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TMI Blog2012 (7) TMI 434X X X X Extracts X X X X X X X X Extracts X X X X ..... ther expenses, depreciation and interest and financial charges made by the Assessing Officer. 2. The appellant craves to leave, to add, alter or amend any ground of appeal raised above at the time of the hearing. 2. The brief facts of the case are that the assessee company is engaged in dealing/investment in securities. The case of the assessee was picked up for scrutiny and assessment was completed by making the following three additions:- i) Interest & financial charges. Rs. 15,55,736/- ii) Administrative & Other expenses. Rs. 1,38,92,750/- iii) Depreciation. Rs. 82,305/- During assessment proceedings, the Assessing Officer noted that assessee is having income as profit or loss on sale of securities which ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... dend is only a consequence of the main business activity of the assessee. However, the Assessing Officer did not agree with the contentions made by the assessee and made the above additions. Aggrieved, the assessee filed appeal before Ld CIT(A) and made the following submissions:- 1) That the assessee company filed return of income declaring income at Rs. 17,04,020/- and in the computation of income out of total administrative and other expenses of Rs. 1,55,30,791/-, Rs. 20,88,588/- and Rs. 20,330/- were already added back in the computation of income and therefore the disallowance of the same to that extent amounts to double addition. 2). The disallowance has been made on wrong understanding of the facts of the case. The reason given by ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... come under the head capital gain. However, from the facts of the case, it is seen that observation made by the Assessing Officer are actually not correct. The appellant is showing income both under the head capital gain as well as business. It is that as in the past shares/securities in the nature of capital assets are shown by the appellant under the head long term investment and gain/loss thereon is shown under the head capital gain. The share/security in the nature of trading/revenue are classified under the head current investment and the profit/loss thereon is shown under the head income from business and profession. The fact that company is having dual portfolio of security i.e. one of trading asset and another is of capital asset is ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ion can be claimed in respect of expenditure incurred in relation to income which does not form part of the total income under the Act. A company cannot earn dividend without its existence and management. Investment decisions are generally communicated requiring daily analysis, market trends and research and analysis. The decisions relate to acquisition, holding period and redemption of investment at the proper time. These decisions are generally taken in the meeting of Board of Directors for which administrative expenses are incurred -------details of expenditure show that the appellant has claimed administrative and other expenses of Rs. 1,38,92,750/-. Keeping in view the facts and circumstances of the case and the judicial precedents dis ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 316. As regards the deletion of other additions, the Ld AR argued that disallowances by the Assessing Officer were made only on the ground that the assessee had no business income and had income only under the head capital gains or dividend income which was not true as was explained by the Ld CIT(A)'s order at page 7 of the order. 9. We have heard the rival submissions of both the parties and have gone through the material available on record. On the point of deletion of interest, we are of the opinion that Ld CIT(A) had rightly deleted the addition of Rs. 15,55,736/- on account of interest paid. This point stands covered by Hon'ble Delhi High Court judgment in assessee's own case reported at 325 ITR 316 wherein it was held that interest f ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ee consists mere of long term, investments than short term investments and therefore 5% disallowance of expenditure upheld by Ld CIT(A) does not seem to be justified. In view of this, we remit the case to the file of the Assessing Officer to consider this aspect and record his clear finding as to the expenses which could be related to earning of exempt income i.e. long term capital gain and dividend income and recompute the disallowance on sound commercial basis. Needless to say, that the Assessing Officer will give a reasonable opportunity to assessee of being heard.
10. In view of the appeal, the appeal of the revenue is partly allowed.
11. Order pronounced in the open court on the 15th day of June, 2012. X X X X Extracts X X X X X X X X Extracts X X X X
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