THE DCIT, CIRCLE-1(3), AHMEDABAD vs. EDELWEISS FINANCIAL ADVISORS LTD., ( FORMERLY KNOWN ANAGRAM STOCK BROKING LTD.,), AHMEDABAD

The Revenue has raised the following grounds of appeal:

The first issue raised by the Revenue is that Learned CIT(A) erred in deleting the addition made by the AO for Rs.79/- on account of depreciation claimed under Section 32 of the Act on the membership card despite the conditions for claiming the depreciation were not satisfied.

The facts in brief are that the assessee in the present case is a limited company and engaged in the business of stock broking. The AO during the assessment proceedings found that the membership card of the stock exchange held by the assessee has been demutualized/corporatized into the shares in the earlier year 2005-06. As such the assessee was not in the possession of stock exchange card in the year under consideration. Accordingly, the AO was of the view that the depreciation claimed by the assessee on the intangible asset being membership card of the stock exchange is not allowable under the provisions of Section 32 of the Act. Accordingly, the AO disallowed the same and added to the total income of the assessee.

Aggrieved assessee preferred an appeal to the Learned CIT (A) who deleted the addition made by the AO by observing as under: “7.3 I have carefully considered the Assessment Order and submission filed by Appellant. The Assessing Officer has made disallowance of depreciation on Ahmedabad Stock Exchange Membership Card relying on decision of Hon'ble Mumbai ITAT in the case of Sino Securities Pvt. Limited whereas Appellant has relied upon decision of Hon'ble Ahmedabad ITAT in the case of Edelweiss Stock Broking Limited for A.Y. 2006-07 which is merged with Appellant Company and Appellant's own case for A.Y. 2008-09 decided by Hon'ble Ahmedabad ITAT on 6th November, 2015. On careful consideration of entire facts, the issue raised by Assessing Officer is covered in favour of Appellant by decision of Hon'ble Ahmedabad ITAT in Appellant's own case for A.Y. 2008-09 (ITA No. 1531 and 1718/Ahd/2011) wherein Hon'ble ITAT vide its order dated 6th November, 2015 has held as under: "13. The Assessee's next ground raised in the instant appeal challenges disallowance of depreciation on Ahmedabad Stock Exchange card of Rs. 141/- made in the course of assessment and affirmed in the lower appellate proceedings. Both the lower authorities hold that stock exchange membership card is not an eligible asset u/s 32 of the Act as held by hon 'ble Bombay high court in M/s. Tech nosh 3 res and Stocks Ltd. Vs.CIT 193 Taxrnan 248. The CIT(A) observes that the hon'ble apex court has reversed the above stated decision as reported in 327ITR 323 with a rider that the same relates to Bombay Stock Exchange card only. He reproduces relevant, portion of this judgment as well. However, the Revenue fails to point out any distinction between the Assessee's Ahmedabad Stock Exchange card and relevant features of Bombay Stock Exchange card. Nor such a distinction is forthcoming from hon'hle apex court decision. We find that a co-ordinate bench of the tribunal in case of Assessee's sister concern's case M/s. Edelweiss Stock

Being aggrieved by the order of the Learned CIT-A, the Revenue is in appeal before us.

The Learned DR before us vehemently supported the order of the AO whereas the Learned AR before us filed a Paper Book running from pages 1 to 231 and submitted that the Tribunal in the own case of the assessee has allowed the depreciation in ITA No. 1718/AHD/2011 vide order dated 6-11- 2015 for the assessment year 2008-09. The Learned AR vehemently supported the order of the Learned CIT (A).

We have heard the rival contentions of both the parties and perused the materials available on record. At the outset we note that the Tribunal in the own case of the assessee in ITA No. 1718/AHD/2011 for the Assessment Year 2008-09 vide order dated 6th November 2015, involving identical issue has decided the matter in favor of the assessee. The relevant extract of the order is reproduced as under: “13. The assessee’s next ground raised in the instant appeal challenges disallowance of depreciation on Ahmedabad Stock Exchange card of Rs.141/- made in the course of assessment and affirmed in the lower appellate proceedings. Both the lower authorities hold that stock exchange membership card is not an eligible asset u/s 32 of the Act as held by hon’ble Bombay high court in M/s. Technoshares and Stocks Ltd. Vs. CIT 193 Taxman 248. The CIT(A) observes that the hon’ble apex court has reversed the above stated decision as reported in 327 ITR 323 with a rider that the same relates to Bombay Stock Exchange card only. He reproduces relevant portion of this judgment as well. However, the Revenue fails to point out any distinction between the assessee’s Ahmedabad Stock Exchange card and relevant features of Bombay Stock Exchange card. Nor such a distinction is forthcoming from hon’ble apex court decision. We find that a co-ordinate bench of the tribunal in case of assessee’s sister concern’s case M/s. Edelweiss Stock Broking Ltd. Vs. CIT, ITA No.

The Learned DR at the time of hearing has not brought anything on record contrary to the finding of the ITAT, as discussed above, suggesting that there was the change in the facts and circumstances or under the provisions of law. Hence, there being is no change in the facts and circumstances viz a viz under the provisions of law, we confirm the order of the ld. CIT-A in view of the order of this tribunal in the own case of the assessee (supra). Accordingly we direct the AO to delete the addition made by him. Hence the ground of appeal of the Revenue is dismissed.

The next issue raised by the Revenue is that the Learned CIT-A erred in deleting the addition made by the AO amounting to Rs. 29,64,082/- being depreciation allowance, interest and insurance expenses relating to vehicles though the assessee was not the owner of such vehicles.

The assessee in the year under consideration has claimed depreciation and incurred expenses on interest /insurance aggregating to Rs. 29,64,082/- with respect to certain vehicles which were not registered in its name. However, it was contended by the assessee that it is the beneficial owner of such vehicles as the loan was taken by it and accordingly the instalment of such loan was also born by it which is evident from the books of accounts.

However, the AO disagreed with the contention of the assessee by observing that the assessee failed to substantiate based on documentary evidence that it had dominion over the vehicles and such vehicles were used for the purpose of the business.

Furthermore, the AO also found that the purpose of registering the vehicles in the name of individual directors was to avoid the tax payable to the RTO. In fact, the amount of tax payable to the RTO is much lesser if the vehicles are registered in the name of the individuals instead of corporate bodies. Accordingly, the AO was of the view that the revenue authority cannot become a party by allowing the benefit of tax payable by the assessee to the RTO. Accordingly, the AO disallowed the claim of the assessee for the depreciation, interest expenses and insurance expenses aggregating to ₹ 29,64,082/- and added to the total income of the assessee.

The Learned CIT (A) after considering the submission of the assessee found that assessee has used its own funds for the purchase of the vehicles viz a viz the repayment of the loan obtained for the purchase of the vehicles was made by it and these vehicles were duly reflected in the balance sheet as assets. Similarly, running and maintenance expenses on such vehicles were incurred by the assessee which were also allowed by the revenue. Thus what is suggested is that the vehicles were used for the purpose of the business. The Learned CIT (A) also found that the assessee is paying the wealth tax on such cars which evidences that the assessee is the beneficial owner of these cars. Accordingly, the Learned CIT (A) was of the view that the assessee cannot be denied the benefit of depreciation, insurance and interest expenses incurred on the vehicles merely on the reasoning that these vehicles were registered in the name of the individual directors. Accordingly the Learned CIT (A) allowed the ground of appeal of the assessee.

Both the Learned DR and the AR before us vehemently supported the order of the respective authorities below as favorable to them.

