TMI Blog2017 (10) TMI 239X X X X Extracts X X X X X X X X Extracts X X X X ..... and that investments in the interest free security was made out of own funds. Accordingly, following the ratio laid down in the case of HDFC Bank (supra) we are inclined to delete the disallowance of ₹ 16,65,803/- by reversing the order CIT(A) on this issue. The AO is directed accordingly Disallowance on account of bad debts - Held that:- Respectfully following the precedent laid down by the Co-ordinate Bench of the Tribunal in the assessee’s own case, we direct the AO to allow the claim of the assessee as held assessee has satisfied the conditions stipulated in section 36(2)(i) since these are business debts which could not be recovered and written off. Following the principles laid down by the Special Bench in the case of Shreyas S. Morakhia (2010 (7) TMI 455 - ITAT MUMBAI ) we hold that assessee satisfied the conditions prescribed under section 36(2). - Decided in favour of assessee. Disallowance of research and processing fees - Held that:- We find a similar issue arose in the assessment year 2009-10 in which the addition was made by the AO to the total income of the assessee but in the proceedings before the FAA, the ld. CIT(A) deleted the addition made by the AO ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... d against the order of ld.CIT(A)-39, dated 23.5.2014 and appeals for the assessment year 2009-10 is directed against the order of ld.CIT(A)-8, dated 24.3.2014. Since the issues agitated in all these appeals filed by the assessee and revenue are almost identical in nature, we shall take up the appeal relating to the assessment year 2010-11 filed by the assessee first as this being the lead case. The facts relating to the issues under consideration are discussed hereunder with reference to A.Y 2010-11. ITA No.4914/Mum/2016 2. The grounds of appeal taken by the assessee are as under : 1) On the facts and circumstances of the case as well as in Law, the Learned CIT(A) has erred in confirming the action of Learned Assessing in disallowing the further expenses of ₹ 16,65,8031 - u/s.14A of the Income Tax Act, 1961 by invoking the rule 80, without considering the facts and circumstances of the case. 2) On the facts and circumstances of the case as well as in Law, the Learned CIT(A) has erred in confirming the action of Learned Assessing in disallowing the claim of Bad Debts, without considering the facts and circumstances of the case. 3) On the fact and ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... indeed an estimated figure. As pointed out by the AO, as held by the jurisdictional High Court in the case of Godrej and Boyce Mft. Co.Ltd (2010) 328 ITR 81 from AY 2008-09 and onwards. Rule 8D will apply. The Assessing Officer has clearly shown forth that he is not satisfied with the correctness of the computation as made by the appellant. In fact the appellant has certainly not been able to establish the basis or appropriateness of the disallowance computed at ₹ 3,64,098/-_ Therefore it is categorically held that in this case the Assessing Officer was correct in applying Rule 80 la compute the disallowance under 8.14A. The appellant has raised a contention that it has enough own funds and when the investments made arc much less that the own funds available, it can be deducted that the investment are made out of own funds. This is too facile an explanation to be accepted. In matters with regard to a fiscal statute there can be no assumptions/presumptions nor can anything be left to be deduced from. It is the statutory obligation of a tax payer to prove the contentions as raised by him. The appellant has not made any effort to establish that it had enough own free funds avail ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ordingly.This ground is allowed. 4. Grounds of appeal no.2 is against the confirmation of disallowance by the ld. CIT(A) as made by the AO on account of bad debts. 4.1.During the course of assessment proceedings, the AO noticed that the assessee has charged to the profit and loss account a sum of ₹ 59,84,843/- on account of bad debts and sundry balances written off and accordingly issued show cause notice to the assessee as to why the assessee fulfilled the conditions of section 36(1)(vii) r.w.s.36(2) of the Act. The assessee submitted before the AO that this amount has been written off as the same pertains to clients the receipts from whom stand offered as income in the past and the money which could not be recovered was charged as per the provisions of the Act. However, the reply of the assessee did not find favour with the AO and he disallowed the same by observing that the assessee has failed to satisfy the conditions as laid down in section 36(1)((vii) read with section 36(2). 4.2.In the appellate proceedings, the ld. CIT(A) after taking into account the contentions and submissions of the assessee partly allowed the appeal by observing and holding as under vide ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... were already filed before the authorities, we have no hesitation in allowing the ground. AO is directed to allow the bad debt as claimed. 4.5. Respectfully following the precedent laid down by the Co-ordinate Bench of the Tribunal in the assessee s own case, we direct the AO to allow the claim of the assessee.The ground is accordingly allowed. 5. The issue raised in grounds of appeal no.3 is with regard to the disallowance of research and processing fees of ₹ 11,75,000/- by the CIT(A) by upholding the order of AO on this issue. 5.1. Facts of the issue in brief are that the AO noticed that the assessee has debited to profit and loss account an amount of ₹ 11,75,000/- towards Research and processing fees. Accordingly, the AO issued notice to the assessee as to why the same should not be disallowed. In response, the assessee submitted that the main object of the assessee was to provide of business centers, housekeeping and infrastructural facilities, project consultancy and management services and also prove services in research development and marketing, manpower and conferencing internet facilities, develop e-commerce and electronics facilities and establish ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... by ordering the deletion of the addition. 5.4. The ld. DR relied upon the orders of authorities below. 