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TMI Blog2014 (2) TMI 671X X X X Extracts X X X X X X X X Extracts X X X X ..... smart Ltd. Versus Addl. CIT & DCIT[2014 (2) TMI 254 - ITAT MUMBAI] followed – there was some force in the contention of the Counsel for the assessee so far as the treatment of brokerage inclusive of STT is concerned – thus, the matter is remitted back to the AO for fresh adjudication. Disallowance of bad debts – Held that:- The decision in CIT Vs. Shreyas S. Morakhia [2012 (3) TMI 103 - BOMBAY HIGH COURT] followed - , in the business of share broking, the amount payable by the clients are also considered as 'amount taken into account' – the AO is directed to allow the amount as bad debts - Decided in favour of Assessee. Entrance fee paid to club – Held that:- The decision in CIT vs. Samtel Color Ltd [2009 (1) TMI 26 - DELHI HIGH COURT] followed - admission fee paid towards corporate membership was an expenditure incurred wholly and exclusively for the purpose of business and not towards capital account as it facilitated the smooth and efficient running of a business and did not add to the profit earning apparatus of a business enterprise - thus, the AO is directed to allow the amount as expenditure u/s 37(1) - Decided in favour of Assessee. Amount paid to stock exchange – ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... d also gave relief on interest under section 234B while confirming addition of other disallowances. Revenue is in appeal in deletion of amount of penalty and interest under section 234B whereas the assessee is in appeal on the disallowances made in the assessment order. 4. Ground No.1 pertains to disallowance of an amount of Rs.33,53,001/- under Section 14A r.w. Rule 8D. The AO noticed that the assessee has earned an amount of Rs.12,06,10,934/- as dividend income and claimed exempt under section 10(34) of the Act. Invoking provisions of Rule 8D, AO computed disallowance at Rs.33,51,001/- which was confirmed by the ld. CIT(A). 5. It was contended that application of Rule 8D is not permitted for assessment year 2006-07 as the said provision came into effect w.e.f. assessment year 2008-09 and the Hon'ble Jurisdictional High Court in the case of Godrej Boyce Manufacturing Co. Ltd. 328 ITR 81 (Bom) stated that reasonable amount can be disallowed under section 14A but cannot be done under Rule 8D which has only prospective applicability. Coming to the merits, it was submitted that out of the total dividend earned an amount of Rs.11.36 crores was earned from mutual funds wherein the ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... (ib) of the Income tax Act. Same was confirmed by CIT(A). 8. It was fairly admitted that the CIT(A) has followed the order in assessment year 2005-06 and dismissed the ground and in assessment year 2005-06 the matter was restored to AO for examination of the contentions raised by the assessee. The order of ITAT in ITA No.5372/Mum/2008 and ITA No.5992/Mum/2008 for assessment year 2005-06 is as under :- "16. We have carefully considered the rival submissions and perused the orders of the lower authorities. We find some force in the contention of the Counsel for the assessee so far as the treatment of brokerage inclusive of STT is concerned. However, in all fairness, in our humble opinion, this issue deserves to be looked afresh. Therefore, we restore this issue back to the file of AO with a direction to examine the book entries in the light of demonstration made by the Counsel for the assessee before us. Needless to mention that a reasonable opportunity of being heard should be given to assessee." Respectfully following the above, we restore this issue to the file of AO for fresh examination as in earlier year. 9. Ground No.3 pertains to the issue of disallowance of bad debts ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... incurred wholly and exclusively for the purpose of business and not towards capital account as it facilitated the smooth and efficient running of a business and did not add to the profit earning apparatus of a business enterprise. The Hon'ble Delhi High Court followed the judgment of Hon'ble Bombay High Court in the case of Otis Elevator Co.(I) Ltd. (195 ITR 682), relied on by assessee before the authorities. In view of the above, we direct the AO to allow the amount as expenditure u/s. 37(1). The grounds are allowed. 13. In the result, assessee appeal is partly allowed. ITA No.1102/M/10 14. In the revenue appeal ground No.1-5 pertain to the issue of allowing an amount of Rs.6,52,450/- paid to stock exchange, considered by AO as in violation of bye-laws of stock exchange and as infringement of law. 14.1 It was submitted that this issue was squarely covered by the orders of ITAT in assessment year 2005-06 in ITA No.5372/M/08 and ITA No.5992/M/08 dated 30.10.2012 wherein it was held as under :- "4. Ground No. 8 to 13 relates to the disallowance of penalty of Rs.25,82,779/- being debited by the assessee on violation of the bye laws of the stock exchange. The Counsel once agai ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... o. 45/2008 is dated 24.3.08, the Special Bench's decision of ITAT, Mumbai dated 20.10.2008 in the case of M/s Daga Capital Management Pvt. Ltd. in ITA No. 8057/M/03. Under the circumstances, it is held that the appellant could not have visualized the disallowance u/s 14A in accordance with Rule 8D amounting to Rs33,51,001/- at the time of filing of return. The law does not envisage impossible. The A.O. is, therefore, directed to exclude the amount of disallowance u/s 14A for levy of interest u/s 234B." 15.1 The ld. DR submitted that interest u/s. 234B is mandatory and provisions of section 14A are already on statute, therefore, ld. CIT(A) is not correct in deleting the interest. The ld. Counsel however supported the orders of CIT(A) to submit that rule 8D was not applicable for the year and so the disallowance made under the section should not be considered for calculating the interest u/s 234B. 16. After considering the rival submissions, we are not in agreement with the order of CIT(A). In principle, the levy of interest u/s. 234B is mandatory as held by the Hon'ble Supreme Court in the case of CIT vs Anjum M H Ghaswala 252 ITR 1(SC) and is to be calculated on the assessed in ..... X X X X Extracts X X X X X X X X Extracts X X X X
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