We have heard the rival contentions of both the parties and perused the materials available on record. From the preceding discussion, we note that claim of the assessee for the depreciation allowance, interest and insurance expenses on the vehicles were rejected by the AO for the following reasons: i. The assessee was not the owner of the vehicles as these were registered in the name of individual directors under the registration of Motor Registration Act. ii. The assessee failed to substantiate based on the documentary evidence that these vehicles were used for the purpose of the business. iii. The assessee by way of registering the vehicles in the name of individual directors instead of in its own name has avoided the legitimate tax due to the RTO under the Motors Registration Act.

The provisions of Section 32 of the Income-tax Act, 1961 grants depreciation allowance to the assessee who is ‘owner’ of specified assets (building, plant and machinery, furniture and fixtures, etc.) and these assets are used during the relevant previous year for the purposes of its business/profession. Therefore, the ownership of asset is one of the important requirements to be entitled for depreciation allowance. The Section, however, does not define the term ‘owner’ as such for the purposes of grant of

Regarding the 2nd question as discussed above, we note that the assessee has claimed repair and maintenance expenses with respect to such vehicles which were also allowed by the Revenue. Thus it is inferred that such vehicles were used for the purpose of the business of the assessee. Accordingly we are of the view that the assessee is eligible for interest and insurance expenses incurred by it with respect to such vehicles.

Moving to question No. 3 wherein it was alleged that the assessee has minimized the tax payable to the RTO by registering the vehicles in the name of the individual directors. In this regard, we note that there is no denial under the Motors Registration Act to register the vehicles in the name of the individual directors. The action taken by the assessee for registry the vehicles in the name of individual directors was within the framework of the provisions of law. Accordingly, we are of the view that this cannot be a ground to reject the claim of the assessee. In view of the above and after considering the facts in totality, we do not find any infirmity in the order of the Learned CIT (A). Hence the ground of appeal of the Revenue is dismissed.

The third issue raised by the Revenue is that the Learned CIT-A erred in deleting the addition made by the AO for Rs. 1,12,972/- on account of interest expenses under the provisions of Section 36(1)(iii) of the Act.

In view of the above the assessee contended that there cannot be any disallowance on the amount of loans and advances provided to the sister concerns without charging any interest thereon.

However, the AO disregarded the contention of the assessee by observing that the assessee failed to substantiate the fact that it has provided loans and advances for the purpose of its business activities. Accordingly, the AO worked out the proportionate amount of interest expenses attributable to such interest-free loans and advances amounting to Rs.1,12,972/- and disallowed the same under Section 36(1)(iii) of the Act by adding to the total income of the assessee.

Aggrieved assessee preferred an appeal to the Learned CIT (A) who has deleted the addition made by the AO by observing as under: “ On careful consideration of entire facts it is observed that issue regarding disallowance of proportionate interest is covered in favour of Appellant by decision of Hon’ble Ahmedabad ITAT in Appellant's own case for A.Y. 2008-09 (ITA No. 1531/Ahd/2011) wherein Hon’ble ITAT vide its order dated 6th November, 2015 has held as under: 3. We come to the lower appellate proceedings now. The CIT(A) prepares a party- wise tabulation qua loans in question of Rs.32,03,147/- as incurred in reimbursement of expenses. He finds the same to have been incurred in business purposes as per case la w of S A Builders vs. CIT, 288 ITR 01 (SC) as having business expediency element embedded therein. The Revenue's arguments strongly support Assessing Officer's action. It transpires from the case file that Assessee's interest free funds as on 31.03.2008 read a figure of Rs, 1,25,83,17,835/- in the nature of share capital, reserves and surplus etc. It files tribunal's order in its own case for AY 2004-05 in ITA No.1890/Ahd/2007 decided on 19.12.2008 deciding the very issue in its favour in identical circumstances. We follow suit in these facts and reject this Revenue's ground as well.” It is pertinent to note that Hon'ble Supreme Court in case of Hero Cycles (P.) Ltd vs. Commissioner of Income-Tax (Central), Ludhiana [vide Civil Appeal No.: 514 of 2008] dated 05/11/2015, held as under: Insofar as the loans to Directors are concerned, it could not be disputed by the Revenue that the assessee had a credit balance in the Bank account when the said advance of Rs. 34 lakhs was given. Remarkably, as observed by the Commissioner of Income-Tax (Appeal) in his order, the company had reserve/surplus to the tune of almost 15 crores and, therefore, the assessee company could in any case, utilise those funds for giving advance to its Directors. On the basis of aforesaid discussion, the present appeal is allowed, thereby setting aside the order of the High Court and restoring that of the Income Tax Appellate Tribunal.” It is observed that during the year under consideration the Appellant has own funds of Rs. 81,80,68,508 as against interest free advances of Rs 36,63,056 hence following the decision of Hon'ble Ahmedabad ITAT and decision of Hon'ble Supreme Court referred supra, disallowance made by Assessing Officer under Section 36(1)(iii) for Rs.1,12,972 is deleted. This ground of appeal is allowed.”

Being aggrieved by the order of the Ld. CIT-A, the Revenue is in appeal before us.

We have heard the rival contentions of both the parties and perused the materials available on record. At the outset we note that the Tribunal in the own case of the assessee in ITA No. 1718/AHD/2011 for the Assessment Year 2008-09 vide order dated 6th November 2015, involving identical issue has decided the matter in favor of the assessee. The relevant extract of the order is reproduced as under: “3. We come to the lower appellate proceedings now. The CIT (A) prepares a party-wise tabulation qua loans in question of Rs.32,03,147/-as incurred in reimbursement of expenses. He finds the same to have been incurred in business purposes as per case law of S A Builders vs. CIT, 288 ITR 01 (SC) as having business expediency element embedded therein. The Revenue's arguments strongly support Assessing Officer's action. It transpires from the case file that assessee's interest free funds as on 31.03.2008 read a figure of Rs. 1,25,83,17,8357- in the nature of share capital, reserves and surplus etc. It files tribunal's order in its own case for AY 2004-05 in ITA No.l890/Ahd/2007 decided on 19.12.2008 deciding the very issue in its favour in identical circumstances. We follow suit in these facts and reject this Revenue's ground as well.”

The Learned DR at the time of hearing has not brought anything on record contrary to the finding of the ITAT as discussed above suggesting that there was any change in the facts and circumstances or under the provisions of law. Hence, there being no change in the facts and circumstances viz a viz under the provisions of law, we confirm the order of the Ld. CIT-A in view of the order of this tribunal in the own case of the assessee (supra). Accordingly, we direct the AO to delete the addition made by him. Hence, the ground of appeal of the Revenue is dismissed.

The next issue raised by the Revenue is that the Learned CIT-A erred in deleting the addition made by the AO under the provisions of Section 14-A read with rule 8D of Income Tax Rule amounting to Rs. 24,75,967/- only.

The assessee during the assessment proceedings contended that it has not incurred any expense against the dividend income of Rs. 10,52,162/- in the year under consideration. As per the assessee, its own funds exceeds the amount of investment which evidences that no borrowed fund was utilized for the purpose of the investment. Accordingly, the question of disallowing any interest expense does not arise under Rule 8D of Income Tax Rule.

Assessee similarly further contended that the dividend has been directly credited in the bank account and therefore it has not incurred any administrative expenses for the earning of such dividend income.

