TMI Blog2023 (2) TMI 1067X X X X Extracts X X X X X X X X Extracts X X X X ..... e against the assessee. As such the revenue, was expected to carry out necessary verification from the bank before reaching to the conclusion that the assessee has suppressed the interest income especially in the given facts and circumstances. It is for the reason that the assessee in the given case has discharged the onus by furnishing Form-16A and interest certificate issued by the bank. Accordingly, we hold that the assessee cannot be held guilty merely on the basis of 3rd party information until and unless it is cross verified - we set aside the finding of the learned CIT (A) and direct the AO to delete the addition made by him. Hence the ground of appeal of the assessee is hereby allowed. Disallowances u/s 14A - AO during the assessment proceedings found that the assessee during the year has earned exempt income but no corresponding expense was disallowed as prescribed under section 14A - AO being dissatisfied with the explanation and working of disallowances furnished by the assessee resorted to the provision of section 14A(2) read with rule 8D - HELD THAT:- For disallowance of interest expenses, the assessee on one hand incurred interest expenses of Rs. 47,23,474/- but ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... the purchase price, if purchased during the year, or on the first day of accounting year, it may result into a gain or loss. While gain is not considered in the profit and loss account on the ground of prudence that no businessman will credit gain without it being realized, the loss so resulted is debited in the profit and loss account on the principle of cost price or net realizable value, whichever is lower. The Hon'ble Apex Court in M/S WOODWARD GOVERNOR INDIA P. LTD. M/S HONDA SIEL POWER PRODUCTS LTD. [ 2009 (4) TMI 4 - SUPREME COURT] upheld the claim of the assessee for the reasons that in mercantile system of accounting the value of the asset on two different dates has to be compared to arrive at a profit for that period. Such loss was considered as allowable u/s 37 of the Act. We hold that the assessee is entitled for the losses incurred with respect to the unsettled contracts as on the balance sheet date. Thus, we set aside the order of the learned CIT-A and direct the AO to delete the addition made by him. Hence, the ground of appeal of the assessee is allowed. Depreciation claimed on the membership card of ASE and BSE - As per the AO the membership of ASE ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... t the assessee during the assessment proceedings can make the fresh claim which was not made during in the return of income. Admittedly, the Hon ble Supreme Court in the case of Goetze (India) Ltd [ 2006 (3) TMI 75 - SUPREME COURT ] has restricted the power of the AO to entertain the fresh claim of the assessee during the assessment proceedings which was not made in the return of income. But there was no such restriction to admit the fresh claim made by the assessee to the higher authorities. It is also a fact on record that the learned CIT-A has denied the claim of the assessee in the absence of necessary document. Assessee before the AO during the assessment proceedings has filed the assessment order framed under section 143(3) of the Act pertaining to the assessment year 2009-10 to justify the brought forward losses. Furthermore, at the outset, we note that assessee before us requested to set aside the issue to the file of AO for fresh adjudication and there was no objection raised by the learned DR appearing for the revenue. Therefore, in the interest of justice and fair play, we set aside the issue to the file of the AO to decide afresh as per the provisions of law and in th ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... rm 26AS. 4. The facts in brief are that the assessee is a private limited company and engaged in the business of dealing in shares securities, broking and related activities. The AO during the assessment proceedings found that the assessee declared interest income from SBI at Rs. 8,16,007/- against which claimed TDS credit of Rs. 84,050/- whereas as per form 26AS, the SBI shown payment of interest of Rs. 11,93,417/- on which deducted TDS at Rs. 84,050/- only, thus leading to difference of Rs. 3,77,410/- which was not offered to tax. The AO further found that the assessee failed to explain the reason for short accounting of interest income from SBI whereas it has claimed credit of TDS on full amount. Therefore, the AO added such interest income of Rs. 3,77,410/- to the total income of the assessee. 5. The aggrieved assessee preferred an appeal before the learned CIT(A). The assessee before the learned CIT(A) submitted that interest income from SBI was of Rs. 8,16,007/- only which is also supported by the copy of interest account and Form-16 issued by the bank. The amount reflected in Form-26AS at income tax portal is not in the control of assessee as it is generated on the bas ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... rnished Form-16A issued by the bank as well as the interest certificate from the bank which are placed on pages 47 48 of the paper book. However, the AO found that the interest income reported in Form-26AS was of Rs. 11,93,417/- leading to the under-reporting of interest income of Rs. 3,77,410/- only. Therefore, the AO added the sum of Rs. 3,77,410/- being the difference in the income declared by the assessee viz a viz the income reported in Form-26AS issued by the revenue. The addition made by the AO was also sustained by the learned CIT-A. 10.1 There is no dispute to the fact that the Form -26AS has been generated by the revenue based on the information furnished by the deductor i.e. the SBI bank in the present case in its TDS return. The assessee as such has no role as far as Form-26AS is concern. In the present case, the assessee has duly discharged the onus by submitting the Form-16A and the interest certificate issued by the bank. Now the onus has shifted upon the Revenue to disprove the contention of the assessee based on the documentary evidence. In fact, in our considered view, the income reported in Form- 26AS cannot be treated as the gospel truth that the assessee h ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ncurred any expenses for earning exempt income and that no borrowed funds have been used for making investments on which exempt income has been earned. The appellant has not given any cash-flow statement in support of this contention. In the absence of such cash flow statement, the claim of the appellant remains unsubstantiated. With due regard to ratio of judgments in the case laws relied on by the appellant, the same are not applicable in the present case as the facts are different. In view of discussion above, I hold that the AO was justified in making addition of Rs.2,50,157/- on account of disallowance u/s 14A of the Act. Accordingly, the addition of Rs.2,50,157/- is upheld and the same is confirmed. This ground of appeal is dismissed. 