TMI Blog2015 (10) TMI 2019X X X X Extracts X X X X X X X X Extracts X X X X ..... ional High Court in the case of HDFC Bank Ltd. [2014 (8) TMI 119 - BOMBAY HIGH COURT] has held that where the assessee’s own funds and other non-interest bearing funds were more than investment in tax free securities, then no disallowance was required to be made out of the interest expenses u/s 14A - Decided in favour of assessee. Disallowance of 21% of brokerage, stamp duty and custodial services charges - disallowance on the ground that the said expenditure was incurred for the purpose of earning tax free income - Held that:- It is observed by us that the Ld. CIT(A) has been quite fair in deleting the disallowance of ₹ 78,49,487/- made out of the brokerage expenditure of ₹ 1,56,98,973/-, on the ground that these were paid for Government Securities, ICD & other debt instruments. With respect to other expenditure aggregating to ₹ 9,09,960/-, it is noted that admitted case of the assessee is that these have been incurred for the purpose of acquisition of shares. Ld. CIT(A) has been very reasonable in restricting the disallowance to 21% of the said amount of expenses. Thus, the disallowance sustained is now of a very miniscule amount. The argument of the Ld Couns ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... aimed by the assessee shall be allowed as deduction. Decided in favour of assessee for statistical purposes. Taxation on interest on deep discount bonds - whether amount of interest had accrued to the assessee company and since the assessee was following mercantile system of accounting, aforesaid interest income was liable to be included in its taxable income of the year under consideration? - Held that:- it is noted that the assessee’s income fall in higher tax brackets and good amount of taxes are being paid by assessee every year. Under these circumstances, the Revenue is not going to suffer with the amount of tax, whether the interest income is taxed in the impugned year or in the next year, so long as, Return has been filed by the assesse showing taxable income and taxes have been paid thereon, in both the years. In our considered opinion, liberal approach should be adopted by the revenue and unnecessary litigation should be avoided. We derive support from the judgment of Hon’ble Supreme Court in the case of Excel Industries Ltd. [2013 (10) TMI 324 - SUPREME COURT]. It is further noted by us that the assessee has already been taxed on this income in the year of sale of bond ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ep discount bonds and software expenses. Therefore, with respect these two disallowances, the basis of levy of penalty cease to exist and therefore, consequently, penalty also cannot survive and accordingly we uphold the order of Ld. CIT(A) in deleting the penalty on both these issues. With respect to the remaining disallowance, with regard to bad debts it is noted that this amount represented dues from various parties towards non-receipt of TDS certificates. This issue has been sent back by us to the file of the AO for re-deciding the same. Therefore, as on date, this addition does not survive. Consequently, the penalty order on this addition is also set aside. The AO shall be at liberty to initiate the penalty proceedings, if considered appropriate, after this issue is re-decided by the AO, as per law. Addition invoking provisions of section 94(7) - disallowance of loss - Held that:- Section 94(7) is not retrospective and therefore, it cannot be invoked in the year under consideration. Further, Hon’ble Supreme Court in the case of Walfort Share and Stock Brokers (P) Ltd. [2010 (7) TMI 15 - SUPREME COURT ] has observed that in absence of section 94(7), the transactions done by ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... dividend and it was observed by him from the balance sheet of the assessee company that assessee had received dividend income on stock- in- trade amounting to ₹ 32.053 crores. It was further observed by him that entire dividend income was claimed as exempt in the return of income filed by the assessee company. He observed that the assessee company did not attribute any expense towards earning of such exempted income. In view of these circumstances, the AO, after examining accounts of the assessee and the facts of the case, observed that the total income earned by assessee company was to the tune of ₹ 2,737.38 million and dividend income earned during the year was ₹ 320.53 million, which was 11.70% of the total income from operations. The assessee company had incurred total interest expenses of ₹ 1,450.96 million, Out of this, disallowance was made by him @ 11.70% of these interest expenses which amounted to ₹ 145.10 million i.e. 14.51 crores, on the ground that this was amount of interest paid by the assessee company on the funds borrowed for earning dividend income. Detailed discussion has been made on this issue in page nos. 2 to 9 of the assessment ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 1 Taxable 15,068.65 11,140.73 18,214.70 2 Tax-free --- 144.23 186.60 644.72 Total 15,212.88 11,327.33 18,859.42 Securities held as investment 3 Taxable 184.61 469.06 