However, the AO disregarded the contention of the assessee by observing that the assessee has not furnished any day to day fund flow statement suggesting that the borrowed fund has not been utilized in the impugned investments. Accordingly, the AO invoked the provisions of Section 14A read with rule 8D of income tax rule and made the disallowance as under: “Direct expenses Nil Interest expenses Rs.18,16,250/- Administrative expenses Rs. 10,80,131/- Total Rs. 28, 96381/-

Aggrieved assessee preferred an appeal to the Learned CIT-A who allowed the appeal of the assessee in part by observing as under:

Being aggrieved by the order of the Learned CIT-A, both Revenue and the assessee are in appeal before us. The Revenue is in appeal against the deletion of the addition made by the AO for Rs. 24,75,967/- whereas the assessee is in appeal against the confirmation of the addition of Rs. 4,20,414/- The ground bearing no. 3 in an appeal of the assessee in ITA No. 268/AHD/2016 reads as under: “3. In law and in the facts and circumstances of the appellant’s case, the learned CIT(A) has grossly erred in sustaining disallowance of Rs. 4,20,414/- made u/s. 14A read with Rule 8D(2)(iii) on account of administrative expenses [even as he had directed the quantum of the disallowance on this account to be reduced from Rs. 10,80,131 to Rs. 4,20,414 after appreciating that the applicant’s investments in shares of its subsidiary which had been amalgamated with the appellant, cannot be taken into account for the purposes of arriving at the quantum of disallowance under the said Rule]. He ought to have appreciated, inter-alia, that in the peculiar and eminent facts of the appellant’s case, the Ld. A.O. had got to be satisfied with the appellant’s claim that it had not incurred any administrative expenditure in relation to income not forming part of its total income and that therefore, the Ld. A.O. could not have assumed jurisdiction u/s. 14A(2) to make any disallowance on this account.”

Both the Learned DR and the AR before us vehemently supported the order of the respective authorities below to the extent favourable to them.

We have heard the rival contentions of both the parties and perused the materials available on record. The first issue that arises from the present ground of appeal is that whether the assessee has utilized the borrowed fund in the investments generating exempted income to it (the assessee). In this connection we note that the owned fund of the assessee exceeds the investments which has been reproduced in the finding of the Learned CIT (A).

We also note that the Tribunal in the own case of the assessee in ITA No. 1531/AHD/2011 for the Assessment Year 2008-09 vide order dated 6th November 2015, involving identical issue has decided the matter partly in favor of the assessee. The relevant extract of the order is reproduced as under:

The Learned DR and the AR at the time of hearing has not brought anything on record contrary to the finding of the ITAT as discussed above suggesting that there was any change in the facts and circumstances or under the provisions of law. Hence, there being no change in the facts and circumstances viz-a-viz under the provisions of law, we confirm the order of the Ld. CIT-A in view of the order of this tribunal in the own case of the assessee (supra). Hence, the grounds of appeal of the Revenue and the assessee are dismissed.

The next issue raised by the Revenue is that Learned CIT-A erred in deleting the addition made by the AO for Rs. 1,51,201/- by disallowing the expenditure representing the penalty.

The assessee during the year under consideration claimed that it has not complied certain bylaws of the National Stock Exchange and Bombay Stock Exchange within the allotted time. Accordingly, the penalties were levied by both the stock exchanges amounting to Rs.1,43,232/- and Rs.7,969/- respectively. However these penalties were not in the nature of any offence or infringement of any law. As such these penalties were levied on account of delay in complying the procedures of the Bombay stock exchange and National stock exchange. Accordingly, the assessee claimed that such expenses were incurred in the course of the business and therefore the same are allowable as deduction under Section 37 of the Act.

Aggrieved assessee preferred an appeal to the Learned CIT (A) who deleted the addition made by the AO by observing as under:

Being aggrieved by the order of the Learned CIT-A the Revenue is in appeal before us.

Both the Learned DR and the AR before us vehemently supported the order of the respective authorities below to the extent favourable to them.

We have heard the rival contentions of both the parties and perused the materials available on record. At the outset we note that the Tribunal in the own case of the assessee in ITA No. 1531/AHD/2011 for the Assessment Year 2008-09 vide order dated 6th November 2015, involving identical issue has decided the matter in favor of the assessee. The relevant extract of the order is reproduced as under: “2. We come to Revenue's appeal ITA No.l531/Ahd/2014. Its first ground challenges the lower appellate order deleting disallowance/addition of NSE penalty of Rs.74,515/-. The assessee is a limited company in stock broking business. It paid the impugned sum to the National Stock Exchange for non-compliance of its bye-laws. The assessee's case was that this penalty sum pertained to procedural delay in filing compliance report to the exchange. And the delay caused was in payment of dues and other obligations. The Assessing Officer disallowed this claim as a business deduction by following an identical finding in preceding Assessment Year 2007-08. The CIT(A) follows case-law 88 TTJ 352 (Kol), ITO vs. GDB Share and Stock Broking Services Ltd., in deciding the very issue in assessee's favour. The Revenue fails to point out any distinction on facts or law before us. It does not quote any case law to the contrary. This first ground accordingly fails.”

The Learned DR at the time of hearing has not brought anything on record contrary to the finding of the ITAT as discussed above suggesting that there was any change in the facts and circumstances or under the provisions of law. Hence, there being no change in the facts and circumstances viz a viz under the provisions of law, we confirm the order of the Ld. CIT-A in view of the order of this tribunal in the own case of the assessee (supra). Accordingly we direct the AO to delete the addition made by him. Hence, the ground of appeal of the Revenue is dismissed.

The next issue raised by the Revenue is that the Learned CIT-A erred in deleting the addition made by the AO for Rs. 1,18,89,628/- on account of bad debts as the conditions specified under Section 36 (2) were not satisfied.

The assessee during the year under consideration has claimed bad debts amounting to Rs. 1,18,89,628/- only. As per the assessee, its client has purchased the shares through the stock exchange but failed to make the payment to it (the assessee). Accordingly, the assessee after making the sale of such shares, has written off the loss in the books of accounts as bad debts as the recovery for the same was not certain. The assessee also claimed that the brokerage on account of purchase and sale of shares on behalf of the client was offered to tax by crediting the profit and loss account. However, the principal amount of purchase and sale was not shown in the profit and loss account but the difference either as loss or gain was reflected in the profit and loss account as bad debt or gain as the case may be. It was done so, with respect to the transactions carried out by it on behalf of the clients but who failed to make the payment. In most of the transactions loss was incurred which was claimed as bad debts.

The assessee alternatively contended that such loss has been incurred in the course of the business and therefore the same should be allowed as deduction either under Section 28 or 37 of the Act if the same is disallowed under the provisions of Section 36(2) of the Act.

However, the AO disregarded the contention of the assessee by observing that the deduction on account of bad debts can be admitted only upon the fulfilment of the condition specified under Section 36(1) (vii) r.w.s 36(2) of the Act. In the case on hand, the specified conditions have not been complied with therefore the same cannot be allowed as deduction under Section 36 (1)(vii)/36 (2), 37 or 28 of the Act.

