HRIM FINANCE & SECURITIES PVT. LTD.(FORMERLY KNOWN AS PELF INVESTMENT PVT. LTD.), MUMBAI V. I.T.O. - 4(2)(3), MUMBAI

ITA 6352/MUM/2011

• Counselvise Citation: [2012] 119 COUNSELVISE.COM (IT) 8436 (ITAT-MUMBAI)
• Duration Of Justice: 1 year(s) 1 month(s) 15 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 30-10-2012
• Appeal Filed By: Assessee
• Order Result: Allowed
• Bench Allotted: H
• Next Hearing Date: 30-10-2012
• Assessment Year: 2008-2009
• Appeal Filed On: 14-09-2011
• Result in Favour of: Assessee
• Court: TRIBUNAL

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL, MUMBAI BENCH H BENCH BEFORE SHRI I.P.BANSAL (JUDICIAL MEMBER) AND SHRI RAJENDRA (ACCOUNTANT MEMBER) ITA NO.6352/MUM/2011 ASSESSMENT YEAR: 2008-09 HRIM FINANCE & SECURITIES PVT LTD., (FORMERLY KNOWN AS PELF INVESTMENT PVT LTD.), 177-179, LAXMI HOUSE, 3 RD FLOOR, KALBADEVI ROAD, MUMBAI-400 002 PA NO.AAACP 6489 M ITO 4(2)(3), MUMBAI. APPELLANT VS. (RESPONDENT) APPELLANT BY : SHRI RAKESH JOSHI RESPONDENT BY: SHRI RAKESH RANJAN DATE OF HEARING: 30.10.2012 DATE OF PRONOUNCEMENT: 30.10.2012 ORDER PER I.P.BANSAL, JM: THIS IS APPEAL FILED BY ASSESSEE. IT IS DIRECTED AGAINST ORDER OF LD CIT(A) DATED 30.8.2011 FOR ASSESSMENT YEAR 2008-09. GROUNDS RAI SED BY ASSESSEE ARE AS UNDER: 1. ON THE FACTS AND CIRCUMSTANCES OF THE CASE AS W ELL AS IN LAW, LD CIT(A) HAS ERRED IN CONFIRMING THE ACTION OF AO: 1.1 IN ALLOCATING THE EXPENSES TOWARDS SECURITY TRA NSACTION TAX (STT) PAID INCOME AND NON-STT INCOME IN THE RATIO OF 50:50 WIT HOUT CONSIDERING THE FATS AND CIRCUMSTANCES OF THE CASE. 1.2 IN NOT CONSIDERING THE SUBMISSION OF THE APPELL ANT THAT MOST OF THE STOCK EXCHANGE EXPENSES ARE BASED ON TURNOVER AND IT SHOU LD BE ALLOCATED IN THE RATIO OF TURNOVER INSTEAD OF NET INCOME. 1.3 IN NOT ALLOCATING ANY FINANCIAL EXPENSES TOWARD S NON-STT INCOME WITHOUT GIVING ANY REASONS FOR THE SAME. ITA NO.6352/MUM/2011 ASSESSMENT YEAR: 2008-09 2 2. FOR THE PURPOSE OF DETERMINING REBATE UNDER SECT ION 88E, WHICH WAS CLAIMED BY THE ASSESSEE AT A SUM OF RS.9,17,282, THE AO HELD T HAT THE ALLOCATION OF EXPENSES DONE BY THE ASSESSEE ON THE BASIS OF TURNOVER WAS INCORR ECT. THE AO APPLIED THE RATIO 50:50 FOR THE PURPOSE OF ALLOCATION AND HAS REDUCED REBAT E UNDER SECTION 88E TO A SUM OF RS.6,07,386/- AND IN THIS MANNER AN ADDITION OF RS. 3,09,906 HAS BEEN MADE TO THE RETURNED INCOME WHICH IS THE SUBJECT MATTER OF DETE RMINATION IN THE PRESENT APPEAL. THE ASSESSEE IS ENGAGED IN THE BUSINESS OF SHARE BR OKING AND TRADING IN SHARE. THE TOTAL TURNOVER OF THE ASSESSEE IS RS.7276,91,76,383 /- (RS.2284,32,41,146 OWN TURNOVER + RS.4992,59,35,237 TURNOVER RELATING TO CLIENTS). THE RATIO OF THE TURNOVER OF THE ASSESSEE DIVIDEND INTO OWN TURNOVER AND CLIENT TURN OVER IS 31.39%: 68.61%. THE ASSESSEE SUPPORTED ITS CALCULATION ON MANY GROUNDS WHICH, INTER ALIA, STATED THAT ASSESSEE HAS BEEN ADOPTING CONSISTENT METHOD FOR AL LOCATING EXPENSES FOR THE PURPOSE OF COMPUTING REBATE UNDER SECTION 88E WHICH HAS NEV ER BEEN DISTURBED. THE EXPLANATION WAS GIVEN FOR EACH AND EVERY EXPENSE TO CONTEND THAT ALLOCATION DONE BY THE ASSESSEE