481.42 4 Tax-free 45.02 45.02 45.01 5 Share Capital 2,030.03 2,030.03 2,030.03 6 Reserves Surplus 525.04 701.51 1,161.85 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... analysis of the working sheet submitted by the learned counsel showing aggregate amount of tax free investment and aggregate amount of own funds of the assessee company. It appears to us that while making analysis of the balance sheet, the lower authorities have inadvertently taken the aggregate amount of securities held as stock-in-trade and securities held as investment , without further looking into bifurcation of taxable and tax free investments, for the purpose of working out the amount to be disallowed u/s 14A. If some disallowance was required to be made, as per law, then, only the amount of tax free investments was to be considered. Analysis of the aforesaid details clearly suggest that the total amount of tax free investment was aggregating to ₹ 189.25 millions as against aggregate amount of own funds of the assessee to the tune ₹ 2,555.07 millions. Thus, apparently the amount of own funds is in far excess of amount of tax free investments of the assessee company. In other words, the assessee company has got sufficient amount of surplus funds. Further, our attention was also drawn to the balance sheet of the assessee company available at page n ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... n upholding the action of the AO in disallowing 21% of brokerage, stamp duty and custodial services charges claimed as deduction by the assessee company, on the ground that the said expenditure was incurred for the purpose of earning tax free income. 2.1. The AO has discussed this issue at page no.9 and 10 of the assessment order, wherein it was observed by the AO that 50% of the total amount of direct expenses aggregating to ₹ 16.60 million under the head brokerage and custodial services was to be disallowed, having been incurred for earning the exempt income and accordingly a sum of ₹ 8.30 million was disallowed. 2.2. Before the Ld. CIT(A), the assessee has submitted that expenses on brokerage, stamp duty and custodial charges were not direct expenses for earning tax free income and it was further submitted that these expenses were incurred in relation to government securities, inter corporate deposits, and other deed instruments, income from which is taxable. After considering the submissions of the assessee, Ld. CIT(A) deleted the amount of ₹ 78,49,487/- being the amount of brokerage paid for the Government Securities, ICD other debt instruments, but c ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... as filed an appeal before the tribunal. The AO has discussed this issue at para 10 of the assessment order. It has been held by the Ld. AO that making investment in shares/securities, bonds etc. were purely professional activity. It requires much more skill than just by investing blindly in any shares and securities and therefore a complete research and thorough studies by highly competent people with adequate modern amenities and proper software were required. It was further observed by the AO that dividend yield was one of the major components of investment decision. In view of these circumstances, AO rejected the contention of the assessee that indirect expenses have no relevance to dividend income and cannot be accepted in toto. Accordingly the AO held after due consideration and deliberation regarding the nature of business of the assessee company and the type of expenses incurred by the assessee company that a sum of ₹ 25.01 million being 5% of the indirect expenses aggregating to ₹ 500.33 million was required to be disallowed and accordingly the disallowance was made for the aforesaid proportionate amount. 3.1. The assessee contested the issue before the Ld. C ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... have ourselves seen the computation sheet of income enclosed at PB-11-12 of the paper book filed by the assessee company. It is noted by us that no such disallowance has been made in the computation sheet as has been mentioned by the Ld. CIT(A) in its order with respect to proportionate indirect expenses disallowable u/s 14A. Under this mistaken belief, Ld. CIT(A) has presumed that the disallowance made by AO has resulted in double taxation. We find that the basic premise of the Ld. CIT(A) appears to be factually incorrect. There seems to be some error in misICICI Securities Primary D. Ltd 16 appreciation of facts on the part of the Ld. CIT(A) in this regard. Therefore, in the interest of justice, we find it appropriate to send this issue back to the file of the Ld. CIT(A) to re-adjudicate the same after giving adequate opportunity of hearing to the assessee and after taking into consideration correct facts. Ld. CIT(A) shall consider all the judgments, if any, placed by the assessee, before him and any other, available with Ld. CIT(A), before passing of the appellate order. The Ld. CIT(A) shall take appropriate view keeping in view all the facts and circumstances of the case. Thus, ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... IT(A). The Ld. CIT(A) did not give relief and confirmed the disallowance by holding as under: I have looked into the facts of the case. The allowability of bad debts is clearly governed by the provisions of Sec. 36(I)(vii) of the Act. It is necessary for the amount in question to fall in the category of debt, before it can be considered for allowability u/s. 36(1)(vii). The amount included in the TDS certificates were not in the nature of debt to the Appellant and therefore according to me the AO was fully justified in rejecting the Appellant s claim. 