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TMI Blog2013 (8) TMI 107X X X X Extracts X X X X X X X X Extracts X X X X ..... debts disallowed - assessee-company a share broker has only the brokerage as embedded in the value of shares purchased or sold, i.e., as included in the debt being written off, that could be subject to an allowance u/s.36(1)(vii) in view of section 36(2)(i) - Held that:- As in CIT vs. Shreyas S. Morakhia [2012 (3) TMI 103 - BOMBAY HIGH COURT] clarified that both the brokerage as well as the principal sum of the shares transacted by a broker on behalf of his clients form part of the debt realizable there-from and, thus, is to be considered as taken into account in computing the income of the assessee-broker in terms of s.36(2)(i). Thus entire such amount would stand to be considered as eligible for deduction u/s. 36(1(vii). In favour of ass ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... sum of Rs.3,61,453/-. Though the same stood deleted by the ld. CIT(A) following the decision by the hon'ble court in the case of Godrej Boyce Manufacturing Co. Ltd. vs. Dy. CIT [2010] 328 ITR 81 (Bom), he substituted the same with an illogical formula, i.e., total expenditure (direct and indirect) x the value of transactions yielding tax-exempt income/value of the total transactions in shares The same has no basis in facts. In fact, in the assessment for A.Y. 2005-06 u/s. 143(3), 2% of the dividend income had been disallowed by the Assessing Officer (AO). A similar disallowance for the current year would, it was pleaded by him, meet the ends of justice. The claim for bad debt, which is the second issue involved, claimed in the sum ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... isdictional high court, as in the case of The Stock and Bond Trading Company (in ITA No.4117 of 2010 dated 14.10.2011). 2.2 The ld. DR, on the other hand, would rely on the orders of the authorities below. The ld. CIT(A) has allowed relief to the assessee to the extent his case was reasonable, and falling within the ambit of law. His order, therefore, would stand to be confirmed. 3. We have heard the parties, and perused the material on record. 3.1 Qua the first issue, the ld. CIT(A) has sought to apply the decision in the case of Godrej Boyce Manufacturing Company Ltd. (supra), advocating a reasonable disallowance for the years up to A.Y. 2007-08, i.e., prior to the currency of rule 8D (refer pgs. 3 4 of the impugned order). It i ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... n. The formula stipulated by the ld. CIT(A), on the other hand, is based on the premise that the transactions in shares and, therefore, the expenditure incurred thereon, is toward earning the said income. In our view, rule 8D, which is not mandatory for the current year, would also not yield a good approximation of such expenditure. It needs to be noted, at the same time, that the expenditure, in so far as it is relevant, stands incurred irrespective of whether the same would result in dividend income or not. For example, the investment is made in shares utilizing (say) borrowed capital. The interest expenditure would stand incurred irrespective of the quantum of the dividend or in fact even the earning of any dividend on the said shares. L ..... X X X X Extracts X X X X X X X X Extracts X X X X
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