Aggrieved assessee preferred an appeal to the Learned CIT-A, who deleted the addition made by the AO by observing as under:- “ On careful consideration of entire facts it is observed that issue regarding disallowance of proportionate interest is covered in favour of Appellant by decision of Hon'ble Ahmedabad ITAT in Appellant's own case for A.Y. 2008-09 (ITA No. 1531/Ahd/2011) wherein Hon'ble ITAT vide its order dated 6th November, 2015 has held as under: "5. The CIT(A) deletes this bad debts disallowance after quoting case law of TRF Ltd. Vs. CIT, 323 ITR 397 (SC) to the fact that it is not necessary to prove the same to have actually become bad as per the relevant law amended from 01.04.1989. The CIT(A) comes to latter aspect (supra). The assessee submitted in the lower appellate proceedings that it had already credited its brokerage income in profit and loss account thereby offering it for taxation. It clarified that sale/purchase price of shares had been credited in the respective accounts. The CIT(A) follows special bench decision of the tribunal (2010) 5 ITR (Trib) 1 (Bom.) DCIT vs. Shreyas S. Morakhia as upheld in (2012) 342 ITR 285 (Bom.) CIT vs. Shreyas S. Morakhia that value of the share transacted by a broker-assessee on behalf of the concerned client is very much allowable as bad debts. The Revenue fails to rebut this legal position. We reject this third substantive ground accordingly." Following the above decision of Ahmedabad ITAT in Appellant's own case, disallowance of Rs. 1,18,89,628 is deleted. This ground of appeal is allowed.”

Being aggrieved by the order of the Learned CIT-A the Revenue is in appeal before us.

Both the Learned DR and the AR before us vehemently supported the order of the respective authorities below to the extent favourable to them.

We have heard the rival contentions of both the parties and perused the materials available on record. At the outset we note that the Tribunal in the own case of the assessee in ITA No. 1531/AHD/2011 for the Assessment Year 2008-09 vide order dated 6th November 2015, involving identical issue has decided the matter in favor of the assessee. The relevant extract of the order is reproduced as under: “The Revenue's third substantive ground assails correctness of the CIT(A) action in deleting bad debt disallowance of Rs.27,35,991/-comprising of debit balance written off of Rs.25,60,148/- and bad debt of Rs.1,75,843/-. These entries are mainly in the nature of vatav kasar. Some of them are less than of Rs.10,000/- even. The Assessing Officer observed that there was no material on record to prove the same to have been actually become bad. And also that the assessee had offered only brokerage sums as its income u/s 36(2) of the Act in profit and loss account. He accordingly made the impugned disallowance of this bad debts claim.”

The Learned DR at the time of hearing has not brought anything on record contrary to the finding of the ITAT as discussed above suggesting that there was any change in the facts and circumstances or under the provisions of law. Hence, there being no change in the facts and circumstances viz a viz under the provisions of law, we confirm the order of the Ld. CIT-A in view of the order of this tribunal in the own case of the assessee (supra). Accordingly, we direct the AO to delete the addition made by him. Hence, the ground of appeal of the Revenue is dismissed.

The next issue raised by the Revenue is that the Learned CIT (A) erred in deleting the addition made by the AO for Rs.17,02,013/- on account of Saudafer loss.

The assessee during the assessment proceedings submitted that it has made certain mistakes while carrying out transactions of purchases and sales of securities on behalf of the clients which has resulted loss of Rs. 38,40,074/- only. As per the assessee such loss should be allowed as deduction under Section 28 (1) of the Act as it did not occur in its own account and the same should not be treated as speculative loss under explanation to Section 73 of the Act.

The assessee further contended that had such loss been debited in the account of the clients, but such clients would not have paid for such losses as the loss was incurred due to the mistake of the assessee. In such a situation, the loss was allowable as deduction either under Section 36(1) as bad debts or as a business loss under Section 28(1) of the Act.

However, the AO disagreed with the contention of the assessee by observing that the assessee has not furnished the details of the mistake committed by it, such as clients in whose accounts the transaction was entered, non-delivery of the shares to the exchange and incorrect execution of orders. The AO also observed that there was disallowance made by his predecessor in the own case of the assessee for the Assessment Year 2006-07 treating such loss as speculative in nature. Accordingly, the AO added the same to the total income of the assessee and allowed the same to be carried forward.

Aggrieved assessee preferred an appeal to the Learned CIT (A).

The assessee before the Learned CIT (A) submitted that the impugned loss of Rs. 38,40,074/- is inclusive of the loss of Rs.17,02,013/- which was incurred out of future and option segment carried out through the recognized stock exchange. Therefore such loss of Rs. 17,02,013/- cannot be treated as speculative transaction as per clause (d) of sub-Section 5 to Section 43 of the Act. Therefore, to the extent of Rs.17,02,013/- such loss cannot be treated as speculative in nature.

The assessee also contended that it has declared of gross brokerage income of Rs. 60,34,33,815/- only and the amount of impugned loss debited stands at Rs. 38,40,074/- which is less than 0.6% of the total turnover. Therefore, there is no justification on the part of the AO to disbelieve its (assessee) version.

However, the Learned CIT (A) found that the assessee has not furnished necessary details about the parties on whose case the mistake was committed by it. Thus, in the absence of such information, it has to be presumed that the impugned loss was incurred on assessee’s account.

Nevertheless, the Learned CIT (A) deleted the addition made by the AO for the Assessment Year 2006-07 for the reason that the assessee has furnished the necessary evidence to justify that the loss was not on its account. Rather such loss was incurred by the assessee on behalf of its client. But in the case on hand the assessee has not furnished the necessary details. Thus, the Learned

However, the Learned CIT (A) held that the loss to the extent of Rs. 17,02,013/- relates to the future and option segment which was carried out through the recognized stock exchange. Therefore, such loss of Rs. 17,02,013/- cannot be treated as speculative transaction as per clause (d) of sub Section 5 to Section 43 the Act and under the explanation to Section 73 of the Act. Accordingly, the Learned CIT (A) deleted the addition made by the AO for such loss of Rs. 17,02,013.00. Thus, the Learned CIT (A) allowed the ground of appeal of the assessee in part.

Being aggrieved by the order of the Learned CIT (A) both the Revenue and the assessee are in appeal before us. The Revenue is in appeal against the deletion of the addition made by the AO for Rs.17,02,013/- treating such loss relating to future option segment which was carried out through the recognized stock exchange whereas the assessee is in appeal against the confirmation of the addition of Rs. 21,38,061/- which was treated by the Learned CIT (A) as speculative in nature in pursuance to the explanation to Section 73 of the Act. The ground No. 4 of appeal filed by the assessee in ITA No. 268/AHD/2016 reads as under: “4. In law and in the facts and circumstances of the appellant’s case, the learned CIT(A) has grossly erred in sustaining the Ld. AO’s action of treating what was normal business los [Saudafer loss] as speculation loss to the extent of Rs. 21,38,061 [out of Rs. 38,40,074 so treated by the Ld. A.O.].”

On the other hand, the Learned AR before us reiterated the contention of the assessee as raised before the authorities below.

Both the Learned DR and the AR before us vehemently supported the order of the authorities below to the extent favourable to them.

