2010 (6) TMI 714 - AT - Income Tax

Summary

Issues Involved:
1. Treatment of loss on sale of securities as speculation loss.
2. Deduction for marketing agent fees paid to ICICI Capital Services Ltd.
3. Disallowance of SEBI turnover tax/fees.
4. Disallowance of provision for incentive.
5. Charging of interest u/s 234B and 234D.
6. Depreciation on stock exchange card.
7. Disallowance of PF payment u/s 43B.

Summary of Judgment:

1. Treatment of Loss on Sale of Securities as Speculation Loss:
The CIT(A) confirmed the AO's action of treating the loss on sale of securities amounting to Rs. 2,08,036/- as speculation loss by applying the Explanation to section 73 of the IT Act, 1961. The ITAT upheld this decision, referencing its earlier ruling in the assessee's own case for AY 2001-02, where it was determined that the assessee's activities did not fall within the exceptions provided in the Explanation to section 73.

2. Deduction for Marketing Agent Fees Paid to ICICI Capital Services Ltd.:
The CIT(A) restricted the deduction for marketing agent fees to Rs. 1,24,37,940/- against the claim of Rs. 4,97,51,760/- u/s 40A(2)(a) of the Act. The ITAT found that section 40A(2) was not applicable as the assessee did not meet the 20% shareholding condition. The ITAT held that the AO wrongly invoked section 40A(2) and deleted the addition sustained by the CIT(A), allowing the assessee's appeal on this ground and dismissing the revenue's appeal.

3. Disallowance of SEBI Turnover Tax/Fees:
The AO disallowed Rs. 34,28,589/- on account of SEBI turnover tax/fees, which was not deposited in the previous year. The ITAT agreed with the assessee that the amount paid before the due date of filing the return is allowable, subject to verification of the dates of deposit by the AO.

4. Disallowance of Provision for Incentive:
The AO disallowed the provision for incentive amounting to Rs. 52,33,685/-, treating it as a contingent liability. The ITAT remitted the issue back to the AO for verification of accounting entries and to ensure no double claim of deduction, directing the AO to allow the claim if proper entries were made in accordance with accounting procedures.

5. Charging of Interest u/s 234B and 234D:
The ITAT held that interest u/s 234D is not applicable for the assessment year 2002-03, following the judgment in ITO V. Ekta Promoters (P.) Ltd. Interest u/s 234B was deemed consequential, and the AO was directed accordingly.

6. Depreciation on Stock Exchange Card:
The ITAT found that depreciation on the stock exchange card is not allowable, referencing the judgment in CIT Vs. Techno Shares & Stocks Ltd. & Ors., where it was held that the stock exchange card does not fall under the categories specified in section 32(1)(ii).

7. Disallowance of PF Payment u/s 43B:
The AO disallowed Rs. 95,614/- u/s 43B for late payment of PF contributions. The ITAT remitted the matter back to the AO to verify payment dates and decide the issue in accordance with the judgment in CIT Vs. Pamwi Tissues Ltd., allowing the claim if the payment was made before the due date of filing the return for employer's contribution, and within the due date/grace period for employees' contribution.

Conclusion:
Both the assessee's and the revenue's appeals were partly allowed for statistical purposes.