5.5. We have heard the rival contentions and perused the material placed before us. We find a similar issue arose in the assessment year 2009-10 in which the addition was made by the AO to the total income of the assessee but in the proceedings before the FAA, the ld. CIT(A) deleted the addition made by the AO vide para 6.3 of the appellate order in appeal No.8/Cir-4/344/11-12 AY-2009-10 and the revenue has not challenged the decision of ld.CIT(A) before the Tribunal. Therefore, revenue s plea cannot be raised at this juncture to rake up the same issue in the subsequent issue as the issue has been settled in the previous year. Moreover, even on merits the case of the assessee is very strong case as the payment is made to the same party viz M/s Key tone Corporate Solutions P. Ltd for providing data analysis and research on the stock market as well as commodity market. In view of the said facts and circumstances, we are inclined to direct the AO to delete the addition by reversing the findings of the ld. CIT(A).The appeal is allowed on this ground. ITA NO.4977/Mum/2014 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... this regard. On an entire appreciation of the matter, the expenditure incurred towards purchase of Logs, for renovation of the rented premises is in the nature of current repairs and therefore held as revenue. The Assessing Officer is directed to allow the sum of ₹ 23,83,275/- claimed under repairs and maintenance 8.3. After hearing the rival contentions and perusing the material placed before us, we find that the assessee has incurred an expenditure on repairs and maintenance and renovation of office premises and therefore the same cannot be treated as capital in nature. We are, therefore, in complete agreement with the ld.CIT(A) that the said expenses are admissible as revenue expenditure. Accordingly we uphold the order of CIT(A) dismissing the ground raised by the revenue. ITA No.4564/Mum/2014 9. Only ground raised by the assessee in this appeal is as under : 1) On the facts and circumstances of the case as well as in Law, the Learned CIT(A) has erred in confirming the addition of ₹ 29,77,239/- made by the AO by wrongly interpreting and applying the provisions of section 14A of the IT Act, 1961 r.w.rule 8D of the Income Tax Rules, 1962 while ig ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... onate expense thereto does not arise. b) It appears that your good self while calculating the deemed speculation loss for. the relevant year for the assessee company has not taken into account the F O profit which is also a result of transactions by way of purchase and sale of shares. of other companies carried out by. the assessee company and as per the deeming provisions of explanation to Sec. 73 of the Act; are to be treated a speculation profit. In this : regard attention of your goods elf is invited to the legal position wherein-it is clear that explanation to sec. 73 is to be applied ignoring the definition of speculation profit / loss u /s 43(5) of the Act defining a speculative transaction.. on all the transactions by way of purchase and sale of shares of other companies. In view of the same one cannot apply the deeming provisions of explanation to sec. 73 only to the trading in delivery based share transaction as they are not included in speculative transaction u/ s. 43(5) of the Act and exclude F O transactions which. are although non- delivery based and covered u/ s. 43(5) of the Act but specifically excluded as an exception to section 43(5) of the Act by way of a ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... es .This position is further supported by the Hon ble Delhi High Court in the case of CIT V/s DLF Commercial Developers Ltd in ITA No.94/2013 vide order dated 11.7.2013) wherein it has been held . 9. In this context, it would be instructive to notice that in Rajshree Sugars and Chemicals Ltd (supra), the Madras High Court noticed, rather dramatically, that ―..'Derivatives are time bombs and financial weapons of mass destruction' said Warren Buffett, one of the world's greatest investors, who overtook Microsoft Maestro in 2008 to become the richest man in the world and who is known as the 'Sage of Omaha or Oracle of Omaha'. Derivatives, according to him, can push companies on to a spiral that can lead to a corporate melt down....‖ The High Court then, after examining the nature and characteristics of derivatives transactions, observed that: ―5. What are these 'derivatives' which have gained such a great deal of notoriety? In simple terms, derivatives are financial instruments whose values depend on the value of other underlying financial instruments. The International Accounting Standard (IAS) 39, defines derivatives as ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e, namely, unless there is anything repugnant in the subject or context. Therefore in finding out the meaning of the word insurer in various sections of the Act, the meaning to be ordinarily given to it is that given in the definition clause. But this is not inflexible and there may be sections in the Act where the meaning may have to be departed from on account of the subject or context in which the word has been used and that will be giving effect to the opening sentence in the definition section, namely, unless there is anything repugnant in the subject or context. In view of this qualification, the court has not only to look at the words but also to look at the context, the collocation and the object of such words relating to such matter and interpret the meaning intended to be conveyed by the use of the words under the circumstances.‖ Similarly, in N.K. Jain and Ors. v C.K. Shah and Ors. AIR 1991 SC 1289, it was held that: ―4. The subject matter and the context in which a particular word is used are of great importance and it is axiomatic that the object underlying the Act must always be kept in view in construing the context in which a particular word is ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... erials placed before us including the case law and impugned orders. The undisputed facts are that during the course of business of share trading, the assessee has suffered a loss of ₹ 77,49,222/- in the share trading business and earning income from F O segment to the tune of ₹ 1,15,64,503/- and after claiming the set off of the loss in trading division against the income of F O the net income of ₹ 33,23,552/- was offered to tax. The AO invoked the provisions of explanation (1) to section 73 treating it the loss from trading in shares to the tune of ₹ 77,49,222/- as speculation loss while treating the income from F O segment as normal business income and thus denied the set off of loss from trading in shares against the income from F O segment. For the purpose of better understanding the Explanation (1) to section 73 of the Act we will first dwell into the provisions of explanation 1 to section 73 of the Act first. The said explanation postulate a situation where any part of business of the company consisted of purchases and sale of shares of other companies. In that case, the deeming fiction has been created by the Explanation with income/loss from share tr ..... X X X X Extracts X X X X X X X X Extracts X X X X
|