We heard the rival contentions of both the parties and perused the materials available on record. The first issue that arises for our consideration is whether the impugned loss incurred by the assessee relates to the sale and purchase activities carried out by the assessee for itself or it relates to the other clients of the assessee. It is a question of fact which can verified based on the documentary evidence. Indeed, the assessee has not furnished the sufficient documentary evidence in support of his contention. But looking at the amount of impugned loss in comparison to the volume of the brokerage business carried out by the assessee, we find that such loss is of negligible value. Furthermore, the tax audit report in form 3CD suggests that the assessee is engaged in the activity of stockbroking only and not in the activity of sale purchase of securities. The copy of form 3 CD is placed on pages 133 to 165 of the Paper Book. Similarly, the AO has also recorded in his order the nature of business of the assessee i.e. stockbroking. Even in the earlier Assessment Year 2006-07, the impugned loss was also treated as speculative in nature but the Learned CIT (A) deleted the same as the assessee was able to justify his contention based on the documentary evidence that such loss relates to its clients. This finding of the Ld. CIT-A, if analyzed in aggregation of other facts

On perusal of the financial statements placed on pages 59 to 132 of the Paper Book, it was observed that there was no transaction shown by the assessee as purchase and sale of the shares. In view of the above and after considering the details as discussed above we hold that the impugned loss incurred by the assessee does not pertain to its accounts rather it relates to the accounts of its clients. Accordingly, we conclude that the provisions of explanation to Section 73 of the Act cannot be applied to the case on hand. In holding so we find support and guidance from the order of this Tribunal in the case of Parker securities Ltd versus DCIT reported in 102 TTJ 235 wherein it was held as under: “Explanation to Section 73 provides that where any part of the business of a company (other than certain specified companies as mentioned in the Explanation) consists in the purchase and sale of shares of other companies, such company shall, for the purposes of this Section, be deemed to be carrying on a speculation business to the extent to which the business consists of the purchase and sale of such shares. It is clear from the said provision that sale and purchase of shares of other companies, within the ambit of the Explanation, must be carried out as an activity of business. The term ‘business’ has been defined in Section 2(13). Noting the definition of ‘business’ from the view point of Explanation to Section 73, it has been observed by the Karnataka High Court in the case of Mysore Rolling Mills (P.) Ltd. v. CIT [1992] 195 ITR 404/ 63 Taxman 416 that any kind of venture would not fall within this inclusive definition. The venture or the adventure will have to be in the nature of trade, commerce or manufacture. Basically, the concept of business involves a frequent activity of a particular nature. Therefore, to find out that the assessee carried on purchase and sale of shares of other companies as its business in a given case, the facts of that case will have to be examined and the tests which could determine such situation are - (i) nature of assessee’s business in general, (ii) the purpose behind the particular transaction, and (iii) the effect of the transaction etc. In the instant case, the nature of the assessee’s business in general was to earn income as a broker of stock exchange and the purpose behind the transactions in regard to which the assessee had incurred loss was the purchase for and on behalf of certain clients to earn brokerage income therefrom. It was only an eventuality that some of the clients disowned only part of the transactions which under compulsion were to be taken by the assessee as its own. [Para 28]”

The next issue raised by the Revenue is that the Learned CIT (A) erred in directing to re-compute the capital gain with indexation from the FY 2005- 06.

The assessee acquired old BSE membership card in the year 1995-96 at cost of Rs.2,75,01,000/- and not claimed any depreciation on such membership card as it was acquired prior to 1st April 1998. The old BSE membership card was demutualised in the Financial Year 2005-06. In other words, the membership card was converted into the shares of Bombay stock exchange in the years 2005-06. The assessee sold such shares in the year under consideration and claimed long-term capital loss at Rs. 1,96,02,783/-. It was worked out as under:

The assessee has worked out the index cost of acquisition from the year 1995-96 while working out the long-term capital gain.

Similarly, the assessee also acquired another BSE membership card in the year 2000-01 at Rs. 2,52,11,102/- and claimed depreciation till the Assessment Year 2009-10. As such the assessee has shown opening written down value of such card at Rs. 93,06,442/-in its balance sheet as on 1st April 2009. Such BSE membership card was also demutualised in the Financial Year 2005-06. In other words, the membership card was converted into the shares of Bombay stock exchange in the year 2005-06. The assessee sold such shares in the year under consideration and claimed long-term capital gain at Rs. 2,77,63,125/-. It was worked out as under:

The assessee has worked out the index cost of acquisition from the year 2000-01 while working out the long-term capital gain.

However, the AO found that the shares of the Bombay Stock Exchange were acquired by the assessee in the financial 2005-06 therefore he was of the view that the benefit of cost indexation to the assessee should be given from the Financial Year 2005-06 and not from the year in which Bombay Stock Exchange membership card were acquired by the assessee. Accordingly, the AO worked out the long-term capital gain in the manner as given below:

In view of the above the AO worked out the excessive long-term capital loss at Rs. 2,95,34,220/- and disallowed the same by adding to the total income of the assessee.

The assessee by way of filing the additional ground of appeal also contended that the cost of acquisition of the membership card of BSE acquired in the FY 2000-01 should be taken the original cost instead of WDV as on 1st April 2005 as mandated under Section 55(2)(ab) of the Act. The assessee in this connection further submitted that it has inadvertently taken the WDV as on 1st April 2009 while computing the long term capital gain.

However, the assessee agreed that the indexation cost of the shares with respect to both the membership card can be taken from the FY 2005-06 corresponding to AY 2006-07. The assessee in support of his contention filed the revised computation of income as detailed under: No of Purchase Sale Long term Sale value Cost Indexed cost shares Date date capital gain 31-03- 27-01- 1,20,000 4,22,50,000 2,75,01,000 3,49,71,090 72,78,910 1996 2010 31-03- 22-01- 1,30,000 4,22,50,000 2,52,11,102 3,20,59,188 1,01,90,812 2001 2010 Total 1,74,69,722

The Ld. CIT-A after considering the submission held that the assessee is entitled for the indexation benefit at the original cost of the membership card after taking the cost inflation index of the AY 2006-07. Thus, the ground of appeal of the assessee was partly allowed.

Being aggrieved by the order of the Learned CIT(A), both the Revenue and the assessee came in appeal before us. The Revenue is in appeal against the direction of the Learned CIT(A) for computing the capital gain considering the original cost of membership cards whereas the assessee is in appeal before us against the direction of the Learned CIT(A) for providing the indexation benefit from the year 2005-06 when the assets were 1st held by the assessee.

On the other hand, the AR before us submitted that the provisions of Section 55(2)(ab) and Explanation 1(ha) to Section 2(42A) of the Act are unambiguous and clear. Therefore, the assessee should be allowed the original cost of acquisition of the membership card while computing the capital gain as per the provisions of Section 55(2)(ab) of the Act. Similarly, the assessee should also be allowed the benefit of indexation from the year of acquisition of respective membership cards as per the provisions of Explanation 1(ha) to Section 2(42A) of the Act.

Both the Learned DR and the AR relied on the order of the respective authorities to the extent favourable to them.

We have heard the rival contentions of both the parties and perused the materials available on record. The facts of the case are not in dispute which have been elaborated in the preceding paragraph. Therefore, we are not

The Act comprises of several provisions pertaining to the computation of capital gains when equity shares of a recognized stock exchange are allotted to a shareholder under a scheme of demutualization and corporatization approved by the SEBI.

Moving forward, we also note that Section 50 of the Act is a special provision for computing capital gains in case of depreciable assets. It begins with a non-obstante clause to Section 2(42A) of the Act. The provision of Section 50 of the Act provides that notwithstanding anything contained in clause (42A) of Section 2 of the Act, where the capital asset in respect of which depreciation is provided under the Act, the cost of acquisition of asset, inter alia, shall be deemed to be written down value of the asset as at the beginning of the previous year. Further, the capital gain shall be deemed to arise from the transfer of short-term capital assets.

In the backdrop of the stated discussion, first we deal with question No. 1 with respect to both the membership card in seriatim. Regarding the first membership card of the BSE acquired in the year 1995-96, we note that the assessee has not claimed any depreciation thereon. Therefore, the same is outside the purview of the provision of Section 50 of the Act i.e. special provision for computation of capital gain in case of depreciable assets. It is because such membership card was not depreciable assets. Thus, the original cost incurred by the assessee on the acquisition of such membership card shall be taken as the cost of acquisition as defined under Section 55(2)(ab) of the Act.

