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2017 (5) TMI 210 - ITAT MUMBAI

2017 (5) TMI 210 - ITAT MUMBAI - TMI - Disallowance of business expenditure - Cessation of business by the assessee - Held that:- As submitted by the assessee that assessee has shown substantial income in assessment year 2007-08 and 2008-09. Also there was a temporary lull in the business activity. However he has claimed that subsequently the business has picked up and in financial year 2015-16 and financial year 2016-17 assessee has shown substantial business income. We note that the balance sh .....

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gaged in doing business and the business expenditure as appropriate deserves to be allowed. - However since we note that the additional evidence and the new submissions were not before the authorities below, hence in the interest of justice we remit this issue the file of the A.O. The A.O shall examine the issue afresh in light of the additional submissions of the assessee. Appeal of the assessee allowed for statistical purposes. - ITA no.240/Mum./2014 - Dated:- 3-5-2017 - SHRI SHAMIM YAHYA, .....

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s not carried on any activity to revive the business and thereby erred in confirming the order of the Assessing Officer. 2) On facts and circumstances, The Learned Commissioner of Income-tax (Appeals)-5, Mumbai, has erred in holding that the business is closed whereas the business of the Appellant is to do equity research and to maximize and/or guard against the risk of fluctuations in equity market and thereby erred in not allowing expenditure incurred in payment of salaries, rent, telephones, .....

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ot; and has erred in not holding that it is an income from business activities. 4) On facts and circumstances, The Learned Commissioner of Income-tax (Appeals)-5, Mumbai, has erred in confirming disallowance of ₹ 93,00,890/- being travelling and salaries paid to staff on the ground that no business is carried on. 5) The Appellant reserves right to add, alter or amend the above grounds of appeal as and when found necessary. 3. The facts are that assessee company has shown income from invest .....

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etc. The AO observed that the kind of activity done by the assessee cannot be considered as business activity or NBFC business. The was of the view that the interest income earned on fixed deposits with banks, public debentures with LIC Housing Finance and L&T Finance Ltd, REC Bonds and interest on IT refunds cannot be treated as business income just because assessee company is registered as NBFC with RBI. The AO also observed that when the assessee was not engaged in the business of money .....

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apital gain have been claimed as exempt. Thus AO held that expenses claimed could also not be covered u/s 48. In the context, by giving detailed reasoning the AO held that the expenses totalling to ₹ 1,32,07,059/- claimed by the assessee cannot be allowed as a deduction u/s 48 & Sec. 57 of the IT Act. The assessee had claimed travelling expenses amounting to ₹ 6,12,858/- on account of air ticket of Prashant K. Trivedi on his foreign visits. The AO noted that the expense was not a .....

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,32,07,059/- minus ₹ 39,06,169/- 4. Upon assessee s appeal Ld. CIT-A confirmed the action of the A.O. He held as under: I have perused the relevant P&L A/c and Balance sheets and taken note of the submissions made by the assessee. I find that the basic activity of the assessee is the investment in shares, capital bonds and Mutual funds. The dividend income thereon stands exempted from tax. The long term capital gain on sale of those investments is also exempted. The short term capital .....

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the total share capital and reserves & surplus shown at ₹ 33,89,88,239/-, the investments in shares and Mutual funds amounts to ₹ 30,26,31,463/-. The goods block [fixed assets] is shows at ₹ 31,89,346/-. Thus it is very evident that no business activity has been undertaken by the assessee. The income is mainly from the investment and as such the assessee's plea that its investments in shares as well as fixed deposits are to be considered as its stock in trade is mispla .....

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fixed deposits. Therefore, its plea that fixed deposits are also held as stock in trade and investment thereof should be treated as its business activity is also misplaced and cannot be accepted. The AO has rightly rejected such claim of the assessee. The perusal of the P&L A/c further indicates that the major cost debited, to the P&L al c has been on account of employee cost [Rs.91,35,418/-] and other expenses [Rs.36,89,952/-]. The break-up of other cost is given in Schedule 9. That inc .....

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utual funds based on the professional advice of its own competent personnel who are engaged in devoting their prime time in equity research by obtaining/collecting the relevant information. The expenses shown in Schedule 9 towards other cost mainly relates to such activities. The dividend as well as the long term capital gain is totally exempt thereon. Thus these expenses [employee cost as well as other cost] are with regards to the investment activities only, the income from which stands exempt .....

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case, in my considered view the AO has taken the correct and just view and does not call for any interference. 5. Against the above order assessee is in appeal before us. We have heard both the counsel and perused the records. Ld. Counsel of the assessee submitted that there has only been a temporary lull in the business. He submitted that assessee has shown substantial income in assessment year 2007-08 and 2008-09. No such disallowance was made in those year. He further submitted that subseque .....

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