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TMI Blog2003 (10) TMI 275X X X X Extracts X X X X X X X X Extracts X X X X ..... to 27th June, 2003, for filing the evidence. However, on 27th June, no such evidence was filed and the assessee came forward with the request for adjournment. In the circumstances of the case, no further time was allowed and the request of the assessee was declined. 4. First, we take up ITA 2825/Del/2002 for asst. yr. 1997-98. Ground 1 is against sustaining the addition of Rs. 4,25,000 in respect of admission fee paid to OTCEI. The assessee-company has debited a sum of Rs. 4,25,000 on account of admission fee paid to OTCEI. When called upon to furnish the details, the assessee explained that total amount of Rs. 8,50,000 has been paid to OTCEI for acquiring partnership (membership) of the exchange as under: Rs. Admission fee 6.00 lakh Annual fee 25.00 lakh Technology cost 2.00 lakh Settlement deposit 25.00 lakh Total: 8,50,000 The date-wise payment of the above amounts are as under: Particulars Amount (Rs.) Ch/DD No. Dated Amount deposited with application 1,00,000 51654 31.01.95 Admission fees 5,00,00 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e learned CIT(A), could not be allowed as revenue expenditure either for asst. yr. 1997-98 or asst. yr. 1998-99. 2. The expenditure in question incurred for acquiring the membership of OTCEI is clearly capital in nature. By becoming a member of OTCEI, the assessee derived enduring benefit to enter into a new area of business, i.e., dealing in shares listed in OTECI. 3. The CIT(A) placed reliance on the Special Bench decision of the Tribunal in the case of Jagan Nath Syal vs. Asstt. CGT (2000) 67 TTJ (Del)(SB) 1 : (2000) 72 ITD 1 (Del)(SB) wherein it has been held that acquiring membership of Delhi Stock Exchange constituted capital asset which entitled a person to transact business in sale and purchase of shares listed in the stock exchange after entering the trading circle in the exchange. CIT(A) further placed reliance on the decision of Bombay High Court in Bombay Steam Navigation (P) Ltd. vs. CIT (1965) 56 ITR 52 (Bom). 7. On the aforesaid grounds, CIT(A) sustained the disallowance of Rs. 4,25,000 for each of the two assessment years, i.e., 1997-98 and 1998-99. 8. We have carefully considered the rival submissions and gone through the orders of the tax authorities below ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ange for acquiring membership of the exchange and this sum has been written off in the books over a period of 10 years in 10 equal instalments. The facts and issues involved are similar as dealt with by us above and, therefore, for the reasons discussed hereinbefore, we are inclined to hold that admission fee paid for acquiring membership of National Stock Exchange represents capital expenditure and there is no occasion for the assessee to claim 1/10th of the expenditure by spreading over the amount over a period of 10 years. The disallowance of Rs. 50,000 would, therefore, be upheld for both the assessment years under appeal and ground No. 2 for each of the two assessment years would thus be dismissed. 10. Ground 3 for asst. yr. 1997-98 is against sustaining the addition of Rs. 11,26,265 on account of speculation loss. Learned CIT(A) has discussed the issue vide para 5 of the impugned appellate order. Briefly stated, the facts having a bearing on the point in issue, are that a sum of Rs. 11,26,265 has been debited by the assessee to the P L a/c as loss in share trading. On the basis of the details furnished during the assessment proceedings, the AO noted that the loss is the res ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... n any case covered as speculation loss under the express provisions of s. 43(5). In support of his conclusions the AO placed reliance on the decision of Hon'ble Supreme Court in Davenport Co. (P) Ltd. vs. CIT 1975 CTR (SC) 235 : (1975) 100 ITR 715 (SC). AO accordingly rejected the claim of set off of the speculation loss of Rs. 11,26,265 against brokerage income and made the addition. 11. In appeal, the learned CIT(A) has discussed the entire matter at length vide para 5 of his appellate order. The CIT(A) has noted detailed submissions of the assessee vide para 5.1 of the order. Before the CIT(A), the assessee stated that one of its clients M/s Suresh Kumar and Co., had placed order on 29th Jan., 1997, on the telephone for purchase of 10,000 shares of Reliance Industries and 21,000 shares of State Bank of India and these shares were purchased at different rates prevailing in the stock exchange. According to the assessee, the party however declined to honour the transaction. The assessee further pleaded that the company consulted Jain Associates, advocates whether legal proceedings for non-acceptance of shares' purchases on their orders can be initiated against M/s Suresh Kuma ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... TR (Cal) 253 : (1983) 139 ITR 371 (Cal) 5. CIT vs. Arvind Investment Ltd. (1991) 94 CTR (Cal) 263 : (1991) 192 ITR 365 (Cal) 13. Learned counsel assailing the impugned finding of the learned CIT(A) argued before us that the loss has been suffered in the transactions of shares which had been entered into for and on behalf of the clients and since the clients refused to honour these transactions, the assessee-company had to bear the said loss in its own account. According to the learned counsel, M/s Suresh Kumar and Co., client of the assessee-company has placed order on 29th Jan,. 