Regarding the second membership card of the BSE acquired in the year 2000-01, we note that the assessee has claimed depreciation thereon. Therefore, it appears that the same is subject to the provision of Section 50 of the Act i.e. special provision for computation of capital gain in case of

In the result, the appeal filed by the Revenue is dismissed.

The assessee has raised the following concise grounds of appeal: “1. In law and in the facts and circumstances of the appellant's case, the learned CIT(A) has grossly erred in dismissing ground No. 1 of the appellant's appeal as being general in nature, not requiring any consideration by him. He ought to have appreciated, inter alia, that only a bare reading of that ground showed the reason for the appellant's challenge to the validity of the assessment order impugned before him and, accordingly, he ought to have adjudicated upon the same on merits. 2. In law and in the facts and circumstances of the appellant's case, the learned CIT(A) has grossly erred in upholding addition of Rs. 8,678 [out of Rs. 6,94,288 added by the Ld. AO. on this account] made on the ground that income to that extent shown by ITS/26AS as having been paid by some parties to the appellant had not been included in the appellant's return.

The first issue raised by the assessee in ground No. 2 is that Learned CIT (A) erred in holding the addition of Rs. 8,678/- in part out of the total addition made by the AO on account of mismatch in ITS/26AS.

The AO during the assessment proceedings observed certain difference in the amount of income shown between ITS/26AS viz-a-viz income accounted in the books of accounts of the assessee. Such difference was of Rs. 6,94,288/- which was not shown as income by the assessee in its books of accounts. On question by the AO, the assessee could not furnish any suitable reply for reconciling such difference. Thus the AO in the absence of any information, treated such difference aggregating to Rs. 6,94,288/- as income and added to the total income of the assessee.

Aggrieved assessee preferred an appeal to the Learned CIT (A) who deleted the addition made by the AO in part by observing as under:

Being aggrieved by the order of the Learned CIT (A), the assessee is in appeal before us.

The Learned AR before us submitted that it has not received any income from the party namely M/s Rajyog Share and stockbrokers Ltd for Rs. 8,678/-. Therefore, no addition is warranted.

On the other hand, the Learned DR vehemently supported the order of the authorities below.

We have heard the rival contentions of both the parties and perused the materials available on record. The onus lies upon the assessee to justify based on the documentary evidence that it has not received any income from M/s Rajyog Share and stockbrokers Ltd for Rs. 8,678/- but the assessee failed to discharge its onus. Thus in the absence of any documentary evidence, we do not find any infirmity in the order of the authorities below. Hence, the ground of appeal of the assessee is dismissed.

The second issue raised by the assessee is that the Learned CIT-A erred in upholding the addition in part amounting to Rs. 4,20,414/- under the provisions of Section 14A read with Rule 8D(2)(iii) of Income Tax Rule.

The issue raised by the assessee has already been disposed of by us along with the appeal filed by the Revenue bearing ITA No. 413/AHD/2016 vide paragraph number 40-42 of this order. As such, the ground of appeal of the assessee has already been dismissed. For the detailed discussion, please

The next issue raised by the assessee in ground No. 4 is that the Learned CIT-A erred in confirming the addition in part of Rs. 21,38,061/- out of the total addition made by the AO at Rs. 38,40,074/- by treating the normal business loss as speculation loss.

The issue raised by the assessee has already been disposed of by us along with the appeal filed by the Revenue bearing ITA No. 413/AHD/2016 vide paragraph number 74 & 75 of this order. As such, the ground of appeal of the assessee has already been allowed. For the detailed discussion, please refer the relevant paragraph. Hence, the ground of appeal of the assessee is allowed.

The next issue raised by the assessee in ground No. 5 is that the Learned CIT (A) erred in holding that the expenses incurred on the purchase of the mobiles are in the nature of capital expenditure.

The assessee in the year under consideration has claimed the expenses incurred by it on the purchase of the mobile set as revenue in nature on the reasoning that there was no enduring benefit accruing to it out of such expenses. However the AO disregarded the contention of the assessee by observing that the mobile phone falls under the category of equipment as provided under Section 32 of the Act. Accordingly the AO treated the same as capital in nature and disallowed the same by adding to the total income of the assessee.

Aggrieved assessee preferred an appeal to the Learned CIT (A).

The assessee before the Learned CIT (A) submitted that there is fast change in the technology in the field of mobiles. Therefore, the same should be treated as revenue expenditure. However, the Learned CIT (A) disregarded the contention of the assessee by observing as under: “15.3 I have carefully considered the assessment order and submission filed by appellant. The Assessing Officer has observed that appellant has claimed purchase of cell phones as revenue expenditure but such claim cannot be allowed as it falls under the category of equipment and it definitely has enduring benefit. Thus Assessing Officer has made disallowance of Rs 2,76,213. On the other hand, appellant has argued that due to radical changes in technology, cell phones have no enduring benefits and same is required to be allowed as revenue expenditure. It was alternatively argued that depreciation on such capital expenditure need to be allowed. On careful consideration of entire facts it is observed that cell phones purchased by appellant are having enduing benefits and same falls under the block of “Plant & machinery” which covers all the office equipment. The Appellant has not established how such expenditure are allowable as revenue expenditure u/s 37 of the Act hence it is held that Assessing Officer is justified in treating the expenditure as capital expenditure. However, while passing the assessment order, Assessing Officer has not allowed depreciation on above expenditure treated as capital expenditure hence he is directed to allow depreciation on cell phones treated as capital expenditure. This ground of appeal is partly allowed.”

Being aggrieved by the order of the Learned CIT (A) the assessee is in appeal before us.

The Learned AR before us reiterated the submission as made before the Learned CIT (A) whereas the Learned DR vehemently supported the order of the authorities below.

We have heard the rival contentions and perused the materials available on record. From the preceding discussion, we note that the assessee has treated the expenses incurred by it on the purchase of mobile expenses as revenue in nature whereas the revenue has treated the same as capital in nature. Accordingly, the claim of the assessee was disallowed but after allowing the depreciation at the rate of 15% treating the same as plant and machinery.

The next issue raised by the assessee in ground No. 6 is that the Learned CIT (A) erred in upholding the disallowance of Rs. 2,29,932/- representing the

The assessee during the assessment proceedings submitted that it has incurred an expense of Rs. 2,29,932/- towards the membership fees paid to the stock exchanges. As per the assessee such membership subscription is not a payment in the nature of technical/professional services and therefore the same is not subject to the TDS under the provisions of Section 194J of the Act.

On appeal, the Learned CIT(A) confirmed the order of the AO by observing as under: (i) So far as payment for depository transactions are concerned, it is observed that Central Government has issued notification on 31st December, 2012 wherein it is stated that such charges are not subject to provisions of TDS but notification is applicable from 1st January, 2013 hence it cannot have retrospective effect. Considering these facts, it is held that Appellant has failed to deduct TDS on payment made to HDFC Bank hence disallowance under Section 40(a)(ia) is required to be upheld subject to legal issue regarding applicability of Finance Act, 2012, as discussed herein under.

Being aggrieved by the order of the Learned CIT (A), the assessee is in appeal before us.

The Learned AR before us submitted that the stock exchange is not providing any service in the nature of technical services. Therefore, the provisions for the TDS under Section 194J of the Act cannot be applied on the payment made by the assessee for the membership subscription and transaction charges.

On the other hand, the Learned DR vehemently supported the order of the authorities below.

