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2023 (2) TMI 1067 - AT - Income TaxAddition of interest income on the basis of form 26AS - assessee failed to explain the reason for short accounting of interest income from SBI whereas it has claimed credit of TDS on full amount - HELD THAT - 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. 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 has earned so much of the income. The income reported in form 26AS can be a reason for suspicion/doubt about the actual income earned by the assessee in the income tax return in the event there is a mismatch. But it cannot be a sacrosanct document to hold the issue 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 on other hand has also earned interest income of Rs. 46,27,470/- only. Accordingly, as contended that only net interest cost should be considered for disallowance. We find force in the contention of the assessee which is covered in its favor by the judgment of Hon ble jurisdictional High Court in the case of PCIT vs. Nirma Credit Capital (P.) Ltd. 2017 (9) TMI 485 - GUJARAT HIGH COURT . 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 - 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. Addition of Employee contribution of EPF/ESI u/s 36(1)(va) - assessee has deposited Employees contribution towards PF/ESI account after the due date prescribed under respective Act and has also not furnished any explanation of such late deposit - HELD THAT - We note that the issue in hand has been covered against the assessee by the judgment of Hon ble Jurisdictional High Court in case of CIT vs. GSRTC 2014 (1) TMI 502 - GUJARAT HIGH COURT - Decided against assessee. Mark to market loss - assessee has booked loss 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, the 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 - HELD THAT - 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 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 and BSE on demutualization was converted into the shares as per the direction of the SEBI and as 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 - HELD THAT - Admittedly, the assessee has been claiming depreciation on the membership cards of the stock exchange since the last many years as evident from the details placed - The shares allotted to the assessee on corporatization of stock exchange have been classified as investment by the assessee in its books of accounts separately and no depreciation of whatsoever was claimed on such investments. In other words, the cost incurred by the assessee 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 - 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. Decided in favour of assessee. Non-deduction of TDS under the provisions of section 194C/, 194J and 194-I read with section 40(a)(ia ) - As submitted that there was short a deduction of TDS with respect to the payment made towards VSAT charges - HELD THAT - 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 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. Fresh claim during assessment proceedings - Disallowance of setoff of speculation loss - AO found that the assessee has neither shown such claim in the original return nor filed any revised return of income - HELD THAT - 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 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 the light of the discussion as stated above. Hence, the ground of appeal of the assessee is hereby allowed for statistical purposes.
Issues Involved:
1. Addition of interest income based on Form 26AS. 2. Disallowance under Section 14A. 3. Addition of Employee contribution of EPF/ESI under Section 36(1)(va). 4. Mark to market loss. 5. Depreciation on membership cards of ASE and BSE. 6. Disallowance under Section 40(a)(ia) for non-deduction of TDS. 7. Disallowance of ROC expenses and long-term capital gain. 8. Disallowance of setoff of speculation loss. Issue-wise Detailed Analysis: 1. Addition of Interest Income Based on Form 26AS: The assessee reported interest income from SBI as Rs. 8,16,007/- with TDS credit of Rs. 84,050/-, while Form 26AS reflected an interest payment of Rs. 11,93,417/-. The AO added the difference of Rs. 3,77,410/- to the income, which was confirmed by CIT(A). The Tribunal held that Form 26AS alone cannot be treated as conclusive evidence without cross-verification and directed the AO to delete the addition, allowing the assessee's appeal. 2. Disallowance Under Section 14A: The AO disallowed Rs. 2,50,157/- under Section 14A, including interest and administrative expenses. The CIT(A) confirmed the disallowance. The Tribunal found that the assessee had sufficient interest-free funds to cover the investments and thus, no interest expense should be disallowed. The Tribunal directed the AO to delete the interest disallowance while confirming the administrative expense disallowance, partly allowing the appeal. 3. Addition of Employee Contribution of EPF/ESI Under Section 36(1)(va): The AO added Rs. 20,807/- for late deposit of employee contributions to PF/ESI, confirmed by CIT(A). The Tribunal upheld the addition based on the jurisdictional High Court ruling that late deposits beyond the due dates are not allowable, dismissing the assessee's appeal. 4. Mark to Market Loss: The AO disallowed Rs. 64,97,480/- as unrealized loss on unsettled F&O transactions, treating it as contingent liability. CIT(A) confirmed the disallowance. The Tribunal, referencing the Supreme Court and other judgments, held that such losses are allowable as business losses and directed the AO to delete the addition, allowing the appeal. 5. Depreciation on Membership Cards of ASE and BSE: The AO disallowed depreciation on stock exchange membership cards post-demutualization, treating them as shares. CIT(A) upheld the disallowance. The Tribunal, emphasizing consistency and the Supreme Court ruling in Techno Shares & Stocks Ltd., directed the AO to allow the depreciation, allowing the appeal. 6. Disallowance Under Section 40(a)(ia) for Non-deduction of TDS: The AO disallowed various expenses for non-deduction of TDS under Sections 194C, 194J, and 194I, confirmed by CIT(A). The Tribunal found: - Payment to M/s Bee Kay Technologies was for product purchase, not services, thus not subject to TDS under Section 194C. - Payments to stock exchanges for VSAT and lease line charges were reimbursements, not subject to TDS under Section 194J/194I. - No disallowance for short deduction of TDS on VSAT charges. The Tribunal directed the AO to delete these additions, allowing the appeal. 7. Disallowance of ROC Expenses and Long-term Capital Gain: The assessee conceded not to press these issues due to the small amounts involved. The Tribunal dismissed these grounds accordingly. 8. Disallowance of Setoff of Speculation Loss: The AO disallowed setoff of brought forward speculation loss due to lack of revised return and documentary proof. CIT(A) confirmed the disallowance. The Tribunal, noting the assessee's request for remand and the absence of DR's objection, remanded the issue to the AO for fresh adjudication, allowing the appeal for statistical purposes. Conclusion: The Tribunal allowed the appeal partly, directing the AO to delete certain additions and disallowances while remanding one issue for fresh adjudication. The order was pronounced on 24/02/2023 at Ahmedabad.
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