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JSB Securities Limited Versus The Income Tax Officer-3 (2) (1) , Mumbai.

2015 (11) TMI 177 - ITAT MUMBAI

Considering business loss as Speculation loss - Held that:- The facts in the said decision in the case of Eastern Aviation & Industries Ltd Vs CIT [1993 (7) TMI 41 - CALCUTTA High Court ] are identical to the assessee’s case and as a result the income of the assessee from share trading is speculative in nature. - Decided against assessee.

Disallowance of sub-brokerage - assessee had not explained the nature and genuineness of the brokerage, not produced evidences with respect to the s .....

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mber, 1997 . As the assessee had filed confirmations from two parties exhibited and also proved the payments having been made to the parties for services rendered by them. Likewise wise the sub-brokerage to JMSSB was paid for primary market transactions. In view of these facts and observations , we are of the view that the disallowances of ₹ 1,05,000 paid to Jaswant Shah, ₹ 1,07,125/- paid to Ramco Financial Services, ₹ 82,27,229/- C.S. Boston (Hong Kong) Ltd and ₹ 91,839 .....

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with non abstante clause & (2) provides that where the assessee has incurred any expenditure by making the payment to any person as referred to clause( b) which is excessive , unreasonable having regard to the fair market value of that expenditure or services or goods, then so much of the expenditure as is considered excessive and unreasonable shall be disallowed by the assessing officer. In this case Rs. ₹ 86,08,898/- were paid as sub-brokerage to the persons covered by the clause (b) of .....

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by disregarding the fact that similar expenses were allowed in the earlier years. We are, therefore, of the considered view that the said disallowance /addition is not justified and therefore the same is ordered to be deleted - Decided in favour of assessee

Disallowance on a/c of interest on the ground that assessee paid interest but did not charge from its director and their family members - Held that:- the net worth of the company was ₹ 4,96,56,180/-, whereas, the purchases o .....

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funds and not out borrowed funds. We, therefore,decide this issue in favour of the assessee. - ITA NO 3493/Mum/2013 - Dated:- 28-9-2015 - JOGINDER SINGH, JUDICIAL MEMBER AND SHRI RAJESH KUMAR, ACCOUNTANT MEMBER For The Assessee :Dr. K. Shivaram For The Revenue : Shri Peeyush Sonhar ORDER Per Rajesh Kumar, Accountant Member These two appeals by the assessee are directed against the orders Commissioner of Income Tax(Appeals){( hereinafter referred to as CIT (A)} even dated 18.02.2013 for A.Y. 199 .....

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] erred on facts and in law in upholding the order of the Additional Commissioner of Income Tax, Special Range 49, Mumbai (AO) considering the business loss suffered by the appellant amounting to ₹ 1,46,03,171/as the speculation loss as per the provisions of Explanation to section 73. 2) The appellant prays that your honour hold that the business loss suffered by the appellant amounting to ₹ 1,46,03,171/cannot be considered to be speculation loss as per the provisions of Explanation .....

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subbrokerage of ₹ 89,32,288/as made by the AO and as confirmed by the CIT(A) may be deleted. C) Disallowance u/s. 40A(2)(b) - ₹ 43,04,449/- 5) The learned CIT(A) erred on facts and in law in confirming the order of the AO disallowing the subbrokerage paid by the appellant to its related parties amounting to ₹ 43,04,449/u/ s. 40A(2)(b) on the alleged ground that the appellant had not produced any evidence that services were rendered by the related parties. 6) The appellant pray .....

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y and debt , private placement of both public and private companies. 4.At the outset , the Ld. AR drew our attention to the order passed by the Hon ble High Court of Calcutta in the case of Eastern Aviation & Industries Ltd Vs CIT(1994) 208 ITR 1023 by stating that the decision was covered against the assessee and the ground no 1 be decided accordingly. We have gone through the contents of the above decision and find that the facts in the said decision are identical to the assessee s case an .....

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the parties . 6.The facts in brief are that during the year assessee earned commission and other jobbing income amounting to ₹ 2,51,04,468/- and paid sub-brokerage of ₹ 1,64,98,254/-. In order to carry out the work for the clients of the assessee in the stock exchange in Bombay , the assessee had to hire the services of other sub-brokers to whom sub-brokerage was paid as per the rates prescribed by the Bombay Stock Exchange. 7. The AO disallowed the sub brokerage paid to various sub .....

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by the AO on the ground that the assessee did not file the details of services rendered by the sub-brokers and also confirmation were not filed. 9. Aggrieved by the order of CIT(A) the assessee is in appeal before us. 10. Before us the Ld. AR submitted that detailed accounts of the subbrokers namely Jaswant Shah (Rs. 1,05,50/-) and Ramco Financial Services (Rs. 1,07,0125/-) along with confirmation were filed before the CIT(A) as additional evidence. The Ld. AR further submitted that commission .....

