN THE OWN CASE OF THE ASSESSEE IN ITA NO. ITA NO. 268/AHD/2016 FOR A.Y. 2010-11 VIDE PARA NO. 74 TO 75 OF THIS ORDER AGAINS T THE REVENUE AND IN FAVOR OF THE ASSESSEE. FOR THE DETAILED DISCUSSION PLEASE REFER THE RELEVANT PARAGRAPHS. RESPECTFULLY, FOLLOWING THE SAME, THE G ROUND OF APPEAL OF THE ASSESSEE IS ALLOWED. 163. THE NEXT ISSUE RAISED BY THE ASSESSEE IN GROUN D NO. 5 IS THAT THE LEARNED CIT (A) ERRED IN HOLDING THAT THE EXPENSES INCURRED ON THE PURCHASE OF THE MOBILES ARE IN THE NATURE OF CAPITAL EXPENDITURE. 164. AT THE OUTSET, WE NOTE THAT THE IDENTICAL IS SUE HAS BEEN DECIDED BY US IN THE OWN CASE OF THE ASSESSEE IN ITA NO. ITA NO. 268 /AHD/2016 FOR A.Y. 2010-11 VIDE PARA NO. 115 OF THIS ORDER AGAINST THE REVENUE AND IN FAVOR OF THE ASSESSEE. FOR THE DETAILED DISCUSSION PLEASE RE FER THE RELEVANT PARAGRAPH. RESPECTFULLY, FOLLOWING THE SAME, THE GROUND OF APP EAL OF THE ASSESSEE IS ALLOWED. 165. THE NEXT ISSUE RAISED BY THE ASSESSEE IS TH AT THE LEARNED CIT-A ERRED IN CONFIRMING THE DISALLOWANCE MADE BY THE AO ON THE P AYMENT MADE TO THE 67 ITA NOS. 413,445,268&318/AHD/2016 AND 446/AHD/2016 ( AY 2012-13) AYS: 2010-11, 2011-12, 2012-13 BSNL AND STOCK EXCHANGE FOR RS. 14,22,831/- ON ACC OUNT OF VSAT AND LEASE LINE CHARGES. 166. AT THE OUTSET, WE NOTE THAT THE IDENTICAL I SSUE HAS BEEN DECIDED BY US IN THE OWN CASE OF THE ASSESSEE IN ITA NO. ITA NO. 268 /AHD/2016 FOR A.Y. 2010-11 VIDE PARA NO. 128 TO 129 OF THIS ORDER AGAI NST THE REVENUE AND IN FAVOR OF THE ASSESSEE. FOR THE DETAILED DISCUSSION PLEASE REFER THE RELEVANT PARAGRAPHS. RESPECTFULLY, FOLLOWING THE SAME, THE G ROUND OF APPEAL OF THE ASSESSEE IS ALLOWED. 167. THE ISSUES RAISED BY THE ASSESSEE IN GROUND NOS. 7, 8 AND 9 ARE CONSEQUENTIAL, PREMATURE TO DECIDE OR GENERAL IN NA TURE. THEREFORE, WE DO NOT FIND ANY MERIT IN THESE GROUNDS OF APPEAL. THEREFOR E WE DISMISS THE SAME AS INFRUCTUOUS. 168. IN THE RESULT, THE APPEAL OF THE ASSESSEE IS P ARTLY ALLOWED FOR THE STATISTICAL PURPOSES. COMING TO THE ITA NO. 446/AHD/2016 FOR AY 2012-13 A N APPEAL FILED BY THE REVENUE. 169. THE CAPTIONED APPEAL HAS BEEN FILED AT THE I NSTANCE OF THE REVENUE AGAINST THE ORDER OF LEARNED COMMISSIONER OF INCOME TAX (APPEALS)-10, AHMEDABAD [IN SHORT LD. CIT(A)], DATED 21/12/2015 A RISING IN THE MATTER OF ASSESSMENT ORDER PASSED U/S 143(3) OF THE INCOME-TA X ACT 1961, (HEREINAFTER 68 ITA NOS. 413,445,268&318/AHD/2016 AND 446/AHD/2016 ( AY 2012-13) AYS: 2010-11, 2011-12, 2012-13 REFERRED TO AS THE ACT) DATED 30/01/2015 RELEVA NT TO ASSESSMENT YEAR 2012- 2013. 