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TMI Blog2012 (9) TMI 124X X X X Extracts X X X X X X X X Extracts X X X X ..... the changing needs and is to be allowable as revenue expenditure - against revenue. Disallowance of rebate under section 88E in respect of Security Transaction Tax - Held that:- AO himself has calculated income from derivative transactions amounting to Rs.30,89,407/- which is included in the total income and as regards the normal share transaction, the AO has calculated loss which is not included in total income this year and has been carried forward as speculation loss. Therefore, rebate has to be calculated with respect to the income from derivative transaction included in the total income @ 30% subject to the limit of STT actually paid. The STT paid in respect of derivative transaction was Rs.2,56,449/-, therefore, deduction has to be limited to Rs.2,56,449/-. Disallowance of claim of deduction against the share of profit in the branch - non deduction of TDS - Held that:- In this case, the assessee was only sharing profit with M/s. JSMS who was managing only day to day affairs of the branch whereas policy decisions were taken by the assessee and the entire investments had also been made by the assessee therefore, hold that the arrangement was not a case of joint venture, ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... the asset has to be reduced from the WDV under the provisions of section 43(6). In the present case, it was pointed out that the card was neither sold nor discarded nor destroyed/demolished and therefore, depreciation had to be allowed on the basis opening WDV. It was further submitted that these aspects had not been considered by the Tribunal in case of Sino Securities Pvt. Ltd.(supra) and, therefore, it was requested that the matter may be restored to the AO for examining all aspects relating to the case. 2.2. We have perused the records and considered the matter carefully. The dispute is regarding allowability of depreciation on NSE membership rights and BSE derivative membership rights. In view of the judgment of Hon'ble Supreme Court in case of Techno Shares and Stock Ltd. (193 Taxmann 248), depreciation is allowable in respect of BSE/NSE membership cards. However, the Mumbai Bench of the Tribunal in case of Sino Securities P. Ltd. in ITA No.6264/M/09 (supra), after considering the said judgment of the Apex Court held that after de-mutualization and corporatization of stock exchanges, assessees have been allotted shares against membership cards and, therefore, the judgment ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... tion @ 30%. In appeal CIT(A) following the decision in the earlier year confirmed the disallowance made by AO, aggrieved by which, assessee is in appeal before the Tribunal. 3.1 Before us, the ld. AR for the assessee submitted that, earlier, Special Bench of the Tribunal in case of Amway India Enterprises (114 TTJ Del.(SB) 476) had laid down certain tests to determine the nature of expenditure on account of software. However, the said decision of the Special Bench has not been upheld by the Hon ble High Court of Delhi vide judgment dated 04/11/2011 in Income Tax Appeal No.1344 1363 of 2009 in the same case. The Hon ble High Court following the judgment dated 04/11/2011 in case of CIT vs. M/s. Asahi India Safety Glass Ltd. held that expenditure has to be allowed as revenue expenditure. The ld. Departmental Representative, on the other hand, submitted that the Tribunal in assessment year 2005-06 in case of the assessee had confirmed the disallowance. The ld. AR for the assessee, however, pointed out that in assessment year 2005-06, there was no decision of the Tribunal as assessee had not pressed the issue. 3.2 We have perused the records and considered the rival contentions ca ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... m was disallowed. In appeal CIT(A) obtained details of STT which was Rs.2,56,449/- in respect of derivative transactions and Rs.5,30,982/- in respect of share transaction. Since there was loss in respect of share transactions, CIT(A) held that rebate with reference to STT of Rs.5,30,982/- was not allowable. It was held by him that the rebate was allowable at Rs.2,56,449/-. CIT(A), therefore, reduced rebate allowed by AO by Rs.1,786/-. Aggrieved by said decision, assessee is in appeal before the Tribunal. 4.1 Before us, the ld. AR for the assessee submitted that rebate under section 88E has to be allowed with respect to income from security transactions included in the total income at the average rate of Income tax. He referred to the decision of the Tribunal in the case of Dy. CIT vs. Ashika Stock Broking Ltd.(2011) (44 SOT 566) in which it was held that once there was net profit from share dealing in the cash segment and F O segment, the rebate under section 88E in relation to STT has to be allowed. In the present case, income from derivative transactions was included in the total income and, therefore, the rebate under section 88E has to be allowed with reference to said income ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... the branch but before tax was to be shared between the assessee and JSMS in the ratio of 65:35. The assessee further submitted that such type of payment was neither fees for professional services as prescribed under section 194J not it was covered as brokerage or commission under section 194H and therefore, no tax was required to be deducted from such payment. 5.1 The AO however observed that the arrangement made with M/s. JSMS was of the nature of joint venture in which the assessee was providing investment and day to day management of the branch including rate of brokerage, opening of bank account, collection of funds from clients, banking operations etc were being handled by M/s. JSMS. The AO also observed that the case was similar to CIT vs. Panipat Woolen and General Mills Company Ltd. (103 ITR 66), in which case, the Hon'ble Supreme Court held that it was joint venture and deduction was not allowable. Alternatively, the AO also observed that the services rendered by M/s. JSMS were of the nature of managerial services, and therefore tax was required to be deducted from payment for such services under the provisions of section 194J as assessee was managing day to day affairs ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... has to be assessed as AOP and payment made to M/s. JSMS would be share of profit which can not be assessed in the name of the assessee. Reliance was placed on the judgment of Hon'ble High Court of Delhi in the case of CIT vs. Malibu Estate P. Ltd. (298 ITR 72). It was also pointed out, that in case of joint venture, there was diversion of income at source by overriding title and amount payable to the joint venture partner as profit could not be assessed as income. As regards the applicability of provisions of section 194J, it was submitted that the services rendered by M/s. JSMS could not be considered as professional or management services and therefore no tax was required to be deducted and no disallowance could be made under section 40(a)(ia). It was further argued that even if the provision of section 40(a)(ia) were found applicable, the assessee had paid the entire amount during the year and nothing was found to be outstanding at the end of the year. Therefore, in such cases, provisions of section 40(a)(ia) could not be applied as held by Special Bench of the Tribunal in case of Merilyn Shipping and Transporters vs. Addl. CIT (16 ITR (Trib.) 01). The ld. AR also referred to ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ble. However, the ld. AR for the assessee has brought to our notice a recent decision of the Special Bench of the Tribunal in the case of Merilyn Shipping and Transports vs. ACIT (16 ITR 01), in which case it has been held that the word payable used in section 40(a)(ia) has to be given its natural meaning and section 40(a)(ia) would be applicable only to expenditure which is payable as on March 31 of every year and can not be invoked to disallow amount which have already been paid during the previous year. The ld. AR submitted that no amount remained payable on account of M/s. JSMC at the end of the year. Therefore, provision of section 40(a)(ia) were not applicable. We, therefore, following the decision of the Special Bench of the Tribunal in the case of Merilyn Shipping and Transports (supra), set aside the order of CIT(A) and allow the claim of the assessee subject to verification of the claim that no amount remained outstanding at the end of the year. We do not consider it necessary to go into other arguments advanced by the ld. AR as the claim has been allowed. 6. The next ground is regarding charging of interest under section 234B and 234C. The ld. AR submitted that this ..... X X X X Extracts X X X X X X X X Extracts X X X X
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