TMI Blog2018 (1) TMI 84X X X X Extracts X X X X X X X X Extracts X X X X ..... .CIT(A), assessee succeeded in getting this addition deleted as ld.CIT(A) observed that assessee being in the business of trading shares and securities, calculates the closing stock on the basis of value of shares and securities as on the last date of last settlement, which in this case was 29.03.2010. 18. We find substance in the findings of ld.CIT(A), as the books of accounts of assessee are audited u/s.44AB, method of closing stock is consistent with the preceding year and there is no variation. Further we also find that the last date of settlement was 29.03.2010 and the assessee has calculated the valuation of closing stock at ₹ 6,20,62,436/- by adopting the valuation method of “cost or market value which were is less” for each script held as on 29.03.2010. The detailed working of closing stock also forms parts of the order of ld. CIT(A). We therefore, in the given facts and circumstances as well the factual material of the issue raised in this ground fail to differ with the view taken by ld.CIT(A) deleting the addition. - ITA.No. 1728/AHD/2015 - - - Dated:- 28-12-2017 - SHRI S.S. GODARA, JUDICIAL MEMBER AND SHRI MANISH BORAD, ACCOUNTANT MEMBER For The Appellant : ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... fact that the assessee is into the business of trading shares and earning of exempt income is mere incidental to the carrying of business activity of share trading. Hon ble Karnataka High Court in the case of CCI Ltd. vs. Joint Commissioner of Income Tax, (2012) 206 Taxman 563 has held that provision of section 14A of the Act are not applicable in the case of assessee who is engaged in the business of share trading. 9. We further observe that ld. CIT(A) sustained the disallowance of ₹ 46,494/- observing as follows: ( C) Ground No.3.1 3.2 is against the disallowance of ₹ 23,21,975/-u/s 14A read with Rule 8D of the Act. The appellant contended that since appellant is in the business of share trading, provisions of section 14A are not applicable. The appellant objected the computation of disallowance as per Rule 8D also. As discussed at para 4A above, the A.O. after observing from audited P L a/c and computation of income that appellant claimed ₹ 5,91,946/- as exempt income being dividend, and also no disallowances were made relatable to such exempt income despite there being continuous activity of investment in shares securities, he rejected appellant&# ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... expenses (direct as well as indirect) which are relatable to such exempt income. The continuous business activities which resulted into incidental income in the form of dividend definitely have indirect cost in the form of remuneration, demat charges and other such expenses hence provisions of section 14A of the Act are applicable. Now coming to disallowances of such expenses as per Rule 8D, I am inclined with appellant that as per ratio as relied on by it, the disallowances in the peculiar facts of appellant cannot be more than exempt income. It is therefore, following the ratio of such case laws, Hon'ble Bombay High Court decision in the case of Godrej Boyce Man. Co. Ltd. (supra), a reasonable disallowance will do the justice for both end. Following ratio of provision of section 80HHC where 10% of expenses are recognized by legislature from the income in the nature of interest, commission etc., I treat 10% of the exempt income as expenses relatable to it. This will give ₹ 46,494/-(10% of ₹ 4,64,942/-) as disallowances. Therefore the A.O. is directed to allow the balance expenses of ₹ 22,75,481/- (2321975 - 46494) and delete the addition to this extent. The ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... complete details about nature of transaction, details of various transactions and confirmation for the transactions with M/s Isha Investment and also such details were called directly from M/s Isha Investment u/s 133(6) of the Act, held that appellant as well as said party failed to submit the nature of transaction and in view of appellant claimed interest of ₹ 33,02,672/- on borrowed fund, such advances can only be treated as given out of interest bearing fund for non-business purpose hence A.O. computed such interest at 12% and disallowed ₹ 6 lac out of such claim. The appellant contended during appeal that advances of ₹ 50 lac (Rs. 10 lac on 06.03.09 and ₹ 40 lac on 13.03.09) were given to M/s ISHA Investment i.e. in F.Y. 08-09 relevant to A.Y. 09-10. It was also submitted with evidences (Bank a/c at HDFC No. 9514) that the same were made out of interest free fund. The same advances as opening balances carried to impugned previous year and no transaction of any payment or receipt is undertaken during previous year. The A.O. has not disallowed interest on such advances in A.Y. 09-10. It is further contended with copy of tax audit report that loans taken du ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... each script held as on 29.03.2010. The detailed working of closing stock also forms parts of the order of ld. CIT(A). We therefore, in the given facts and circumstances as well the factual material of the issue raised in this ground fail to differ with the view taken by ld.CIT(A) deleting the addition of ₹ 58,85,251/- observing as follows: ( E) Ground No. 5.1 5.2 are against the A.O.'s holding that appellant understated its closing stock. As an alternative, it was contended by appellant that if such understatement is upheld with addition of valuation, then direction be given to A.O. to consider it as opening stock of same value in A.Y. 11-12. The A.O. in the impugned order after observing auditor's remarks at point no. 6 that Inventories are valued at market value as on cutoff date called for the details of valuation for closing stock reflected at ₹ 6,20,62,436/-. The A.O. thereafter compared value as on 30th / 31st March 2010 as per BSE/NSE and as taken by appellant and show caused appellant for difference-of such valuation of ₹ 58,85,251/-and made the addition. The A.O. attached with impugned order the value of various script taken from NSE/B ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... any deviation, the tax auditor has to report about it with effect on profit thereof. As contended by appellant that details of closing stock valuation at ₹ 6,20,62,436/- is based on such consistent method of valuation on cost or Market value whichever is low . It is therefore, I am inclined with appellant that on an 'incorrect' or even if the same is correct, the comment at annual report cannot be adopted overlooking tax audit report for method of valuation to be followed. I am also inclined with appellant with its alternative argument that on account of fact that appellant is paying tax at maximum rate for impugned previous year as well as subsequent year, such adjustment if made with given its effect for opening stock in next year, it will be a tax neutral exercise. The appellant's valuation chart reflecting market value as well as cost value at ₹ 6,67,91.183/- and at ₹ 6,24,24,431/- respectively and adopting of closing stock at lowest of two resulting in valuation at ₹ 6.20,62,436/- is attached herewith this order as Annexure-A for ready reference. This chart clearly reflect that for market value is taken at stock price on 29.03.2010 i.e. l ..... X X X X Extracts X X X X X X X X Extracts X X X X
|
