TMI Blog2015 (6) TMI 879X X X X Extracts X X X X X X X X Extracts X X X X ..... y the assessee, it appears that there was a dispute between the assessee and land lord with regard to the quantum of rent. When the quantum of rent was finally settled between the parties, the arrear rent was deducted by the Land lord against the Rent deposit. Accordingly, the assessee has transferred the amount so deducted from the Rent deposit account to Rent expenditure account. We notice that, the tax authorities, without appreciating these factual aspects, has held that the loss of rent deposit is a capital loss. However, according to the assessee, it was not loss of rent deposit as presumed by the tax authorities, but it was only adjustment of part of rent deposit towards arrear rent. However, the factual details relating to rent arrear, dispute and adjustment of rent deposit have not been examined by the tax authorities. Thus restore this issue to the file of the assessing officer with the direction to examine this issue afresh - Decided in favour of assessee for statistical purposes. Disallowance of retention money retained from sub-brokerage - Held that:- The liability is determined on the basis of contract between the assessee and the sub-brokers and accordingly, the a ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... Rule 8D, did not include the value of shares held as stock-in-trade. Hence, the AO recomputed the disallowance as per Rule 8D of the IT Rules by including the value of stock-in-trade also along with the value of shares held as investment and accordingly computed average value of investment and the disallowance. In that process, the disallowance to be made u/s 14A read with Rule 8D worked out to ₹ 2,14,276/-. Accordingly, the AO made further addition of ₹ 63,580/- (Rs.2,14,276 ₹ 1,50,696) u/s 14A of the Act. In the appellate proceedings, the ld.CIT(A) also confirmed the same. 4. Before us, the Ld A.R submitted that the assessing officer was not correct in including the value of shares held as stock in trade for computing the Average value of investments. However, we notice that an identical issue was considered by a Co-ordinate Bench of the Mumbai Tribunal in the case of DCIT V/s Damani Estates and Finance Pvt. Ltd in ITA No.3029/Mum/2012 (AY-2008-09) and the Tribunal, vide its order dated 17.7.2013, has taken the view that the disallowance computed under Rule 8D(2)(ii) qua the shares in stock-in-trade would be restricted to 20% of the amount computed under ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ing at the disallowance u/r. 8D, the amount as per r. 8D(2)(ii) qua shares held as stock-in-trade would stand to be restricted to 20% thereof. As regards the legal mandate for the adjustment aforesaid, we have already clarified of the manifestly incorrect, if not absurd results that would otherwise follow. In fact, in our view, the language of r. 8D(2)(ii) itself provides the mandate inasmuch as it prescribes or authorizes a disallowance only qua investment, income from which is not taxable, so that in limiting the amount worked out with reference to the total investment; the same also yielding taxable income, we have only sought to operationalize and implement the said rule. It would also be appreciated that not doing so would also violate the principle of only the net income (from any source) being subject to tax inasmuch as disallowance of the total interest as per r. 8D(2)(ii) would in effect bring the share trading income to tax without deduction of the interest expenditure allocable or attributable thereto. Needless to add that no adjustment would arise in respect of shares held as 'investments', so that the two parts would need to be separately computed, which is ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... rent deposit is a capital loss. However, according to the assessee, it was not loss of rent deposit as presumed by the tax authorities, but it was only adjustment of part of rent deposit towards arrear rent. However, the factual details relating to rent arrear, dispute and adjustment of rent deposit have not been examined by the tax authorities. Accordingly, we set aside the order of Ld CIT(A) on this issue and restore the same to the file of the assessing officer with the direction to examine this issue afresh. The assessee is also directed to furnish all the relevant documents to substantiate its claim on this issue. 7. The next issue relates to the disallowance of Retention money. During the year under consideration, the assessee had claimed subbrokerage/ commission income of ₹ 1,61,41,616/-. The AO noticed that the assessee had actually paid a sum of ₹ 1,49,40,094/- and retained a sum of ₹ 9,56,564/- as contingency fund. The same was disclosed in the Balance sheet as its liability, the purpose being to cover any eventual bad debt that may arise against any sub-broker. The AO took the view that the liability pertaining to the amount retained by the assessee ..... X X X X Extracts X X X X X X X X Extracts X X X X
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