TMI Blog2020 (1) TMI 311X X X X Extracts X X X X X X X X Extracts X X X X ..... he same income is avoided. The contention that this benefit is not available to the assessee whose total income is assessed under Section 115JB has no substance. In other words, when the total income is assessed and the tax chargeable is computed, it is from that tax which is chargeable, the tax paid under Section 88E is given deduction, by way of rebate, under Section 87 of the Act. This is the legislative intent. That is a promise to give deduction of the tax already paid. This is the mode in which tax already paid is handed back at the time of final computation. - Decided against revenue Disallowance of interest expenditure on the ground that the certain loan amount was utilized for acquiring the property - HELD THAT:- This issue is squarely covered in favour of the assessee by the decision of Reliance Industries Ltd. [ 2019 (1) TMI 757 - SUPREME COURT] that interest free funds were available to assessee which were sufficient to meet its investment in subsidiaries, appellate authorities were justified in allowing assessee's claim for deduction. In the present case the assessee has issued subscribed and paid-up share capital of 19705200/ and reserves and surplus of ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ine Trading (BOLT) System] for which transaction charges are paid by members of BSE are common services that every member of Stock Exchange is necessarily required to avail of to carry out trading in securities in Stock Exchange; such services do not amount to 'technical services' provided by Stock Exchange, not being services specifically sought for by user or consumer and, therefore, no TDS would be deductible under section 194J on payments made for such services. Disallowance u/s 14A - HELD THAT:- Claim of the assessee is that only investment yielding the exempt income should be considered to workout the average value of investment for the purpose of disallowance of the expenditure. Before us the assessee has submitted the opening and closing balance of investments which yielded dividend income which are placed at page number 38 of the paper book and the assessee has worked out the total disallowance of INR 1 0404/-thereon. The above details were not available with the assessing officer and therefore we direct the assessee to submit the above details before the assessing officer, who may verify and consider the argument of the assessee that only the investments ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... which is erroneous on facts and on law and as such liable to be deleted. 3. That the Ld. AO has erred and in not justified in making an addition of ₹ 16071237/- on account of disallowance of interest paid on loan, which is erroneous on facts and on law and as such liable to be deleted. 4. That the Ld. AO has erred and in not justified in making an addition of ₹ 50000/- on account of disallowance of charges paid to NSE treating the same as penalty for violation of law, which is erroneous on facts and on law and as such liable to be deleted. 5. That the Ld. AO has erred and unjustified in denial of rebate u/s 88E of the Income Tax Act, 1961 to the extent of ₹ 267208/- which is against the facts and on law and as such should be allowed. 6. That the Ld. AO is unjustified in making addition of ₹ 1961579/- on account of disallowance of expenses u/s 40(a)(ia) of the Income Tax Act 1961 by treating the amount paid by the assessee to NSE for NSE transaction charges, as Fees paid for Professional and Technical Services which is erroneous on facts and on law and as such liable to be deleted. ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... of rebate u/s 80 8D 267208 allowed ground number 5 of assessing officer 6 disallowance under section 40 (a) (ia) 1961579 deleted ground number 6 7 disallowance u/s 14 A of the act 225174 confirmed ground number 2 of the appeal of assessee and ground number 7 of AO 6. As per Ground no 1 of the AO s appeal, of granting of rebate u/s 88E while calculating the tax liability of the assessee for minimum alternative tax under section 115JB of the income tax act on the book profit of INR 20047802/ . The assessee has claimed rebate of INR 6048942/ paid securities transaction tax as rebate under that section while computing its tax liability under section 115 JB of the income tax act. The learned assessing officer disallowed the above credit holding that as per t ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ate amount of the deductions under section 88 or section 88A [or section 88B] [or section 88C] [or section 88D or section 88E] shall not, in any case, exceed the amount of income-tax (as computed before allowing the deductions under this Chapter) on the total income of the assessee with which he is chargeable for any assessment year. 88F. Rebate in respect of securities transaction tax.