1997, on the telephone for purchase of 10,000 shares of Reliance Industries and 21,000 shares of State Bank of India and subsequently, the said client backed out with the result that assessee had to square off these transactions incurring loss to the extent of Rs. 10,46,450. Learned counsel referred to the correspondence entered into with M/s Suresh Kumar and Co. placed in paper book at pp. 48-52. He claimed that since the loss has been suffered during the course of brokerage business, claim of deduction as business loss made by the assessee is liable to be allowed. 14. Learned Departmental Represent ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... transactions in question have been admittedly settled without delivery of share securities, loss of Rs. 11,26,265 has been rightly held to be speculative, loss. He further relied upon Explanation to s. 73 and argued that because of the deeming fiction enacted by the legislature, loss in share dealing is liable to be treated as speculative loss. 15. We have carefully considered the rival submissions and gone through the orders of the Revenue authorities below as well as the paper book filed by die learned counsel before us. As we have already pointed out hereinbefore, despite opportunity allowed by us, share transaction books (chopris) or documents like contract notes in respect of transactions with M/s Suresh Kumar and Co., or any other evidence in support of assessee's claim that transactions were entered into for and on behalf of its clients have not been produced before us. In fact no such evidence has been produced before the Revenue authorities below. In fact from the letter of M/s Jain and Associates placed in the paper book at p. 55 we find that it has been specifically' stated by the advocates that "no documentary evidence or any other proof for their ordering of purchas ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ment company nor banking company and carries on business of purchase and sale of shares. The case of the assessee is clearly hit by the mischief of the aforesaid Explanation to s. 73. Since the assessee-company does not fall within the exempted categories, s. 73 would apply. The loss in share dealings amounting to Rs. 11,26,265 would thus be treated as speculation loss under s. 73 r/w Explanation thereto. 16. The proposition is well-settled that brokerage income received by the assessee as a share broker could not be set off against speculation loss because there was no element of speculation whatever in the brokerage/commission income received by the assessee. The brokerage was independent of any fluctuations in the market and no risk was involved in earning it. The brokerage/commission had to be treated not as a profit from speculation business but as a profit from the business as a broker and the assessee was not entitled to have the commission income set off against the loss of the speculation business. Sec. 72 specifically prohibits set off of speculation loss against business income. Therefore, there is no occasion for allowing set off of speculation loss of Rs. 11,26,905 a ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... escribed by the income-tax statute for the assessment order. It is a common practice amongst the AOs that the assessment order is separately drawn up assessing the total income and tax computation form is attached therewith indicating computation of tax and interest. This form is described as income-tax computation form also known as ITNS 150. The process of assessment under s. 143(3) is complied when the assessment order as well as tax computation sheets are sent by the ITO. Now, in the instant case, computation forms for both the assessment years indicate the levy of interest which is reflected in the notice of demand as issued by the AO. Since computation form is a part of assessment order, levy of tax and interest in the said form would comply with the requirement that interest should be levied while making the assessment. Reliance is placed in this behalf on the decision of Supreme Court in the case of Kalyan Kumar Ray vs. CIT (1992) 102 CTR (SC) 188 : (1991) 191 ITR 634 (SC). This decision has been rendered by three Judges wherein it has been held specifically that income-tax computation form is a part of the assessment order. Their Lordships observed at p. 639 of the report: ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... onding sections pertaining to the imposition of interest used the expression "may" but the change brought about by the Finance Act, 1987 is a clear indication that the intention of the legislature was to make the calculation of statutory interest mandatory. The mainstay of the case, as presented by the learned counsel before us, concerning levy of interest under ss. 234A, 234B and 234C is the decision of Supreme Court in CIT vs. Ranchi Club L td. In this decision the apex Court has held that the interest under ss. 234A, 234B and 234C could not be levied merely through a notice of demand under s. 156 of the IT Act, 1961, where there was no specific order in the assessment order that interest was leviable and for charging such interest. When we apply the proposition enunciated by Their Lordships in Ranchi Club Ltd.'s case to the facts of this instant case, it is clear that interest under ss. 234A, 234B and 234C has been charged in ITNS-150 in compliance with the direction of the AO in the assessment order itself and since ITNS-150 is a part of the assessment order, the test laid down in Ranchi Club Ltd.'s case is fulfilled. Kalyan Kumar Ray's case is an authoritative pronouncement of ..... X X X X Extracts X X X X X X X X Extracts X X X X
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