We have heard the rival contentions of both the parties and perused the materials available on record. For attracting the provisions of TDS under Section 194J of the Act, the payment as 'fees for technical services' should have been paid in consideration of rendering by the recipient of payment of any (a ) managerial service, (b) technical or consultancy services. The stock exchanges merely provide facility to its members to purchase and sell shares, securities, etc., within the framework of its bye laws. In the event of dispute it provides for mechanism for settlement of dispute. It regulates conditions subject to which a person can be a member and as to when and in what circumstances membership can be transferred, cancelled, suspended, etc. The exchange provides a place where the members can meet and transact business. The membership subscription /transaction fee paid is on the basis of volume of transaction effected by a member. The stock exchanges neither render any managerial service nor any technical consultancy service. The transaction fee

The next issue raised by the assessee is that the Learned CIT-A erred in partly confirming the disallowance made by the AO on the payment made to the stock exchange for Rs. 9,14,619/-on account of VSAT and lease line charges.

The AO during the year under consideration found that the assessee has paid VSAT and lease line charges amounting to Rs. 37,46,013/- without deducting the TDS under the provisions of Section 194-I of the Act. Accordingly, the AO disallowed the same and added to the total income of the assessee.

Being aggrieved by the order of the Learned CIT-A the assessee is in appeal before us.

The Learned AR before us submitted that the payment to the stock exchange towards the VSAT charges and lease line charges are not subject to

On the other hand, the Learned DR vehemently supported the order of the authorities below.

We have heard the rival contentions of both the parties and perused the materials available on record. 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 res integra by virtue of the order of the ITAT Mumbai in the case of Destimoney Securities Private Ltd vs. ITO in ITA No. 4106 /MUM/2014, after relying the judgment of the Hon’ble Bombay High Court, wherein it was held as under: “12. We now take up the issue as regards the liability of the assessee to deduct tax at source on payments towards lease line charges. We find that the issue involved herein is no more res integra, as the same is squarely covered in favour of the assessee by the judgment of the Hon’ble High Court of Bombay in the case of:- (i) Income Tax Commissioner, Mumbai City-4 Vs. Angel Capital & Debit Market Ltd. (ITA (L) No. 475 of 2011, dated 28.07.2011)(Bom) (ii) CIT-4, Vs. M/s. The Stock and Bond Trading Company Ltd. (ITA No. 4177 of 2010, dated 14.10.2011)(Bom). We find that the Hon’ble Jurisdictional high Court in the aforesaid judgments had clearly held that VSAT and lease line charges paid by the assessee to stock exchange are merely in the nature of reimbursement of the charges paid/payable by the stock exchange to the department of the telecommunication, and thus in the absence of any element of income involved in the said payments, the issue as regards deduction of tax at source on the same does not arise at all. We are of the considered view that in the backdrop of the aforesaid judgment of the Hon’ble Jurisdictional High Court, the order of the CIT(A) treating the assessee as being in default u/s. 201(1)/201(1A) in respect of failure to deduct tax at source as regards the payments made towards lease line charges, cannot be sustained, and is thus set aside. The Ground of appeal No. 2 raised by the assessee before us is allowed.”

Before parting, it is also important to note that the ITAT in the own case of the assessee for the Assessment Year 2008-09 in ITA No. 1718/AHD/2011 has set aside the identical issue to the file of the AO for fresh adjudication after verifying whether payees have included the amount received from the assessee in their income tax return. However in that order, there was no whisper about the Tribunal order as discussed above in the case of Destimoney Securities Private Ltd versus ITO in ITA No. 4106 /MUM/2014, which was decided in favour of the assessee after placing reliance on the order of Bombay High Court as discussed here in above. Thus the issue on hand on merit has been decided by a higher forum in favour of assessee which is binding on us. Accordingly, we are not impressed with the finding of the ITAT in the own case of the assessee and accordingly, the principles laid down by the ITAT in its own case in earlier years are not applicable. Thus, the grounds of appeal of the assessee is allowed.

The next issue raised by the assessee is that Learned CIT-A erred in confirming the order of the AO by sustaining the disallowance of brokerage expenses of Rs. 26,910/- on the reasoning that the registration certificate of broker was not produced.

Aggrieved assessee preferred an appeal to the Learned CIT (A).

The assessee before the Learned CIT (A) submitted that it has provided the registration numbers of all the brokers except in one case only who was paid brokerage based on the volume of the business carried out through him.

Being aggrieved by the order of the Learned CIT (A), the assessee is in appeal before us.

The Learned AR before us reiterated the submission as made before the Learned CIT (A) whereas the Learned DR vehemently supported the order of the authorities below.

We have heard the rival contentions of both the parties and perused the materials available on record. The amount of brokerage expenses can be claimed as deduction provided it was incurred in the course of the business. The Learned AR at the time of hearing has not brought anything on record suggesting the nature of services rendered by such brokerage.

The next issue raised by the assessee in ground No. 9 is that the Learned CIT-A erred in directing the AO to compute the capital gain on the basis of cost inflation index pertaining to the financial 2005-06 instead of the cost inflation index pertaining to the years in which the assets in question were acquired i.e. 1995-96 and 2000-01.

The issue raised by the assessee has already been disposed of by us along with the appeal filed by the Revenue bearing ITA No. 413/AHD/2016 vide paragraph number 90 to 95 of this order. As such, the ground of appeal of the assessee has already been dismissed. For the detailed discussion, please refer the relevant paragraph. Hence, the ground of appeal of the assessee is dismissed.

The next issues raised by the assessee in ground No. 10, 11 and 12 are consequential, premature to decide or general in nature. Therefore, we do not find any merit in the grounds of appeal. Therefore we dismiss the same as infructuous.

In the result, the appeal filed by the assessee is partly allowed.

The first issue raised by the Revenue is that the Learned CIT-A erred in deleting the addition made by the AO amounting to Rs. 21,07,549/- being depreciation allowance, interest and insurance expenses relating to vehicles though the assessee was not the owner of such vehicles.

The second issue raised by the Revenue is that Learned CIT-A erred in deleting the addition made by the AO in part amounting to Rs. 15,10,965/- on account of interest and administrative expenses under the provisions of Section 14A r.w.r 8D of Income Tax Rules.

The AO during the assessment proceedings found that the assessee has not provided the basis for the disallowance of the expenses of Rs.14,284/- against the dividend income of Rs.24,324/-. As per the assessee, its own funds exceeds the amount of investment and therefore no borrowed fund was utilized for the purpose of the investment. Accordingly, the question of disallowing any interest expense does not arise under Rule 8D of Income Tax Rule.

Aggrieved assessee preferred an appeal to the Learned CIT-A, who partly allowed the appeal of the assessee.

Being aggrieved by the order of the Learned CIT-A, both the Revenue and the assessee are in appeal before us. The Revenue is in appeal against the deletion made by the AO for Rs. 15,10,965/- whereas the assessee is in appeal against the confirmation of the addition of Rs. 2,76,400/-. The ground bearing No. 2 in an appeal of the assessee in ITA No. 318/AHD/2016 reads as under:

Both the Learned DR and the AR before us vehemently supported the order of the respective authorities below to the extent favourable to them.

We have heard the rival contentions of both the parties and perused the materials available on record. Admittedly, the assessee in the year under consideration has earn exempted income amounting to Rs.24324/- only. Now the issue arises before us for the adjudication whether the disallowances made under Section 14A r.w Rule 8D can exceed the amount of exempted income earned during the year under consideration. At this juncture, we find important to refer the provisions of Section 14A of the Act which reads as under:

In holding so we find support and guidance from the judgment of Hon’ble Delhi High Court in the case of Joint Investments Private Ltd. vs. CIT reported in 372 ITR 694 wherein it was held as under:

In view of the above, we hold that the disallowance of the expenses under Section 14A read with rule 8D cannot exceed the amount of exempted income. Hence, the ground of appeal filed by the revenue is dismissed whereas the ground of appeal filed by the assessee is partly allowed.