-(i) Where the total income of an assessee in a previous year includes any income, chargeable under the head Profits and gains of business or profession'', arising from taxable securities transactions, he shall be entitled to a deduction, from the amount of income-tax on such income arising from such transactions, computed in the manner provided in sub-section (2), of an amount equal to the securities transaction tax paid by him in respect of the taxable securities transactions entered into in the course of his business during that previous year; Provided that no deduction under this sub-section shall be allowed unless the assessee furnishes along with the return of income, evidence of payment of securities transaction tax in the prescribed form : ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... uance of an antecedent contract and also a deduction or drawback from a stipulated payment, charge, or rate not taken out in advance of payment, but handed back to the payer after he has paid the full stipulated sum. 12. Corpus Juris Secundum defines the word rebate as The etymological or dictionary meaning of the term includes any discount or deduction from a stipulated payment, charge, or rate not taken as in advance of payment, but handed back to the payer after he has paid the stipulated sum, even when such discount or deduction is equally applied to all from whom such payment is demandable, 13. The Kerala High Court in the case of Deputy Commissioner of Sales Tax v. Travancore Rayons Ltd. [1961] 12 STC 178 after considering the aforesaid definitions held as under:- Rebate means relinquishing part of the liability by a person entitled to with a view to persuade a person liable to follow a particular conduct which such person was not otherwise compelled. 14. The Bombay High Court in the case of Someshwar Sahakari Sakhar Karkhana Ltd., v. Union of India 1988 (34) ELT 522 held as unde ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... not see any substantial question of law involved in this appeal, which merits admission. The appeal is dismissed. In view of this, we dismiss ground number 1 of the appeal of the learned assessing officer. 8. Ground number 2 of the appeal of the learned assessing officer is with respect to the disallowance of INR 1 263849/ on account of disallowance of interest paid on loan. In fact on reading para number 12 of the order of the learned CIT A the ultimate result is that the learned CIT A has confirmed the disallowance of interest expenditure of INR 1 263849/ . Therefore this ground of appeal is wrongly taken by the learned assessing officer as revenue could not have been aggrieved with the order of the learned CIT A where the disallowance has been confirmed. In fact, the assessee is in appeal against that order as per ground number 1 of its appeal. Thus, Ground no 2 is dismissed. 9. Per Ground no 1 of the appeal of the assessee connected with the above ground of AO appeal, appellant has challenged the confirmation of disallowance of interest expenditure of INR 1 263849 on the ground that the certain loan amo ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... come Tax v. Reliance Industries Ltd. that interest free funds were available to assessee which were sufficient to meet its investment in subsidiaries, appellate authorities were justified in allowing assessee's claim for deduction. In the present case the assessee has issued subscribed and paid-up share capital of 19705200/ and reserves and surplus of INR 6 8624247/ which is far more than investment in the answer Plaza shop of INR 1 9009105. Thus following the decision of the honourable Supreme Court, the above addition cannot be sustained. Hence, we direct the learned assessing officer to delete the same. Accordingly, ground number 1 of the appeal of the assessee is allowed. 13. Ground number 3 of the appeal of the learned assessing officer is against the addition of INR 1 6071237/ because of disallowance of interest paid on loan deleted by the learned CIT A. During the year it was found that assessee has given in advance to a builder for a space amounting to INR 1 01750000/ which is admittedly not related to the existing business of the assessee. The learned assessing officer noted that merely because there was a clause in the memorandu ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... rticulars 1. 3777201/- This interest was paid to Birla Global Finance Co. Ltd. For loan of ₹ 10 Crore sanctioned by them against the shares and securities therefore interest on this loan is directly related to the shares business of the assessee. (As a proof loan sanction letter enclosed at page 2 of Paper Book II 2. 4200564/- This interest was paid to Kotak Mahendro Prime Ltd for loan of ₹ 5 Crore sanctioned by them against the shares/ mutual find financing therefore interest on this loan is directly related to the shares business of the assessee. (As a proof loan sanction letter enclosed at page % of Paper Book II 3. 