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2016 (12) TMI 242 - ITAT MUMBAI

2016 (12) TMI 242 - ITAT MUMBAI - TMI - Income from share transactions - Nature of income - Short Term Capital Gains or income from business - Held that:- As decided in assessee's own case for AY 2007-08 the issue has been decided against the assessee. We, therefore , respectfully following the decision of the coordinate bench uphold the orders of authorities below in treating the STCG as income from business. - Disallowance u/s 14A read with Rule 8D - Held that:- We find that in the case of .....

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ddition of ₹ 18,51,670/- by sustaining the disallowance to the extent of ₹ 40,000/- only. - Confirmation of disallowance on account of car expenses, depreciation of motor car, telephone expenses, conveyance allowance and travelling expenses - Held that:- We find that the adhoc disallowances has been made by the AO at the rate of 20% of the total expenses in respect of car expense, depreciation , telephone, office expenses, conveyance, miscellaneous expense, foreigen travel and ot .....

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e are therefore of the considered opinion that it would be justified and reasonable if the disallowances is restricted to 10% of the total expenses - Addition on account of commission income on the basis of AIR information available with the department - Held that:- We find from the reconciliation statement that most of the entries attributing to the difference between the books of the assessee and Form 26A were duly recorded by the assessee either in the preceding or succeeding year. We, th .....

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d wholly and exclusively for the purpose of business. We do not find any infirmity in the findings of the ld.CIT(A) and accordingly same is confirmed on this issue - Disallowance of travelling expenses - Held that:- CIT(A) upheld the action of the AO on the ground that the assessee failed to prove that one of his employees visited Shirdi for cracking the business deal with one of the client but relevant documents have not been submitted as to which employee was sent to Shirdi, to whom did he .....

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, AM These appeals by the assessee are directed against the order dated 26.03.2012 and 28.10.2013 of CIT(A), Mumbai for the A.Ys. 2008-09 and 2009-10 respectively. Since, the appeals before us relate to the same assessee, therefore, for the sake of convenience, they are clubbed together, heard together and disposed of in this consolidated order. I.T.A. No.3594/Mum/2012 (AY-2008-09) 2. Facts of the case are that the assessee has filed return of income on 24.9.2008 declaring total income of ₹ .....

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- on sale of investments. The AO observed that the activities of the assessee were of trading nature as he was involved in sale and purchase of shares and thus dealing in shares at a very frequent interval. The AO was of the opinion that the assessee was routinely involved in share transactions and therefore, the AO treated this gain as income from business by rejecting all the contentions of the assessee. 5. At the outset, the ld. AR fairly conceded that the issue involved in this ground is cov .....

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lied on the decision of the Tribunal in the case of Gopal Purohit (29 SOT 171) to argue that income from all delivery based transactions has to be assessed as income as held by the Tribunal in the said case. We have carefully perused the order of the Tribunal in the case of Gopal Purohit (supra), but we find that there is no universal finding in that case that all delivery based transactions have to be treated as investment. It is pertinent to note that the Tribunal in case of Gopal Purohit (sup .....

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y in respect of such cases, the decision in case of Gopal Purohit (supra), could be applied. The Hon ble High court of Bombay had upheld the decision of the Tribunal in the case of Gopal Purohit (supra), on the ground that there was no substantial question of law involved. Even before Hon ble High Court there was no question raised that all delivery based transactions have always to be treated as investment activity. Thus the decision of the Tribunal as well as the Hon ble High court in case of .....

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e share transactions from which the assessee has shown short term capital gain ITA No : 7881/Mum/2010 Shri Devji Nenshi Palani 8 were of the nature of trading activity of the assessee and accordingly we set aside the order of the CIT(A) treating the short term capital gain as business income. In view of the fact that in the assessee s own case the issue has been decided against the assessee. We, therefore , respectfully following the decision of the coordinate bench uphold the orders of authorit .....

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vide show cause notice dated 24.11.2010 as to why the provisions of section 14A read with rule 8D should not be invoked which was replied by the assessee by submitting that the provisions of section 14A r.w.r 8D were not applicable to the assessee as no expenses have been incurred in relation to exempt income. However the AO brushing aside the contentions of the assessee invoked the provisions of section 14A read with rule 8D and made disallowance of ₹ 18,91,658/- comprising of ₹ 17, .....

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ring the year. The ld. AR in defence of his argument heavily relied on a number of decisions namely (i) M/s Daga Global Chemicals V/s ACIT , ITA No.5592/MUM/2012(AY: 2009-10) dated 1.1.2015, (ii) M/s Arcadia Share & Stock Brokers P. Ltd. V/s Addl. CIT , ITA No.5871/Mum/2012 (AY-2010-11) dated 23/03/2016 (iii) DCIT V/s M/s Silvassa Wooden Drums in ITA No.5782/Mum/2013,(AY-2005-06) dated 9.2.2015. 9. The ld. DR on the other hand, opposed the arguments of the ld.AR by submitting that the assess .....

