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TMI Blog2023 (2) TMI 1067X X X X Extracts X X X X X X X X Extracts X X X X ..... ard to the impugned addition/disallowances. The observations made and conclusions reached by AO and confirmed by CIT(A) to the extent the same are contrary to the evidence on record are not admitted by the appellant. 2.1 The Ld. CIT(A) has grievously erred in law and or on facts in upholding the following additions /disallowances made by AO. (i) Disallowance of Interest exp. (ii) Disallowance u/s 36(l)(va). (iii) Disallowance u/s 14A (iv) Unrealised loss. (v) Depreciation of SE card (vi) Disallowance u/s 40(a)(ia) (vii) ROC expenses (viij] Long Term capital gain (ix) Set off of speculation loss Rs, 3,77,410 Rs. 20,807 Rs. 2,50,157 Rs. 64,97,480 Rs.6,06,538 Rs. 9,74,839 Rs. 4,000 Rs. 15,429 Rs.l, 37,941 3.2 That in the facts and circumstances of the case as well as in law the Id. CIT(A) ought not to have confirmed the above said addition /disallowances made by AO. It is therefore prayed that the impugned additions/disallowances may please be deleted or reduced 3. The first issue raised by the assessee is that the learned CIT(A) erred in confirming the addition of interest income of Rs. 3,77,410/- on the basis of form 26AS. 4. The facts in brief are that the ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... AO was justified in making! addition of Rs.3,77,410/- on account of interest income received from SBI but| omitted to be included in the total income. Accordingly, addition of Rs.3,77,410/- is upheld and the same is confirmed. 7. Being aggrieved by the order of the learned CIT(A), the assessee is in appeal before us. 8. The learned AR before us filed a paper book running from pages 1 to 89 and contended that the actual amount of interest received by the assessee stands at Rs. 8,16,007.00 which can be verified from the bank statement of the assessee. Therefore, there cannot be made any addition to the total income of the assessee based on form 26 AS issued by the Department. 9. On the contrary, the learned DR vehemently supported the order of the authorities below. 10. We have heard the rival contentions of both the parties and perused the materials available on record. The assessee in the present case has shown interest income of Rs. 8,16,007/- from the SBI bank and also claimed the credit of the TDS of Rs. 84,050/- deducted by the bank on such interest income. The assessee in support of such interest income has furnished Form-16A issued by the bank as well as the interest cert ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... he assessment proceedings found that the assessee during the year has earned exempt income but no corresponding expense was disallowed as prescribed under section 14A of the Act. On question by the AO, the assessee submitted that no borrowed fund was utilized for making investments which are yielding exempted income. Therefore, no disallowance of interest expense was required to be made. But the assessee agreed to offer disallowance of Rs. 49,156/- on account of expenses. The 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 of Income Tax Rule and worked out the amount of disallowances at Rs. 2,50,157/- which includes interest expenses of Rs. 1,97,672- and administrative expenses of Rs. 52,485/- only. 13. On appeal by the assessee the learned CIT(A) also confirmed the addition made by the AO by observing as under: The rival submissions have been considered. I am inclined to agree with the AO that disallowance u/s 14A is warranted. The appellant has only given general explanation that it has not incurred any expenses for earning exempt income and that no borrowed funds ha ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ered in its favor by the judgment of Hon'ble jurisdictional High Court in the case of PCIT vs. Nirma Credit & Capital (P.) Ltd. reported in 85 taxmann.com 72. 17.2 We further find that the assessee was having interest free/own fund in the form of capital and reserve at Rs. 11,65,02,192/- against the investment in shares of Rs. 1,06,67,432/- only. Thus, it is transpired that the assessee was having sufficient interest free fund to meet the requirement of investment which yielded exempted income. Therefore, presumption should be drawn that that the interest free/own fund were utilized for making the investment. Accordingly, no interest income is required to be disallowed under the provision of section 14A(2) r.w. rule 8D of the Act. In holding so, we also draw support and guidance from the judgment of Hon'ble Gujarat High court in case of PCIT vs. Sherno Ltd reported in [2019] 102 taxmann.com 129 (Guj.) The exposition of law made by the Supreme Court in case of S.A. Builders Ltd. v. CIT(Appeals) [2007] 158 Taxman 74/288 ITR 1 and observation made therein have been applied by this court on various occasions, particularly in connection with the disallowance to be made under section ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... the Act i.e. date by which the concerned assessee was required as an employer to credit employees' contribution to the employees' account in the Provident Fund under the Provident Fund Act and/or in the ESI Fund under the ESI Act. 24.1 Respectfully following the finding of Hon'ble Jurisdictional High Court in the case cited above, we don't find any infirmity in the order of the lower authorities. Hence, the ground of appeal of the assessee is hereby dismissed. 25. The next issue raised by the assessee is that the learned CIT(A) erred in confirming the mark to market loss of Rs. 64,97,480/- only. 26. The assessee in the year under consideration has purchased shares in F & O segment, the settlement date of which was due after 31 March 2010 i.e. in the next financial year. However, the assessee has booked loss of Rs. 64,97,480/- representing mark to market loss with respect to the unsettled transaction in the year under consideration. As per the AO, the loss claimed by the assessee was unrealized loss and contingent/uncertain in nature. As such, the amount of loss claimed by the assessee represents the provision for the contingencies which is not allowable as deduction unde ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ualify for deduction However, it has been found that Banks are claiming provisions on different accounts, probably under the RB! guidelines [e.g. Provision for wage arrears for which negotiations are yet to be finalized, provision for standard asset etc...].A contingent liability cannot constitute deductible expenditure for the purposes of Income Tax Act. Thus, putting aside of money which may become expenditure on the happening of an event would normally not constitute an allowable expenditure under the Income Tax Act. The AOs should verify such claims as to whether these are admissible as per the Income Tax Act". (Emphasis supplied) Thus it is clear that a contingent liability does not constitute a deductible] expenditure and the same is not allowable u/s. 37 of the Act. With due regard ratio of judgment relied on by the appellant, the same is not applicable as the facts are different. In view of discussion above, and relying on CBDT Instruction 17/2008 dated 26.11.08 and CBDT Instruction No. 3/2010 dated 23.3.10, 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 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... commercial principles of policy of prudence, all anticipated liabilities have to be accounted for but as per the Act, only that liability will be allowed which has actually accrued, (ii) if an anticipated liability is coupled with present obligation and only quantification can vary depending upon the terms of contract, then a liability is said to have crystallised on the balance sheet date. (iii) the anticipated losses on account of existing obligation as on 31st March are determinable with reasonable accuracy, (iv) Forward contracts have trappings of stock-in-trade. 