170. THE REVENUE HAS RAISED THE FOLLOWING GROUNDS OF APPEAL: APPELLATE ORDER OF COMMISSIONER OF INCOME-TAX(A)-10 , AHMEDABAD IN THE CASE OF EDELWEISS BROKING LTD. (ON BEHALF OF AMALGAMATING C OMPANY EDELWEISS FINANCIAL ADVISORS LTD.), FOR AY 2012-13. I HEREBY DIRECT THE DCIT, CIRCLE-1(3), AHMEDABAD T O FILE AND APPEAL TO THE APPELLATE TRIBUNAL AGAINST THE ORDER NO.CIT(A)-10/A CIT-CIR.1(3)/654/14-15 DATED 21.12.2015 IN THE ABOVE CASE ON THE FOLLOWING GROUN DS: (1) THAT THE LD.CIT(A) HAS ERRED IN LAW AND ON THE FAC TS BY DELETING ADDITION OF DEPRECIATION, INTEREST AND INSURANCE ON VEHICLE AMO UNTING TO RS.16,62,595/- BY IGNORING THE FACT THAT THE ASSESSEE FAILED TO PROVE THE OWNERSHIP OF THESE VEHICLES AS WELL AS USE OF THOSE ASSETS WHOLLY AND EXCLUSIVE LY FOR THE BUSINESS PURPOSE. (2) THAT THE LD.CIT(A) ERRED IN LAW AND ON THE FACTS BY DELETING ADDITION OF RS.12,09,926/- MADE BY THE AO U/S.14A WITHOUT CONS IDERING THE FACT THAT THE AO HAS RIGHTLY DISALLOWED THE SAME U/S.14A AFTER CONSI DERING THE PROVISIONS FOR RULE 8D, WHICH IS NOT FULFILLED IN THE ASSESSEES C ASE. (3) THAT THE LD.CIT(A) ERRED IN LAW AND ON THE FACTS BY DELETING ADDITION OF RS.6,44,163/- MADE BY THE AO AS DISALLOWANCE OF EX PENDITURE FOR PAYMENT OF PENALTY WITHOUT APPRECIATING THE FACT THAT THE COND ITIONS OF PROVISIONS U/S.37 ARE NOT FULFILLED BY THE ASSESSEE. (4) THAT THE LD.CIT(A) ERRED IN LAW AND ON THE FACTS BY DELETING ADDITION OF RS.78,98,203/- MADE BY THE AO AS DISALLOWANCE OF DE DUCTION OF BAD DEBTS BY IGNORING THE FACT THAT THE CONDITION OF PROVISIONS OF SECTION 36(2) ARE NOT SATISFIED IN THE ASSESSEES CASE. (5) THAT THE LD.CIT(A) ERRED IN LAW AND ON THE FACTS BY DELETING ADDITION OF RS.20,29,917/- MADE BY THE AO U/S.40(A)(IA) WITHOU T APPRECIATING THE FACT THAT THE CONDITIONS OF PROVISIONS U/S.40(A)(IA) ARE NOT FULFILLED BY THE ASSESSEE AND HAD UPHELD DISALLOWANCE IN ASSESSEES OWN CASE FOR PAYMENT MADE FOR VSAT CHARGES AND LEASE LINE CHARGES IN AY 2007-08. 171. AT THE TIME OF DICTATION, IT WAS NOTICED THAT THE TAX EFFECT IN THE IMPUGNED APPEAL FILED BY THE REVENUE IS LESS THAN 50 LAKHS. THEREFORE, THE 69 ITA NOS. 413,445,268&318/AHD/2016 AND 446/AHD/2016 ( AY 2012-13) AYS: 2010-11, 2011-12, 2012-13 SAME IS NOT MAINTAINABLE IN VIEW OF THE RECENT CIRC ULAR ISSUED BY THE CBDT BEARING NO. 17/2019 DATED 8 TH AUGUST 2019. THE RELEVANT EXTRACT OF THE CIRCULAR ISSUED DATED 8 AUGUST 2019 READS AS UNDER: 2. AS A STEP TOWARDS FURTHER MANAGEMENT OF LITIGA TION. IT HAS BEEN DECIDED BY THE BOARD THAT MONETARY LIMITS FOR FILIN G OF APPEALS IN INCOME- TAX CASES BE ENHANCED FURTHER THROUGH AMENDMENT IN PARA 3 OF THE CIRCULAR MENTIONED ABOVE AND ACCORDINGLY. THE TABLE FOR MONE TARY LIMITS SPECIFIED IN PARA 3 OF THE CIRCULAR SHALL READ AS FOLLOWS: S.NO. APPEALS/SLPS IN INCOME-TAX MATTERS MONETARY L IMIT (RS.) 1 BEFORE APPELLATE TRIBUNAL 50,00,000 2 BEFORE HIGH COURT 1,00,00,000 3 BEFORE SUPREME COURT 2,00,00,0 00 172 FROM THE ABOVE, IT IS CLEAR THAT THE IMPUGNED A PPEAL FILED BY THE REVENUE IS NOT MAINTAINABLE AS THE TAX EFFECT IS LE SS THAN 50 LAKHS. THIS FACT CAN ALSO BE VERIFIED FROM THE GROUNDS OF APPEAL FIL ED BY THE ASSESSEE AS MENTIONED ABOVE. 