14. Being aggrieved by the order of the learned CIT(A) the assessee is in appeal before us. 15. The learned AR before us contended that the own fund of the assessee exceeds the amount of investments and therefore there cannot be any disallowance of interest expenses under the provisions of section 14-A read with rule 8D of Income Tax Rule. 16. On the contrary, the learned DR before us vehemently supported the order of the authorit ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... various occasions, particularly in connection with the disallowance to be made under section 14A of the Act. It has been held that if the assessee can demonstrate availability of surplus interest free funds for making investment generating tax free income, disallowance under section 14A of the Act would not be justified. [Para 12] 17.3 In view of the above and after considering facts in totality, we are hereby set aside the finding of the learned CIT(A) to the extent of disallowance of interest expense of Rs. 1,97,672/- and direct the AO to delete the same. Hence the ground of appeal of the assessee is hereby partly allowed. 18. The next issue raised by the assessee is that the learned CIT(A) erred in confirming the addition of Employee contribution of EPF/ESI under section 36(1)(va) of the Act. 19. The AO during the assessment proceedings found that assessee has deposited Employees contribution towards PF/ESI account after the due date prescribed under respective Act. The assessee has also not furnished any explanation of such late deposit. Therefore, the AO by invoking the provision of section 2(24)(x) r.w.s. 36(1)(va) of the Act made addition of Rs. 20,807/- being t ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e amount of loss claimed by the assessee represents the provision for the contingencies which is not allowable as deduction under the provisions of the Act. Thus, the AO disallowed the loss claimed of ₹ 64,97,480/- and added to the total income of the assessee. 27. Aggrieved assessee preferred an appeal to the learned CIT(A) who also confirmed the order of the AO by observing as under: The rival submissions have been considered. As per appellant's own admission, Rs. 64,97,480/- is a notional loss that it has debited to the P L A/c. The notional loss has occurred on account of valuing the futures and options on Marked to Market' basis. This is not allowed under the Income tax Act 1961. The CBDT has clarified the matter vide Instruction No. 3/2010 dated 23.3.10. The relevant portion is reproduced below:- In cases where no sale or settlement has taken place and the loss on Marked to Market basis has resulted in reduction of book profits, such notional loss would be contingent in nature and cannot be allowed to be set off against taxable income. The same should therefore be added back for the purpose of computing taxable income of the assessee. Thus an ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... I hold that the AO was justified in disallowing Rs. 64,97,480/- claimed on account of notional loss on futures and options. Accordingly, addition of Rs. 64,97,480/-is upheld and the same is confirmed. This ground of appeal is dismissed. 28. Being aggrieved by the order of the learned CIT(A), the assessee is in appeal before us. 29. The learned AR before us submitted that the losses with respect to the unexpired future contracts are business losses and therefore the same are eligible for deduction. 30. On the other hand, the learned DR before us vehemently supported the order of the authorities below. 31. We have heard rival contention of both the parties and perused the materials available on record. In the present case, the assessee has recorded securities being future and option transactions at their market price on the date of the balance sheet. This is done to provide a realistic picture of the company's financial status on the basis of accounting principle of 'prudence'. When compared to the purchase price, if purchased during the year, or on the first day of accounting year, it may result into a gain or loss. While gain is not considered in the profit ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 6,06,538/- on the membership card of ASE and BSE. 33. The AO during the assessment proceedings found that the assessee has claimed depreciation on the membership cost incurred for the acquisition trading rights of ASE and BSE. As per the AO the membership of ASE and BSE on demutualization was converted into the shares as per the direction of the SEBI. Thus, the membership of ASE and BSE were no longer in existent and therefore, the assessee was not entitled for the depreciation, treating the membership as intangible asset. The AO while holding so has made reference to the provisions of section 55(2) of the Act and the order of the Mumbai tribunal in the case of Sino Securities (P.) Ltd vs. ITO reported in 16 taxmann.com 354. 34. On appeal by the assessee, the learned CIT(A) also confirmed the order of the AO by observing as under: The rival submissions have been considered. It is observed that the appellant has not put forth a cogent and tenable argument. I am inclined to agree with the AO that the judgment of hon'ble ITAT, Mumbai in the case of Securities P ltd vs. ITO 16 taxmann.com 354(Mum) is squarely applicable in the present case, in this case, hon'ble ITAT ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ct one way or the other and parties have allowed that position to be sustained by not challenging the order, it would not be at all appropriate to allow the position to be changed in a subsequent year. 38.1 In view of the above discussion, we are inclined to hold that once the revenue has allowed the depreciation on the membership cards in the earlier years, then in subsequent year on same facts and circumstances principal of consistency should be applied. 