4.3. Before us, the Ld. Counsel has contested this disallowance and submitted that bad debts claimed by the assessee company is on account of the amounts which have been included as part of the income, by not recovered or received by the assessee company. It was further argued by him, as alternative claim, that in any case deduction for this amount was to be allowed u/s 37(1) of the Income Tax Act, as normal business loss/expenses. In support of this proposition, reliance was placed on the judgment of Hon ble Punjab and Haryana High Court in the case of CIT vs. Shreyans Industries Ltd. 303 ITR 393. On the other hand, Ld. DR ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... nts is added as interest income of the assessee. 5.2. Before the Ld. CIT(A), the assessee company contested this issue by submitting that as per clarification given by Central Board of Direct Taxes vide Circular No.225/45/96-ITA dated 12.03.1996, it has been clarified that difference between the issue price and the redemption price was to be treated as interest income in the year of redemption and if the instrument was sold before the date of redemption, then the difference between the sale price and its cost was to be taxed in the year of sale. It was further submitted before the Ld. CIT(A) that if the intention was to tax the income on accrual basis, then capital gain would have been calculated as difference between the sale price and the cost plus the interest offered to tax and not the difference between the sale price and cost. Attention was drawn to the CBDT circular No.2/2002 dated 15.2.2002. However, the Ld. CIT(A) did not agree with the submissions of the assessee and upheld the addition made by the AO, inter alia on the ground that situation of the assessee was not envisaged in the circular and therefore, it was not covered by this circular and therefore, on the basi ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ary litigation should be avoided. We derive support from the judgment of Hon ble Supreme Court in the case of Excel Industries Ltd. 358 ITR 295. It is further noted by us that the assessee has already been taxed on this income in the year of sale of bonds. Thus, as on date, the assessee is suffering with the amount of double addition on the same income. In our view, such kind of situation should have been avoided, as far as possible. Keeping in view these facts and circumstances of the case, we delete the addition of ₹ 84,50,164/- made under this head by the AO and accordingly Ground no.5 of the assessee s appeal is allowed. 6. Ground No.4 of revenue s appeal and Ground No.6 of assessee s appeal deal with the disallowance made by the AO and partly confirmed by the Ld. CIT(A), out of expenses incurred by the assessee and claimed as deduction u/s 36(1)(xi) of the Act 1961 for making computer systems of the assessee as Y2K compliant. 6.1. The brief facts of the case are that an aggregate sum of ₹ 63,90,000/- was incurred by the assessee during the year as Y2K expenses and claimed this amount as deduction u/s 36(1)(xi). The AO was not satisfied with the claim of the ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... as argued this issue in detail. It was argued by him that Ld. CIT(A) has rightly held that requirement of filing of audit report should be interpreted in liberal manner and further submitted that there was no prior period expenses and the impugned expenses were incurred during the year and Ld. CIT(A) has wrongly confirmed the disallowance of ₹ 8,80,000/-. On the other hand, Ld. DR submitted that the AO was justified in denying the claim in toto and the order of AO should be restored and full claim should be rejected. 6.4. We have heard both the sides, and find that Ld. CIT(A) was correct and justified in following the judgments of Hon ble Bombay High Court and Hon ble Calcutta High Court, as mentioned above, to hold that requirement of filing of audit report along with return of income is directory and the same is not mandatory in nature and therefore it should be interpreted liberally. 6.5. We feel that the Revenue should avoid highly technical approach in such cases. If legislature has brought beneficial provisions on the statute, then, there should be an endeavor to ensure that the assesse is able to rightfully claim the benefits of the beneficial provisions. In our ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ecover a sum of ₹ 2,00,03,887/- on account of interest receivable, in the subsequent year. According to the AO, under such circumstances, assessee s claim for treating the aforesaid amount as bad debts could not have been allowed. The assessee gave its reply, but AO was not satisfied and therefore aforesaid amount of bad debts was disallowed in the assessment order. 