31.2 In view of the above, 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. 32. The next issue raised by the assessee is that the learned CIT(A) erred in disallowing the depreciation claimed of Rs. 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 th ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e assesse on corporatization of stock exchange have been classified as investment by the assesse in its books of accounts separately and no depreciation of whatsoever was claimed on such investments. In other words, the cost incurred by the assesse on the acquisition of the membership cards of the stock exchange were classified as intangible assets by the assesse and accordingly depreciation was claimed which was accepted by the revenue in the earlier years. Accordingly, the principles of consistency need to be adopted in the given facts and circumstances. The Hon'ble Supreme Court in the case of Radhasoami Satsung Vs CIT reported in 193 ITR 321 wherein it has held as under: "We are aware of the fact that strictly speaking res judicata does not apply to income-tax proceedings. Again, each assessment year being a unit, what is decided in one year may not apply in the following year but where a fundamental aspect permeating through the different assess ment years has been found as a fact 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 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ,300/- on account of NSE annual subscription fees. The AO was of the view that all these payments to stock exchange were in the nature of fees for technical services on which assessee was required to deduct tax under section 194J of the Act but the assessee failed to do so. Therefore, the AO disallowed the same under the provisions of section 40(a)(ia) of the Act and added the same to the total income of the assessee. iii) Non-deduction of TDS under the provisions of section 194I of the Act The AO during the assessment proceedings found that the assessee has made payment of Rs. Rs. 72,000/- and Rs. 1,82,800/- to the BSE towards "MPS/ VPN Connectivity Charges and "lease Line Charges" respectively. As per the AO, these payments were in the nature of rent made for the use of Plant and Machinery or Equipment. Hence, the same attracts the provisions of section 194I of the Act but the assessee failed to deduct the TDS thereon under the provisions 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. ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... icable as the facts are different Accordingly, the additions of Rs.1,33,539/- and Rs. 1,10,300/-are upheld. (iv)The AO disallowed Rs. 3,10,200/- paid to NSE as VSAT charges. The AO observed that TDS on this payment was deducted at the rate of 2.4% while u/s. 194 I, TDS is to be deducted at the rate of 10% upto 30.9.09. As the payment was made before 30.9.09, there was a default u/s. 1941. The appellant merely relied on decision of hon'ble ITAT, Mumbai in DC1T vs NNM Securities in ITA No. 3686/Mum/2010 wherein it was held that on charges paid to stock exchanges, TDS is not deductible. After considering rival submissions, I hold that the AO was justified in disallowing Rs. 3,10,200/- u/s. 40(a)(ia) of the Act. The appellant has deducted TDS at the rate of 2.4%. That essentially shows that the appellant agrees that TDS is deductible on this payment. Since the TDS which was to be deducted at the rate of 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). ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ant of deduction of tax under section 194C, 194J and 194I of the Act, which were also confirmed by the learned CIT(A). For the sake of better appreciation of facts, we proceed to adjudicate the issue in the manner detailed below. i) Non-deduction of TDS under the provision of section 194C of the Act We note that the controversy relates whether the expense incurred by the assessee for Rs.1,31,000/- which was paid to M/s Bee Kay Technologies represents the purchase of the product or it has been paid for availing the services. In this regard, we have referred the bill issued by the party namely M/s Bee Kay Technologies placed on page 71 of the paper book. On perusal of the same, we find that it relates to the purchase of "Fortigate FG300A". The impugned product "Fortigate" refers to the item which provide antivirus firewall multi thread security for high performance, flexibility and security in the small and medium size enterprise. Thus, it appears that, the cost incurred by the assessee for Rs.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 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ot be sustained, and is thus set aside. The Ground of appeal No. 2 raised by the assessee before us is allowed." 45.2 In view of the above, we hold that the assessee was not subject to the provisions of TDS under Section 194-J/194-I of the Act as alleged by the authorities below. Accordingly, no disallowance on account of non-deduction of TDS is warranted. It is also important to note that there cannot be disallowance of the expenses in the case of short deduction of TDS i.e. VSAT charges of Rs. 3,10,200.00 in respect of which TDS was deducted at the rate of 2.40% as against 10% up to 30 September 2009. Thus, we set aside the finding of the learned CITA and direct the AO to delete the addition made by him. Hence, the ground of appeal of the assessee is hereby allowed. 46. The next issue raised by the assessee is that the learned CIT(A) erred in confirming 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. H ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... allowed to be set off. But the AO disallowed the contention of the assessee on the reasoning that such claim was not made in the income tax return or revised income tax return. Subsequently, the learned CIT-A confirmed the order of the AO by holding that there was no documentary evidence furnished by the assessee on account of speculative loss of Rs. 301533.00. There is no dispute to the fact that 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 (supra) 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. However, we note that the 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 ..... X X X X Extracts X X X X X X X X Extracts X X X X
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