9911796707
TMI Blog2014 (1) TMI 1276X X X X Extracts X X X X X X X X Extracts X X X X ..... f activities – thus, expenditure, though leading to varying incomes; the brokerage income itself varying from 0.1% to 1%, the proper basis for allocation of expenditure would be the turnover, rather than the gross income arising there-from – the issue is again restored back to the file of the AO for fresh consideration – Decided in favour of Assessee. Disallowance u/s 40(a)(ia) of the Act – Held that:- The decision in Kotak Securities Ltd. vs. Addl. CIT [2008 (8) TMI 592 - ITAT MUMBAI] followed – the TDS provision of section 194J would apply only in respect of transaction charges, and not to the VSAT and lease line charges - the Revenue succeeds in part, so that the disallowance would stand restricted to the amount of transaction charges paid to the Stock Exchange – Decided partly in favour of Revenue. Disallowance of non-compliance charges – Held that:- The decision in Haji Aziz and Abdul Shakoor Bros. vs. CIT [1960 (11) TMI 15 - SUPREME Court] followed - A penalty for a violation of the law is not an allowable expenditure as the same cannot be considered as an incident of the business - The Explanation to section 37(1), introduced by Finance (No.2) Act, 1998, w.r.e.f. 01.04 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... . The same did not find favour with the authorities below inasmuch as in the absence of a direct nexus between the borrowings and the utilization of the funds, a general pool of funds hypothesis, as envisaged under rule 8D(2)(ii), would prevail, so that interest would stand to be disallowed proportionately. Aggrieved, the assessee is in second appeal. 3.1 Before us, the ld. AR would submit that the Revenue had incorrectly worked out the interest expenditure incurred by it at Rs.4,37,571/-, inasmuch as the same includes bank charges to the extent of Rs.8,95,307/-. A working of the same, reproduced as under, stood also submitted before the first appellate authority, who, however, has failed to consider the same: Interest Paid Rs.7,84,783/- Bank Charges Paid Rs.8,95,307/- Rs.16,80,090/- Less: Interest earned from bank deposits Rs.12,42,549/- Rs.4,37,571/- On being queried by the Bench as to the nature of the services for which and the expenditure by way of bank charges stands incurred, it was submitted by the ld. AR that the same is in respect of its regular business activities as a share and stock broker as well as a Deposit ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ated in determining the profit on the securities transactions, i.e., which are entered into on own account, vis-a-vis the expenditure on the regular share transactions conducted on client account, for which the assessee receives brokerage income. The Revenue has apportioned the expenditure on the basis of the gross income from the two activities, i.e., at 35% for own transactions, while the assessee insists on the same being rightly allocable at 5% (of the total expenditure) only. 6. We have heard the parties, and perused the material on record. Even as clarified during the course of the hearing itself, the transactions for both types of the businesses, i.e., on own account and for the clients, being essentially the same, so that they entail the same set of activities and, therefore, expenditure, though leading to varying incomes; the brokerage income itself varying from 0.1% to 1%, the proper basis for allocation of expenditure would be the turnover, rather than the gross income arising there-from. This would at once shift the allocation to a valid, cogent basis. Accordingly, this issue is again restored back to the file of the A.O. for consideration afresh on the lines as indic ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... of Asst. CIT v. Subhash Chand Shorewala, 91 TTJ (Del) 57; and Kapoor Sons Co. vs. ITO [1984] 7 ITD (Del) 319, wherein penalty for failure to adhere to the regulatory procedure mandated by the Stock Exchange has been held as not an allowable expenditure. Reliance has also been placed by him on the decision by the apex court reported at 1970 AIR 245 to the effect that if a statute gives power to the Government or other authority to make rules, the rules so framed have the force of the statute, and are to be deemed to be incorporated as a part of the statute, as well as by the jurisdictional high court in Hemendra V. Shah v. Bombay Stock Exchange, holding that the rules and regulations of the stock exchange are statutory in character. 9.2 The basic law in the matter is in fact well settled by the decisions by the apex court, as in the case of Haji Aziz and Abdul Shakoor Bros. vs. CIT [1961] 41 ITR 350 (SC) and Indian Aluminium Co. Ltd. vs. CIT [1971] 79 ITR 514 (SC), holding that a penalty for a violation of the law is not an allowable expenditure as the same cannot be considered as an incident of the business. The Explanation to section 37(1), introduced by Finance (No.2) Act, 19 ..... X X X X Extracts X X X X X X X X Extracts X X X X
|
