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2015 (11) TMI 177 - AT - Income TaxConsidering business loss as Speculation loss - Held that:- The facts in the said decision in the case of Eastern Aviation & Industries Ltd Vs CIT [1993 (7) TMI 41 - CALCUTTA High Court ] are identical to the assessee’s case and as a result the income of the assessee from share trading is speculative in nature. - Decided against assessee. Disallowance of sub-brokerage - assessee had not explained the nature and genuineness of the brokerage, not produced evidences with respect to the services rendered and also not furnished the confirmations of the parties - Held that:- We note that confirmations from two parties namely Jaswant Shah and Ramco Financial Services were filed before the ld CIT(A) and also before us . We also note that sub-brokerage of ₹ 82,27,229/- payable to C.S. Boston (Hong Kong) Ltd has been taxed in the A.Y. 1999-00 on being offered to tax by the assessee suo motto upon denial of permission to remit the payment by the Reserve Bank of India on 20th November, 1997 . As the assessee had filed confirmations from two parties exhibited and also proved the payments having been made to the parties for services rendered by them. Likewise wise the sub-brokerage to JMSSB was paid for primary market transactions. In view of these facts and observations , we are of the view that the disallowances of ₹ 1,05,000 paid to Jaswant Shah, ₹ 1,07,125/- paid to Ramco Financial Services, ₹ 82,27,229/- C.S. Boston (Hong Kong) Ltd and ₹ 91,839/for primary market transactions paid to JMSSB were not justified as these expenses were incurred by the assessee for the purpose of business as assessee required the services of sub-brokers to carry out business in stock market Mumbai and also activities in the primary markets on behalf of its clients and thus these disallowances are hereby deleted. - Decided in favour of assessee in part. Disallowance u/s. 40A(2)(b) - Held that:- We note that the provisions of section 40A(1) begins with non abstante clause & (2) provides that where the assessee has incurred any expenditure by making the payment to any person as referred to clause( b) which is excessive , unreasonable having regard to the fair market value of that expenditure or services or goods, then so much of the expenditure as is considered excessive and unreasonable shall be disallowed by the assessing officer. In this case Rs. ₹ 86,08,898/- were paid as sub-brokerage to the persons covered by the clause (b) of section 40A(2). We further note that the assessing officer no where observed these expenses were either excessive or unreasonable and disallowed and proceeded to make the disallowance and thus the pre-conditions for disallowance u/s 40A(2b) were not satisfied. It is nowhere pointed out by both the authorities that payment is excessive or unreasonable from prevalent market rates for such services. We also note that 50% disallowance was made on purely adhoc basis which is not permissible under law by disregarding the fact that similar expenses were allowed in the earlier years. We are, therefore, of the considered view that the said disallowance /addition is not justified and therefore the same is ordered to be deleted - Decided in favour of assessee Disallowance on a/c of interest on the ground that assessee paid interest but did not charge from its director and their family members - Held that:- the net worth of the company was ₹ 4,96,56,180/-, whereas, the purchases on behalf of the related parties were worth ₹ 1,56,44,818/- which proves that assessee had sufficient and adequate own funds to finance the purchases so made for related parties. In the case of CIT Vs. Reliance Utilities and Power Ltd. (2009 (1) TMI 4 - HIGH COURT BOMBAY) the Honble jurisdictional High Court has held that in case the assessee has own funds besides having borrowed funds , the presumption as to the money advanced to sister concern was that the assessee has advanced out of own funds and not out borrowed funds. We, therefore,decide this issue in favour of the assessee.
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