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TMI Blog2016 (6) TMI 880X X X X Extracts X X X X X X X X Extracts X X X X ..... : Shri Subash Agarwal, AR For the Respondent : Shri Rajat Kr. Kureel, JCIT, Sr. DR ORDER Per Shri Mahavir Singh, JM Both these appeals by assessee are arising out of separate orders of CIT(A), Central-II, Kolkata vide Appeal Nos. 256 257/CC-X/CIT(A)C-II/11-12 dated 02.08.2012. Assessments were framed by DCIT, Central Circle-X, Kolkata u/s. 153C/143(3) of the Income Tax Act, 1961 (hereinafter referred to as the Act ) for Assessment Years 2007-08 and 2008-09 vide his separate orders both dated 23.12.2011. 2. The only common issue in these two appeals of assessee is against the order of CIT(A) in restricting the disallowance made by AO in respect to rebate claimed by assessee u/s. 88E of the Act. The facts and circumstance ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... segment wise gross profit i.e. STT paid trading profit, interest income, brokerage income and dividend. The assessee reduced direct expenses related to STT paid trading profit and brokerage income from the gross profit. Further, it allocated the indirect expenses in the ratio of turnover. According to AO, certain expenses like rent, repairs and maintenance, electricity, director s remuneration, staff welfare, auditor s remuneration, travelling, miscellaneous expenses, depreciation etc. were claimed by the assessee exclusively against the brokerage income and on perusal of detail, the AO was not satisfied that the expenses both direct and indirect have been allocated on the basis of turnover whereas they ought to have been allocated on the ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... its clients as well as its own account. Hence, whatever expenses were incurred by the appellant are attributable to this composite activity and, therefore, allocable to both STT and non STT paid receipts, unless an expenditure may be linked directly to a specific category of income. The appellant company cannot say that the FORs were taken out of the borrowed money only and that the benefit of such FORs was taken only to execute the transactions on behalf of its clients. Hence, I agree with the view of the AO that the payment of interest is allocable to both SIT paid and non STT paid income. Further, I find no force in the submission of the appellant that certain indirect expenses as mentioned above are deductible from non STT paid income o ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... d STT paid transactions is 59% and 41% respectively. Hence, after deduction of direct expenses, the indirect expenses are to be deducted on the basis of aforesaid ratio to arrive on the net income to allow the rebate u/s 88E of the Act. In the course of appellate proceedings, the appellant company was asked to prepare the chart by allocating the indirect expenses on the basis of turnover. The said chart was submitted by the appellant and examined by the undersigned. The chart submitted by the appellant is as under: Destiny Securities Ltd. A.Y 2007-08 Particulars Non STT STT Turnover 41540012233.63 28503579582. ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ved that the transactions were assessee's own transactions and only 17% were transactions belonging to the clients. Thus, he observed that the substantial portion of the transactions were assessee's own transaction and it was wrong for the ae to claim that it mainly maintain its establishment for its clients. He pointed out that out of the total expenses, other than the STT charges debited in the profit and loss account only the expenses for stamp duty charges amounting to ₹ 22,31,939/- could be said to be fully related to client's transactions. All remaining expenses had been incurred both for assessee's own transactions as well as the transactions of the clients. Therefore, out of total expenses of ₹ 1,66,63,90 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... w of this, ld. Counsel for the assessee stated that in the present case there is no dispute in regard to direct expenses whereas dispute is limited to indirect expenses and the nature of expenses are fixed and do not change with the volume of self business, hence should be apportioned over the core business of brokerage but Ld. Counsel for the assessee finally agreed for proportionate disallowance. In respect to interest on FD, ld. Counsel for the assessee stated that interest on FD is not made out of surplus fund but 100% of these FDs have been deposited with the Stock Exchange as margin money against which business of bunch clients and self was carried on. Qua this, ld. Counsel for the assessee filed complete chart in respect to FD intere ..... X X X X Extracts X X X X X X X X Extracts X X X X
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