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2012 (11) TMI 811 - ITAT MUMBAIDisallowance in respect of VSAT charges paid to Stock Exchange – For non-deduction of TDS u/s 40(a)(ia) – AO had disallowed the claim holding that the payment made were not for use of standard equipments but also involved technical services – Held that:- Following the decision in case of KOTAK SECURITIES LTD. (2008 (8) TMI 592 - ITAT MUMBAI) holding that VSAT, and leaseline charges, were reimbursement of expenses to the stock exchanges for use of standard facilities and transaction charges were not disallowable. Delete the addition. In favour of assessee Penalty u/s 37 - Addition on account of on account of short delivery charges, failure to raise requisite margin money, non-timely deposit of margin money paid to stock exchange – AO treat it as penalty - Held that:- Following the decision in case of Master Capital (2007 (2) TMI 241 - ITAT CHANDIGARH-A) that amount paid by the assessee, a share broker to the NSE for violation of trading beyond the exposer limit, late submission .of margin certificate and delay in making deliveries of shares due to deficiencies were deductible as a business expenditure, as the amount was paid during the course of business of the assessee’s business and there was no infraction of law. In favour of assessee Disallowance of Bad debts u/s 36 – Bad debts in relation to the value of shares transacted by the assessee as a stock broker on behalf of his clients – AO argued that bad debt can be allowed only to the extent brokerage earned on the transactions – Held that:- Following the decision in case of Shri Shreyas S. Morakhia (2012 (3) TMI 103 - BOMBAY HIGH COURT) that the brokerage having been credited to the P&L of the assessee, it was evident that a part of the debt was taken into account in computing the income of the assessee. The fact that the liability to pay the brokerage may arise at a point in time anterior to the liability to pay the value of the shares transacted would not make any material difference to the position. Both constitute a part of the debt which arises from the very same transaction involving the sale or, as the case may be, purchase of shares. Since both form a component part of the debt, the requirements of Sec. 36(2)(i) are fulfilled where a part thereof is taken into account in computing the income of the assessee. Therefore, the assessee was entitled to deduction by way of bad debts under section 36(1)(vii) read with section 36(2) in respect of the amount which could not be recovered from its clients in respect of transactions effected by him on behalf of his clients. Issue decides in favour of assessee Cost of acquisition of share of BSE - Corporatisation and demutualization - Assessee claim depreciation on BSE Card till A.Y. 2005-06 – Claim original cost of the Card as the cost of acquisition for the purpose of calculating LTCG and cost indexation benefit which was claimed by taking the cost in 1999-2000 – AO argued that the assessee was not entitled to claim of double deduction on the same asset under two provisions of IT Act. - CIT(A) has held that cost of acquisition of shares should be taken only at Rs.7500/- in the year 2005-06 and the other cost which is WDV of the shares as on 1/04/2005 should not be added to the cost and thus he has computed the long term capital gain at Rs. 3,86,91,391/ – Held that:- Following the decision in case of Omniscient Securities (P) Ltd. (2011 (3) TMI 896 - ITAT, MUMBAI) that while computing capital gain on such transfer the AO has calculated its cost of acquisition on the basis of the written down value and Re.1 which had paid per share at the time of issue of shares by BSE Ltd. Therefore, we hold that the AO had rightly computed the capital gain and CIT(A) has wrongly calculated the long term capital gain in the hands of assessee. Appeal in favour of assessee
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