173. BEFORE PARTING, WE ALSO NOTE THAT THERE ARE CE RTAIN EXCEPTIONS SPECIFIED IN THE CBDT CIRCULAR BEARING NO. 17 OF 2019 DATED 8 AUGUST 2019 READ WITH CIRCULAR NO. 3 OF 2018 DATED 11 TH JULY 2018 WHERE THE TAX LIMIT OF RS. 50 LACS WILL NOT BE APPLIED. AS SUCH, IN THOSE CASES THE AP PEAL OF THE REVENUE WILL STAND AND THE SAME WILL NOT BE HIT BY THE IMPUGNED CIRCUL AR DESPITE THE TAX EFFECT IS LESS THAN 50 LAKHS. THEREFORE, WE WANT TO MAKE IT CLEAR THAT IF THE REVENUE ON THE VERIFICATION FINDS THAT THE IMPUGNED CASE OF TH E ASSESSEE FALLS IN THE EXCEPTION AS PROVIDED IN THE CIRCULAR OR TAX EFFECT EXCEEDS, THEN IT WILL BE AT ITS LIBERTY TO MOVE AN APPLICATION FOR THE RECALLING OF THIS ORDER OF THE TRIBUNAL WITHIN THE PRESCRIBED TIME UNDER THE PROVISIONS OF SECTION 254(2) OF THE ACT. IN VIEW OF THE ABOVE, WE DISMISS THE APPEAL FILED BY T HE REVENUE AS NOT MAINTAINABLE. 70 ITA NOS. 413,445,268&318/AHD/2016 AND 446/AHD/2016 ( AY 2012-13) AYS: 2010-11, 2011-12, 2012-13 174. IN THE RESULT, THE APPEAL FILED BY THE REVENUE IS DISMISSED. 175. IN THE COMBINED RESULT, ALL THE THREE APPEALS FILED BY THE REVENUE ARE DISMISSED, WHEREAS ASSESSEES APPEAL IN ITA NO.268/ AHD/2016 IS PARTLY ALLOWED AND ITA NO.318/AHD/2016 IS PARTLY ALLOWED F OR STATISTICAL PURPOSES. ORDER PRONOUNCED IN THE COURT ON THE 3 RD DECEMBER, 2020 AT AHMEDABAD. SD/- SD/- (JUSTICE P. P. BHATT) HONBLE PRESIDENT ( WASEEM AHMED ) ACCOUNTANT MEMBER AHMEDABAD; DATED 03 /12/2020 TANMAY, SR. PS/TC NAIR, SR.PS / COPY OF THE ORDER FORWARDED TO : 1. / THE APPELLANT 2. / THE RESPONDENT. 3. !! ' # / CONCERNED CIT 4. ' # ( ) / THE CIT(A)-10, AHMEDABAD 5. &'()**+ , , / DR, ITAT, AHMEDABAD. 6. ),-./ / GUARD FILE. / BY ORDER, &* //TRUE COPY// / ( DY./ASSTT.REGISTRAR) '#$, / ITAT, AHMEDABAD 1. DATE OF DICTATION 05.10.2020/2.12.20 ( WORD PROCESSED BY HONBLE AM IN HIS COMPUTER BY DRAGON ) 2. DATE ON WHICH THE TYPED DRAFT IS PLACED BEFORE THE DICTATING MEMBER 16.10.2020/2.12.20 3. OTHER MEMBER 4. DATE ON WHICH THE APPROVED DRAFT COMES TO THE SR.P. S./P.S 5. DATE ON WHICH THE FAIR ORDER IS PLACED BEFORE THE D ICTATING MEMBER FOR PRONOUNCEMENT 6. DATE ON WHICH THE FAIR ORDER COMES BACK TO THE SR.P .S./P.S.4.12.2020 7. DATE ON WHICH THE FILE GOES TO THE BENCH CLERK ..4.12.2020 8. DATE ON WHICH THE FILE GOES TO THE HEAD CLERK ... 9. THE DATE ON WHICH THE FILE GOES TO THE ASSISTANT RE GISTRAR FOR SIGNATURE ON THE ORDER.. 10. DATE OF DESPATCH OF THE OR DER