IS PROPER. HOWEVER, THE AO DID NOT AC CEPT SUCH SUBMISSION OF THE ASSESSEE. THE MAIN OBJECTION OF THE AO FOR DISTURB ING THE ALLOCATION MADE BY THE ASSESSEE WAS THAT THE FINANCIAL CHARGES CANNOT BE A TTRIBUTED TO BROKERAGE INCOME AS THE SAME WERE TO BE RECOVERED BY THE ASSESSEE FROM ITS CLIENTS. AS AGAINST THAT ARGUMENT OF AO, IT IS THE CASE OF THE ASSESSEE THAT THE FINA NCIAL CHARGES ARE MAINLY WITH REGARD TO BANK GUARANTEE CHARGES. ASSESSEE HAS TO PROVIDE BA NK GUARANTEE TO THE EXCHANGE AGAINST TRADING EXPOSURE OF ITS CLIENTS, THEREFORE, THE SAME IS ALSO APPORTIONED IN THE RATIO OF TURNOVER. WITH REGARD TO ADMINISTRATIVE E XPENSES, IT IS THE CASE OF THE ASSESSEE THAT IT IS MAINLY ON ACCOUNT OF DIRECTORS SALARY A ND COMPUTER SOFTWARE EXPENSES AND ALLOCATION THERETO, ACCORDING TO THE TURNOVER, IS A LSO APPROPRIATE. HOWEVER, THE AO DID NOT ACCEPT THE SUBMISSION OF ASSESSEE AND HAS MADE AFOREMENTIONED ADDITION. LD CIT(A) HAS UPHELD THE ALLOCATION MADE BY THE AO. T HE ASSESSEE IS AGGRIEVED AND HENCE, HAS FILED THE AFOREMENTIONED GROUNDS OF APPE AL. 3. AFTER NARRATING THE FACTS, IT WAS CONTENDED BY T HE LD A.R. THAT ASSESSEE HAS ADOPTED A CONSISTENT METHOD OF ALLOCATION OF EXPENS ES ACCORDING TO THE TURNOVER. SUCH METHOD OF THE ASSESSEE IS A SCIENTIFIC METHOD. THE METHOD ADOPTED BY THE AO AND CONFIRMED BY THE CIT(A) DOES NOT GIVE THE TRUE PICT URE. HE SUBMITTED THAT ASSESSEE HAS GIVEN EXPLANATION FOR EACH AND EVERY EXPENSE AND JU STIFICATION OF ALLOCATION WHICH HAS ITA NO.6352/MUM/2011 ASSESSMENT YEAR: 2008-09 3 ARBITRARILY BEEN REJECTED BY THE AO AS WELL AS THE CIT(A). HE SUBMITTED THAT THE CASE OF THE ASSESSEE SHOULD BE ADMITTED AND PROPER RELIEF S HOULD BE GRANTED. 4. ON THE OTHER HAND, LD D.R. RELIED UPON THE ORDER OF LD CIT(A). 5. WE HAVE HEARD RIVAL CONTENTIONS IN THE LIGHT OF MATERIAL PLACED BEFORE US. THE EXPENDITURE INCURRED BY THE ASSESSEE IS TABULATED B Y THE AO IN THE ASSESSMENT ORDER IN PARA 7. THE ASSESSEE HAS GIVEN EXPLANATION WITH RE GARD TO EACH AND EVERY EXPENDITURE. WE HAVE CAREFULLY GONE THROUGH ALL THESE DETAILS AN D WE ARE OF THE OPINION THAT ASSESSEE, ACCORDING TO THE FACTS OF ITS CASE, HAS A DOPTED A PROPER METHOD OF ALLOCATION OF EXPENSES WHICH IS BASED UPON TURNOVER. THE AO H AS NOT PROPERLY APPRECIATED THE CASE OF THE ASSESSEE AND HAS MAINLY RELIED UPON FIN ANCIAL CHARGES, WHICH ARE IN THE SHAPE OF BANK GUARANTEE WHICH IS UTILIZED FOR THE P URPOSE OF OWN TURNOVER AND TURNOVER RELATED TO CLIENTS. THEREFORE, THE PROPER METHOD I N THE PRESENT CASE FOR ALLOCATION OF EXPENSES IS ONLY BASED ON TURNOVER. THEREFORE, WE DELETE THE ADDITION AND DIRECT THE AO TO ACCEPT THE CALCULATION SUBMITTED BY THE ASSES SEE WITH REGARD TO REBATE UNDER SECTION 88E OF THE ACT. 4. IN THE RESULT, APPEAL IS ALLOWED. PRONOUNCED IN THE OPEN COURT ON 30 TH OCTOBER, 2012 SD/- (RAJENDRA) ACCOUNTANT MEMBER SD/- (I.P.BANSAL) JUDICIAL MEMBER MUMBAI, DATED 30 TH OCTOBER, 2012 PARIDA COPY TO: 1. THE APPELLANT 2. THE RESPONDENT 3. COMMISSIONER OF INCOME TAX(A)-8 4. CIT-CITY-+4 5. DEPARTMENTAL REPRESENTATIVE, BENCH H MUMBAI //TRUE COPY// BY ORDER ASSTT. REGISTRAR, ITAT, MUMBAI