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2015 (10) TMI 811 - ITAT MUMBAI

2015 (10) TMI 811 - ITAT MUMBAI - TMI - Disallowance of VSAT charges for non-deduction of tax - charges paid by the assessee to Stock Exchange - CIT(A) deleted the addition - Held that:- Payment of VSAT/lease line charges to the stock exchange without deduction of tax at source is covered in favour of assessee by the decision of Hon'ble Bombay High Court in the case of Angel Capital & Debit Market Ltd. [2014 (5) TMI 584 - BOMBAY HIGH COURT ]. Similar issue has been considered by various benches .....

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r of assessee.

Penalty paid to SEBI - CIT(A) deleted the penalty - Held that:- This issue is also covered by the decision of Angel Capital & Debit Market Ltd (supra) as that the amount paid as penalty was on account of irregularities committed by the assessees clients. Such payments were not on account of any infraction of law and hence allowable as business expenditure. In such as case the explanation to Section 37 would not apply.- Decided in favour of assessee.

Disallowa .....

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decision of the Tribunal in assessee's own case, we do not find any merit for the disallowance made by the AO on account of provisions for loss on mark to market.- Decided in favour of assessee.

Disallowance made u/s.14A - Held that:- As we found that the assessment year under consideration is A.Y.2007-08, in which rule 8D is not applicable keeping view the decision of the Tribunal in assessee own case vis-a-vis the decisions of other benches of the Tribunal, we restrict the disallowa .....

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were under the bonafide belief for nearly a decade that tax was not deductible at source on payment of transaction charges, no fault can be found with the assessee in not deducting the tax at source in the assessment year in question and consequently disallowance made by the assessing officer under Section 40(a)(ia) of the Act in respect of the transaction charges cannot be sustained. - Decided in favour of the assessee. - ITA No. 7737/Mum/2010, ITA Nos. 7952/Mum/2010 - Dated:- 11-9-2015 - R C .....

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ares, derivatives and other permissible marketable instruments. During the course of scrutiny assessment the AO made addition on account of VSAT/lease line charges on the plea of non-deduction of tax u/s.40(a)(ia) of the Act. The AO also made disallowance u/s.14A and penalty paid to stock exchange, mark to market loss on account of trading in derivative transactions was also declined by the AO. 3. By the impugned order the CIT(A) deleted the addition with respect to VSAT charges, part of additio .....

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s the Hon'ble Bombay High Court in Angel Capital & Debt market Ltd., in assessee's favour. 5. We have considered rival contentions and found that the issue with regard to payment of VSAT/lease line charges to the stock exchange without deduction of tax at source is covered in favour of assessee by the decision of Hon'ble Bombay High Court in the case of Angel Capital & Debit Market Ltd., I.T Appeal(L) No.475 of 2011, dated 28-7-2011. Similar issue has been considered by vario .....

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ck Exchange to the Department of Telecommunication. Since the VSAT and Lease Line charges paid by the assessee do not have any element of income, deducting tax while making such payments do not arise. Hence, question Nos.(A) and (B) cannot be entertained." Respectfully following the decision of Hon'ble Bombay High Court as well as the decision of the Tribunal in assessee's own case, we do not find any infirmity in the order of the CIT(A) in regard to addition made on account of VSAT .....

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d as penalty was on account of irregularities committed by the assessees clients. Such payments were not on account of any infraction of law and hence allowable as business expenditure. In such as case the explanation to Section 37 would not apply. Accordingly question (C) raised by the Revenue cannot be entertained." Respectfully following the decision of Hon'ble Bombay High Court, we do not find any infirmity in the order of the CIT(A) in regard to deleting the penalty of ₹ 55,0 .....

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arefully gone through the facts of the case as observed by the AO in the assessment order and also recorded by the CIT(A) in his order and the references made by the AR to the various aspects of the case from the paper book. According to the AR, case of the assessee on the issue of provision for loss on mark to market, is covered by the decision arrived at by the coordinate Bench of I.T.A.T., Mumbai in the assessee's sister concern, i.e. Edelweiss Capital Ltd. Mumbai in ITA No. 5324/M/2007 d .....

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ock-in-trade then whatever rules apply to the valuation of stock- in-trade will have to be necessarily apply to their valuation also. It is a well settled position in law that "while anticipated loss is taken into account in valuing the closing stock, anticipated profit in the shape of appreciated value of the closing stock is not brought into the account, as no prudent trader would care to show increased profit before its realization. This is the theory underlying the rule that the closing .....

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a fall in price below cost is allowed even if such loss has not been actually realized". Quoting from the case of Whimster & Co. vs. Commissioners of Inland Revenue (1926) 12 Tax Cases 813, the Supreme Court observed that the profits that are chargeable to tax are those realized in the year and that an exception is recognized where a trader purchased and still holds goods which are fallen in value in which case though no loss has been realized nor it has occurred, nevertheless at the cl .....

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f the Supreme Court cited above, cannot be treated as a contingent liability. 8. The learned DR pointed out that the assessee has valued each scrip of the derivatives as at the end of the year. We do not see how this can make any difference to the legal principle. If the derivatives have been treated as stock-in-trade then there is nothing unusual in the assessee valuing each derivative by applying the rule cost or market whichever is lower. 9. We, therefore, direct the Assessing Officer to allo .....

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CIT Vs. Kamani Metal and Alloys Ltd. 208 ITR 1017 (Bombay) had been distinguished on facts. The DR, after the Bench, submitted on untitled extract wherein it mentioned that where such money is stock in trade, the loss had to be accounted for as per according standards. 14. We find that the case so heavily relied upon by the Revenue authorities have facts which are no different footings. In that case, where the contract was between the assessee and MMTC, no raw material was purchased during the .....

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lso followed the guidance note on accounting for Equity Index and Equity Stock Futures and options (as placed in the APB), as to how the ICAI has dealt with the issue. We have also seen that the ICAI has prescribed the accounting treatment to be followed by the persons engaged in mark to market on equity index / stock futures. It is also imperative for the companies to strictly follow the standard and guideline fixed by ICAI. 17. Taking into account the details and the explanations submitted by .....

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peal filed by the assessee is partly allowed." As the facts and circumstances during the year under consideration are same, respectfully following the decision of the Tribunal in assessee's own case, we do not find any merit for the disallowance made by the AO on account of provisions for loss on mark to market. 9. With regard to disallowance made u/s.14A, we found that the assessment year under consideration is A.Y.2007-08, in which rule 8D is not applicable keeping view the decision o .....

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ay High Court in the case of Kotak Securities Ltd., 340 ITR 333, the issue was decided in favour of the assessee. 11. We have considered rival contentions and gone through the order of the Tribunal in case of Mehta Vakil and Co. Ltd.. The precise observation of the Tribunal with regard to the disallowance made for transaction charges paid without deduction of tax at source was as under:- "3. We notice that the Hon ble jurisdictional Bombay High Court has held in the case of CIT Vs. Kotak Se .....

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the same to tax deduction at source and the department has also allowed the claim. Hence the Hon ble High Court, under these peculiar facts, held as under:- "However, since both the revenue and assessee were under the bona fide belief for nearly a decade that tax was not deductible at source on payment of transaction charges, no fault can be found with the assessee in not deducting the tax at source in the assessment year in question consequently disallowance made by the assessing officer u .....

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