38.2 The Hon ble SUPREME COURT OF INDIA in the case of Techno Shares Stocks Ltd. v. Commissioner of Income-tax- reported [2010] 193Taxman248 (SC) has held as under: We answer the question at page 6 in the affirmative by holding that on the facts and circumstances of these cases the Tribunal was right in holding that depreciation was allowable on the cost of the membership card under section 32(1)(ii) of the 1961 Act. Accordingly, the impugned judgment(s) of the Bombay High Court is set aside and the appeal(s) filed by the nominated non-defaulting continuing member stands allowed with no order as to costs. 38.3 In view of the above and after considering the facts in entirety, we set aside the order of the learne ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... rovisions of section 194I of the Act. Therefore, the AO disallowed the same under the provisions of section 40(a)(ia) of the Act by adding to the total income of the assessee. 40.1 Likewise, the AO also found that the assessee has made payment of Rs. 3,10,200/- to the NSE towards NSE VSAT Quarterly Charges . As per the AO, the VSAT charges represents the rental charges and as per the amended provision of section 194I of the Act, the assessee was required to deduct tax on the same at 10%. However, the assessee deducted tax on the same @ 2.4% under the provisions of section 194C of the Act. Thus, the AO disallowed the same and added to the total income of the assessee under the provision of section 40(a)(ia) of the Act by holding that provision of TDS was not complied with. 41. Aggrieved assessee preferred an appeal to the learned CIT-A who confirmed the order of the AO by observing as under: The AO disallowed Rs. 1,31,000/- on account of payment made to M/s. Bee Kay Technologies since TDS which was deductible u/s. 194 C was not deducted. During appeal proceedings, the appellant submitted that payment to M/s. Bee Kay was for replacing parts. Hence, no TDS was deducti ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... f 10% has been deducted at the rate of 2.4%, there is violation of provisions of section 194J. With due regard to ratio of judgment relied on by the appellant, the same is not applicable as the facts are different Hence, the AO has rightly disallowed the amount u/s. 40(a)(ia). In view of discussion above, the addition of Rs. 3,10,200/- is upheld and the same is confirmed. (v) The AO further disallowed Rs. 72,000/- and Rs. 1,82,800/- paid to BSE as VPN connectivity charges and Lease Line charges respectively. The AO disallowed these amounts since TDS was not deducted, which was required to be deducted u/s. 194 I of the Act, The appellant merely relied on judgment of hon'ble ITAT, Mumbai in DCIT vs. NNM Securities Ltd (ITA No.3686/Mum/2010) where it is held that TDS is not deductible on payments made to stock exchanges. After considering rival submissions, I hold that the AO was justified in disallowing payments of Rs. 72,000/- and Rs. 1,82,800/- . These payments have been made for VPN Charges and Lease Line charges. These payments are clearly made for using the Virtual Private Network and Leased Lines provided by BSE. Thus these are payments essentially in th ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... bility and security in the small and medium size enterprise. Thus, it appears that, the cost incurred by the assessee for ₹1,31,000/- represents the purchase of the product and the same therefore cannot be made subject to the provisions of TDS under section 194C of the Act. The provisions of section 194C of the Act are applicable to the payment made for carrying out any work including supply of labour in pursuance to a contract. In the given case, the payment in dispute has not been made for carrying out any work as envisaged under the provisions of section 194C of the Act. It is the payment made for the purchase of the product and therefore in our considered view, the same cannot be made subject to the provisions of section 194C of the Act. Hence we set aside the finding of the learned CIT(A) and direct the AO to delete the addition made by him on account of non-deduction of TDS as discussed above. ii) Non-deduction of TDS under the provisions of section 194J and 194-I of the Act 45.1 The issue for deducting the TDS on the payment made to the stock exchange on account of VSAT charges and lease line charges is no longer resintegra by virtue of the order of the ITAT ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ming the disallowances of ROC expenses for Rs. 4,000/- and addition on account of long term capital gain for Rs. 15,249/- only. 47. At the outset, we note that the learned AR for the assessee at the time of hearing conceded that he has been instructed by the assessee not to press the issue on hand due smallness of amount involved. Hence, the same is dismissed accordingly. 48. The last issue raised by the assessee is that the learned CIT(A) erred in confirming the disallowance of setoff of speculation loss of Rs. 1,37,941/- only. 49. The assessee in the return filed for the year under consideration under section 139 of the Act claimed setoff of brought forward speculative loss of Rs. 1,37,941/- only. However, the assessee during the assessment proceedings submitted that during the year earned speculative profit of Rs. 32,33,171/- and actual loss brought forwarded is of Rs. 3,01,533/- only which was wrongly claimed at Rs. 1,37,941.00. Therefore, the claim should be allowed accordingly. But the AO found that the assessee has neither shown such claim in the original return nor filed any revised return of income. Therefore, the AO by referring to the judgment of Hon ble SC in ..... X X X X Extracts X X X X X X X X Extracts X X X X
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