7.2. Being aggrieved, the assessee contested this matter before the Ld. CIT(A). He has discussed this issue at page 10 to 11 of the appellate order. Before him, the assessee company made detailed submissions and these submissions are found to be relevant by us and therefore these are reproduced here under: 3.2 It has been submitted in appeal before me that the Appellant is a non banking finance company governed by the guideline by RBI, according to which when the company defaults either in the payment of interest on due date or repayment of principal on maturity, it turns into a NPA. The Appellant s representative produced before me the correspondence which were also submitted before the AO to show that M/s. Nucent Finance Ltd., was facing financial problems and was not in a position to repay the amount. A ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... Electricity Co. Ltd. v. CIT (1997) 225 ITR 746(SC). On the other hand, the Ld. DR supported the order of AO and submitted that since the assessee has not been able to prove that the impugned amount had become bad debt during the year and therefore, the AO had rightly disallowed the claim and therefore, the order of the AO should be restored and order of Ld. CIT(A) should be reversed. 7.4.. We have considered both the sides and have gone through material before us. First of all, it is seen by us that amendment was made in section 36(1)(vii) vide Direct Tax Laws (Amendment) Act 1987 w.e.f. 01.04.1989. Amended provision reads as under: .Subject to the provisions of sub-section(2), the amount of any bad debt or part thereof which is written off as irrecoverable in the accounts of the assessee for the previous year For the sake of ready reference, relevant portion of preamended section is also reproduced herein; ..any debts, or part thereof, which is established to have become bad debts in the previous year . The perusal of these two sets of provisions, would show that earlier (i.e. before 01.04.1989), the requirement of the law was that the assessee was o ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e evaded. 8.1. It is noted that penalty was levied on the following amount of disallowances made by the AO in the assessment order: (i) Bad debts written off Rs.81,61,611/- (ii) Income accrued on discounted instrument Rs.84,50,164/- (iii) Y2K expenses Rs.63,90,000/- 8.2. The assessee contested penalty order before the Ld. CIT (A), whereinpenalty was deleted appeal of the assessee was allowed. Thereafter, Revenue filed the appeal against the order of Ld. CIT(A) deleting the penalty. 8.3. During the course of hearing before us, Ld. DR has relied upon the penalty order, whereas Ld. Counsel has relied upon the order of Ld. CIT(A). 8.4. Before going into the merits of the penalty order, it is noted by us that out of the disallowances mentioned in para 8.1. above, we have deleted the disallowances on account of interest on deep discount bonds and software expenses. Therefore, with respect these two disallowances, the basis of levy of penalty cease to exist and therefore, consequently, penalty also cannot ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... f the assessee for A.Y. 2000-01 wherein it was raised as Ground No.2. The facts and circumstances in this year are also identical. Thus, following our own order, we direct that the disallowance of ₹ 7,00,000/- is confirmed and Ground No.2 of assessee s appeal for A.Y. 2001-02 is rejected. 11. Ground No.3 of assessee s appeal and Ground No.1 of revenue s appeal are common, wherein the assessee has challenged the action of Ld. CIT(A) in upholding the action of AO in disallowing a sum of ₹ 44,79,910/- being 1% of the indirect expenditure u/s 14A of the Act. On the other hand, the revenue has challenged the action of Ld. CIT(A) in deleting the disallowance of ₹ 21,966,900/- out of the disallowance made by the AO by invoking the provisions of section 14A. 11.1. It is noted that Ld. CIT(A) has followed the order of earlier years while giving part relief to the assessee under this head. We have decided these grounds in A.Y. 2000-01 wherein this issue has been sent back to the file of Ld. CIT(A) for readjudicating this issue after considering proper facts. Therefore, following our own order in this year also both these grounds are sent back to the file of Ld. CIT( ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... he present case, it will be seen that appellant was in full knowledge that subsequent to the dividend being declared and credited in his account, the NAV would be correspondingly reduced and therefore, the redemption proceeds on the date of re-investment of the dividend would be less i.e. the los arising from the transaction was known with certainty to the appellant. 9.25 I have considered the facts of the case and I have also gone through the submission made by the appellant. In the instant case, the appellant was fully aware of the facts and subsequent to the dividend being declared and credited in his account, the NAV would be correspondingly reduced and therefore, redemption proceeds on the date of reinvestment of the dividend would be loss. In view of the facts and case laws discussed earlier, I hold that this loss cannot be allowed as business loss and therefore, the same is disallowed and the income of the appellant is enhanced to the extent of ₹ 1,33,55,778/- .. 