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TMI Blog2015 (10) TMI 811X X X X Extracts X X X X X X X X Extracts X X X X ..... apital & Debit Market Ltd (supra) as that the amount paid as penalty was on account of irregularities committed by the assessees clients. Such payments were not on account of any infraction of law and hence allowable as business expenditure. In such as case the explanation to Section 37 would not apply.- Decided in favour of assessee. Disallowance of mark to market loss on account of derivative transactions by considering the same to be contingent loss - Held that:- Taking into account the details and the explanations submitted by the AR and taking into account the guidance note issued by ICAI, which the companies have to follow, besides the several case laws cited by the Revenue authorities and by the AR, we are of the opinion that the assessee has rightly claimed the provision in the Profit & Loss Account Respectfully following the decision of the Tribunal in assessee's own case, we do not find any merit for the disallowance made by the AO on account of provisions for loss on mark to market.- Decided in favour of assessee. Disallowance made u/s.14A - Held that:- As we found that the assessment year under consideration is A.Y.2007-08, in which rule 8D is not applicable keepi ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... before us. 4. At the outset ld. AR contended that the issue with regard to disallowance of VSAT charges for non-deduction of tax has been consistently decided by various benches of the Tribunal including assessee's own case for the A.Y.2006-07 2008-09, as well as the Hon'ble Bombay High Court in Angel Capital Debt market Ltd., in assessee's favour. 5. We have considered rival contentions and found that the issue with regard to payment of VSAT/lease line charges to the stock exchange without deduction of tax at source is covered in favour of assessee by the decision of Hon'ble Bombay High Court in the case of Angel Capital Debit Market Ltd., I.T Appeal(L) No.475 of 2011, dated 28-7-2011. Similar issue has been considered by various benches of the Tribunal as well as assessee's own case for the assessment year 2005-06 and 2006-07 vide order dated 28-3-2012 and the issue has been decided in assessee's favour. The precise observation of the Hon'ble Bombay High Court is as under:- 2. As regard first two questions are concerned, the findings of fact recorded by the ITAT is that VSAT and Lease Line charges paid by the assessee to Stock Exchange ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... the decision arrived at by the coordinate Bench of I.T.A.T., Mumbai in the assessee's sister concern, i.e. Edelweiss Capital Ltd. Mumbai in ITA No. 5324/M/2007 dated 10.10.2010, wherein the Hon'ble coordinate Bench held as under:- The aforesaid Note gives a fair picture of the nature of provision. The provision in substance has been made to cover the anticipated loss in the derivatives trading. There is no dispute that the assessee holds derivatives as its stock-in-trade and there is also no dispute that it follows the principle cost or market price, whichever is lower in valuing the derivatives. When the derivatives are held as stock-in-trade then whatever rules apply to the valuation of stock- in-trade will have to be necessarily apply to their valuation also. It is a well settled position in law that while anticipated loss is taken into account in valuing the closing stock, anticipated profit in the shape of appreciated value of the closing stock is not brought into the account, as no prudent trader would care to show increased profit before its realization. This is the theory underlying the rule that the closing stock is to be valued at cost or market price wh ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... the AO and the CIT(A), i.e. the case of CIT Vs. Kamani Metal and Alloys Ltd. 208 ITR 1017 (Bombay) had been distinguished on facts. The DR, after the Bench, submitted on untitled extract wherein it mentioned that where such money is stock in trade, the loss had to be accounted for as per according standards. 14. We find that the case so heavily relied upon by the Revenue authorities have facts which are no different footings. In that case, where the contract was between the assessee and MMTC, no raw material was purchased during the relevant accounting year. The raw material was received in the next accounting year. The Hon'ble High Court, on these facts held that since there was no material except the paper contract, the material so contracted could not be regarded as assessee's stock in trade. 15. In the case at hand, the assessee had been engaging in marked to market on daily basis and on the last day of the financial year, provision is made in the Profit Loss Account against anticipated loss. 16. We have also followed the guidance note on accounting for Equity Index and Equity Stock Futures and options (as placed in the APB), as to how the ICAI has de ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... the transaction charges paid by the assessee to the stock exchanges constitute .fee for technical services. and the same is liable for tax deduction at sources u/s 194J of the Act. However, before the Hon ble High Court, the assessee therein pleaded that it was under bonafide belief that no tax was deductible at source. The Hon ble High Court also noticed that the assessee has been paying the transaction charges for the past several years without subjecting the same to tax deduction at source and the department has also allowed the claim. Hence the Hon ble High Court, under these peculiar facts, held as under:- However, since both the revenue and assessee were under the bona fide belief for nearly a decade that tax was not deductible at source on payment of transaction charges, no fault can be found with the assessee in not deducting the tax at source in the assessment year in question consequently disallowance made by the assessing officer under section 40(a)(ia) of the Act in respect of the transaction charges cannot be sustained. We made it clear that we have arrived at the above conclusion in the peculiar facts of the present case, where both the revenue and the assessee ..... X X X X Extracts X X X X X X X X Extracts X X X X
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