The third issue raised by the Revenue is that Learned CIT-A erred in deleting the addition made by the AO for Rs. 42,700/- by disallowing the expenditure representing the penalty.

The fourth issue raised by the Revenue is that the Learned CIT-A erred in deleting the addition made by the AO for Rs. 1,47,79,776/- on account of bad debts as the conditions specified under Section 36 (2) were not satisfied.

The assessee has raised the following grounds of appeal: “1. In law and in the facts and circumstances of the appellant's case, the learned CIT(A) has grossly erred in dismissing ground No. 1 of the appellant's appeal as being general in nature, not requiring any consideration by him. He ought to have appreciated, inter alia, that only a bare reading of that ground showed the reason for the appellant's challenge to the validity of the assessment order impugned before him and, accordingly, he ought to have adjudicated upon the same on merits. 2.1 In law and in the facts and circumstances of the appellant's case, the learned CIT(A) has grossly erred in sustaining disallowance of Rs. 2,76,400 u/s. 14A read with Rule 8D(2)(iii) on account of administrative expenses [even as he had directed the quantum of the disallowance on this account to be reduced from Rs.2,90,466 to Rs. 2,76,400 after appreciating that the appellant's investments in shares of its subsidiary which had been amalgamated with the appellant, cannot be taken into account for the purposes of arriving at the quantum of disallowance under the said Rule], He ought to have appreciated, inter- alia, that in the peculiar and eminent facts of the appellant's case, the learned A.O. had got to be satisfied with the appellant's claim that it had not incurred any administrative expenditure in relation to income not forming part of its total income other than expenditure of Rs. 14,284 for which it had made a suo motu disallowance and that

The first issue raised by the assessee in ground No. 1 is general in nature and, therefore, no separate adjudication is required. Accordingly, we dismiss the same.

The second issue raised by the assessee is that the Learned CIT (A) erred in upholding the order of the AO in part by sustaining the disallowance of Rs.2,76,400/- under the provisions of Section 14A read with Rule 8D(2)(iii) of income tax rule.

The issue raised by the assessee has already been disposed of by us along with the appeal filed by the Revenue bearing ITA No. 445/AHD/2016 vide paragraph number 147 to 149 of this order. As such, the ground of appeal of the assessee has already been allowed in part. For the detailed discussion, please refer the relevant paragraph. Hence, the ground of appeal of the assessee is partly allowed.

The next issue raised by the assessee in ground No. 3 is that the Learned CIT (A) erred in confirming the order of the AO by sustaining the disallowance of Rs. 19,38,202/- with respect to the deposits made with the landlords for the rented properties.

The AO during the assessment proceedings found that the assessee has claimed the deduction with respect to the deposits made with the rented properties amounting to Rs. 19,38,007/- but failed to file the supporting

Aggrieved assessee preferred an appeal to the Learned CIT (A) who also confirmed the order of the AO.

Being aggrieved by the order of the Learned CIT (A), the assessee is in appeal before us.

At the outset, the Learned AR appearing for the assessee submitted that the assessee has not furnished the necessary evidence in support of his claim before the authorities below. Accordingly, the Learned AR prayed before us to restore the matter to the file of the AO for fresh adjudication and further assured that all the necessary documents shall be filed before the AO.

On the other hand the Learned DR did not raise any objection if the matter is set aside to the file of the AO for fresh adjudication as per the provisions of law.

The next issue raised by the assessee in ground No. 4 is that the Learned CIT (A) erred in confirming the addition made by the AO for Rs. 19,68,177.00 on account of Saudafer loss.

The next issue raised by the assessee in ground No. 5 is that the Learned CIT (A) erred in holding that the expenses incurred on the purchase of the mobiles are in the nature of capital expenditure.

At the outset, we note that the identical issue has been decided by us in the own case of the assessee in ITA No. ITA No. 268/Ahd/2016 for A.Y. 2010-11 vide Para No. 115 of this order against the Revenue and in favor of the assessee. For the detailed discussion please refer the relevant paragraph. Respectfully, following the same, the ground of appeal of the assessee is allowed.

The next issue raised by the assessee is that the Learned CIT-A erred in confirming the disallowance made by the AO on the payment made to the

At the outset, we note that the identical issue has been decided by us in the own case of the assessee in ITA No. ITA No. 268/Ahd/2016 for A.Y. 2010-11 vide Para No. 128 to 129 of this order against the Revenue and in favor of the assessee. For the detailed discussion please refer the relevant paragraphs. Respectfully, following the same, the ground of appeal of the assessee is allowed.

The issues raised by the assessee in ground Nos. 7, 8 and 9 are consequential, premature to decide or general in nature. Therefore, we do not find any merit in these grounds of appeal. Therefore we dismiss the same as infructuous.

In the result, the appeal of the assessee is partly allowed for the statistical purposes.

The captioned appeal has been filed at the instance of the Revenue against the order of Learned Commissioner of Income Tax (Appeals)-10, Ahmedabad [in short Ld. CIT(A)], dated 21/12/2015 arising in the matter of assessment order passed u/s 143(3) of the Income-tax Act 1961, (hereinafter

The Revenue has raised the following grounds of appeal: Appellate order of Commissioner of Income-tax(A)-10, Ahmedabad in the case of Edelweiss Broking Ltd. (On behalf of amalgamating Company Edelweiss Financial Advisors Ltd.), for AY 2012-13. I hereby direct the DCIT, Circle-1(3), Ahmedabad to file and appeal to the Appellate Tribunal against the order No.CIT(A)-10/ACIT-Cir.1(3)/654/14-15 dated 21.12.2015 in the above case on the following grounds: (1) That the ld.CIT(A) has erred in law and on the facts by deleting addition of depreciation, interest and insurance on vehicle amounting to Rs.16,62,595/- by ignoring the fact that the assessee failed to prove the ownership of these vehicles as well as use of those assets wholly and exclusively for the business purpose. (2) That the ld.CIT(A) erred in law and on the facts by deleting addition of Rs.12,09,926/- made by the AO u/s.14A without considering the fact that the AO has rightly disallowed the same u/s.14A after considering the provisions for Rule 8D, which is not fulfilled in the assessee’s case.

At the time of dictation, it was noticed that the tax effect in the impugned appeal filed by the Revenue is less than ₹50 lakhs. Therefore, the

Before parting, we also note that there are certain exceptions specified in the CBDT circular bearing No. 17 of 2019 dated 8 August 2019 read with circular No. 3 of 2018 dated 11th July 2018 where the tax limit of Rs. 50 lacs will not be applied. As such, in those cases the appeal of the revenue will stand and the same will not be hit by the impugned circular despite the tax effect is less than ₹50 lakhs. Therefore, we want to make it clear that if the revenue on the verification finds that the impugned case of the assessee falls in the exception as provided in the circular or tax effect exceeds, then it will be at its liberty to move an application for the recalling of this order of the tribunal within the prescribed time under the provisions of section 254(2) of the Act. In view of the above, we dismiss the appeal filed by the Revenue as not maintainable.

In the result, the appeal filed by the Revenue is dismissed.

In the combined result, all the three appeals filed by the Revenue are dismissed, whereas assessee’s appeal in ITA No.268/Ahd/2016 is partly allowed and ITA No.318/Ahd/2016 is partly allowed for statistical purposes. Order pronounced in the Court on the 3rd December, 2020 at Ahmedabad.