13.2. Before us, Ld. Counsel assailed the order of Ld. CIT(A) and argued that Ld. CIT(A) has wrongly applied provisions of section 94(7) and disallowance made by him is contrary to law and facts. The Ld. ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... C), it may be stated that in the later decision of the Supreme Court in Union of India v. Azadi Bachao Andolan [2003] 263 ITR 706 / 132 Taxman 373 it has been held that a citizen is free to carry on its business within the four corners of the law. That, mere tax planning, without any motive to evade taxes through colourable devices, is not frowned upon even by the judgment of the Supreme Court in McDowell Co. Ltd. s case (supra). Hence, in the cases arising before 1-4-2002, losses pertaining to exempted income could not be disallowed. However, after 1-4-2002, such losses to the extent of dividend received by the assessee could be ignored by the Assessing Officer in view of section 94(7). The object of section 94(7) is to curb the shortterm losses. Applying section 94(7) in a case for the assessment year(s) falling after 1-4-2002, the loss to be ignored would be only to the extent of the dividend received and not the entire loss. In other words, losses over and above the amount of the dividend received would still be allowed from which it follows that the Parliament has not treated the dividend stripping transaction as sham or bogus. It has not treated the entire loss as fictitiou ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ly when the sale takes place. Section 14A comes in when there is claim for deduction of an expenditure whereas section 94(7) comes in when there is claim for allowance for the business loss. One must keep in mind the conceptual difference between loss, expenditure, cost of acquisition, etc., while interpreting the scheme of the Act. [Para 21] 13.4. On the perusal of aforesaid judgment, it is clear that the section 94(7) is not retrospective and therefore, it cannot be invoked in the year under consideration. Further, Hon ble Supreme Court has observed that in absence of section 94(7), the transactions done by the assessee in this regard were permitted under the income tax law and thus losses resulting there from could not have been disallowed. Thus, respectfully following the judgment of Hon ble Supreme Court, we find that Ld. CIT(A) has wrongly disallowed the loss. Thus, reversing the action of Ld. CIT(A), we direct the AO to allow the loss of ₹ 1,33,55,778/-. As a result, Ground No.5 of the assessee s appeal is allowed. 14. Ground No.2 of Revenue s appeal:- In this ground the revenue has challenged the action of Ld. CIT(A) in deleting the addition of ₹ 1,85,1 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... d. CIT(A) on this issue and confirm the deletion of the disallowance. Consequently, Ground No.2 of Revenue s appeal is dismissed. 14.5. In the result, appeals filed by the Revenue as well as assessee are partly allowed. Assessee s appeal in ITA No.884/Mum/2007 and Revenue s appeal in ITA No.928/Mum/2007 for Assessment Year 2002-03: These cross appeals filed by the revenue and assessee are against the order of Ld. CIT(A) dated 16.11.2006 for the assessment year 2002-03: 15. Ground No.1 2 of assessee s appeal and Ground No.1 of Revenue s appeal: In these grounds, the assessee has challenged the action of Ld. CIT(A) in confirming the disallowance of interest amounting to ₹ 59,40,000/- and ₹ 4,03,00,000/- made by the AO, whereas the Revenue has challenged the relief provided by the Ld. CIT(A) of ₹ 7,44,10,000/-, out of total disallowance of ₹ 11,47,10,000/- made by the AO in the assessment order. 15.1. The AO has discussed this issue at para 2.1 to 2.3, and para 3 of the assessment order, wherein disallowance of interest has been made, on the ground that borrowed funds were used by the assessee company for making investment in shares of su ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... s assessment years and Ld. DR has relied upon the order of the AO on this issue. On perusal of record and consideration of arguments advanced from both sides, we note that this issue has already been decided by us in proceedings years. It is seen that disallowance was made by AO was on the similar pattern as in earlier years and Ld. CIT(A) has given major relief to the assessee and sustained disallowance of a small amount, following the same pattern as in earlier years. Thus, following our order of A.Y. 2000-01, we sustain the order of Ld. CIT(A). Thus, action of Ld. CIT(A) in giving part relief is confirmed. Consequently, Ground No.3 of assessee s appeal as well as Ground No.2 of Revenue s appeal are dismissed. 17. In Ground No.4 of assessee s appeal, the assessee has challenged the action of Ld. CIT(A) in upholding the action of AO and disallowing an amount to the extent of ₹ 2,92,91,500/- u/s 14A of the Act, on adhoc basis, @ 5% of indirect expenses, considering the same as attributable to earning of tax free income. 