4196354/- This interest was paid to IL FS Ltd for loan of ₹ 10 Crore sanctioned by them against the shares and securities therefore interest on this loan is directly related to the shares business of the assessee. (As a proof Copy of account of I ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... Which was utilized to repay the loan taken By TT Limited (which was utilized to repay the loan of ILFS (at page of Paper Book II) 15270368/- TOTAL 17.4 It is further seen that the gain of ₹ 124.50 lacs on the sale of investment in the shares of M/s Victory Buildwell Pvt Ltd. was offered for taxation as business income in A.Y.2009-10. Hence investment of ₹ 2,49,00,000 in the shares of M/s Victory Buildwell Pvt Ltd naturally requires to be excluded while working out the funds diverted for non-business purpose. The value of non-business investment is ₹ 12,42,50,000(14,91,50,000-2,49,00,000). The disallowable interest works out to ₹ 1,49,10,000. Since ₹ 12,63,849 was disallowed already, the expenditure to be disallowed works out to ₹ 1,36,46,151 (1,49,10,000 - 12,63,849) which is lesser than the interest expenditure worked out by the AR on the funds utilized for business purpose as detailed in the table given above. 17. In view of the fact that the learned CIT A has considered each and every item of the interes ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... before us. 21. The learned departmental representative vehemently supported the order of the learned assessing officer and stated that when the interest income is earned on fixed deposit with the stock exchange it is chargeable to tax as income from other sources and cannot be a business income. 22. The learned authorised representative relied upon the order of the learned CIT A. 23. We have carefully considered the rival contentions. Assessee has earned the interest income of INR 8 90692 earned on bank fixed deposit receipts on which no security transaction taxes suffered and paid by the assessee, therefore the learned assessing officer computed the disallowance of the rebate at the rate of 30% of the interest income. The CIT A has allowed the claim of the assessee based on the decision of the honourable Kerala High Court in 290 ITR 598 which has been reversed by the honourable Supreme Court in 322 ITR 270. Therefore we set aside whole issue back to the file of the learned CIT A to re-examine the claim of the assessee in view of the decision of the learned assessing officer on the merits in accordance with the law. Accordin ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... avail of to carry out trading in securities in Stock Exchange; such services do not amount to 'technical services' provided by Stock Exchange, not being services specifically sought for by user or consumer and, therefore, no TDS would be deductible under section 194J on payments made for such services. In view of this we do not find any merit in ground number 6 of the appeal of the learned assessing officer hence same is dismissed. 27. Ground number 7 is with respect to disallowance u/s 14 A of the income tax act. This issue is decided in favour of the learned assessing officer but assessing officer has preferred this ground of appeal, which is grossly incorrect as the AO cannot be held to be aggrieved when the learned CIT A has upheld the disallowance. Accordingly this ground of appeal is dismissed. 28. Now we come to the ground number 2 of the appeal of assessee where the disallowance made by the learned assessing officer u/s 14 A of the income tax act of INR 2 25174 confirmed by the learned CIT A contested. The fact shows that during the year the assessee has earned dividend income of INR 1 39200. As ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... essing officer, as assessee has not claimed that it has not incurred any expenditure. He read the para number 7.1 of the assessment order and stated that the only claim of the assessee before the assessing officer that assessee is a share broker and he has not used any separate funds in the shares to on dividend income. He further referred to the order of the learned assessing officer and stated that there is no exemption to the share broker. He therefore submitted that the proper satisfaction has been recorded by the learned assessing officer. With respect to the other arguments of the learned A.R. he relied upon the orders of the lower authorities. 31. We have carefully considered the rival contention and perused the orders of the lower authorities. Admittedly the assessee has earned the exempt income of INR 1 39200 as dividend income which is claimed as exempt income. The learned assessing officer computed the average value of investment of INR 4 5034783 and considered only 0.50 percentage thereon as disallowable expenditure u/s 14 A of the income tax act applying the provisions of rule 8D. The learned assessing officer has not disallowed any sum because of inte ..... X X X X Extracts X X X X X X X X Extracts X X X X
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