2013 (10) TMI 546 - AT - Income Tax

Disallowance u/s 40(a)(ia) - VSAT & transaction charges paid to Stock Exchange - Held that - liability of TDS exists u/s. 194J in respect of transaction charges only. (i) that the assessee was liable to deduct tax at source before crediting the transaction charges to the account of the stock exchange. (ii) That though section 194J was inserted with effect from July 1 1995 till the assessment year in question that is assessment year 2005-06 both the Revenue and the assessee proceeded on the footing that section 194J was not applicable to the payment of transaction charges and accordingly during the period from 1995 to 2005 neither had the assessee deducted tax at source while crediting the transaction charges to the account of the stock exchange nor had the Revenue raised any objection or initiated any proceedings for not deducting the tax at source. In these circumstances if both the parties for nearly a decade proceeded on the footing that section 194J was not attracted then in the assessment year in question no fault could be found with the assessee in not deducting the tax at source under section 194J of the Act and consequently no action could be taken under section 40(a)(ia) of the Act - Following decision of Commissioner of Income-tax - 4(3) Versus Kotak Securities Ltd. 2011 (10) TMI 24 - Bombay High Court - Decided in favour of assessee. Disallowance of penalty u/s 37 of the Act - Business expenditure - Held that -penalty/payments made by the Assessee to the Stock Exchange for violation of their regulation being risk management oriented are not an account of an offence which is prohibited by law.Hence the invocation of explanation to section 37 is not justified - Following decision of CIT Vs M/s. Stock and Bond Trading Co. 2011 (10) TMI 172 - BOMBAY HIGH COURT - Decided against Revenue. Disallowance u/s 14A - Held that - A perusal of the balance sheet of the assessee as exhibited at page-1 of the paper Book supports the contention of the Counsel that assessee has sufficient own funds to cover up the investments - where both own funds and loan funds are available with the assessee the presumption is that the investment is made out of own funds - Following decision of The Commissioner of Income Tax Versus Reliance Utilities & Power Ltd. 2009 (1) TMI 4 - HIGH COURT BOMBAY - Decided partly against Revenue. Disallowance of mark to mark loss on derivatives - Held that - There is no dispute that the assessee holds derivatives as its stock-in-trade and there is also no dispute that it follows the principle cost or market price whichever is lower in valuing the derivatives. When the derivatives are held as stock-in-trade then whatever rules apply to the valuation of stock-in-trade will have to be necessarily apply to their valuation also. It is a well settled position in law that while anticipated loss is taken into account in valuing the closing stock anticipated profit in the shape of appreciated value of the closing stock is not brought into the account as no prudent trader would care to show increased profit before its realization. This is the theory underlying the rule that the closing stock is to be valued at cost or market price whichever is the lower and it is now generally accepted as an established rule of commercial practice and accountancy - profits that are chargeable to tax are those realized in the year and that an exception is recognized where a trader purchased and still holds goods which are fallen in value in which case though no loss has been realized nor it has occurred nevertheless at the close of the year he is permitted to treat these goods as of their market value - Following decision of Chainrup Sampatram vs. Commissioner of Income Tax West Bengal 1953 (10) TMI 2 - SUPREME Court - Decided in favour of assessee.