17.1. This issue has been discussed by the AO in the assessement order in para 3, whereas Ld. CIT(A) has discussed this issue in his order in paras 5 to ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... short term capital gain arising during the year. The difference between the market price as on the date of conversion and the sale price at ₹ 20,77,719/- was shown by the assessee as loss under the head Profits and gains from business or profession . However, the AO did not accept the claim of the assessee. According to him, the assessee was engaged in the business of the sale and purchase of shares of other companies and its case did not fall in any of the exceptions provided in Explanation to section 73. Therefore, invoking the provisions contained in Explanation to section 73, the AO treated the loss of ₹ 20,77,719/- as speculation loss and also did not allow the long term capital loss, claimed by the assessee at ₹ 7,74,718/-. Accordingly, the set off of the long term capital loss of ₹ 7,74,718/-against the short capital gains, as claimed by the assessee, was not allowed by the AO. 17.6. The assessee contested the matter before the Ld. CIT(A), but Ld. CIT(A) was not satisfied with the submissions of the assessee and confirmed the action of AO in treating these losses as speculative. 17.7. Before us, Ld. Counsel has relied upon the judgment of coor ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... that application of explanation to section 73 of the Act is quite unjustified as the provision is not applicable, where income on sale of shares held as investment offered under the head capital gain/capital loss by further claiming that section 73 is applicable in respect of loss in speculation business. The ld. Commissioner of Income Tax (Appeals) granted relief to the assessee. 2.3. The Revenue is aggrieved and is in appeal before this Tribunal. We find that the assessee is admittedly engaged in the business of trading of shares as investment. The assessee earned loss of ₹ 1,72,33,233/-. The question for consideration is whether the long term capital gain/short term capital loss of the assessee are in the nature of speculative M/s Mother India Securities Pvt. Ltd. transaction within the meaning of explanation to section 73 of the Act. We note that even the ld. Assessing Officer has not disputed that certain shares were held as investment on which LTCG/STCL was suffered by the assessee. Broadly, we are in agreement that the assessee held the shares as investment on STCG by incurring loss. The proviso/explanation to section 73 applies in respect of business of company ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... of M/s. Onyx Investments Pvt. Ltd. vs. ITO (ITA No.6656/Mum/2003-A.Y. 2001-02), wherein it has been held that explanation to section 73 would be attracted even to sale and purchase of shares in the context of investment in shares. 17.8.. We have heard both the parties. In our considered opinion, this issue needs to go back to the file of the AO. The AO shall take into consideration new factual pleadings made by the assessee and all other facts as would be required for deciding this issue. The assessee shall be free to submit further details and evidences as may be required by the AO and as may be considered appropriate by the assessee in support of its claim. The AO shall take into account the judgments of M/s. Mother India Securities Pvt. Ltd. (supra) and M/s. Onyx Investments Pvt. Ltd.(supra) or another judgment as may be found relevant as per law at the time of adjudication of the issue. Thus, this issue is sent back to the file of the AO with the directions as stated above. Thus, Ground No.6 is allowed for statistical purposes. 18. Ground No.7 of assessee s appeal: This ground deals with the action of Ld. CIT(A) in upholding the action of AO of disallowing expendit ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ahi India Safety Glass Ltd. (203 Taxman 277) On the other hand, Ld. DR has supported the order of authorities below and has argued that the AO has rightly made the disallowance. 18.4. We have gone through the order of the Ld. CIT(A) and AO. We have also considered the submissions made by both the sides. We have observed that impugned software expenses are routine expenses which are required to be incurred to enable the assessee company to run day to day business operations more efficiently. It is well known fact that today s technology is changing very fast and rate of obsolescence is very high. It has been held by the Hon ble Bombay High Court in the case of Raychem, (supra) that the software acquired by the assessee did not form part of its profit making apparatus, and therefore software expenditure was allowable expenditure. Similarly Hon ble Delhi High Court in the case of CIT Vs. Amway India Enterprises (2012) (346 ITR 341), it was held that expenditure incurred on purchase of software was allowable as revenue expenditure. Further observations of Delhi High Court in the case of Asahi India Safety Glass Ltd (2012) (346 ITR 329) are worth noting to decide this issue. ..... X X X X Extracts X X X X X X X X Extracts X X X X
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