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disallowance u/s 14A r.w.r 8D should not exceed the exempt income earned during the year. The case of the assessee is also supported by the decisions referred and relied to by the ld AR in which it has been held that disallowance cannot be exceed the amount of exempt income. We, therefore, respectfully following the ratio laid down in (i) M/s Daga Global Chemicals (supra), (ii) M/s Arcadia Share & Stock Brokers P. Ltd. (supra) and M/s Silvassa Wooden Drums (supra) set aside the order of the .....

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28,555 C Adhoc disallowance of Telephone expenses 43,912 D Adhoc disallowance of office expenses 63,550 E Adhoc disallowance of conveyance 10,786 F Adhoc disallowance of Misc. expenses 15,278 G Adhoc disallowance of foreign expenses 1,73,752 J Adhoc disallowance of traveling expenses 2,04,596 12. The AO during the course of assessment proceedings found that the above said expenses from C to E were incurred by the assessee and charged to the profit and loss account which included personal elemen .....

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al expenses by following the order of ITAT in ITA No 6280/Mum/2008 AY 2005-06 wherein the tribunal confirmed 1/6th of the total disallowance. Similarly in respect F, G, H , the AO noted that most of these expenses were incurred in cash and based upon the self made vouchers with no third party verification available. The AO further observed that the nature of expenses were such that it was very difficult to ascertain whether these were incurred for the purpose of business of the assessee and acco .....

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e could not substantiate to be exclusively incurred for business purposes and disallowed ₹ 3,78,348/- @ 20% of these expenses which was also upheld by the CIT(A) by holding that assessee could not prove these expenses before AO as well as before me and keeping in view the nature of these expenses personal element could not be ruled out. 13. We have heard the rival contentions and perused the material placed before us. We find that the adhoc disallowances has been made by the AO at the rate .....

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confirmation is tribunal decision and CIT(A) decisions in the case of the assessee himself. Further we find that disallowances were purely on adhoc basis. We are therefore of the considered opinion that it would be justified and reasonable if the disallowances is restricted to 10% of the total expenses. Accordingly, we set aside the order of the ld.CIT(A) and direct the AO to make the disallowance equal to 10% of total expenses claimed by the assessee. Accordingly, this ground is partly allowed .....

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see has credited commission of ₹ 86,51,000/- whereas as per the AIR information available with the AO the commission received was ₹ 1.14 Cr. Accordingly, the AO called upon the assessee to explain the discrepancy of the amount of commission account for and as per AIR. In response to the said notice, the assessee vide letter dated 12.12.2011 submitted before the AO that he was following the cash system of accounting and therefore the commission received has been shown by the assessee .....

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either at the assessment stage or in the appellate proceedings and accordingly dismissed the appeal of the assessee. 17. Before us, the ld. AR submitted that the assessee was following cash system of accounting and accordingly credited the commission received to the profit and loss account, whereas the amounts appearing in the AIR information were on the basis of mercantile system of accounting by the persons/entities who pay the commission. The ld. AR filed a copy of statement reconciling and .....

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ost of the entries attributing to the difference between the books of the assessee and Form 26A were duly recorded by the assessee either in the preceding or succeeding year. We, therefore, consider it fit and proper to restore the mater to the file of the AO to verify the facts and decide the matter on the basis of reconciliation statement filed by the assessee as per fact and law. This ground is allowed for statistical purposes. 18. The issue raised in ground No.B in confirming the action of d .....

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travelling expenses of ₹ 4,969/- made by the AO and confirmed by the ld.CIT(A). 21. We find that the ld.CIT(A) upheld the action of the AO on the ground that the assessee failed to prove that one of his employees visited Shirdi for cracking the business deal with one of the client but relevant documents have not been submitted as to which employee was sent to Shirdi, to whom did he meet and what business purpose was served. Since, the assessee failed to controvert the findings of the AO b .....

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ground also. The AO is directed accordingly. 23. The ground Ë is in respect of disallowance @ 20% of car expenses, car depreciation and telephone expenses amounting at ₹ 98,053/-. 24. The assessee debited motor car expenses ₹ 2,67,897/-, depreciation on motor car ₹ 1,30,829/- and telephone expenses ₹ 91,540/- aggregating to ₹ 4,90,266/-. The AO on the basis of CIT(A) s order for the preceding year following the order of ITAT order dated 30.10.2009 in ITA No.62 .....

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