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₹ 82,27,229/- in the financial year 1998-99 relevant to AY 1999-00 and offered the same for taxation and was taxed accordingly. The ld AR also submitted that confirmation of disallowance in the current year under reference means taxing the amount twice which is against the spirit of Law. The Ld. AR further prayed that since the amount stood offered to tax in the A.Y. 1999-00, the same may be allowed in the year under consideration. He placed reliance on the Judgment of Hon ble Bombay High .....

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e note that confirmations from two parties namely Jaswant Shah and Ramco Financial Services were filed before the ld CIT(A) and also before us . We also note that sub-brokerage of ₹ 82,27,229/- payable to C.S. Boston (Hong Kong) Ltd has been taxed in the A.Y. 1999-00 on being offered to tax by the assessee suo motto upon denial of permission to remit the payment by the Reserve Bank of India on 20th November, 1997 . As the assessee had filed confirmations from two parties exhibited at page .....

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re not justified as these expenses were incurred by the assessee for the purpose of business as assessee required the services of sub-brokers to carry out business in stock market Mumbai and also activities in the primary markets on behalf of its clients and thus these disallowances are hereby deleted. Therefore, the ground no. 2 of assessee s appeal is partly allowed. 13. Ground no. 3 is against disallowance of ₹ 43,04,449/- u/s 40A(2)(b). 14. The assessee made payment of ₹ 86,08,89 .....

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The CIT(A) upheld the disallowance made by the AO by observing as under:- The disallowance of ₹ 43,04,449/u/ s 40A(2) on account of subbrokerage paid to two related parties, M/s JM Share & Stock Borkers Ltd. and Mr. Ashit Kampani. Services rendered are claimed to be introduction of clients only without any evidence, whereas, commission paid is 50% of the brokerage earned. In these circumstances, I also find that the subbrokerage paid is very unreasonable, hence, the disallowance is con .....

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nly. The AO did not go into the unreasonableness of the payments. He contended that the AO nowhere had pointed out that the payment was either excessive or non genuine or not comparable with the market rates and, therefore, the disallowance u/s 40A(2b) is unwarranted and uncalled for. He relied upon the decision in the case of CIT Vs. Ashok J. Patel (2014) 225 Taxman 79.He further submitted that sub-brokerage paid to these parties in earlier year was accepted by the revenue and no disallowance w .....

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ions relied upon by the assessee. We note that the provisions of section 40A(1) begins with non abstante clause & (2) provides that where the assessee has incurred any expenditure by making the payment to any person as referred to clause( b) which is excessive , unreasonable having regard to the fair market value of that expenditure or services or goods, then so much of the expenditure as is considered excessive and unreasonable shall be disallowed by the assessing officer. In this case Rs. .....

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ote that 50% disallowance was made on purely adhoc basis which is not permissible under law by disregarding the fact that similar expenses were allowed in the earlier years. We are, therefore, of the considered view that the said disallowance /addition is not justified and therefore the same is ordered to be deleted. Accordingly ground no. 3 is decided in favour of the assessee. 18. The grounds raised in ITA No 3494/Mum/2013 for assessment year 1998-99 reads as under:- A) Disallowance u/s. 40A(2 .....

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allowance made by the AO u/s. 40A(2)(b) of ₹ 22,54,117/and confirmed by the CIT(A) may be deleted. B) Disallowance of interest ₹ 23,46,450/ 3) The learned CIT(A) erred on facts and in law in confirming the disallowance made by the AO on account of interest to the extent of ₹ 23,46,450/on the alleged ground that the appellant had paid interest but had not charged interest from directors and their family members. 4) The appellant prays that the disallowance of interest amounting .....

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ly members. 21. The fact in brief are that the assessee paid interest of ₹ 32,02,948/-on borrowed funds. During the year, the assessee in its normal course of its business, purchased shares amounting to ₹ 156.43 Lacs on behalf of Mr. Ashit M. Kampani, Mr. H.N. Kampani and Mr. Hemul Ashit Kampani. The cost of these shares were debited to their accounts and the amounts due from them was shown as receivable from them under the head Sundry Debtors . 22. The AO during the course of assess .....

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50/- . 23. CIT(A) upheld the disallowance by observing in para 9 as under:- I have considered the facts of the case and submissions of the assessee. Undisputedly, the assessee has paid interest on the borrowed funds, whereas, no interest has been charged from directors of their family members, whereas, assessee has failed to show that the loan or advances have been given to directors or family members for any business purpose, no evidence in this regard is produced. Therefore, disallowance @ 15% .....

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ese transactions were made at the market rate charging commission from these persons as per market regulations. The Ld. AR further submitted that, without prejudice, the own funds of the assessee were sufficient to take care of the amount due from directors and their family members and where the assessee had own funds as well as borrowed funds , in that the event the presumption is that the money/advances are given out of own funds by placed reliance on the Judgment of Hon ble Bombay High Court .....

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